Securities and Exchange Commission
Washington, D.C. 20549
FORM 10-K
(Mark One)
Annual Report pursuant to Section 13 or 15(d) of the
( X ) Securities Exchange Act of 1934 [fee required]
For the Fiscal Year Ended December 31, 1993
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 ________
Commission file number 33-30874
CHICAGO AND NORTH WESTERN HOLDINGS CORP.
(Exact name of registrant as specified in its charter)
Delaware 13-3526817
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
One North Western Center 60606 (312) 559-7000
Chicago, Illinois (Zip code) (Registrant's telephone
(Address of principal number, including
executive offices) area code)
Securities registered pursuant to Section 12(b) of the Act:
Name of each exchange
Title of each class on which registered
Common Stock, $.01 par value New York Stock Exchange
Securities registered pursuant to Section 12(g) of the Act: None
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
As of March 11, 1994, the aggregate market value of common shares held by
nonaffiliates (based on the closing price as reported on the New York Stock
Exchange composite tape) was approximately $827 million.
Indicate by checkmark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of the registrant's knowledge in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. X
Indicate the number of shares outstanding of each of the registrant's classes
of common stock, as of the latest practicable date:
CLASS OUTSTANDING AT MARCH 11, 1994
Common Stock 30,927,713 Shares
Non-Voting Common Stock 12,835,304 Shares
DOCUMENTS INCORPORATED BY REFERENCE:
Part of Form 10-K into Which
Document Document is Incorporated
Sections of Annual Report to Stockholders
for Year Ended December 31, 1993 as specified herein. II and IV
Sections of the Company's Proxy Statement for the
Annual Meeting of Stockholders to be held in May, 1994 III
PART I
ITEM 1. BUSINESS
The Company
Chicago and North Western Holdings Corp. (together with its subsidiaries, the
"Company") is the holding company for the nation's eighth largest railroad
based on total operating revenues and miles of road operated, transporting
approximately 46 billion ton miles of freight in 1993. The railroad was
chartered in 1836 and currently operates approximately 5,500 miles of track in
nine states in the Midwest and West. The Company's east-west main line
between Chicago and Omaha is the principal connection between the lines of the
Union Pacific Railroad and the lines of major eastern railroads, providing the
most direct transcontinental route in the nation's central corridor.
The Company hauls a wide variety of freight, classified into five major
business groups: Energy (Coal); Agricultural Commodities; Automotive, Steel
and Chemicals; Intermodal; and Consumer Products. The Company's Energy
business group also includes its subsidiary, Western Railroad Properties,
Incorporated ("WRPI"), which transports low-sulfur coal in unit trains from
the southern Powder River Basin in Wyoming (the "Powder River Basin"), part of
the largest reserve of low-sulfur coal in the United States, and is one of
only two rail carriers originating traffic from the Powder River Basin. WRPI
provides service principally under long-term contracts and is a highly
efficient, low-cost operation. WRPI's tonnage, revenues and profits have
increased significantly since its inception in 1984. During the period from
1986 to 1993, WRPI's annual coal tonnage increased from 23.8 million to 73.9
million tons. In addition to these major business groups, the Company
provides commuter service in the Chicago area under a service contract with a
regional transportation authority.
The Company, through its subsidiaries, is the successor to the business of CNW
Corporation, which was acquired in 1989 in a leveraged, going-private
transaction (the "Acquisition") led by Blackstone Capital Partners L.P.
("Blackstone"). The Company went public through a stock offering in 1992.
Blackstone and its affiliates sold substantially all their shares in
connection with a secondary stock offering in 1993.
Freight Business Groups
The Company groups its freight traffic into five major business groups, each
of which is organized to service a particular commodity and customer base.
These business groups transport coal; agricultural commodities; automotive,
steel and chemical products; and consumer products; and provide intermodal
services, primarily hauling containers on double-stack trains under agreements
with large international marine shipping companies. The Company seeks to
maintain and enhance its competitive position by tailoring its capabilities to
fit its particular customer base in such areas as equipment availability,
scheduling, special purpose loading facilities and flexible contract terms.<PAGE>
2
Set forth below is a five-year comparison of gross revenues and volumes of the
Company's five freight business groups.
<TABLE>
<CAPTION>
Gross Freight Revenue and Loads by Business Group
(Revenue in millions, loads in thousands)
1993 1992 1991 1990 1989
Revenue Loads Revenue Loads Revenue Loads Revenue Loads Revenue Loads
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Energy (Coal):
Core RR $112.9 76.6 $ 98.1 83.1 $110.2 89.9 $102.9 89.3 $101.3 89.7
WRPI 206.1 708.9 169.2 554.9 180.0 572.7 152.7 483.4 145.8 420.8
Agricultural
Commodities 211.3 304.5 218.1 320.6 208.7 296.1 223.8 309.9 213.5 295.8
Automotive, Steel
and Chemicals 200.5 332.3 190.9 318.0 177.6 291.9 207.8 296.5 215.2 309.6
Intermodal 119.5 714.0 116.4 689.2 109.0 618.0 99.2 593.4 96.4 581.0
Consumer
Products 145.8 215.3 152.0 226.4 150.3 224.8 149.0 221.0 166.1 226.0
Total $996.1 2,351.6 $944.7 2,192.2 $935.8 2,093.4 $935.4 1,993.5 $938.3 1,922.9
</TABLE>
Overall gross freight revenues per load decreased from 1989 to 1993, due
to volume growth in lower revenue per load traffic, such as the Intermodal and
Energy (Coal) business groups. Revenue per load for traffic other than the
Intermodal and Energy (Coal) business groups has remained stable over that
same period.
Energy (Coal). Coal transportation is the Company's largest revenue-
producing activity, handled by both WRPI and the core railroad. WRPI, which
commenced operations in 1984, transports low-sulfur coal directly from ten of
the fifteen mines of the Powder River Basin in Wyoming to the lines of the
Union Pacific Railroad at South Morrill, Nebraska, for forwarding to
electricity generating facilities primarily in the midwestern and south
central states. WRPI originated 90.7% of the total coal loads handled by the
Company in 1993. In addition, the core railroad transports a substantial
volume of coal over its lines, including a significant number of trains
carrying WRPI coal which re-enter the core railroad at Council Bluffs, Iowa,
enroute to midwestern electricity generating facilities.
Western Railroad Properties, Incorporated. The Powder River Basin is
part of the largest reserve of sub-bituminous coal in the United States. In
recent years, coal from the Powder River Basin has experienced a growing
demand from electric utilities and other industrial customers due to the
comparatively low cost of the delivered product (on a BTU basis) and the low-
sulfur nature of the coal. The cost of the coal is lower because the reserves
are relatively close to the earth's surface. In addition to lower mining
costs, competition among the Powder River Basin mines and transportation
suppliers has resulted in lower delivered cost of Powder River Basin coal than
the delivered cost of local coal in most regions of the United States. Demand
for Powder River Basin coal has also increased due to the reduced
environmental impact because of its low-sulfur content. Demand for low-sulfur
coal has increased due to the passage of the 1990 Amendments to the Clean Air
Act. The Clean Air Act requires electric generating facilities to reduce
their sulfur dioxide emissions. Utilities can accomplish this by burning coal
with low-sulfur content, such as Powder River Basin coal, or by continuing to
burn high-sulfur coal through the use of scrubbing devices designed to remove
the sulfur from the smoke emissions or other balancing mechanisms.<PAGE>
3
WRPI Operating Statistics
(in millions)
1993 1992 1991 1990 1989
Tonnage 73.9 57.2 58.4 49.0 42.6
Revenues $204.9 $169.0 $176.4 $150.8 $142.4
Operating income 1/ $ 94.6 $ 80.7 $ 68.8 $ 62.3 $ 70.2
___________________
1/ Operating income was reduced by a special charge of $6.8 million in 1991.
1992 tonnage and revenues decreased from 1991 levels due to abnormally
mild weather, which reduced the demand for electricity. In addition, first
quarter 1991 shipments were high to meet contracted minimum shipping
requirements deferred from 1990.
WRPI handles coal for customers principally under long-term
transportation contracts, with over 93% of WRPI's 1993 revenues derived from
such contracts. The large percentage of revenues under long-term contracts,
combined with the inherent stability of demand for coal from WRPI's electric
utility customers, has provided a stable source of revenue. During 1993, WRPI
had 50 contracts with electric utilities and other industrial users of low-
sulfur coal. The remaining terms of these contracts vary between four months
and 21 years. The ten largest WRPI customers accounted for approximately 69%
of 1993 WRPI revenues. The weighted average life (based on historical
tonnages) of the transportation contracts at December 31, 1993, for these ten
customers was approximately seven years. Most of these facilities have been
designed to burn sub-bituminous, low-sulfur coal.
Core Railroad Coal. The core railroad's coal business is comprised
primarily of trains carrying WRPI coal re-entering the east-west main line at
Council Bluffs, Iowa. Such traffic accounted for 80% of the core railroad's
coal revenues in 1993. The top ten customers accounted for 86% of 1993 coal
revenue of the core railroad. The core railroad's coal is shipped principally
under long-term contracts; the weighted average life (based on historical
tonnages) at December 31, 1993 of the contracts for these ten customers was
approximately four years. Profit margins on the core railroad coal movements
are generally lower than on WRPI movements.
Agricultural Commodities. The core railroad is one of the largest rail
transporters of grain in the United States, operating over 750 miles of "grain
gathering" lines. More than 140 multiple-car grain loading facilities in
Iowa, Minnesota, Wisconsin, Illinois and Nebraska provide shipments to
processors, barge terminals or the gateways of Chicago, Omaha, Kansas City and
St. Louis for delivery to other carriers.
The agricultural commodities group consists of the following
commodities:<PAGE>
4
Percent of 1993 Agricultural
Commodities Revenue
Corn and soybeans 33.2%
Wheat 6.3
Barley, oats and other grains 7.9
Subtotal grain 47.4%
Corn syrup 8.2%
Soybean meal and oil 9.6
Feed and flour 11.4
Malt 3.7
Subtotal grain products 32.9%
Agricultural chemicals 8.1%
Potash and sulfur 11.6
Total 100.0%
In 1993, approximately 70% of grain shipments was for domestic
processing and the balance was for feed lots and other users. 1993 grain
shipments decreased due to flooding in the Midwest, which reduced the quantity
and quality of the corn harvest in the Company's service territory. The core
railroad has historically benefitted from long-term relationships with its
grain customers. Continuation of these stable relationships is important
because changes in weather, government farm policies and import-export demand
makes the movement of agricultural products fluctuate unpredictably. The
agricultural commodities business is conducted primarily with large grain
firms, grain processing companies and fertilizer producers.
Automotive, Steel and Chemicals. The Automotive, Steel and Chemicals
business group serves domestic and international auto manufacturers, steel
producers, iron ore mining operations and industrial chemical firms.
The Company delivers auto parts to and handles finished motor vehicles
from two assembly plants in Illinois and Wisconsin. The Company also
transports finished domestic and import vehicles to the Company's regional
distribution ramp facilities in West Chicago, Illinois; St. Paul, Minnesota;
and Milwaukee, Wisconsin.
The Company serves three industrial chemical producers and numerous
chemical receivers, primarily in Illinois, Iowa, Minnesota and Wisconsin. The
Company also participates in several overhead movements of industrial
chemicals, primarily soda ash destined for the eastern U.S.
In 1993, four auto customers accounted for 94% of total automotive
revenues and seven steel and iron ore customers accounted for 85% of total
steel and iron ore revenues.
Intermodal. The Intermodal business group provides the transportation of
various types of consumer products through a combination of railroad transport
and transport by water or motor carriers. Intermodal traffic includes the
movement of trailers-on-flat-car ("TOFC"); containers-on-flat-car ("COFC"); or
unit trains of double-stack container cars, where the Company has been a
pioneer. Intermodal transport has been among the fastest growing areas of the
<PAGE>
5
railroad business in the past decade and technological advances have made
double-stack container service a highly cost-efficient method of transport
since 1984. Double-stack container traffic now accounts for approximately 83%
of the group's volume.
The Intermodal business group's primary business is supplying intermodal
transportation across the east-west main line directly to major international
containership lines involved in intermodal trade. In addition to providing
rail transportation, the Company provides terminal services to these customers
at the Company's "Global I" and "Global II" double-stack terminal facilities.
These facilities, located in the Chicago area, were specifically designed to
economically handle modern double-stack unit trains. The Company believes
that these facilities are among the nation's premier intermodal loading and
unloading facilities and are of continuing strategic importance to the
Company's ability to provide high quality intermodal service to its customers.
While the Company's intermodal volume has grown rapidly in the past
several years, from 581,000 loads in 1989 to 714,000 loads in 1993, revenues
from intermodal services have grown less rapidly, from $96.4 million in 1989
to $119.5 million in 1993. Volumes have shifted from higher revenue, higher
cost TOFC/COFC to the lower cost double-stack method of transport. The lower
unit costs associated with double-stack movements have been shared with
customers, resulting in higher profit margins for the Company and lower unit
costs for the customers.
Consumer Products. This business group includes a variety of consumer
oriented commodities including food products, paper and related products,
lumber and plywood, construction materials and some minerals such as silica
sand and bentonite clay. Due to the diversity of customers and the products
they ship, this business group, as a whole, closely tracks general economic
conditions, and is very sensitive to other railroad and truck competition.
Commuter Line
Since July 1, 1975, the Company has operated Chicago suburban commuter
service under a purchase of service agreement with a regional transportation
authority. The present agreement expires on December 31, 1994, and provides
for the Company to receive a small profit for operating the service in
addition to being reimbursed for the costs of commuter operations in excess of
revenue fares collected. In 1993, gross revenues from the Commuter Line were
approximately $85 million.
Under a related agreement, the Company received approximately $7 million
from the regional transportation authority during 1993 for the regional
transportation authority's share of track improvements in the commuter
operations territory.<PAGE>
6
Employees
The Company's employment levels and gross wages paid are shown in the
following table:
1993 1992 1991 1990 1989
Average employees for the year 6,158 6,269 6,841 7,397 8,140
Gross payroll (millions) $306 $292 $294 $309 $332
In 1991, the Company entered into an agreement (the "UTU Agreement") with
the United Transportation Union ("UTU"), which permitted the Company to reduce
crew size on all the Company's freight trains and yard crews from three to two
persons by eliminating brakemen positions on those crews. This agreement
resulted in the elimination of approximately 580 brakemen positions.
Employees with jobs abolished pursuant to the UTU Agreement, who did not
voluntarily resign, were placed on reserve boards where they remain until
recalled to service. As of December 31, 1993, there were no employees
currently on reserve board status due to current traffic levels.
Competition
The Company is subject to significant competition for freight traffic
from rail, motor and water carriers. Strong competition among rail carriers
exists in most major rail corridors. The principal factor in the Company's
ability to compete for freight traffic is price. Quality of service and
efficiency of operations are also significant factors, particularly in the
intermodal area, where competition from motor carriers is substantial. Barge
lines and motor carriers have certain cost advantages over railroads because
they are not obligated to acquire, maintain or pay real estate taxes on the
rights-of-way they use. WRPI's principal competitor is the Burlington
Northern Railroad, a substantially larger carrier which has access to all of
the Powder River Basin mines.
Railroad Regulation
The core railroad and WRPI, along with other common carriers engaged in
interstate transportation, are subject to the regulatory jurisdiction of the
Interstate Commerce Commission ("ICC") in various matters, including rates
charged for transportation services (to the extent they are still regulated),
issuance of securities and assumption of obligations or liabilities, the
extension and abandonment of rail lines, and the consolidation, merger and
acquisition or control of carriers. ICC jurisdiction over rate matters
generally is limited to general rate increases and to situations where
railroads have market dominance and rates charged exceed a stated percentage
of the variable costs of providing service. The core railroad, WRPI and other
railroads are also subject to the jurisdiction of the Federal Railroad
Administration with respect to safety appliances and equipment, railroad
engines and cars, protection of employees and passengers, and safety standards
for track.
<PAGE>
7
The conversion to Common Stock of the Non-Voting Common Stock issued to
UP Rail in connection with the Company's 1992 recapitalization (see Note 12 to
Consolidated Financial Statements) requires the approval of the ICC. On
January 29, 1993, UP Rail filed an application with the ICC requesting this
approval. A decision is expected in late 1994. See Item 13 "Certain
Relationships and Related Transactions--UP Rail and UP."
Labor relations in the railroad industry are governed by the Railway
Labor Act ("RLA") instead of the National Labor Relations Act. The national
collective bargaining agreements with the major national railway labor
organizations covering the union employees of certain railroads, including
certain subsidiaries of the Company, become open for modification in January
of 1995. Under the RLA, when these agreements are open for modification,
their terms remain in effect until new agreements are reached, and typically
neither management nor labor is permitted to take economic action (such as a
strike) until an extended process of negotiation, mediation and federal
investigation is completed.
Railroad industry personnel are covered by the Railroad Retirement Act
("RRA") instead of the Social Security Act. Employer contributions under the
RRA are currently approximately triple those under the Social Security Act.
Operating Statistics
Set forth below are certain operating statistics for the Company during
the last five years.
Freight Statistics
1993 1992 1991 1990 1989
Loadings
(thousands) 2,351.6 2,192.2 2,093.4 1,993.5 1,922.9
Freight train
miles (thousands) 13,219 11,809 11,365 11,353 11,756
Revenue ton miles
(millions) 46,114 40,986 40,601 37,205 35,687
Average length of
haul (miles) 299 288 292 296 294
Net tons per load 65.8 64.3 66.8 64.5 65.1
Distribution of Traffic (Loads)
1993 1992 1991 1990 1989
Originated 43.7% 41.5% 41.4% 38.6% 39.5%
Terminated 24.1 24.4 24.8 25.4 24.1
Overhead 1/ 18.3 18.1 18.1 18.5 19.2
Local 2/ 13.9 16.0 15.7 17.5 17.2
100.0% 100.0% 100.0% 100.0% 100.0%
1/ Overhead represents traffic over the Company's rail lines that is neither
originated nor terminated on such lines.
2/ Local represents traffic that is both originated and terminated on the
Company's rail lines.<PAGE>
8
The following table reflects the Company's operating expenses as a
percentage of revenues.
Operating Expense Ratios
Percent of Revenue
1993 1992 1991 1990 1989
Transportation 33.5% 31.5% 33.4% 35.2% 36.7%
Way and Structures 13.5 13.5 13.5 14.3 14.8
Equipment 18.9 19.4 19.0 17.6 18.4
Depreciation 6.6 6.6 6.8 7.6 6.3
Other Operating Expenses 7.0 8.3 7.8 8.2 8.5
Special Charges 1/ 0.5 3.0 11.8 1.4 2.6
80.0% 82.3% 92.3% 84.3% 87.3%
1/ Special charges comprise employee reduction and relocation costs of $3.4
million in 1993, $30.0 million in 1992, $76.8 million in 1991, $13.4
million in 1990, and $24.7 million in 1989; $39.0 million for
environmental and personal injury reserves in 1991; and $1.6 million for
management fees payable to a previous principal stockholder in 1993.
ITEM 2. PROPERTIES
Trackage and Rolling Stock. The status of the Company's trackage at
December 31, 1993 was as follows:
Miles of Track
Main line 1,998
Branch lines 2,841
Operated under trackage rights 676
Total railroad
(includes 2,880 miles of welded rail) 5,515
Additional main tracks 845
Yard switching and other track 2,515
Total railroad and yard tracks 8,875
Weight of Rail Owned (miles)
130 lbs. or greater 1,287
100 to 119 lbs. 3,319
Less than 100 lbs. 1,078
At December 31, 1993, the Company's motive power and freight train car
fleets were as follows:
Rolling Stock Statistics 1/
Diesel locomotive units:
Owned 222
Leased 489
Total 711
Capacity (thousands of horsepower) 2,124
Average age since built or rebuilt (years) 12.0
Bad order ratio 2/ 15.2
<PAGE>
9
Covered
Box Flat Gondola Hopper Hopper Other Total
Freight train car
and auto racks -
Owned 2,002 126 1,527 2,371 2,198 898 9,122
Leased 5,208 483 2,025 1,909 9,657 445 19,727
Total 7,210 609 3,552 4,280 11,855 1,343 28,849
Capacity (thousands
of tons) 3/ 555 26 321 386 1,166 13 2,467
Average age since
built or rebuilt
(years) 21.3
Bad order ratio 6.6
1/ Does not include the Commuter Line's fleet of 53 diesel units and 293
coaches, which are leased at a nominal cost.
2/ Bad order ratio reflects the ratio of unusable rolling stock to total
rolling stock. This ratio includes locomotives in shop for regularly
scheduled inspections and 74 locomotives (or 9.7% of the total) being
held for sale, potential rebuilding programs, spare parts or as a reserve
to accommodate surges in business levels.
3/ Excludes capacity of 1,142 auto racks, which are not rated in tons.
Western Railroad Properties, Incorporated. WRPI's trackage consists of a
103-mile line (the "Joint Line"), which is jointly owned with Burlington
Northern Railroad, the only other railroad originating service from the Powder
River Basin area, and a 107-mile line which connects the Joint Line to an
existing line of the Union Pacific Railroad in western Nebraska.
A trust for the benefit of a subsidiary of the Union Pacific Corporation
(the "WRPI Trust") owns 101 miles of track and certain support facilities and
leases them to WRPI under a 75-year lease (the "Lease"). Lease rentals by
WRPI to the WRPI Trust provide a fixed return to the WRPI Trust plus a
contingent return to the WRPI Trust measured by a varying percentage of
available cash flow or operating revenues. Under the Lease, WRPI is required
to transport substantially all of its coal over this line, where it is
interchanged with the Union Pacific Railroad. WRPI owns the land under the
line and leases it to the WRPI Trust. The core railroad operates the line as
agent for WRPI under an operating agreement, with WRPI receiving all revenues
and being responsible for all operating expenses.
The Company believes that the amount and condition of its property, track
and rolling stock are adequate to maintain the current level of operations.
The Company anticipates future expenditures will be required to continue its
strategy to achieve low-cost leadership in its markets.
Capital and Maintenance Expenditures. Over the last five years, the
following track improvements and maintenance have been effected and the
following amounts have been spent to maintain and improve rail service.<PAGE>
10
Track Improvements
1993 1992 1991 1990 1989
Ties inserted
(new and reusable) 598,475 620,717 575,036 652,933 747,749
Miles of rail laid
(new and reusable) 183.8 170.6 167.7 145.3 147.4
Miles of track surfaced 3,544.0 2,868.0 3,089.0 3,290.0 2,778.0
Cubic yards of ballast
installed 607,283 748,496 480,275 593,256 807,553
Capital and Maintenance Expenditures
(In Millions)
Maintenance (excluding
Capital Expenditures depreciation & rent)
Year Ended
December 31, Road Equipment Road Equipment Total
1993 $ 99.4 $ 16.4 $117.1 $ 93.7 $ 326.6
1992 79.4 3.9 111.3 86.0 280.6
1991 77.1 7.3 136.0 85.2 305.6
1990 60.1 1.7 120.2 90.3 272.3
1989 88.4 16.6 123.3 98.5 326.8
Total $404.4 $ 45.9 $607.9 $453.7 $1,511.9
The Company allocates funds for capital and maintenance expenditures
based on its capital needs indicated by its long-term planning and
availability of internally generated funds or suitable long-term financing.
Capital expenditures in 1993 were $115.8 million, compared with $83.3
million in 1992, and $84.4 million in 1991. The majority of these
expenditures were for improvements to the railroad plant, structures and
equipment.
Not included in the chart above is $202 million (excluding $97.4 million
related to the sale and leaseback of certain locomotives and freight cars in
1990) representing the cost to lessors of freight cars and locomotives which
the Company leased during the five-year period. The Company entered into
operating lease agreements in 1993 covering 65 locomotives and 1,300 freight
cars with a cost to the lessors of approximately $161 million, of which
approximately $59 million of such equipment was received in 1993. The Company
expects to enter into additional operating lease agreements in 1994 for 65
locomotives and approximately 300 freight cars which have a cost to the
lessors of approximately $107 million.
A $152 million capital expenditures program is presently budgeted for
1994. The majority of the capital expenditures program covers replacement of
rail, ties and other track material system-wide, expansion of train handling
capacity from the Powder River Basin by WRPI, and construction of new
facilities to serve shippers.<PAGE>
11
The Debt Facilities and other indebtedness of the Company impose
limitations on the amount of capital expenditures by the Company and its
subsidiaries. The Company does not believe that either the restrictions on
capital expenditures contained in the Debt Facilities or the Company's other
indebtedness should adversely affect its ability to carry out its planned
capital expenditures.
Other Property. The Company owns various facilities including those for
maintenance, stores and yards throughout its system. It leases, and at the
expiration of the lease in 1996 will at a nominal price become the owner of,
an iron ore handling facility at Escanaba, Michigan, which transports ore by
conveyor belts from car to boat or from car to stockpile to boat.
The Company is the lessor of certain real estate under approximately
1,700 leases for commercial, agricultural and industrial uses and owns
additional real estate available for such uses. The Company continues to
identify and sell real estate not needed for present or planned rail
operations. The Company owns several repair facilities, including a heavy
freight car repair facility at Clinton, Iowa, and other facilities for
locomotive heavy repair at Marshalltown, Iowa; Chicago, Illinois; and Proviso,
Illinois.
ITEM 3. LEGAL PROCEEDINGS
Environmental Matters
The Company's operations are subject to a variety of federal, state and
local environmental and pollution control statutes and regulations which
govern air emissions from equipment and facilities, discharges to water and
the generation, handling, storage, transportation, treatment and disposal of
hazardous substances. While over time, substantial expenditures by the
Company may be required to comply with such existing and future statutes and
regulations, the Company believes that, based on present information, such
compliance can be achieved without a material adverse effect on the financial
condition or competitive position of the Company.
The federal Comprehensive Environmental Response, Compensation and
Liability Act, as amended ("CERCLA") and many state "superfund" laws, subject
to certain limitations and defenses, impose strict, joint and several
liability on current and prior owners or operators of contaminated properties
and persons that arranged for disposal of hazardous substances at such
properties. The Company, as owner and prior owner of properties used in rail
or other industrial operations or leased to others for such purposes, is
subject to liability from such laws without regard to when contamination may
have occurred.
The Company is the lessor of real property under approximately 1,700
leases for commercial, agricultural and industrial uses and owns or leases
numerous other sites. The Company has provided reserves for environmental
exposure from current and former railroad operating properties, fueling
facilities, leased properties and pending litigation and enforcement actions.
The Company's environmental exposure is reevaluated periodically.<PAGE>
12
At December 31, 1993 the Company's reserve for environmental liabilities
was $28 million. No offsets were credited for possible insurance recoveries,
as the Company believes, to a large extent, it would not be able to obtain
such recoveries. The reserves were determined based on the Company's
anticipated cost of remediation at all known sites, including those where no
claim or enforcement action has been issued, taking into consideration the
extent of damage and the Company's remediation cost history. The Company has
not discounted its environmental liabilities as the timing of remediation
payments is uncertain. Environmental regulations and remediation processes
are subject to future change, and determining the actual cost of remediation
will require further investigation and remediation experience. Therefore, the
ultimate cost cannot be determined at this time. However, while such cost may
vary from the Company's current estimate, the Company believes the difference
between its reserve and the ultimate liability will not be material.
The Company has been named as a potentially responsible party in three
proceedings under CERCLA and in one state superfund matter, all in the
Midwest. The Company is also a defendant in one private CERCLA cost recovery
action. The Company's reserves for environmental proceedings include these
cases. The Company has assumed that other PRPs will pay appropriate shares of
remediation obligations, except when the Company is aware they are incapable
of doing so. In such instances, the Company has reapportioned the potential
liability and provided a reserve.
Following is a listing of the sites of which the Company is currently
aware in which CERCLA or similar state superfund claims for remedial
investigation, feasibility study and/or remediation costs have been made:
9th Avenue Dump -- This proceeding involves the remediation of a
contaminated site in Gary, Indiana. The Company is alleged to have been a
generator of hazardous waste deposited at the site. Approximately 180 other
potentially responsible parties ("PRPs") have also been identified. The
United States Environmental Protection Agency ("U.S. EPA") has issued Section
106 orders to a large number of PRPs, including the Company, to undertake an
interim remedial action (Phase 1) and a final remedial action (Phase 2). Work
on Phase 1 is nearing completion. Negotiations with respect to the terms of
the final remedial action are continuing. Total remediation costs are
currently estimated at $45,000,000 based on Phase 1 costs to date and a
proposed revised remedy under review by U.S. EPA. Separate groups of PRPs
have entered into consent decrees with the U.S. EPA to undertake the interim
and final remedies and another group of de minimis PRPs has settled with the
U.S. EPA. The Company and a number of PRPs have withdrawn from the
Participation Agreement for the interim remedy, and the Company did not
participate with the group of PRPs involved in undertaking the final remedy.
A participant group is attempting to reach agreement with EPA as to the terms
of a revised Phase 2 remedy. The participant group has informed the Company
that it may rejoin the group if it agrees to pay approximately 6.2% of the
total remediation costs. The matter is in negotiation.<PAGE>
13
Moss-American Site -- The Company is the owner of approximately one-third
of an area in Milwaukee County, Wisconsin, which has been identified by the
U.S. EPA as a CERCLA site. The remainder of the site is owned by Milwaukee
County. The site was previously operated by Moss-American, a division of
Kerr-McGee Oil Company, as a wood treatment facility and is contaminated with
creosote and other hazardous wastes from the wood treatment process. The
Company purchased the property from Kerr-McGee in 1980. The U.S. EPA has
completed a remedial investigation and feasibility study and issued a Record
of Decision which specifies a remediation plan estimated by U.S. EPA at
$26,000,000. Both the Company and Milwaukee County have refused to undertake
the remedy. Kerr-McGee has agreed to the terms of a consent decree which
obligates it to undertake the remediation and is seeking $1 million from the
Company as its contribution to the remediation costs. The matter is under
negotiation. Kerr-McGee has also agreed to pay $1 million of approximately
$1.9 million in U.S. EPA response costs. The Company has filed comments with
the Department of Justice opposing the approval of the proposed consent decree
between U.S. EPA and Kerr-McGee. Milwaukee County has filed for leave to
intervene in the consent decree proceeding in the U.S. District Court in
Milwaukee and to oppose entry of the consent decree and to initiate suit
against U.S. EPA, the Wisconsin Department of Natural Resources, Kerr-McGee
and the Company. U.S. EPA has made a claim against the Company and Milwaukee
County for approximately $900,000 of response costs. The matter is in
negotiation.
West Minneapolis Site -- The Company is a defendant in a cost recovery
suit brought in the U.S. District Court in St. Paul, Minnesota, by Riverwalk
Partnership ("Riverwalk"), formerly known as Stanton-Harstad Properties and
the Minneapolis Community Development Agency ("MCDA"). Riverwalk is the
former owner of property which, in part, was the site of a railroad yard,
roundhouse and coal gassification plant owned by the Chicago, St. Paul,
Minneapolis & Omaha Railroad (the "Omaha"), a company acquired by the Company.
Riverwalk alleges it has incurred expenses in excess of $200,000 for
remediation of contamination discovered on the property allegedly caused by
prior rail operations of Omaha. MCDA is the owner of property previously
owned by Stanton-Harstad and Glacier Park, an affiliate of Burlington Northern
(the "BN property") which lies adjacent to the Omaha property. MCDA,
subsequent to the remediation performed by Stanton-Harstad, alleges that it
has incurred expenses in excess of $2 million for its remediation costs of
the Omaha and BN properties together and also alleges damages for diminution
in value and delay in development. Consolidated Container Corporation is a
defendant in both suits, and Burlington Northern Railroad and Glacier Park are
defendants in the suit brought by MCDA. The Company has cross claimed against
all other defendants.
Union Scrap Iron and Metal Company III - The Company and approximately
eighty other parties have received a notice from the U.S. EPA requesting
reimbursement of approximately $1 million for costs allegedly incurred in
connection with the remediation of the Union Scrap Iron and Metal III Site in
Minneapolis, Minnesota.<PAGE>
14
Rock, Michigan Groundwater - The Company has been identified by the
Michigan Department of Natural Resources (the "Michigan DNR") as one of five
PRP's allegedly responsible for contamination of shallow residential wells in
Rock, Michigan. Property owned by the Company and previously used by a bulk
fuel operator is alleged to be contaminated and the source of groundwater
contamination. The Michigan DNR has demanded payment of its response costs of
approximately $2.2 million. The Company and other PRP's have been ordered to
perform an investigation to determine the extent of contamination and to
formulate a feasibility study for remediation. The Company has agreed to
perform an investigation of its own property.
During 1993, the Company settled environmental litigation with respect to
the following sites:
Holtz-Krause Landfill - During October, 1993, the Company entered into a
consent and settlement agreement among a large group of participants and the
Wisconsin Department of Natural Resources providing for the remediation of the
site. The settlement is at a cost to the Company within its existing reserve.
East Bethel Landfill - During May, 1993, the Company and other defendants
settled with Sylvester Brothers, the owner and operator of the East Bethel
Landfill, under the terms of which the defendants (including the Company) will
undertake remediation of the site. The settlement is at a cost to the Company
within its existing reserve.
Litigation
The Company is party to a number of other legal actions arising in the
ordinary course of business, including actions involving personal injury
claims. In management's opinion, the legal actions to which the Company is a
party will not in the aggregate have a material adverse effect on the
financial condition of the Company.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matter was submitted during the fourth quarter of 1993.
Executive Officers of the Registrant
Listed below are the names, present titles and ages of all executive
officers of the Company or its predecessor and the positions held during the
last five years. Each executive officer holds office until his successor
shall have been elected or appointed or until his death, resignation or
removal. There have been no arrangements or understandings between any
executive officer and any other person or persons pursuant to which he was
selected as an executive officer. There are no family relationships between
any executive officer and any director or other executive officer. <PAGE>
15
Robert Schmiege age 52, Chairman and Chief Executive Officer
since August of 1988; President and a
Director since July of 1988.
Arthur W. Peters age 51, Senior Vice President-Sales and
Marketing since June of 1988.
Robert A. Jahnke age 50, Senior Vice President-Operations
since December of 1988.
James P. Daley age 66, Senior Vice President and General
Counsel since July of 1985; and Secretary
since January of 1987.
Thomas A. Tingleff age 47, Senior Vice President-Finance and
Accounting since June of 1989; Vice
President-Finance and Assistant Treasurer
from July of 1980 to May of 1989.
Jerome W. Conlon age 54, Senior Vice President-Administration
since June of 1989; Director from July of
1989 to February of 1990; Senior Vice
President-Public Affairs, Acquisitions and
Planning from July of 1988 to July of 1989.
ITEM 6. SELECTED FINANCIAL DATA
The following table sets forth selected consolidated financial
information for the Company and the Predecessor for the periods and at the
dates indicated. Information denoted "Predecessor" relates to dates or
periods prior to the Acquisition. The purchase method of accounting was used
to record assets acquired and liabilities assumed by the Company in connection
with the Acquisition. Such method of accounting has resulted in increased
depreciation. In addition, the capital structure of the Company is different
from that of its Predecessor, resulting in increased interest and prior to the
Recapitalization, preferred dividends. Accordingly, the financial statements
for periods and dates after July 24, 1989 are not comparable in all material
respects to the financial statements for periods and dates prior to July 24,
1989. As explained in Note 1(f) to the Consolidated Financial Statements,
effective January 1, 1992, the Company changed its method of accounting for
postretirement benefits other than pensions and effective January 1, 1991, the
Company changed its method of accounting for income taxes.
The historical financial information (other than operating data) for each
of the five years in the period ended December 31, 1993 was derived from
consolidated financial statements, of which the three most recent years are
incorporated by reference herein and were audited by Arthur Andersen & Co.,
independent public accountants, whose reports thereon are incorporated by
reference herein.
<PAGE>
16
<TABLE>
<CAPTION>
Company Predecessor
July 24,- January 1,-
Years ended December 31, December July 23,
1993 1992 1991 1990 31, 1989 1989
(Dollars in millions, except per share amounts)
<S> <C> <C> <C> <C> <C> <C>
Statement of Operations Data:
Operating revenues $1,043.2 $ 985.0 $ 979.0 $960.7 $412.9 $541.7
Operating expenses 1/ 834.1 810.8 904.0 810.1 352.7 480.6
Operating income 209.1 174.2 75.0 150.6 60.2 61.1
Other income, net 11.0 8.1 11.1 7.5 3.9 (16.2)
Interest expense 105.4 126.1 156.8 174.6 88.8 37.1
Income (loss) before income taxes 114.7 56.2 (70.7) (16.5) (24.7) 7.8
Income (loss) before extraordinary
item and cumulative effect 64.0 37.4 (43.5) (58.5) (25.1) 4.3
Net income (loss) 2/ 53.2 (56.2) (72.5) (56.4) (25.1) 4.3
Income (loss) available for
common stockholders 53.2 (114.9) (102.8) (76.1) (32.4) 1.3
Income (loss) per share before
extraordinary item and
cumulative effect 3/ 1.44 (.58) (3.39) (3.59) (1.49)
Net income (loss) per share 3/ 1.20 (3.15) (4.72) (3.49) (1.49)
</TABLE>
Years Ended December 31,
1993 1992 1991 1990 1989
Operating Data:
Revenue ton miles
(millions) 4/ 46,114 40,986 40,601 37,705 35,687
Operating ratio (%) 5/ 80.0 82.3 92.3 84.3 87.3
December 31,
1993 1992 1991 1990 1989
(Dollars in millions)
Balance Sheet Data:
Working capital $ (51.9) $ (72.2) $ (75.6) $ (48.3) $ (31.9)
Total assets 2,135.9 2,072.0 2,089.0 1,905.1 1,937.5
Long-term debt 1,142.8 1,227.9 1,224.3 1,213.1 1,313.3
Preferred Stock - - 207.4 177.1 157.5
Common stockholders'
equity 226.2 144.0 (98.5) 4.4 80.5
1/ Special charges included in operating expenses consist of employee
reduction and relocation costs in 1993, 1992, 1991, 1990 and 1989, a
charge in 1993 for management fees payable to a previous principal
stockholder, and environmental and personal injury costs in 1991. Such
special charges totaled $5.0 million in 1993; $30.0 million in 1992;
$115.8 million in 1991; $13.4 million in 1990; $6.3 million for the
period July 24 to December 31, 1989; and $18.4 million for the period
January 1 to July 23, 1989.
<PAGE>
17
2/ Net income for 1993 has been reduced by a $10.8 million extraordinary
loss related to the refinancing of long-term debt. The 1992 net loss
includes a $91.0 million extraordinary loss related to the
Recapitalization and a $2.6 million charge for the cumulative effect of a
change in the method of accounting for other postretirement benefits.
The 1991 net loss includes a $25.6 million charge for the cumulative
effect of a change in the method of accounting for income taxes and a
$3.4 million extraordinary loss on prepayment of long-term debt.
3/ Income (loss) per share is calculated after deducting preferred stock
dividends and accretion to liquidation value from net income (loss).
Such amounts totalled $58.7 million in 1992; $30.3 million in 1991; $19.7
million in 1990; $7.3 million for the period July 24 to December 31,
1989; and $3.0 for the period January 1 to July 23, 1989.
4/ Revenue ton miles equals the product of the weight in tons of freight
carried for hire and the distance in miles carried on the Company's
lines.
5/ Operating ratio is the ratio of operating expenses to operating revenues.
Special charges increased the operating ratio by 0.5, 3.0, 11.8, 1.4, and
2.6 percentage points for the years ended December 31, 1993, 1992, 1991,
1990 and 1989, respectively.
PART II
The following items are incorporated into this report by reference to the
sections of the Company's 1993 Annual Report to Stockholders shown below:
Annual Report Section Title
(If Applicable)
Item Description and Page Number
5 Market for the Registrant's Stock Listing,
Common Equity and Related inside back cover
Stockholders Matters.
7 Management's Discussion and Management Discussion and
Analysis of Financial Condition Analysis of Financial
and Results of Operations. Condition and Results
of Operations,
pages 16 through 21.
8 Financial Statements, Supplementary Pages 22 through 32.
Data and the Report of
Independent Public Accountants.
<PAGE>
18
Item 9. Disagreements on Accounting and Financial Disclosure
None.
PART III
Item 10. Directors and Executive Officers of the Registrant
Information with respect to the directors of the Company will be set
forth under the caption "Nominees for Election as Directors," "Directors
Continuing in Office Until 1995" and "Directors Continuing in Office until
1996" in the Company's Proxy Statement for the Annual Meeting of Stockholders
and is hereby incorporated by reference. The Annual Meeting is scheduled to
be held at 9:00 a.m. (CST), on May 3, 1994, at the Harris Trust and Savings
Bank Auditorium, 111 West Monroe, 8th Floor, Chicago, Illinois.
Information with regard to the Company's executive officers appears
in Part I of this Form 10-K under the caption "Executive Officers of the
Registrant."
Item 11. Executive Compensation
Information with respect to this item will be set forth under the
caption "Executive Compensation" in the Company's Proxy Statement for the
Annual Meeting of Stockholders and is hereby incorporated by reference.
Item 12. Security Ownership of Certain Beneficial Owners and Management
Information with respect to this item will be set forth under the
caption "Security Ownership of Certain Beneficial Owners and Management" in
the Company's Proxy Statement for the Annual Meeting of Stockholders and is
hereby incorporated by reference.
Item 13. Certain Relationships and Related Transactions
Information with respect to this item will be set forth under the
caption "Certain Relationships and Related Transactions" in the Company's
Proxy Statement for the Annual Meeting of Stockholders and is hereby
incorporated by reference.
<PAGE>
19
PART IV
Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K
Incorporated
Page by Reference to
Number Page Number in
of this Annual Report
Form 10-K to Stockholders
(a) 1. Financial Statements
Report of independent public accountants 32
Consolidated statement of income--years
ended December 31, 1991, 1992 and 1993 22
Consolidated balance sheet--
December 31, 1992 and 1993 23
Consolidated statement of cash flows--years
ended December 31, 1991, 1992 and 1993 24
Notes to Consolidated Financial Statements 25-31
(a) 2. Financial Statement Schedules
Report of independent public accountants 32
Selected Quarterly Financial Data for the
years ended December 31, 1992 and 1993 30
Schedule V -- Property, plant and equipment 28
Schedule VI -- Accumulated depreciation,
depletion and amortization of property,
plant and equipment 29
Schedule VIII -- Valuation and qualifying
accounts and reserves 30
Schedule X -- Supplementary income
statement information 31
<PAGE>
20
(a) 3. Exhibits
Many Company exhibits are incorporated by reference to previous filings
of the Company as defined below:
The Preliminary Proxy Statement filed on March 7, 1994 by Chicago
and North Western Holdings Corp.
The Form S-8 filed on December 10, 1993 by Chicago and North
Western Holdings Corp., file number 33-51405 (the "1993 Form S-
8").
The Form S-4 filed by Chicago and North Western Holdings Corp.,
file number 33-30874 (the "Form S-4").
The Form S-1 filed on March 27, 1992 by Chicago and North Western
Holdings Corp., file number 33-45265 (the "1992 Form S-1").
The Annual Report of Chicago and North Western Holdings Corp. on
Form 10-K for the year ended December 31, 1992, file number 33-
30874 (the "1992 10-K").
The Annual Report of Chicago and North Western Holdings Corp. on
Form 10-K for the year ended December 31, 1990, file number 33-
30874 (the "1990 10-K").
The Annual Report of Chicago and North Western Holdings Corp. on
Form 10-K for the year ended December 31, 1989, file number 33-
30874 (the "1989 10-K").
Number
3.1 Restated Certificate of Incorporation of Chicago and North Western
Holdings Corp. (incorporated by reference to Exhibit 4.1 to Form
S-8).
3.2 By-Laws of Chicago and North Western Holdings Corp. amended
November 23, 1993 (incorporated by reference to Exhibit 4.2 to
Form S-8).
4.1 Specimen form of Certificate of Common Stock (incorporated by
reference to Exhibit 4.1 to the 1992 Form S-1).
4.14 Second Participation and Loan Agreement dated as of December 20,
1990 among Western Railroad Properties, Incorporated as Lessee and
Citibank, N.A., not individually but solely as Trustee, as Lessor,
and UP Leasing Corporation, as Beneficial Owner, and Union Pacific
Corporation as Beneficial Owner Parent, and Chicago and North
Western Transportation Company and CNW Corporation and Chemical
Bank as Administrative Agent and Continental Bank, N.A. and the
Long-Term Credit Bank of Japan, Ltd., Chicago Branch, as Co-
Agents, and Banque Paribas, New York Branch and Manufacturer
Hanover Trust Company as Lead Managers (incorporated by reference
to Exhibit 10.19 to the 1990 10-K).<PAGE>
21
Number
4.16 Credit Agreement among Chicago and North Western Transportation
Company, Chicago and North Western Holdings Corp., the Lenders
named therein, Bank of Montreal, as issuing bank, the Co-Agents
named therein and Chemical Bank, as Agent, dated as of March 27,
1992 (incorporated by reference to Exhibit 4.16 to the 1992 10-K).
4.16a First Amendment and Waiver dated as of April 7, 1992 to the Credit
Agreement dated as of March 27, 1992, among Chicago and North
Western Transportation Company, Chicago and North Western Holdings
Corp., the Lenders named therein, Bank of Montreal, as Issuing
Bank, the Co-Agents party thereto and Chemical Bank, as Agent
(incorporated by reference to Exhibit 4.16a to the 1992 10-K).
* 4.16b Amendment dated as of September 10, 1993, to the Credit Agreement
dated as of March 27, 1992, as previously amended, among Chicago
and North Western Transportation Company, Chicago and North
Western Holdings Corp., the Lenders named therein, Bank of
Montreal, as Issuing Bank, the Co-Agents party thereto and
Chemical Bank, as Agent.
* 4.16c Master Assignment and Acceptance Agreement, dated as of September
10, 1993, among Chicago and North Western Transportation Company,
Chicago and North Western Holdings Corp., the Lenders named
therein, Bank of Montreal, an Issuing Bank, the Co-Agents named
therein and Chemical Bank, as Agent.
4.17 Senior Secured Note Purchase Agreement among Chicago and North
Western Transportation Company, Chicago and North Western Holdings
Corp., and the Purchasers listed on Schedule I thereto dated March
27, 1992 (incorporated by reference to Exhibit 4.17 to the 1992
10-K).
4.17a First Amendment and Waiver, dated as of April 7, 1992, to the
Senior Secured Note Purchase Agreement, dated as of March 27,
1992, among Chicago and North Western Transportation Company,
Chicago and North Western Holdings Corp., and The Purchasers named
there (incorporated by reference to Exhibit 4.17a to the 1992 10-
K).
4.18 Master Collateral Agreement and Intercreditor Agreement among
certain participating creditors of Chicago and North Western
Transportation Company and Chemical Bank, as agent, dated as of
March 27, 1992 (incorporated by reference to Exhibit 4.18 to the
1992 10-K).<PAGE>
22
Number
10.2 Second Amended and Restated Stockholders Agreement, dated as of
March 30, 1992, among Chicago and North Western Holdings Corp.,
CNW Corporation, Chicago and North Western Transportation Company,
Blackstone Capital Partners L.P., Blackstone Family Investment
Partnership L.P., Blackstone Advisory Directors Partnership L.P.,
Chemical Investments, Inc., The Prudential Insurance Company of
America, DLJ Capital Corporation, Union Pacific Corporation, UP
Rail, Inc. and the Management Group (incorporated by reference to
Exhibit 10.2 to the 1992 Form S-1).
10.2a Letter Agreement dated October 1, 1992 releasing certain persons
from the Second Amended and Restated Stockholders Agreement
(incorporated by reference to Exhibit 10.2a to the 1992 10-K).
10.2b Agreement dated as of December 1, 1992 among Chicago and North
Western Holdings Corp., Blackstone Capital Partners, L.P.,
Blackstone Family Investment Partnership, L.P., Blackstone
Advisory Directors Partnership, Chemical Investments Inc.,
Prudential Insurance Company of America, DLJ Capital Corporation,
Union Pacific Corporation, UP Rail, inc., CNW Corporation, Chicago
and North Western Transportation Company and the Management Group
(incorporated by reference to Exhibit 10.2b to the 1992 10-K).
10.3 Registration Rights Agreement, dated as of July 14, 1989, among
Chicago and North Western Holdings Corp., Blackstone Capital
Partners L.P., DLJ Capital Corporation, Union Pacific Corporation
and the Management Group (the "Registration Rights Agreement")
(incorporated by reference to Exhibit 10.3 to Form S-4).
10.4 Amendment No. 1 to Registration Rights Agreement, dated as of July
24, 1989 (incorporated by reference to Exhibit 10.4 to Form S-4).
10.5 Exchange Agreement between Chicago and North Western Holdings
Corp. and UP Rail, Inc. dated March 30, 1992 (incorporated by
reference to Exhibit 10.5 to the 1992 10-K).
10.6 Standstill Agreement among Chicago and North Western Holdings
Corp., Union Pacific Corporation and UP Rail, Inc. dated April 7,
1992 (incorporated by reference to Exhibit 10.6 to the 1992 10-K).
10.7 Gillette-Douglas Joint Line Agreement between Burlington Northern,
Inc. and Chicago and North Western Transportation Company
(incorporated by reference to Exhibit 10.9 to Form S-4).<PAGE>
23
Number
10.8 Letter Agreement dated March 4, 1986 between Chicago and North
Western Transportation Company, Western Railroad Properties
Incorporated and Burlington Northern Railroad Company for the
purchase of an undivided one-half interest in Burlington
Northern's Coal Creek Junction and Caballo Junction, Wyoming line
of railroad (incorporated by reference to Exhibit 10.10 to Form S-
4).
10.9 Agreement for Modification of Joint Line Agreement and for Interim
Trackage Rights dated April 21, 1986 (incorporated by reference to
Exhibit 10.11 to Form S-4).
# 10.10 Chicago and North Western Transportation Company Supplemental
Pension Plan, amended and restated January 1, 1984 (incorporated
by reference to Exhibit 10.13 to the 1989 10-K).
# 10.11 First Amendment to Chicago and North Western Transportation
Company Supplemental Pension Plan, effective July 1, 1985
(incorporated by reference to Exhibit 10.14 to the 1989 10-K).
# 10.12 Second Amendment to Chicago and North Western Transportation
Company Supplemental Pension Plan, effective July 1, 1985
(incorporated by reference to Exhibit 10.15 to the 1989 10-K).
# 10.13 Third Amendment to Chicago and North Western Transportation
Company Supplemental Pension Plan, effective January 1, 1987
(incorporated by reference to Exhibit 10.16 to the 1989 10-K).
# 10.13a Fourth Amendment to Chicago and North Western Transportation
Company Supplemental Pension Plan, effective January 1, 1989
(incorporated by reference to Exhibit 10.63 to the 1989 10-K).
10.14 One North Western Center Lease (incorporated by reference to
Exhibit 10.20 to Form S-4).
# 10.15 Chicago and North Western Transportation Company Profit Sharing
and Retirement Savings Program (as amended and restated January 1,
1989) (incorporated by reference to Exhibit 10.8 to the 1989 10-
K).
# 10.16 Bonus Plan of Chicago and North Western Holdings Corp., adopted
March 9, 1992 (incorporated by reference to Exhibit 10.16 to the
1992 10-K).
# 10.17 Chicago and North Western Transportation Company Executive
Retirement Plan, dated January 1, 1989 (incorporated by reference
to Exhibit 10.46 to the 1990 10-K).<PAGE>
24
Number
10.19 Purchase of Service Agreement between Commuter Rail Division and
Chicago and North Western Transportation Company, October 1, 1984
to December 31, 1988 (incorporated by reference to Exhibit 10.22
to Form S-4).
10.26 Amendments Nos. 7, 8 and 9 to Purchase of Service Agreement
between the Commuter Rail Division and Chicago and North western
Transportation Company (incorporated by reference to Exhibit 10.26
to the 1992 Form S-1).
# 10.27 Chicago and North Western Transportation Company Excess Benefit
Retirement Plan dated January 1, 1989 (incorporated by reference
to Exhibit 10.36 to the 1989 10-K).
# 10.28 Employment Agreement, dated as of July 14, 1989, between CNW
Corporation and Jerome W. Conlon (incorporated by reference to
Exhibit 10.42 to Form S-4).
# 10.29 Employment Agreement, dated as of July 14, 1989, between CNW
Corporation and James P. Daley (incorporated by reference to
Exhibit 10.43 to Form S-4).
# 10.30 Employment Agreement, dated as of July 14, 1989, between CNW
Corporation and Robert A. Jahnke (incorporated by reference to
Exhibit 10.44 to Form S-4).
# 10.31 Employment Agreement, dated as of July 14, 1989, between CNW
Corporation and Arthur W. Peters (incorporated by reference to
Exhibit 10.45 to Form S-4).
# 10.32 Employment Agreement, dated as of July 14, 1989, between CNW
Corporation and Robert W. Schmiege (incorporated by reference to
Exhibit 10.46 to Form S-4).
# 10.33 Employment Agreement, dated as of July 14, 1989, between CNW
Corporation and Thomas A. Tingleff (incorporated by reference to
Exhibit 10.47 to Form S-4).
*# 10.33a Termination Agreements each dated February 22, 1994 with respect
to each of the Employment Agreements referenced in 10.28 through
10.33.
# 10.34 Equity Incentive Plan for Key Employees of Chicago and North
Western Holdings Corp. and Subsidiaries (incorporated by reference
to Exhibit 10.48 to Form S-4).
# 10.35 Form of Non-Qualified Stock Option Agreement, dated as of July 14,
1989, between Chicago and North Western Holdings Corp., and
certain of the Management Investors (incorporated by reference to
Exhibit 10.49 to Form S-4).
# 10.42 Rollover Option Agreement, dated as of July 14, 1989, between
Chicago and North Western Holdings Corp. and Robert A. Jahnke
(incorporated by reference to Exhibit 10.57 to Form S-4).<PAGE>
25
Number
# 10.43 Rollover Option Agreement, dated as of July 14, 1989, between
Chicago and North Western Holdings Corp. and Arthur W. Peters
(incorporated by reference to Exhibit 10.58 to Form S-4).
# 10.44 Rollover Option Agreement, dated as of July 14, 1989, between
Chicago and North Western Holdings Corp. and Thomas A. Tingleff
(incorporated by reference to Exhibit 10.59 to Form S-4).
10.45 Agreement for UP Trackage Rights, dated as of July 14, 1989, by
and among Union Pacific Railroad Company, Missouri Pacific
Railroad Company, CNW Corporation and Chicago and North Western
Transportation Company (incorporated by reference to Exhibit 10.60
to Form S-4).
10.46 Supplemental Form of Agreement for UP Trackage Rights, dated as of
January 31, 1990 (incorporated by reference to Exhibit 10.39 to
the 1990 10-K).
10.47 Amendment to Agreement for UP Trackage Rights dated as of December
20, 1990 (incorporated by reference to Exhibit 10.40 to the 1990
10-K).
10.52 Letter of Intent, dated January 23, 1992 among Chicago and North
Western Holdings Corp., CNW Corporation, Union Pacific
Corporation, UP Rail, Inc. and UP Leasing Corporation
(incorporated by reference to Exhibit 10.52 to the 1992 Form S-1).
# 10.53 Chicago and North Western Holdings Corp. 1992 Equity Incentive
Plan dated April 7, 1992 (incorporated by reference to Exhibit
10.53 to the 1992 10-K).
# 10.53a Chicago and North Western Holdings Corp. 1992 Equity Incentive
Plan Amendment effective April 7, 1992.
*# 10.53b Second Amendment to The Chicago and North Western Holdings Corp.
1992 Equity Incentive Plan.
# 10.54 Chicago and North Western Holdings Corp. 1994 Equity Incentive
Plan (subject to shareholder approval incorporated by reference to
Exhibit 22 to Preliminary Proxy Statement filed on March 7, 1994
via EDGAR).
* 10.55 AT&T Corporate Center office sublease between AT&T Communications,
Inc. (as Landlord) and Chicago and North Western Transportation
Company (as Tenant) dated as of October 25, 1993.
*# 10.56 Chicago and North Western Holdings Corp. Directors' Deferred
Compensation Plan.
*# 10.57 Chicago and North Western Holdings Corp. Directors' Pension and
Retirement Savings Plan.
*# 10.58 Chicago and North Western Holdings Corp. Directors' Pension and
Retirement Savings Plan Trust.<PAGE>
26
Number
* 10.59 Agreement as of June 21, 1993 among Chicago and North Western
Holdings Corp., Blackstone Capital Partners L.P., Blackstone
Family Investment Partnership II L.P., Blackstone Advisory
Directors Partnership L.P., Chemical Investments, Inc., The
Prudential Insurance Company of America, DLJ Capital Corporation,
Donaldson, Lufkin & Jenrette Securities Corporation, Union Pacific
Corporation, UP Rail, Inc., CNW Corporation, Chicago and North
Western Transportation Company, Chicago and North Western
Acquisition Corporation, UP Leasing Corporation and certain
individuals.
* 13. Chicago and North Western Holdings Corp. 1993 Annual Report to
Stockholders (only those portions incorporated by reference are
deemed "filed").
* 21. Subsidiaries of Chicago and North Western Holdings Corp.
28. Railroad Common Control Application before the Interstate Commerce
Commission, Finance Docket No. 32133, Union Pacific Corporation,
Union Pacific Railroad Company and Missouri Pacific Railroad
Company - Control -Chicago and North Western Holdings Corp. and
Chicago and North Western Transportation Company, volumes 1 - 4
(incorporated by reference to Exhibit 28 to the 1992 10-K).
* Filed herewith.
# Management contract or compensatory plan or arrangement.
No report on Form 8-K was filed in the fourth quarter of 1993.<PAGE>
27
SIGNATURES
Pursuant to the requirements of Section 12 or 15(d) of the
Securities Exchange Act of 1934, Registrant has duly caused this report to be
signed on its behalf by the undersigned, thereunto duly authorized.
CHICAGO AND NORTH WESTERN HOLDINGS CORP.
Principal Executive Officer
By /s/ Robert Schmiege
Robert Schmiege
Chairman, President and Chief Executive Officer
Principal Finance and Accounting Officer
By /s/ T. A. Tingleff
T. A. Tingleff
Senior Vice President-Finance and Accounting
March 18, 1994
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.
Date Signed
/s/ Robert Schmiege Director March 18, 1994
Robert Schmiege
/s/ Richard K. Davidson Director March 18, 1994
Richard K. Davidson
/s/ James E. Martin Director March 18, 1994
James E. Martin
/s/ James Mossman Director March 18, 1994
James Mossman
/s/ Samuel K. Skinner Director March 18, 1994
Samuel K. Skinner
/s/ James R. Thompson Director March 18, 1994
James R. Thompson<PAGE>
28
SCHEDULE V
CHICAGO AND NORTH WESTERN HOLDINGS CORP.
PROPERTY, PLANT AND EQUIPMENT
Millions of dollars
Column A Column B Column C Column D Column E Column F
Other
Balance Changes
at Additions add Balance
beginning at cost (deduct) at end
Classification of period (1) Retirements (2) of period
Year Ended
December 31, 1993
Road $1,301.1 $ 95.3 $ 4.2 $ (0.9) $1,391.3
Equipment 142.8 16.4 4.8 0.9 155.3
WRPI 543.3 4.1 0.2 0.1 547.3
$1,987.2 $115.8 $ 9.2 $ 0.1 $2,093.9
Year Ended
December 31, 1992
Road $1,248.7 $ 65.6 $ 13.5 $ 0.3 $1,301.1
Equipment 144.5 3.9 5.3 (0.3) 142.8
WRPI 533.2 13.8 3.7 - 543.3
$1,926.4 $ 83.3 $ 22.5 $ - $1,987.2
Year Ended
December 31, 1991
Road $ 941.2 $ 62.6 $ 17.2 $262.1 $1,248.7
Equipment 143.4 7.3 6.2 - 144.5
WRPI 491.4 14.5 1.2 28.5 533.2
$1,576.0 $ 84.4 $ 24.6 $290.6 $1,926.4
(1) Approximately $58.0 million in 1993, $39.0 million in 1992 and $26.8
million in 1991 represents payments to outsiders in cash, part of which
was secured through long-term financing. The balance each year represents
expenditures for company labor and related overheads and the use of new or
reusable material from inventory used in construction.
(2) Reflects adoption of SFAS No. 109, "Accounting for Income Taxes" in 1991.
<PAGE>
29
SCHEDULE VI
CHICAGO AND NORTH WESTERN HOLDINGS CORP.
ACCUMULATED DEPRECIATION, DEPLETION AND AMORTIZATION
OF PROPERTY, PLANT AND EQUIPMENT
Millions of dollars
Column A Column B Column C Column D Column E Column F
Other
Balance Additions changes-
at charged add Balance
beginning to cost & (deduct) at end
Classification of period expenses Retirements (1) of period
Year Ended
December 31, 1993
Road $106.1 $ 35.6 $ 1.0 $ 1.7 $142.4
Equipment 24.6 10.2 4.8 1.9 31.9
WRPI 75.1 23.0 - 0.7 98.8
$205.8 $ 68.8 $ 5.8 $ 4.3 $273.1
Year Ended
December 31, 1992
Road $ 76.9 $ 34.1 $ 9.5 $ 4.6 $106.1
Equipment 22.4 10.9 4.9 (3.8) 24.6
WRPI 57.4 19.9 3.5 1.3 75.1
$156.7 $ 64.9 $ 17.9 $ 2.1 $205.8
Year Ended
December 31, 1991
Road $ 47.3 $ 33.3 $ 5.2 $ 1.5 $ 76.9
Equipment 13.4 10.8 6.4 4.6 22.4
WRPI 33.4 22.7 1.1 2.4 57.4
$ 94.1 $ 66.8 $ 12.7 $ 8.5 $156.7
(1) Principally proceeds from disposal of property, net of removal costs,
credited to reserve, depreciation capitalized through overhead rates.
<PAGE>
30
SCHEDULE VIII
CHICAGO AND NORTH WESTERN HOLDINGS CORP.
VALUATION AND QUALIFYING ACCOUNTS AND RESERVES
Millions of dollars
Column A Column B Column C Column D Column E
Additions
Balance charged to
at Costs Other Deductions Balance
beginning and accounts describe at end
Description of period expenses describe (1) of period
Year Ended December 31, 1993
Reserves deducted from
assets to which
they apply--
Reserve for uncollectible
revenues and
other charges $ 4.0 $ 0.9 $ - $ 0.8 $ 4.1
Reserve for deferred
tax assets 43.1 - - 5.5 (2) 37.6
Year Ended December 31, 1992
Reserves deducted
from assets to which
they apply--
Reserve for uncollectible
revenues and
other charges $ 4.0 $ 0.6 $ - $ 0.6 $ 4.0
Reserve for deferred
tax assets 52.1 - - 9.0 (2) 43.1
Year Ended December 31, 1991
Reserves deducted
from assets to which
they apply--
Reserve for uncollectible
revenues and
other charges $ 4.1 $ 1.3 $ - $ 1.4 $ 4.0
Reserve for deferred
tax assets 52.1 - - - 52.1
(1) Write off of uncollectible accounts, unless otherwise noted.
(2) Reduction for expiring fully-reserved investment
tax credits and change in estimated use of credits.<PAGE>
31
SCHEDULE X
CHICAGO AND NORTH WESTERN HOLDINGS CORP.
SUPPLEMENTARY INCOME STATEMENT INFORMATION
Millions of dollars
Column A Column B
Charged to Costs and Expenses
Years Ended December 31,
1993 1992 1991
Maintenance and repairs (excluding payroll
taxes of $22.9 million in 1993, $23.4 million
in 1992 and $22.8 million in 1991. $187.9 $173.9 $198.4
Depreciation, depletion and amortization
of property, plant and equipment $ 68.8 $ 64.9 $ 66.8
Taxes, other than income taxes $ 75.8 $ 75.5 $ 79.3
Depreciation and amortization of intangible assets, royalties and advertising
costs are individually less than 1% of total revenues.<PAGE>
32
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To Chicago and North Western Holdings Corp.:
We have audited in accordance with generally accepted auditing standards,
the consolidated financial statements included in Chicago and North Western
Holdings Corp.'s Annual Report to Stockholders incorporated by reference in
this Form 10-K, and have issued our report thereon dated February 4, 1994.
Our audits were made for the purpose of forming an opinion on those statements
taken as a whole. The schedules listed in the Index to Financial Statement
Schedules are the responsibility of the Company's management and are presented
for purposes of complying with the Securities and Exchange Commission's rules
and are not part of the basic financial statements. These schedules have been
subjected to the auditing procedures applied in the audits of the basic
financial statements and, in our opinion, fairly state in all material
respects the financial data required to be set forth therein in relation to
the basic financial statements taken as a whole.
Our report on the consolidated financial statements includes an
explanatory paragraph with respect to the changes in method of accounting for
income taxes and other postretirement benefits as discussed in Note 1(f) to
the consolidated financial statements.
ARTHUR ANDERSEN & CO.
Chicago, Illinois
February 4, 1994<PAGE>
CONFORMED COPY
AMENDMENT dated as of September 10,
1993, to the Credit Agreement dated as
of March 27, 1992, as previously amended
(the "Credit Agreement"), among CHICAGO
AND NORTH WESTERN TRANSPORTATION
COMPANY, a Delaware corporation (the
"Borrower"), CHICAGO AND NORTH WESTERN
HOLDINGS CORP., a Delaware corporation
("Holdings"), the financial institutions
party thereto as lenders (the
"Lenders"), BANK OF MONTREAL, a Canadian
banking corporation, as issuing bank (in
such capacity, the "Issuing Bank"), the
Co-Agents named therein and CHEMICAL
BANK, as administrative agent for the
Lenders and the Issuing Bank (in such
capacity, the "Agent").
Capitalized terms used herein and not otherwise
defined herein shall have the respective meanings assigned
to such terms in the Credit Agreement. The Borrower has
requested that the Lenders enter into this Agreement in
order to amend certain provisions of the Credit Agreement as
set forth herein. Simultaneously with the execution and
delivery of this Agreement, the parties hereto, together
with certain other financial institutions which were lenders
under the Credit Agreement prior to the Effective Time (as
defined in Section 5 hereof), are entering into a Master
Assignment and Acceptance Agreement dated as of the date
hereof (the "Master Assignment Agreement") which provides
for certain assignments resulting in the Lenders hereunder
being the only lenders under the Credit Agreement as of the
Effective Time. The Lenders have agreed to the requested
amendments to the Credit Agreement, subject to the terms and
conditions set forth herein. Accordingly, the parties
hereto agree as follows:
SECTION 1. Amendments to Article I. Effective as
of the Effective Time, Article I of the Credit Agreement is
hereby amended as follows:
(a) The definition of the term "Dividend Amount" set
forth in Article I of the Credit Agreement is hereby amended
to read in its entirety as follows:
"Dividend Amount" shall mean, at any time, an
amount equal to the sum of (a) the aggregate amount of
Designated Capital Expenditures and Designated Payments
(provided that the portion of any Designated Payment
used to pay any premium or penalty on account of the
prepayment, repurchase or redemption of Indebtedness<PAGE>
2
shall not be included in this calculation) made after
the Closing Date and prior to such time, plus (b) if
positive, 10% of the aggregate net income of Holdings
and its consolidated subsidiaries for the period from
and including October 1, 1993, to and including the end
of the most recent fiscal quarter of Holdings ended
prior to such time for which financial statements have
been delivered to the Agent, treated as a single
accounting period, computed in accordance with GAAP
consistently applied but excluding any non-cash
extraordinary or nonrecurring gains or losses, minus
(c) the sum of (i) the aggregate amount of dividends
(other than Designated Dividends) paid by Holdings
after the Closing Date and prior to such time, plus
(ii) the aggregate amount of Capital Expenditures made
in reliance upon clause (vi) of the proviso to Section
6.03 prior to such time.
(b) Article I of the Credit Agreement is hereby
amended to include the definitions set forth below, in the
appropriate alphabetic positions:
"Master Assignment Agreement" shall mean the
Master Assignment and Acceptance Agreement dated as of
September 10, 1993, among the Borrower, Holdings, the
financial institutions that were Lenders hereunder at
the time of execution and delivery thereof, the Issuing
Bank and the Agent.
"Special ABR Loan" means any Loan (or portion of a
Loan) assigned pursuant to the Master Assignment
Agreement that is outstanding at the time of such
assignment as an ABR Loan; provided that the term
"Special ABR Loan" shall not include any such Loan (or
portion of a Loan) after September 30, 1993, or any
earlier date on which the Borrower converts, pursuant
to Section 2.10, the Borrowing in which such Loan is
included.
"Special LIBOR Loan" means any Loan (or portion of
a Loan) assigned pursuant to the Master Assignment
Agreement that is outstanding at the time of such
assignment as a Eurodollar Loan; provided that the term
"Special LIBOR Loan" shall not include any such Loan
(or portion of a Loan) after October 15, 1993, or any
earlier date on which the Borrower converts, pursuant
to Section 2.10, the Borrowing in which such Loan is
included.<PAGE>
3
SECTION 2. Amendments to Article II. Effective
as of the Effective Time, Article II of the Credit Agreement
is hereby amended as follows:
(a) Section 2.05 of the Credit Agreement is amended to
reduce the rate of the Commitment Fee (i) from "1/2 of 1%
per annum" to "0.375% per annum" on the average daily unused
amount of the Revolving Credit Commitment of each Lender and
(ii) from "1% per annum" to "0.375% per annum" on the
average daily unused amount of the Standby Commitment of
each Lender.
(b) Section 2.06(a) of the Credit Agreement is amended
to delete clauses (i) and (ii) thereof and to substitute,
after the word "plus", the rate of "0.50%".
(c) Section 2.06(b) of the Credit Agreement is amended
to delete clauses (i) and (ii) thereof and to substitute,
after the word "plus", the rate of "1.625%".
(d) Section 2.06(c) of the Credit Agreement is hereby
amended to delete clauses (i) and (ii) thereof and to
substitute, after the word "plus", the rate of "1.50%".
(e) Section 2.06 of the Credit Agreement is hereby
amended to add an additional paragraph (e) thereto, as set
forth below:
(e) Notwithstanding the foregoing or any contrary
provision of this Agreement, (i) each Special LIBOR
Loan shall have an Interest Period commencing on the
date that such Special LIBOR Loan is assigned pursuant
to the Master Assignment Agreement and ending on
October 15, 1993 and (ii) each Special ABR Loan shall
have an Interest Period commencing on the date that
such Special ABR Loan is assigned pursuant to the
Master Assignment Agreement and ending on September 30,
1993. For purposes of paragraph (c) above, the
Adjusted LIBO Rate shall be determined for Special
LIBOR Loans for the Interest Period applicable thereto
as provided above, but, for all other purposes of this
Agreement, each Special LIBOR Loan and Special ABR Loan
will continue to constitute part of the same Borrowing
of which such Special LIBOR Loan or Special ABR Loan
was a part immediately prior to the effectiveness of
the assignments under the Master Assignment Agreement.
It is understood and agreed that the foregoing
arrangements are intended to facilitate the
transactions contemplated by the Master Assignment
Agreement and are temporary. It also is understood and
agreed that (i) the foregoing arrangements may result<PAGE>
4
in a higher or lower Adjusted LIBO Rate applicable to
Special LIBOR Loans than that applicable to the other
Eurodollar Loans included in the same Borrowing, (ii)
the foregoing arrangements will result in Special LIBOR
Loans and Special ABR Loans accruing interest from the
date that such Loans are assigned pursuant to the
Master Assignment Agreement whereas other Loans
included in the same Borrowing will have accrued
interest from an earlier date, and (iii) Lenders
holding Special LIBOR Loans shall be paid interest
thereon reflecting such higher or lower Adjusted LIBO
Rate, and Lenders holding Special LIBOR Loans and
Special ABR Loans will be paid interest thereon
accruing from the date that such Loans are assigned
pursuant to the Master Assignment Agreement,
notwithstanding that such payment would result in
payments of interest failing to be made pro rata in
accordance with Section 2.16. Each Lender further
agrees that it will not make any assignment of its
rights and obligations under this Agreement until
October 15, 1993.
(f) Section 2.07 of the Credit Agreement is hereby
amended to delete clauses (i) and (ii) thereof and to
substitute, after the word "plus", the rate of "2.50%".
(g) Section 2.21 of the Credit Agreement is hereby
amended to reduce the rate of the Letter of Credit Fee from
"2-1/2% per annum" to "1.50% per annum".
SECTION 3. Amendment to Section 6.03. Effective
as of the Effective Time, Section 6.03 of the Credit
Agreement is hereby amended to read in its entirety as set
forth below:
SECTION 6.03. Capital Expenditures. Permit
Capital Expenditures of Holdings on a consolidated
basis during any calendar year to be greater than the
amount set forth below for such year:<PAGE>
5
Calendar Year Amount
1992 $ 95,000,000
1993 $115,000,000
1994 $120,000,000
1995 $125,000,000
1996 $145,000,000
1997 $135,000,000
1998
and each year thereafter $145,000,000
provided, however, that (i) such limits shall not apply
to any Capital Expenditure made pursuant to the
Trackage Rights Agreement to maintain 100% of the Lines
at FRA Track Classification 5 (as such terms are
defined in the Trackage Rights Agreement) and financed
exclusively by the issuance of the junior subordinated
note referred to in Exhibit B thereto; (ii) to the
extent Capital Expenditures made in any year are less
than the amount set forth above opposite such year,
Holdings and its subsidiaries shall be permitted to
carry forward the unused amount to succeeding calendar
years; (iii) the aggregate amount of the limit may be
exceeded by $8,000,000 for expenditures directly
related to the Twin Cities Project; (iv) the aggregate
amount of the limit may be exceeded by $15,000,000 for
expenditures directly related to the Borrower's Cargill
project at Blair, Nebraska; (v) such limits shall not
apply to a Capital Expenditure if (A) the amount of
such Capital Expenditure does not exceed the amount of
Residual Equity Proceeds available for the making of
Capital Expenditures, (B) the Borrower notifies the
Agent prior to the making of such Capital Expenditure
that it is designating such Capital Expenditure as a
use of Residual Equity Proceeds (it being understood
that such Capital Expenditure shall reduce the amount
of such Residual Equity Proceeds available for other
purposes by the amount of such Capital Expenditure),
which notice shall specify the Capital Expenditure so
designated and the amount thereof and (C) such Capital
Expenditure shall not be deducted in calculating Excess
Cash Flow; (vi) such limits shall not apply to a
Capital Expenditure if (A) the amount of such Capital
Expenditure does not exceed the Dividend Amount at the
time such Capital Expenditure is made and (B) the
Borrower notifies the Agent prior to the making of such
Capital Expenditure that it is utilizing the Dividend
Amount to make such Capital Expenditure; and (vii)
Capital Expenditures may only be made by CNW and its
subsidiaries.<PAGE>
6
SECTION 4. Representations and Warranties. Each
of Holdings and the Borrower represents and warrants to each
of the Lenders that:
(a) as of the Effective Time, there exists no Default
or Event of Default;
(b) the representations and warranties set forth in
each Loan Document are true and correct in all material
respects at and as of the Effective Time with the same
effect as though made at and as of the Effective Time,
except to the extent such representations and warranties
expressly relate to an earlier date; and
(c) as of the Effective Time, each of Holdings, the
Borrower and each other subsidiary of Holdings that is a
party to any Loan Document is in compliance with all of the
terms and provisions set forth in the Credit Agreement and
in each other Loan Document on its part to be observed or
performed.
SECTION 5. Conditions of Effectiveness. This
Agreement, including the amendments to the Credit Agreement
set forth above, shall become effective upon the
satisfaction of the following conditions:
(a) The Agent (or its counsel) shall have received
counterparts of this Agreement which, when taken together,
bear the signatures of Holdings, the Borrower, the Issuing
Bank and each Lender.
(b) The assignments to be made pursuant to the Master
Assignment Agreement shall have become effective in
accordance with the terms of the Master Assignment
Agreement.
(c) The Agent shall have received a duly executed
Revolving Credit Note, Standby Note and Term Note, complying
with the provisions of Section 2.04 of the Credit Agreement,
for each Lender that accepted an assignment of any
Commitments or Loans pursuant to the Master Assignment
Agreement, reflecting such assignment.
(d) The Agent shall have received (i) for the account
of each Lender, a fee equal to 0.25% of the sum of such
Lender's Loans, Letter of Credit Exposure and unused
Commitments (calculated as of the date of effectiveness of
this Agreement, prior to giving effect to the assignments
contemplated by the Master Assignment Agreement, provided
that if such Lender reduced the sum of its Loans, Letter of
Credit Exposure and unused Commitments pursuant to<PAGE>
7
assignments under the Master Assignment Agreement, the fee
payable to such Lender pursuant to this clause shall be
calculated on such sum after giving effect to such
assignments), (ii) for the account of each Lender that
accepted an assignment of any Commitments or Loans pursuant
to the Master Assignment Agreement, a fee equal to 0.40% of
the sum of the Loans, Letter of Credit Exposure and unused
Commitments so assigned to such Lender, and (iii)
reimbursement of any out-of-pocket expenses incurred by the
Agent in connection with the preparation, execution and
delivery of this Agreement and the Master Assignment
Agreement and the transactions contemplated hereby and
thereby (to the extent that notice thereof is given to the
Borrower prior to the date of effectiveness of this
Agreement).
(e) The Agent shall have received (i) a certificate,
dated the date of effectiveness of this Agreement and signed
by a Financial Officer of Holdings and the Borrower,
confirming the representations made in Section 4 of this
Agreement and (ii) the favorable written opinion of James P.
Daley, Esq., general counsel for Holdings and the Borrower,
dated the date of effectiveness of this Agreement, addressed
to the Lenders and in the form attached as Exhibit A to this
Agreement. Each of Holdings and the Borrower hereby directs
its general counsel to deliver the opinion referred to in
clause (ii) above, it being understood that the Lenders will
and may rely thereon.
The Agent will notify the Borrower, the Issuing Bank and the
Lenders when the foregoing conditions have been satisfied.
The time at which such conditions are satisfied, as
reasonably determined by the Agent, is referred to herein as
the "Effective Time". The Agent's determination of the
Effective Time shall be conclusive absent manifest error.
SECTION 6. APPLICABLE LAW. THIS AGREEMENT SHALL
BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF
THE STATE OF NEW YORK.
SECTION 7. Counterparts. This Agreement may be
executed in two or more counterparts, each of which shall
constitute an original, but all of which when taken together
shall constitute but one instrument.
SECTION 8. Agreement. Except as expressly
amended hereby, the Credit Agreement shall continue in full
force and effect in accordance with the provisions thereof
on the date hereof. Without limiting the generality of the
foregoing, it is acknowledged and agreed that the amendments
to the Credit Agreement contemplated hereby shall not affect<PAGE>
8
the calculation or amount of any interest or Fees accrued
prior to the Effective Time.
SECTION 9. Expenses. The Borrower shall pay all
reasonable out-of-pocket expenses incurred by the Agent in
connection with this Agreement or the Master Assignment
Agreement.
SECTION 10. Headings. The headings of this
Agreement are for the purposes of reference only and shall
not limit or otherwise affect the meaning hereof.
IN WITNESS WHEREOF, Holdings, the Borrower, the
Agent, the Issuing Bank and the Lenders have caused this
Agreement to be duly executed by their duly authorized
officers, all as of the date first above written.
CHICAGO AND NORTH WESTERN
TRANSPORTATION COMPANY,
by
/s/ John E. Voldseth
Name: John E. Voldseth
Title: Vice-President
Finance
CHICAGO AND NORTH WESTERN
HOLDINGS CORP.,
by
/s/ John E. Voldseth
Name: John E. Voldseth
Title: Vice-President
Finance
CHEMICAL BANK,
by
/s/ Julie A. Soper
Name: Julie A. Soper
Title: Vice President<PAGE>
9
BANK OF MONTREAL,
by
/s/ Christine M. Tierney
Name: Christine M. Tierney
Title: Director
BANQUE PARIBAS,
by
/s/ Peter Toal
Name: Peter Toal
Title: Regional General
Manager
by
/s/ S. M. Heiner
Name: S. M. Heiner
Title: Assistant Vice
President
THE CHASE MANHATTAN BANK, N.A.,
by
/s/ Francis M. Cox, III
Name: Francis M. Cox, III
Title: Vice President
CONTINENTAL BANK N.A.,
by
/s/ Paul R. Frey
Name: Paul R. Frey
Title: Vice President
THE FIRST NATIONAL BANK OF CHICAGO,
by
/s/ Gerald F. Mackin
Name: Gerald F. Mackin
Title: Vice President<PAGE>
10
THE LONG-TERM CREDIT BANK OF JAPAN,
LTD.,
by
/s/ Richard E. Stahl
Name: Richard E. Stahl
Title: Senior Vice President &
Joint General Manager
BANK OF AMERICA NATIONAL TRUST AND
SAVINGS ASSOCIATION,
by
/s/ Patricia DelGrande
Name: Patricia DelGrande
Title: Vice President
NATIONAL WESTMINSTER BANK USA,
by
/s/ Kathleen Weiss, VP
Name: Kathleen Weiss
Title: Vice President
ALLSTATE LIFE INSURANCE COMPANY,
by
/s/ Mark D. Senkpiel
Name: Mark D. Senkpiel
Title: Director
by
/s/ Gary W. Fridley
Name: Gary W. Fridley
Title: Authorized Signatory
ANCHOR NATIONAL LIFE INSURANCE
COMPANY,
by
/s/ Michael J. Campbell
Name: Michael J. Campbell
Title: Director, Corporate
Finance Sunamerica
Investments, Inc.<PAGE>
11
THE FIRST NATIONAL BANK OF BOSTON,
by
/s/ Dexter Freeman
Name: Dexter Freeman
Title: Vice President
THE BANK OF NEW YORK,
by
/s/ Charlotte Sohn
Name: Charlotte Sohn
Title: Assistant Vice
President
CANADIAN IMPERIAL BANK OF COMMERCE,
by
/s/ John W. Kunkle
Name: John W. Kunkle
Title: Agent
CAISSE NATIONALE DE CREDIT
AGRICOLE,
by
/s/ David Bouhl
Name: David Bouhl, F.V.P.
Title: Head of Corporate
Banking Chicago
CREDIT SUISSE,
by
/s/ Harry R. Olsen
Name: Harry R. Olsen
Title: Member of Senior
Management
by
/s/ William P. Murray
Name: William P. Murray
Title: Member of Senior
Management<PAGE>
12
DRESDNER BANK AG CHICAGO BRANCH,
by
/s/ Brian Brodeur
Name: Brian Brodeur
Title: Vice President
by
/s/ E. Ronald Holder
Name: E. Ronald Holder
Title: Senior Vice President
THE MITSUBISHI TRUST AND BANKING
CORPORATION,
by
/s/ Akira Suzuki
Name: Akira Suzuki
Title: Chief Manager
THE NIPPON CREDIT BANK, LTD.,
by
/s/ Hideaki Mori
Name: Hideaki Mori
Title: Vice President &
Manager
THE NORTHERN TRUST COMPANY,
by
/s/ J. Mark Berry
Name: J. Mark Berry
Title: Vice President
PROSPECT STREET SENIOR PORTFOLIO,
L.P.,
by PROSPECT STREET SENIOR LOAN
CORP., as managing general
partner of PROSPECT STREET
SENIOR PORTFOLIO, L.P.,
by
/s/ Preston I. Carnes, Jr.
Name: Preston I. Carnes, Jr.
Title: Vice President<PAGE>
13
THE TORONTO-DOMINION BANK,
by
/s/ William H. Hoffman
Name: William H. Hoffman
Title: Director
THE TRAVELERS INSURANCE COMPANY,
by
/s/ Paul T. Quistberg
Name: Paul T. Quistberg
Title: Assistant Investment
Officer
THE TRAVELERS INDEMNITY COMPANY,
by
/s/ Paul T. Quistberg
Name: Paul T. Quistberg
Title: Assistant Investment
Officer
PROTECTIVE LIFE INSURANCE COMPANY
(NATIONAL DEPOSIT LIFE),
by
/s/ Mark K. Okada
Name: Mark K. Okada
Title: Principal Protective
Asset Management Co.
PROTECTIVE LIFE INSURANCE COMPANY,
by
/s/ Richard Bielen
Name: Richard Bielen
Title: Vice President,
Investments<PAGE>
14
CHANCELLOR SENIOR SECURED
MANAGEMENT, INC., as Portfolio
Advisor to:
RESTRUCTURED OBLIGATIONS BACKED BY
SENIOR ASSETS, B.V. (ROSA)
by
/s/ Stephen M. Alfieri
Name: Stephen M. Alfieri
Title: Vice President
CHANCELLOR SENIOR SECURED
MANAGEMENT, INC., as Portfolio
Advisor to:
KEYPORT LIFE INSURANCE CO.,
by
/s/ Stephen M. Alfieri
Name: Stephen M. Alfieri
Title: Vice President
SUN LIFE INSURANCE COMPANY
OF AMERICA
by
/s/ Michael J. Campbell
Name: Michael J. Campbell
Title: Director, Corporate
Finance Sunamerica
Investments, Inc.
INDUSTRIAL BANK OF JAPAN, LTD.,
by
/s/ Masaaki Takeda
Name: Masaaki Takeda
Title: General Manager<PAGE>
CONFORMED COPY
MASTER ASSIGNMENT AND ACCEPTANCE AGREEMENT dated as of
September 10, 1993, among CHICAGO AND NORTH WESTERN
TRANSPORTATION COMPANY, a Delaware corporation (the
"Borrower"), CHICAGO AND NORTH WESTERN HOLDINGS CORP., a
Delaware corporation ("Holdings"), the financial
institutions party to the Credit Agreement referred to below
as lenders thereunder (the "Lenders"), BANK OF MONTREAL, a
Canadian banking corporation, as issuing bank under such
Credit Agreement (in such capacity, the "Issuing Bank") and
CHEMICAL BANK, as administrative agent for the Lenders and
the Issuing Bank under such Credit Agreement (in such
capacity, the "Agent").
Preliminary Statement
Reference is made to the Credit Agreement dated as of March 27,
1992, as amended (the "Credit Agreement"), among the Borrower, Holdings,
the Lenders, the Issuing Bank, the Co-Agents named therein and the Agent.
Capitalized terms used herein and not otherwise defined herein are used as
defined in the Credit Agreement. The Borrower has requested that the
Lenders amend certain provisions of the Credit Agreement in order to, among
other things, reduce the rates of interest on the Loans and reduce the
Commitment Fees thereunder (the "Proposed Amendment"). The Lenders
identified on Schedule I hereto (the "Assignor Lenders") are not willing to
approve the Proposed Amendment, but are willing, on the terms and
conditions set forth herein, to sell and assign their rights and
obligations under the Credit Agreement to other Lenders who are willing to
approve the Proposed Amendment. The Lenders identified on Schedule II
hereto (the "Assignee Lenders") are willing, on the terms and conditions
set forth herein, to purchase and assume the rights and obligations of the
Assignor Lenders under the Credit Agreement. The purpose of this Agreement
is to provide for the assignment and acceptance of such rights and
obligations and to confirm the respective amounts of the resulting rights
and obligations of the respective Lenders under the Credit Agreement after
giving effect thereto.<PAGE>
2
Accordingly, the parties hereto hereby agree as follows:
I. ASSIGNMENT AND ACCEPTANCE
SECTION 1.01. Assignments. (a) Subject to the conditions set
forth in Article III hereof, effective on the Effective Date (as defined in
Article III hereof) and for the consideration referred to in clause (c)(i)
of Section 1.04 below, each Assignor Lender hereby sells and assigns,
without recourse, to the Assignee Lenders, and the Assignee Lenders hereby
purchase and assume, without recourse, from each Assignor Lender, all
interests, rights and obligations of such Assignor Lender (its "Assigned
Interest") under the Credit Agreement and related Intercreditor Agreement,
including, without limitation, the Standby Commitment and Revolving Credit
Commitment of such Assignor Lender on the Effective Date and the Term
Loans, Standby Loans and Revolving Credit Loans owing to such Assignor
Lender which are outstanding on the Effective Date; provided, however, that
each Assignor hereby retains and reserves unto itself (i) all of its rights
to reimbursement and indemnification which may have accrued pursuant to the
Credit Agreement and the related Intercreditor Agreement on or prior to the
Effective Date (including any indemnification payments that may be due to
it as a result of the foregoing assignment, as contemplated by Section 1.05
hereof) and (ii) its rights to receive the payments to be made to it as
provided in Section 1.04 hereof (such rights described in clauses (i) and
(ii) being referred to herein as the "Reserved Rights"). From and after
the Effective Date, each Assignor Lender shall relinquish its rights
(except its Reserved Rights) and be released from its obligations under the
Credit Agreement and the related Intercreditor Agreement. In
implementation of the foregoing, each Assignor Lender agrees to use its
best efforts to deliver to the Agent, on or prior to the Effective Date (or
as promptly as possible thereafter), all Notes issued to it under the
Credit Agreement, or written certification that such Notes are lost or
cannot be located; provided that (A) failure to deliver such Notes shall
not affect the validity of the assignments provided for herein and (B) each
Assignor Lender that fails to so deliver its Notes hereby agrees to
indemnify the Borrower against any loss, cost or expense resulting from
such failure. After the Effective Date, the Agent shall surrender to the
Borrower, for cancellation, all such Notes received by the Agent.
(b) The foregoing assignments are intended to, and shall, result
in the respective Standby Commitments, Revolving Credit Commitments and
outstanding Term Loans of the Assignee Lenders, as of the Effective Date
after giving effect to such assignments (and assuming that such Commitments
are not reduced, and that the Term Loans are not prepaid, during the period
between the date hereof and the Effective Date), being in the respective
amounts set forth opposite the names of such Assignee Lenders on
Schedule III hereto. The foregoing assignments shall be allocated between
the Assignee Lenders so as to achieve such result and the obligations of
the Assignee Lenders under paragraph (a) above shall be several, and not
joint, in proportion to such allocation. Each Lender who is neither an
Assignee Lender nor an Assignor Lender (such Lenders being referred to
herein as "Confirming Lenders") hereby confirms as correct the respective
amounts set forth opposite its name on Schedule III hereto as its Standby
Commitment, Revolving Credit Commitment and outstanding Term Loan. The
rights and obligations of the Confirming Lenders under the Credit Agreement
and the related Intercreditor Agreement shall not be affected hereby.
SECTION 1.02 Consent and Release. (a) The Borrower hereby
consents and agrees to the transactions to be effected by Section 1.01
above and hereby releases, effective on the Effective Date, the Assignor
Lenders from all their obligations under the Credit Agreement.
SECTION 1.03 Determination of Amounts to be Paid on Effective
Date. Prior to the Effective Date, the Agent will determine (a) the
amounts to be paid to each Lender pursuant to Section 1.04 below (and will
confirm such amounts with such Lender), (b) the amounts to be paid by each
Assignee Lender pursuant to Section 1.04 below (and will confirm such
amounts with such Lender) and (c) the amounts to be paid by the Borrower<PAGE>
3
pursuant to Section 1.04 below (and will confirm such amounts with the
Borrower).
SECTION 1.04. Payments. Subject to the conditions set forth in
Article III hereof, on the Effective Date:
(a) the Borrower shall pay to the Agent in accordance with
Section 2.17 of the Credit Agreement, in addition to any other amounts
then due and payable under the Credit Agreement, an amount equal to
the sum of (i) all accrued and unpaid interest on all the Loans of
each Assignor Lender outstanding under the Credit Agreement, (ii) all
unpaid Commitment Fees and Letter of Credit Fees accrued to and
including the Effective Date (for the account of each Lender, whether
or not such Lender is an Assignor Lender) and (iii) all other amounts,
if any, accrued and owing to any Assignor Lender under the Credit
Agreement (excluding the outstanding principal amount of any Loan, but
including any amount referred to in Section 1.05 hereof which such
Assignor Lender has notified the Borrower and the Agent not less than
two Business Days prior to the Effective Date will be payable to such
Assignor Lender on the Effective Date);
(b) each Assignee Lender shall pay to the Agent, in accordance
with Section 2.02(c) of the Credit Agreement (as though such payment
were being made as proceeds of a Loan to be advanced on such date) an
amount equal to the outstanding principal amount of each Loan to be
purchased by such Assignee Lender on the Effective Date pursuant to
Section 1.01 hereof; and
(c) the Agent shall pay from the funds received by it pursuant to
clauses (a) and (b) above (i) to each Assignor Lender an amount equal
to the sum of the outstanding principal amount of its Loans and
accrued interest thereon, all unpaid Commitment Fees and Letter of
Credit Fees accrued for its account and any other amounts received for
its account referred to in clause (a)(iii) above, and (ii) to each
Assignee Lender and Confirming Lender an amount equal to the sum of
all unpaid Commitment Fees and Letter of Credit Fees accrued for its
account.
SECTION 1.05. Indemnification. The Borrower agrees that the
assignment by each Assignor Lender of its outstanding Loans on the
Effective Date shall be deemed, for purposes of Section 2.15 of the Credit
Agreement, to constitute a prepayment of such Loans on the Effective Date.
Each Assignor Lender shall be entitled to make claims under such
Section 2.15 in accordance with the terms thereof.
II. CERTAIN CONFIRMATIONS
Each of the Assignor Lenders and Assignee Lenders acknowledges
and agrees that this Agreement is intended to, and shall, constitute an
Assignment and Acceptance under the Credit Agreement and hereby confirms
the agreements and representations made by it as a consequence thereof as
set forth in Section 9.04(c) of the Credit Agreement, except that each
Assignor Lender, in lieu of representing as to the outstanding balances of
its respective Loans as provided in clause (i) of such Section, represents
that, as of the Effective Date, the outstanding balances of its respective
Loans shall be as confirmed with the Agent pursuant to Section 1.03 hereof.
III. CONDITIONS
The assignments contemplated by Section 1.01 above shall become
effective only upon the satisfaction, on a single date (which shall be the
Effective Date) on or prior to September 30, 1993, of the following
conditions:
(a) the Agent (or its counsel) shall have received counterparts
of this Agreement which, when taken together, bear the signatures of
Holdings, the Borrower, the Issuing Bank and each Lender;<PAGE>
4
(b) all the payments referred to in clauses (a) and (b) of
Section 1.04 hereof shall have been received by the Agent; and
(c) all the conditions to the effectiveness of the Proposed
Amendment (other than the effectiveness of the assignments
contemplated by Section 1.01 above) shall have been satisfied or
waived.
Immediately upon satisfaction of the foregoing conditions the Agent shall
distribute in accordance with clause (c) of Section 1.04 the amounts
received by it pursuant to clauses (a) and (b) of Section 1.04, and
satisfaction of the foregoing conditions shall be conclusively evidenced by
such distribution. The date upon which such conditions are satisfied and
such funds are distributed is referred to herein as the "Effective Date".
Unless and until the assignments contemplated by Section 1.01 hereof become
effective as provided above, the Credit Agreement shall remain in full
force and effect in accordance with its terms and the rights and
obligations of the parties thereto shall not be affected hereby.
IV. MISCELLANEOUS
SECTION 4.01. Successors and Assigns; Assignments. This
Agreement shall inure to the benefit of and be binding upon the parties
hereto and their respective successors and assigns. Each Lender agrees
that it will not make any assignment of its rights and obligations under
the Credit Agreement prior to the Effective Date without making
arrangements satisfactory to the Borrower and the Agent for its assignee to
become bound by this Agreement; provided that the foregoing agreement shall
lapse if the Effective Date does not occur on or prior to the date
specified in Article III.
SECTION 4.02. Applicable Law. This Agreement shall be construed
in accordance with and governed by the laws of the State of New York.
SECTION 4.03. Amendment. This Agreement may be waived, modified
or amended only by a written agreement executed by the party or parties to
be bound thereby.
SECTION 4.04. Counterparts. This Agreement may be executed in
any number of counterparts and by the different parties hereto on separate
counterparts, each of which when so executed and delivered shall be an
original, but all of which shall together constitute one and the same
agreement.
IN WITNESS WHEREOF, each of the parties hereto has caused this
Agreement to be duly executed and delivered as of the date first above
written.
CHICAGO AND NORTH WESTERN
TRANSPORTATION COMPANY,
by
/s/ John E. Voldseth
Name: John E. Voldseth
Title: Vice-President
Finance
CHICAGO AND NORTH WESTERN HOLDINGS
CORP.,
by
/s/ John E. Voldseth
Name: John E. Voldseth
Title: Vice President
Finance<PAGE>
5
CHEMICAL BANK,
by
/s/ Julie A. Soper
Name: Julie A. Soper
Title: Vice President<PAGE>
6
BANK OF MONTREAL,
by
/s/ Christine M. Tierney
Name: Christine M. Tierney
Title: Director
BANQUE PARIBAS,
by
/s/ Peter Toal
Name: Peter Toal
Title: Regional General
Manager
by
/s/ S. M. Heiner
Name: S. M. Heiner
Title: Assistant Vice
President
THE CHASE MANHATTAN BANK, N.A.,
by
/s/ Francis M. Cox, III
Name: Francis M. Cox, III
Title: Vice President
CONTINENTAL BANK N.A.,
by
/s/ Paul R. Frey
Name: Paul R. Frey
Title: Vice President
THE FIRST NATIONAL BANK OF CHICAGO,
by
/s/ Gerald F. Mackin
Name: Gerald F. Mackin
Title: Vice President<PAGE>
7
THE LONG-TERM CREDIT BANK OF JAPAN,
LTD.,
by
/s/ Richard E. Stahl
Name: Richard E. Stahl
Title: Senior Vice President
and Joint General
Manager
BANK OF AMERICA NATIONAL TRUST AND
SAVINGS ASSOCIATION,
by
/s/ Patricia DelGrande
Name: Patricia DelGrande
Title: Vice President
CREDIT LYONNAIS CHICAGO BRANCH,
by
/s/ Francois Valla
Name: Francois Valla
Title: First Vice President
Branch Manager
NATIONAL WESTMINSTER BANK USA,
by
/s/ Kathleen Weiss, VP
Name: Kathleen Weiss
Title: Vice President
ALLSTATE LIFE INSURANCE COMPANY,
by
/s/ Mark D. Senkpiel
Name: Mark D. Senkpiel
Title: Director
by
/s/ Gary W. Fridley
Name: Gary W. Fridley
Title: Authorized Signatory<PAGE>
8
ANCHOR NATIONAL LIFE INSURANCE
COMPANY,
by
/s/ Michael J. Campbell
Name: Michael J. Campbell
Title: Director, Corporate
Finance Sunamerica
Investments, Inc.
THE FIRST NATIONAL BANK OF BOSTON,
by
/s/ Dexter Freeman
Name: Dexter Freeman
Title: Vice President
THE BANK OF NEW YORK,
by
/s/ Charlotte Sohn
Name: Charlotte Sohn
Title: Assistant Vice
President
CANADIAN IMPERIAL BANK OF COMMERCE,
by
/s/ John W. Kunkle
Name: John W. Kunkle
Title: Agent
CAISSE NATIONALE DE CREDIT
AGRICOLE,
by
/s/ David Bouhl
Name: David Bouhl, F.V.P.
Title: Head of Corporate
Banking Chicago<PAGE>
9
CREDIT SUISSE,
by
/s/ Jan Kofol
Name: Jan Kofol
Title: Member of Senior
Management
by
/s/ William P. Murray
Name: William P. Murray
Title: Member of Senior
Management
DRESDNER BANK AG CHICAGO BRANCH,
by
/s/ Brian Brodeur
Name: Brian Brodeur
Title: Vice President
by
/s/ E. Ronald Holder
Name: E. Ronald Holder
Title: Senior Vice President
EATON VANCE PRIME RATE RESERVES,
by
/s/ Jeffrey S. Garner
Name: Jeffrey S. Garner
Title: Vice President
THE MITSUBISHI TRUST AND BANKING
CORPORATION,
by
/s/ Akira Suzuki
Name: Akira Suzuki
Title: Chief Manager<PAGE>
10
THE NIPPON CREDIT BANK, LTD.,
by
/s/ Hideaki Mori
Name: Hideaki Mori
Title: Vice President &
Manager
THE NORTHERN TRUST COMPANY,
by
/s/ J. Mark Berry
Name: J. Mark Berry
Title: Vice President
PROSPECT STREET SENIOR PORTFOLIO,
L.P.,
by PROSPECT STREET SENIOR LOAN
CORP., as managing general
partner of PROSPECT STREET
SENIOR PORTFOLIO, L.P.,
by
/s/ Preston I. Carnes, Jr.
Name: Preston I. Carnes, Jr.
Title: Vice President
THE TORONTO-DOMINION BANK,
by
/s/ William H. Hoffman
Name: William H. Hoffman
Title: Director
THE TRAVELERS INSURANCE COMPANY,
by
/s/ Paul T. Quistberg
Name: Paul T. Quistberg
Title: Assistant Investment
Officer<PAGE>
11
THE TRAVELERS INDEMNITY COMPANY,
by
/s/ Paul T. Quistberg
Name: Paul T. Quistberg
Title: Assistant Investment
Officer
PROTECTIVE LIFE INSURANCE COMPANY
(NATIONAL DEPOSIT LIFE),
by
/s/ Mark K. Okada
Name: Mark K. Okada
Title: Principal Protective
Asset Management Co.
PROTECTIVE LIFE INSURANCE COMPANY,
by
/s/ Richard Bielen
Name: Richard Bielen
Title: Vice President,
Investments
CHANCELLOR SENIOR SECURED
MANAGEMENT, INC., as Portfolio
Advisor to:
RESTRUCTURED OBLIGATIONS BACKED BY
SENIOR ASSETS, B.V. (ROSA),
by
/s/ Stephen M. Alfieri
Name: Stephen M. Alfieri
Title: Vice President
CHANCELLOR SENIOR SECURED
MANAGEMENT, INC., as Portfolio
Advisor to:
KEYPORT LIFE INSURANCE CO.,
by
/s/ Stephen M. Alfieri
Name: Stephen M. Alfieri
Title: Vice President<PAGE>
12
SUN LIFE INSURANCE COMPANY
OF AMERICA
by
/s/ Michael J. Campbell
Name: Michael J. Campbell
Title: Director, Corporate
Finance Sunamerica
Investments, Inc.
INDUSTRIAL BANK OF JAPAN, LTD.,
by
/s/ Masaaki Takeda
Name: Masaaki Takeda
Title: General Manager<PAGE>
SCHEDULE I
Assignor Lenders
Credit Lyonnais Chicago Branch
Eaton Vance Prime Rate Reserves<PAGE>
SCHEDULE II
Assignee Lenders
Caisse Nationale de Credit Agricole
Bank of America National Trust and Savings Association
Bank of Montreal
The Chase Manhattan Bank, N.A.
The Long-Term Credit Bank of Japan, Ltd.
National Westminster Bank USA
The Toronto-Dominion Bank
Chemical Bank
Canadian Imperial Bank of Commerce
Dresdner Bank AG Chicago Branch
The Mitsubishi Trust and Banking Corporation
The Nippon Credit Bank, Ltd.
Industrial Bank of Japan, Ltd.
The Bank of New York
Credit Suisse
The First National Bank of Boston
Continental Bank N.A.
Allstate Life Insurance Company
Protective Life Insurance Company
The Travelers Insurance Company and The Travelers Indemnity
Company
The First National Bank of Chicago<PAGE>
SCHEDULE III
<TABLE>
Assignee Lenders and Confirming Lenders
<CAPTION>
Revolving
Standby Credit Outstanding Total
Name Commitment Commitment Term Loans Commitment
<S> <C> <C> <C> <C>
Caisse Nationale de Credit Agricole $9,768,516.36 $4,062,887.36 $3,617,047.21 $17,448,450.93
Bank of America National Trust and 8,410,962.24 3,180,899.36 5,517,824.09 17,109,685.69
Savings Association
Bank of Montreal 8,410,962.24 3,180,899.36 5,517,824.09 17,109,685.69
The Chase Manhattan Bank, N.A. 8,410,962.24 3,180,899.36 5,517,824.09 17,109,685.69
The Long-Term Credit Bank of Japan, Ltd. 8,410,962.24 3,180,899.36 5,517,824.09 17,109,685.69
National Westminster Bank USA 8,410,962.24 3,180,899.36 5,517,824.09 17,109,685.69
The Toronto-Dominion Bank 7,916,530.09 2,994,564.36 5,201,028.36 16,112,122.81
Banque Paribas 7,910,923.32 2,981,366.00 5,068,737.95 15,961,027.27
Chemical Bank 8,410,964.21 3,180,904.36 3,854,816.98 15,446,685.55
Sun Life Insurance Co. 0.00 0.00 13,297,673.53 13,297,673.53
Canadian Imperial Bank of Commerce 5,444,366.36 2,062,887.36 3,617,047.21 11,124,300.93
Dresdner Bank AG Chicago Branch 5,444,366.36 2,062,887.36 3,617,047.21 11,124,300.93
The Mitsubishi Trust and Banking 5,444,366.36 2,062,887.36 3,617,047.21 11,124,300.93
Corporation
The Nippon Credit Bank, Ltd. 5,444,366.36 2,062,887.36 3,617,047.21 11,124,300.93
Industrial Bank of Japan, Ltd. 4,086,812.25 3,044,253.36 3,280,697.33 10,411,762.94
The Bank of New York 4,620,312.12 1,752,328.36 3,089,053.90 9,461,694.38
Credit Suisse 4,620,312.12 1,752,328.36 3,089,053.90 9,461,694.38
The First National Bank of Boston 4,620,312.12 1,752,328.36 3,089,053.90 9,461,694.38
Continental Bank N.A. 4,606,344.70 1,747,064.53 3,080,104.92 9,433,514.15
Anchor National Life Insurance Company 7,659,167.67 1,023,133.71 0.00 8,682,301.38
The Northern Trust Company 4,120,273.20 1,552,795.00 2,639,967.76 8,313,035.96
Allstate Life Insurance Company 0.00 0.00 8,219,796.10 8,219,796.10
Prospect Street Senior Portfolio, L.P. 0.00 0.00 4,885,457.60 4,885,457.60
Keyport Life Insurance Co. 0.00 0.00 4,739.870.92 4,739,870.92
Restructured Obligations Backed by 0.00 0.00 4,739.870.92 4,739,870.92
Senior Assets, B.V. (ROSA)
Protective Life Insurance Company 0.00 0.00 4,357,451.98 4,357,451.98
The Travelers Insurance Company and 0.00 0.00 4,357,451.98 4,357,451.98
The Travelers Indemnity Company
The First National Bank of Chicago 500,038.92 0.00 449,086.14 949,125.06
</TABLE>
TERMINATION OF EMPLOYMENT AGREEMENT
The undersigned parties to the Employment Agreement, made as
of July 14, 1989, by and between CNW Corporation (the "Company"),
a Delaware Corporation, and Jerome W. Conlon ("Executive") hereby
agree to terminate such Agreement, effective February 22, 1994.
Such termination is not intended to affect in any manner
Executive's employment by the Company.
CNW CORPORATION
By: /s/ Robert Schmiege
Robert W. Schmiege
Chairman, President and
Chief Executive Officer
/s/ Jerome W. Conlon
Jerome W. Conlon<PAGE>
TERMINATION OF EMPLOYMENT AGREEMENT
The undersigned parties to the Employment Agreement, made as
of July 14, 1989, by and between CNW Corporation (the "Company"),
a Delaware Corporation, and Thomas A. Tingleff ("Executive")
hereby agree to terminate such Agreement, effective February 22,
1994. Such termination is not intended to affect in any manner
Executive's employment by the Company.
CNW CORPORATION
By: /s/ Robert Schmiege
Robert W. Schmiege
Chairman, President and
Chief Executive Officer
/s/ Thomas A. Tingleff
Thomas A. Tingleff<PAGE>
TERMINATION OF EMPLOYMENT AGREEMENT
The undersigned parties to the Employment Agreement, made as
of July 14, 1989, by and between CNW Corporation (the "Company"),
a Delaware Corporation, and Robert A. Jahnke ("Executive") hereby
agree to terminate such Agreement, effective February 22, 1994.
Such termination is not intended to affect in any manner
Executive's employment by the Company.
CNW CORPORATION
By: /s/ Robert Schmiege
Robert W. Schmiege
Chairman, President and
Chief Executive Officer
/s/ Robert A. Jahnke
Robert A. Jahnke<PAGE>
TERMINATION OF EMPLOYMENT AGREEMENT
The undersigned parties to the Employment Agreement, made as
of July 14, 1989, by and between CNW Corporation (the "Company"),
a Delaware Corporation, and Arthur W. Peters ("Executive") hereby
agree to terminate such Agreement, effective February 22, 1994.
Such termination is not intended to affect in any manner
Executive's employment by the Company.
CNW CORPORATION
By: /s/ Robert Schmiege
Robert W. Schmiege
Chairman, President and
Chief Executive Officer
/s/ Arthur W. Peters
Arthur W. Peters<PAGE>
TERMINATION OF EMPLOYMENT AGREEMENT
The undersigned parties to the Employment Agreement, made as
of July 14, 1989, by and between CNW Corporation (the "Company"),
a Delaware Corporation, and Robert W. Schmiege ("Executive")
hereby agree to terminate such Agreement, effective February 22,
1994. Such termination is not intended to affect in any manner
Executive's employment by the Company.
CNW CORPORATION
By: /s/ James P. Daley
James P. Daley
Senior Vice President, General
Counsel and Secretary
/s/ Robert W. Schmiege
Robert W. Schmiege<PAGE>
TERMINATION OF EMPLOYMENT AGREEMENT
The undersigned parties to the Employment Agreement, made as
of July 14, 1989, by and between CNW Corporation (the "Company"),
a Delaware Corporation, and James P. Daley ("Executive") hereby
agree to terminate such Agreement, effective February 22, 1994.
Such termination is not intended to affect in any manner
Executive's employment by the Company.
CNW CORPORATION
By: /s/ Robert Schmiege
Robert W. Schmiege
Chairman, President and
Chief Executive Officer
/s/ James P. Daley
James P. Daley<PAGE>
SECOND AMENDMENT
TO THE
CHICAGO AND NORTH WESTERN HOLDINGS CORP.
1992 EQUITY INCENTIVE PLAN
The Chicago and North Western Holdings Corp. 1992 Equity
Incentive Plan (the "Plan") as adopted effective April 7, 1992,
is hereby amended effective January 1, 1994, as follows:
I
Paragraph 6(a) is amended by adding, at the end thereof,
subparagraph (iv) to read as follows:
"(iv) Notwithstanding any other provision herein, the
number of shares of Stock issued to any individual
employee under the Plan in any calendar year shall not
exceed 200,000 shares of Stock."
II
Except as provided herein, the Plan shall remain in full
force and effect.
Executed this 8th day of December , 1993.
CHICAGO AND NORTH WESTERN
HOLDINGS CORP.
By: /s/ Robert Schmiege
Robert Schmiege
Chairman, President
and Chief Executive Officer
ATTEST:
/s/ Robin Bourne-Caris
Robin Bourne-Caris
Assistant Vice President-
Assistant Corporate Secretary<PAGE>
AT&T CORPORATE CENTER
OFFICE SUBLEASE
BETWEEN
AT&T COMMUNICATIONS, INC.,
a Delaware corporation
(as Landlord)
and
CHICAGO AND NORTH WESTERN TRANSPORTATION COMPANY,
a Delaware corporation
(as Tenant)
Dated: As of October 25, 1993<PAGE>
TABLE OF CONTENTS
Page
1. Base Rent . . . . . . . . . . . . . . . . . . . . . . . . 2
2. Additional Rent . . . . . . . . . . . . . . . . . . . . . 2
3. Early Occupancy . . . . . . . . . . . . . . . . . . . . . 14
4. Use of Premises . . . . . . . . . . . . . . . . . . . . . 15
5. Services . . . . . . . . . . . . . . . . . . . . . . . . 15
6. Condition and Care of Premises . . . . . . . . . . . . . 22
7. Return of Premises . . . . . . . . . . . . . . . . . . . 23
8. Holding Over . . . . . . . . . . . . . . . . . . . . . . 25
9. Rules and Regulations . . . . . . . . . . . . . . . . . . 25
10. Rights Reserved to Landlord . . . . . . . . . . . . . . 26
11. Alterations . . . . . . . . . . . . . . . . . . . . . . 28
12. Assignment and Subletting . . . . . . . . . . . . . . . 30
13. Damage or Destruction by Casualty . . . . . . . . . . . 33
14. Eminent Domain . . . . . . . . . . . . . . . . . . . . . 39
15. Default: Landlord's Rights and Remedies . . . . . . . . 41
16. Mortgagee Protection . . . . . . . . . . . . . . . . . . 45
17. Quiet Enjoyment . . . . . . . . . . . . . . . . . . . . 46
18. Subrogation and Insurance . . . . . . . . . . . . . . . 46
19. Nonwaiver . . . . . . . . . . . . . . . . . . . . . . . 48
20. Estoppel Certificate . . . . . . . . . . . . . . . . . . 48
21. Tenant Authorization . . . . . . . . . . . . . . . . . . 49
22. Landlord Authorization . . . . . . . . . . . . . . . . . 49
23. Real Estate Brokers . . . . . . . . . . . . . . . . . . 49
24. Notices . . . . . . . . . . . . . . . . . . . . . . . . 49
25. Delivery of Possession . . . . . . . . . . . . . . . . . 50
26. Miscellaneous . . . . . . . . . . . . . . . . . . . . . 59
-i-<PAGE>
27. Landlord . . . . . . . . . . . . . . . . . . . . . . . . 61
28. Title and Covenant Against Liens . . . . . . . . . . . . 61
29. Bankruptcy or Insolvency . . . . . . . . . . . . . . . . 62
30. Roof Rights . . . . . . . . . . . . . . . . . . . . . . 64
31. Attorneys' Fees . . . . . . . . . . . . . . . . . . . . 65
32. Waiver . . . . . . . . . . . . . . . . . . . . . . . . . 66
33. Mutual Indemnity and Waiver . . . . . . . . . . . . . . 66
34. "Force Majeure" . . . . . . . . . . . . . . . . . . . . 66
35. Arbitration . . . . . . . . . . . . . . . . . . . . . . 67
36. Use of Name . . . . . . . . . . . . . . . . . . . . . . 68
37. Direct Lease Option and Consent Agreement . . . . . . . 68
38. Agreements Regarding Main Lease . . . . . . . . . . . . 68
39. Furniture . . . . . . . . . . . . . . . . . . . . . . . 69
40. Short Form of Lease . . . . . . . . . . . . . . . . . . 70
41. Basement Storage Space . . . . . . . . . . . . . . . . . 70
42. Option to Extend. . . . . . . . . . . . . . . . . . . . 71
43. Fair Market Rent. . . . . . . . . . . . . . . . . . . . 73
-ii-<PAGE>
OFFICE SUBLEASE
THIS OFFICE SUBLEASE (herein called the "Lease") is
made as of the 25th day of October, 1993, WITNESSETH AT&T
COMMUNICATIONS, INC., a Delaware corporation (herein called the
"Landlord"), hereby subleases to CHICAGO AND NORTH WESTERN
TRANSPORTATION COMPANY, a Delaware corporation (herein called the
"Tenant"), and Tenant hereby accepts, the premises and the
improvements within the premises, all as outlined on the floor
plan attached hereto as Exhibit A, subject to adjustment as
hereinafter provided (herein called the "Premises") consisting of
a minimum of 206,697 and a maximum of 245,025 rentable square
feet between (and including) floors six (6) through twelve (12)
of the building located at 227 W. Monroe Street, Chicago,
Illinois (herein called the "Building"), for a term (herein
called the "Term") commencing on September 1, 1996 ("Commencement
Date") and ending on March 30, 2009 ("Termination Date"), unless
sooner terminated or extended as provided herein, and subject to
the agreements herein contained, paying as rent therefor the sums
hereinafter provided, without any set-off, abatement, counter-
claim or deduction whatsoever except as expressly herein set
forth.
The parties hereto acknowledge that Landlord has
succeeded to the leasehold interest of AT&T Resource Management
Corporation, a New York corporation ("AT&T-RMC"), by assignment
and is currently the tenant under that certain Office Lease made
as of December 31, 1985, but actually executed on May 16, 1986,
as the same has been, or may be, amended or modified from time to
time (including, without limitation, pursuant to that certain
First Amendment to Office Lease dated July 29, 1988) ("Main
Lease") by and between AT&T-RMC, as tenant, and American National
Bank and Trust Company of Chicago, not personally but solely as
Trustee under Trust Agreement dated April 1, 1985 and known as
Trust No. 64020, as landlord ("Main Landlord"), which Main Lease
covers certain space in the Building ("Main Premises"),
including, without limitation, the Premises. Tenant hereby: (i)
acknowledges that the terms and provisions of this Lease are
subject to the terms and provisions of the Main Lease, and (ii)
covenants and agrees to comply with the terms and provisions of
the Main Lease insofar as they relate to the Premises and the
Tenant other than payment of rentals thereunder.
The parties hereto agree to enter into a written
amendment to this Lease (herein referred to as the "Premises
Amendment") in accordance with, and on the terms and provisions
set forth in, Section 2(a)(xiv)(A) of this Lease.<PAGE>
IN CONSIDERATION THEREOF, THE PARTIES HERETO COVENANT
AND AGREE:
1. Base Rent. Commencing on the Commencement Date,
Tenant shall pay an annual base rent (herein called the "Base
Rent") to Landlord for the Premises at a rate per square foot of
Rentable Area of the Premises determined in accordance with the
Premises Amendment described in Section 2(a)(xiv)(A) hereof and
subject to adjustment as hereinafter provided (including, without
limitation, pursuant to Section 2(i) hereof), payable in equal
monthly installments. Monthly installments of Base Rent are
herein called "Monthly Base Rent" and shall be payable, in
advance on the Commencement Date and on the first day of each
calendar month thereafter of the Term, and at the same rate for
fractions of a month if the Term shall begin on any date except
the first day, or shall end on any day except the last day of a
calendar month. Base Rent, Additional Rent (as hereinafter
defined), Adjusted Base Rent (as hereinafter defined), Additional
Rent Progress Payment (as hereinafter defined) and all other
amounts becoming due from Tenant to Landlord hereunder (herein
collectively called the "Rent") shall be paid in lawful money of
the United States to Landlord at the office of Landlord, or as
otherwise designated from time to time by written notice from
Landlord to Tenant. The payment of Rent hereunder is independent
of each and every other covenant and agreement contained in this
Lease, except as expressly herein set forth.
2. Additional Rent. In addition to paying the Base
Rent specified in Section 1 hereof, Tenant shall also pay as
additional rent the amounts determined in accordance with this
Section 2 ("Additional Rent"):
(a) Definitions. As used in this Lease,
(i) "Adjustment Date" shall mean the first day of the
Term and each January 1 thereafter falling within the Term.
(ii) "Adjustment Year" shall mean each calendar year
during which an Adjustment Date falls.
(iii) "Commercial Space" shall mean all areas of the
Building devoted to retail tenants, but excluding the lobby
and other common areas of the Building as shown on Exhibit C
to the Main Lease.
(iv) "Expenses" shall mean and include those costs and
expenses paid by the Main Landlord for managing, operating,
maintaining and repairing the Building and the personal
property used in conjunction therewith (said Building and
personalty being herein collectively called the "Project"),
including (without limitation) maintenance of alarm and
security systems, snow and ice and trash removal, cleaning
-2-<PAGE>
and sweeping, planting and replacing decorations, flowers
and landscaping, maintenance and repair of utility systems,
elevators, electricity, steam, water, gas, sewers, fuel,
heating, lighting, air conditioning, window cleaning,
janitorial service, insurance, including, but not limited
to, fire, extended coverage, all risk, liability, workmen's
compensation, elevator, or any other insurance carried by
the Main Landlord and applicable to the Project, to the
extent same is customarily carried by owners of first-class
non-institutional office buildings, painting, uniforms,
management fees not to exceed three percent (3%) of gross
revenues from the Project (including the amount of the rent
abatement pursuant to Section 37 of the Main Lease) (whether
or not the management agent is affiliated with Landlord,
Main Landlord or its beneficial owner), supplies, sundries,
sales or use taxes on supplies or services, cost of wages
and salaries of all persons engaged in the operation,
management, maintenance and repair of the Project, and so-
called fringe benefits, as customarily paid by owners of
first-class office buildings, including social security
taxes, unemployment insurance taxes, cost for providing
coverage for disability benefits, cost of any pensions,
hospitalization, welfare or retirement plans, or any other
similar or like expenses incurred under the provisions of
any collective bargaining agreement, the charges of any
independent contractor who, under contract with the Main
Landlord or its representatives, does any of the work of
operating, managing, maintaining or repairing of the
Project, legal and accounting expenses, including, but not
to be limited to, such expenses related to seeking or
obtaining reductions or preventing increases in assessed
valuations in connection with real estate taxes or any other
expense or charge, whether or not hereinbefore mentioned,
which, in accordance with generally accepted accounting and
management principles, would be considered as an expense of
managing, operating, maintaining or repairing the Project,
except as hereinafter provided (but in no event will Tenant
be charged twice for the same Expense as a result of the
application of said principles). Expenses shall not include
costs or other items included within the meaning of the term
"Taxes" (as hereinafter defined), costs of alterations of
the premises of tenants of the Building (including the Main
Premises other than with respect to the Premises), expenses
of renovating or otherwise decorating vacant or previously
leased space for tenants (including the Main Premises other
than with respect to the Premises), costs of capital
improvements to the Building (excluding repairs to Building
equipment), depreciation charges, interest and principal
payments on mortgages creating liens on the Project and
interest on other debt instruments of the Main Landlord,
ground rental payments, expenses incurred in leasing or
procuring tenants including, without limitation, advertising
-3-<PAGE>
costs and real estate brokerage and leasing commissions, any
expenditures for services which are provided to one or more
tenants (including those expenditures for services which
relate to the Main Premises except to the extent that Tenant
receives a benefit in connection therewith) and which are
not available generally to all office tenants, any
expenditures for which Main Landlord has been reimbursed
(other than pursuant to additional rent provisions in
leases), except as hereinafter provided; legal costs in
leasing space or incurred in disputes with tenants, except
as set forth in Section 9(b) of the Main Lease; electricity
and other utility services which are directly billed to
tenants (except to the extent such services are provided to
tenants generally and/or Tenant receives a benefit
therefrom); wages, salaries or other compensation paid to
any executive employees above the grade of building manager;
wages, salaries and so-called fringe benefits of clerks or
attendants in concessions or newsstands operated by the Main
Landlord and/or Landlord; the cost of correcting defects
(latent or otherwise) in the construction of the Building or
in the Building equipment; the cost of repair or rebuilding
in the event of fire or other casualty or eminent domain;
the cost of installing, operating and maintaining a
specialty improvement including, without limitation, an
observatory or broadcasting facility, cafeteria or dining
facility, an athletic, luncheon or recreational club, and
any cost or expense paid to a related entity or entity not
dealt with on an "arms-length" basis which is in excess of
the amount which would be paid in the absence of such
relationship. Notwithstanding anything contained herein to
the contrary, Expenses directly applicable to or solely
utilized in connection with the Commercial Space (including,
but not limited to utilities, scavenger services, janitorial
and window washing) shall be paid for directly by tenants of
the Commercial Space or if such direct payment is not
feasible then Main Landlord shall, in accordance with
Section 2(a)(iv) of the Main Lease, require such tenants'
proportionate share of such Expenses to be adjusted to
reflect their increased use of any service over and above
customary office use.
Tenant shall pay all incremental out-of-pocket Expenses
attributable to the operation and maintenance of equipment
installed at Tenant's request for Tenant's exclusive use
(including, without limitation, the Additional HVAC Units
(as hereinafter defined)).
Notwithstanding anything contained herein to the
contrary, Tenant acknowledges that (1) in the event the
Parking Garage (as hereinafter defined) is operated pursuant
to a lease or license agreement under which the lessee or
licensee is obligated to pay Expenses of the Parking Garage,
-4-<PAGE>
from the revenue received by said lessee or licensee (as
opposed to being an Expense of the Building), then expenses
relating to the Parking Garage to the extent required to be
paid by the lessee or licensee shall not be included in
Expenses, and (2) in the event (1) above is not applicable,
in no event shall Tenant be required to pay a percentage of
Parking Garage Expenses greater than the ratio of the
average number of spaces contracted for by Tenant on an
annual basis over the total number of spaces in the Parking
Garage.
Notwithstanding anything contained in this clause (iv)
of Section 2(a) to the contrary,
(A) The cost of any capital improvements to the
Building made after the Commencement Date of this Lease
which (i) reduce Expenses or (ii) which are required under
any governmental laws, regulations, or ordinances which were
not applicable to the Building at the time it was
constructed, amortized on a straight line basis over the
then anticipated useful life of the capital improvement (as
determined in accordance with generally accepted accounting
principles), together with interest on the unamortized cost
of any such improvement (at the prevailing loan rate
available to Main Landlord (or, in the event Main Landlord
is an Illinois land trust, its beneficiary) on the date the
cost of such improvement was incurred) shall be included in
Expenses; provided, however, as to (i) above, costs shall be
included in Expenses only to the extent Expenses are
actually reduced (unless Landlord has previously approved
such capital improvement in accordance with the Budget (as
defined in Section 2(i) of the Main Lease) and has obtained
Tenant's consent thereto, which consent shall not be
unreasonably withheld or delayed).
(B) If ninety-five percent (95%) of the Rentable Area
of the Building is not leased by tenants during all or a
portion of any Adjustment Year, then the components of
Expenses and the amounts thereof, which may vary depending
upon the occupancy level of the Building, shall be adjusted
for such year, employing sound accounting and management
principles in so doing, to the extent adjusted by Main
Landlord pursuant to Section 2(a)(iv)(B) of the Main Lease,
to reflect a 95% occupancy level. Any such adjustments
shall be deemed costs and expenses paid or incurred by Main
Landlord and included in Expenses for such year, as if the
Building had been ninety five percent (95%) occupied and the
Main Landlord had paid or incurred such costs and expenses
for such year. In no event, however, shall Tenant be
required to pay an amount in excess of the total of actual
costs and expenses less the amounts due from other tenants
in the Building (including Landlord, as a tenant under the
-5-<PAGE>
Main Lease, but only to the extent of the excess of the Main
Premises over the Premises).
(C) If any item of Expenses, though paid in one year,
relates to more than one calendar year, such item shall be
proportionately allocated pursuant to the provisions of the
Main Lease at the option of Main Landlord among such related
calendar years. Main Landlord shall be entitled pursuant to
the provisions of the Main Lease to allocate such items of
Expense to one calendar year if the contract for such
Expense item requires payment in one year. At the
termination of the Lease, Tenant shall be reimbursed for any
disproportionate allocations of Expense items.
(v) "Land" shall mean the parcel of real estate
legally described on Exhibit D to the Main Lease.
(vi) "Parking Garage" shall mean two underground
levels containing approximately 170 spaces.
(vii) "Taxes" shall mean general real estate taxes,
assessments, (whether they be general or special) sewer
rents, rates and charges, water taxes, transit taxes, taxes
based upon the receipt of rent, and any other federal, state
or local governmental charge, general, special, ordinary or
extraordinary (but not including income or franchise taxes,
personal property replacement taxes or any other taxes
imposed upon or measured by the Main Landlord's general net
income or profits of the Building), which may now or
hereafter be levied, assessed or imposed against the
Building and/or the Land (the Building and said Land
collectively referred to herein as "Real Property") and
shall also mean leasehold taxes imposed upon the Landlord or
Main Landlord in connection with the leasing and operation
of the Real Property, except to the extent such taxes
constitute income or other taxes imposed upon or measured by
the general net income or profits of the Landlord or Main
Landlord; provided, however, to the extent Landlord is
charged a leasehold tax under the Main Lease and Tenant pays
Tenant's Proportionate Share thereof pursuant to the terms
and provisions of this Lease, Tenant will not also be
required to pay a separate subleasehold tax, if any, solely
in connection with this Lease.
In the event that Main Landlord and/or Landlord is
required by federal, state or local statute or ordinance to
collect taxes imposed upon Tenant in connection with the
Main Lease or this Lease (as the case may be), Tenant shall
cooperate with Main Landlord and/or Landlord (as the case
may be) in the collection and payment of same, shall execute
and deliver such forms and other documents as shall be
required to enable Main Landlord and/or Landlord (as the
-6-<PAGE>
case may be) to collect and pay such taxes and shall remit
to either Landlord and/or Main Landlord (as the case may be)
all of Tenant's required payments, including interest and
penalties (but, with respect to interest, only to the extent
incurred as a direct result of the failure by Tenant to make
timely payments thereunder) prior to the date said taxes are
due and payable. In the event that such taxes may be paid
directly by Tenant, Tenant shall cooperate with Landlord
and/or Main Landlord in making any requests or applications
to enable Tenant, rather than Landlord and/or Main Landlord,
to pay such tax, and Tenant shall pay such tax directly to
the appropriate governmental authorities after the required
approvals are obtained.
Notwithstanding anything contained in this clause (vii)
of Section 2(a) to the contrary,
(A) If at any time the method of taxation then
prevailing shall be altered so that any new or additional
tax, assessment, levy, imposition or charge or any part
thereof shall be imposed upon Main Landlord in place or
partly in place of general real estate taxes, and shall be
measured by or be based in whole or in part upon the Real
Property or the rents or other income therefrom, then all
such new taxes, assessments, levies, impositions or charges
or part thereof, to the extent that they replace general
real estate taxes, shall be included in Taxes levied,
assessed or imposed against the Real Property to the extent
that such items would be payable if the Real Property were
the only property of Main Landlord subject thereto and the
income received by Main Landlord from the Real Property were
the only income of Main Landlord.
(B) Notwithstanding the year for which any such taxes
or assessments were levied, assessed or otherwise imposed,
Taxes for any year shall mean (i) the taxes or special
assessments (plus any interest payable thereon, but only to
the extent the interest was incurred as a result of the
failure by Tenant to make payments on a timely basis
hereunder) due and payable during such year, and (ii) if any
taxes or assessments payable during any calendar year shall
be computed with respect to a period in excess of twelve
(12) calendar months, then taxes or assessments applicable
to the excess period shall be included in Taxes for that
year only if due and payable in that year. Except as
provided in the preceding sentence, all references to Taxes
"for" a particular year shall be deemed to refer to taxes
levied, assessed or otherwise imposed for such year without
regard to when such taxes are payable.
(C) Taxes shall also include any personal property
taxes, if any, (attributable to the calendar year in which
-7-<PAGE>
paid) imposed upon the furniture, fixtures, machinery,
equipment, apparatus, systems and appurtenances used in
connection with the Real Property, and excluding equipment
or personal property owned by tenants of the Building
including any personal property of Landlord as a tenant.
(D) As soon as practical following the expiration of
the Term of this Lease, Landlord and Tenant shall adjust the
amount of Additional Rent attributable to Taxes by
determining the difference, if any, between the Additional
Rent attributable to Taxes actually paid by Tenant ("Taxes
Paid") during the Term of the Lease and the Additional Rent
attributable to Taxes as actually assessed ("Taxes
Assessed") against the Building and Land during the Term of
the Lease. Tenant shall pay to Landlord the amount, if any,
by which the Taxes Assessed exceed the Taxes Paid and
Landlord shall pay to Tenant the amount, if any, by which
the Taxes Paid exceed the Taxes Assessed. The foregoing
obligations shall survive the termination of the Lease.
Such payment shall be made within thirty (30) days of such
determination by Landlord and Tenant.
(viii) "Rentable Area of the Building" shall mean the
sum of the areas of all office floors of the Building
computed by measuring to the interior face of the exterior
glass wall on each entire floor plus the public ground floor
and second floor lobby and excluding only the public stairs,
elevator shafts, flues, stacks, pipe shafts and vertical
ducts ("vertical penetrations"). No deduction shall be made
for columns or projections necessary to the Building.
Rentable Area of the Building shall, for the purposes of
this Lease, be deemed to be 1,442,284 square feet.
Notwithstanding anything contained in this clause (viii) of
Section 2(a) to the contrary, the deemed to be Rentable Area
for each full floor of the Premises is the square footage
shown on Exhibit F hereto for the particular floor.
(ix) "Rentable Area of the Premises" shall be between
206,697 and 245,025 square feet, subject to adjustment as
hereinafter provided, and shall mean the sum of the areas of
all office floors in the Premises shown on Exhibit F hereto
with respect to full floors. Partial floors shall be
calculated in accordance with clause (viii) above. The
exact "Rentable Area of the Premises" shall be set forth in
the Premises Amendment.
(x) "Tenant's Proportionate Share" shall mean the
percentage obtained by dividing the Rentable Area of the
Premises by the Rentable Area of the Building. The exact
"Tenant's Proportionate Share" shall be set forth in the
Premises Amendment.
-8-<PAGE>
(xi) "Additional Rent" shall mean all amounts
determined pursuant to this Section 2, including any amounts
payable by Tenant to Landlord on account thereof.
(xii) "Adjusted Base Rent" shall mean the Base Rent as
adjusted pursuant to the provisions of Section 2(i) below.
(xiii) "Lease Year" shall mean the twelve (12) month
period commencing on the Commencement Date of the Lease and
each successive twelve (12) consecutive month period
thereafter during the Term of this Lease.
(xiv) Notwithstanding anything to the contrary set
forth above, Landlord and Tenant hereby agree as follows:
(A) On or before March 1, 1995, Tenant shall designate
the following information to Landlord in writing, which
designations shall be made in accordance with the terms and
provisions of Exhibit F attached hereto: (1) the per square
foot Base Rent per annum under the Lease, (2) the per square
foot amount of the Landlord's Allowance (as defined in the
Workletter), and (3) the exact location, size and floor
configuration of the Premises (including, without
limitation, the exact Rentable Area of the Premises)
(collectively, the foregoing are referred to herein as the
"Economic Terms"). In the event Tenant fails to designate
the Economic Terms on or before March 1, 1995 as aforesaid,
Landlord shall be permitted to designate such Economic Terms
for and on behalf of Tenant (which Economic Terms shall
assume that the Premises will consist of floors six (6)
through twelve (12) inclusive and that the Rentable Area of
the Premises shall be 245,025 square feet and shall
otherwise be in accordance with Exhibit F). Within twenty
(20) days after determination of the Economic Terms as
aforesaid, Landlord shall prepare and submit to Tenant a
proposed form of "Premises Amendment" to this Lease, which
Premises Amendment shall include the following information:
(a) the Rentable Area of the Premises, (b) the Base Rent,
Tenant's Proportionate Share and the amount of the
Landlord's Allowance calculated in accordance with the terms
and provisions of Exhibit F; (c) an amendment to Exhibit A
hereof designating the Premises; and (d) such other
information as Landlord and Tenant reasonably determine is
necessary as a result of the determination of the Economic
Terms. The Premises Amendment shall be in form and
substance reasonably satisfactory to Landlord and Tenant.
In the event the Premises Amendment has not been executed
and delivered within thirty (30) days after its delivery to
Tenant, the parties agree to submit the matter to
arbitration in accordance with Section 35 hereof.
-9-<PAGE>
(B) In the event any item of Expense is included as a
part of Additional Rent for tenants of the Building (other
than Landlord as a tenant under the Main Lease) and a tenant
of the Building (the "Excluded Tenant") is responsible for
the total amount of such Expense item with respect to the
Excluded Tenant's premises (e.g., if Main Landlord shall
have no obligation to furnish cleaning and janitorial
service for the Excluded Tenant's premises) and the Main
Landlord includes the cost of such service for all other
tenants' premises as an item of Expense as a part of Rent
Adjustment, then the Rentable Area of the Excluded Tenant's
premises shall be deducted from the Rentable Area of the
Building (for purposes of calculating the remaining tenants'
Proportionate Share with respect only to such item of
expense) and such item of Expense shall be allocated only
among the remaining tenants.
(b) Computation of Additional Rent - Tax and Expense
Adjustments.
Commencing on the Commencement Date, Tenant shall pay
Additional Rent in the form of Tax and Expense Adjustments (as
hereinafter defined) for each Adjustment Year hereinafter
specified. Additional Rent payable by Tenant with respect to
each Adjustment Year during which an Adjustment Date falls shall
include the product of the Tenant's Proportionate Share,
multiplied by the amount of Taxes and Expenses for such
Adjustment Year ("Tax and Expense Adjustment").
(c) Payments of Additional Rent; Projections.
Tenant shall pay Additional Rent to Landlord in the
manner hereinafter provided.
(i) Tax and Expense Adjustment. Tenant shall make
payments on account of the Tax and Expense Adjustment (any
such payment with respect to any Adjustment Year being also
called "Additional Rent Progress Payment") effective as of
the Adjustment Date for each Adjustment Year as follows:
(A) Landlord shall, within ten (10) days of its
receipt of a "Projection Notice" (as defined in the Main
Lease), deliver to Tenant a copy of such Projection Notice,
which Projection Notice shall set forth, among other items,
Main Landlord's reasonable estimates, forecasts or
projections (collectively, the "Projections") of Taxes and
Expenses and shall be based, as set forth in the Main Lease,
on the Budget. Landlord shall, concurrently with the
delivery to Tenant of the Projection Notice as aforesaid,
furnish Tenant with a written statement setting forth
Tenant's Additional Rent Progress Payment for such
Adjustment Year based upon the Projection.
-10-<PAGE>
(B) Until such time as Landlord furnishes a copy of a
Projection Notice for an Adjustment Year as aforesaid,
Tenant shall pay to Landlord a monthly installment of
Additional Rent Progress Payment at the time of each payment
of Monthly Base Rent equal to the latest monthly installment
of Additional Rent Progress Payment. On or before the first
day of the next calendar month following Landlord's service
of a copy of a Projection Notice, and on or before the first
day of each month thereafter, Tenant shall pay to Landlord
one-twelfth (1/12) of the Additional Rent Progress Payment
shown in the copy of the Projection Notice. Within twenty
(20) days following Landlord's service of a copy of a
Projection Notice, Tenant shall also pay Landlord a lump sum
equal to the Additional Rent Progress Payment shown in the
copy of the Projection Notice less (1) any previous payments
on account of Additional Rent Progress Payment made during
such Adjustment Year and (2) monthly installments on account
of Additional Rent Progress Payment due for the remainder of
such Adjustment Year.
(C) Landlord shall deliver to Tenant on or before the
Commencement Date a statement of the initial monthly
installment of Additional Rent Progress Payment payable by
Tenant. Tenant agrees to pay monthly installments of
Additional Rent Progress Payment equal to said initial
monthly installments from and after the Commencement Date
hereof until changed pursuant to a Projection Notice from
Landlord as provided above.
(D) When encumbering the Real Property with a
mortgage, trust deed, ground or underlying lease, or other
such security documents to which the Main Lease shall be or
become subordinate ("Security Documents"), Main Landlord has
agreed under the Main Lease that it shall attempt in good
faith when negotiating any Security Documents to obtain the
waiver of any term or provision that would require Main
Landlord to, from time to time, deposit sums into an account
or escrow to be used for the payment of any or all Taxes
("Tax Escrow"). If Main Landlord is unable to eliminate or
waive the requirement in a Security Document for a Tax
Escrow, then Main Landlord has agreed pursuant to the terms
of the Main Lease to use its best efforts to obtain the
agreement of the lender to permit deposits made into the Tax
Escrow by Main Landlord to bear interest. Tenant shall,
within twenty (20) days of Landlord's receipt of the same
from Main Landlord, receive Tenant's Proportionate Share of
such interest, dividend or other income earned from the
deposits held in the Tax Escrow, such earnings to be
disbursed from the Tax Escrow when available pursuant to
such Security Documents. In the event Main Landlord is
successful in obtaining such waiver, then Tenant shall not
be required to make Additional Rent Progress Payments with
-11-<PAGE>
regard to Taxes, but shall make payment in accordance with
the following provisions. Landlord shall within ten (10)
days of its receipt of a Tax Bill (being a copy of the bill
for Taxes which Landlord received from Main Landlord under
the Main Lease) deliver to Tenant a copy of such Tax Bill.
Tenant shall deliver to Landlord a certified check made
payable to the relevant taxing authority in the amount of
Tenant's Proportionate Share of the Tax Bill on a date which
is the later of: (a) ten (10) business days prior to the
date on which the Tax Bill is due, or (b) ten (10) days
after Tenant's receipt of the Tax Bill. If Taxes are
reduced or refunded after Tenant has paid its Tenant's
Proportionate Share thereof, Landlord will reimburse Tenant
for Tenant's Proportionate Share of such reduction or refund
within twenty (20) days after Landlord's receipt of same
from Main Landlord.
(d) Readjustments.
The following readjustments with regard to the Tax and
Expense Adjustment shall be made by Landlord and Tenant:
Within five (5) days of Landlord's receipt of
"Landlord's Statement" (as defined in the Main Lease) setting
forth Main Landlord's determination of the amount of Taxes and
actual Expenses ("Actual Expenses") for such Adjustment Year,
Landlord shall deliver to Tenant a copy of such Landlord's
Statement. If the Tax and Expense Adjustment owed for such
Adjustment Year exceeds the Additional Rent Progress Payment paid
by Tenant during such Adjustment Year, then Tenant shall, within
twenty (20) days after receipt of Landlord's Statement, pay to
Landlord an amount equal to the excess of the Tax and Expense
Adjustment over the Additional Rent Progress Payment paid by
Tenant during such Adjustment Year. If the Additional Rent
Progress Payment paid by Tenant during such Adjustment Year
exceeds the Tax and Expense Adjustment owed for such Adjustment
Year, then Landlord's payment of such excess ("Excess Expense
Adjustment") shall accompany the copy of the Landlord's Statement
delivered to Tenant as aforesaid. In the event the amount of the
Excess Expense Adjustment exceeds the actual Expenses by more
than ten percent (10%), then Landlord shall pay Tenant at the
time of repayment of the Excess Expense Adjustment Tenant's
Proportionate Share of any interest paid by Main Landlord to
Landlord pursuant to, and in accordance with, the Main Lease with
respect to such Excess Expense Adjustment; provided, however,
Landlord shall only be obligated to pay interest as aforesaid to
the extent it actually receives a corresponding interest payment
from Main Landlord under Section 2(d) of the Main Lease ("Main
Lease Interest") and provided further, that such Main Lease
Interest relates to Expenses paid by Tenant hereunder. Landlord
agrees, in good faith, to pursue its right to receive Main Lease
Interest from Main Landlord. The parties hereto acknowledge that
-12-<PAGE>
pursuant to, and in accordance with, Section 2(i) of the Main
Lease, in the event the Landlord (in its capacity as a tenant
under the Main Lease) disapproves of the Budget (as defined in
the Main Lease) for any Adjustment Year under the Main Lease, the
Building shall be operated on the basis of the Temporary Budget
(as defined in the Main Lease) until such time as a revised
budget is approved by Landlord as Tenant thereunder.
(e) Audited Statement.
Within five (5) days of receipt thereof by Landlord
under Section 2(e) of the Main Lease, Landlord shall furnish to
Tenant a copy of the audited statement prepared by the
independent certified public accountant selected by Main Landlord
under the Main Lease setting forth in reasonable detail a
calculation of Expenses and Taxes. The cost of such audit shall
be an Expense pursuant to the terms of Section 2(a)(iv) hereof.
Landlord agrees, upon Tenant's request at any time within fifty
(50) days following Tenant's receipt from Landlord of the
Landlord's Statement, to request that Main Landlord permit Tenant
to examine, during normal business hours, Main Landlord's books
and records showing Expenses and Taxes; provided, however,
Landlord's only obligation hereunder shall be to make such
request and Landlord shall have no liability to Tenant in the
event Main Landlord, for any reason whatsoever, refuses to honor
said request. Unless Tenant objects to any item set forth in the
Landlord's Statement within fifty (50) days after the furnishing
of the Landlord's Statement containing said item, such Landlord's
Statement shall be considered final and accepted by Tenant.
(f) Proration and Survival.
With respect to any Adjustment Year which does not fall
entirely within the Term, Tenant shall be obligated to pay as
Additional Rent for such Adjustment Year only a pro rata share of
Additional Rent as hereinabove determined, based upon the number
of days of the Term falling within the Adjustment Year.
Following expiration or termination of this Lease, Tenant shall
pay to Landlord or Landlord shall pay to Tenant, as the case may
be, any Additional Rent or Excess Expense Adjustment, as the case
may be, due to the other within twenty (20) days after the date
Landlord's Statement is sent to Tenant. Without limitation on
other obligations of Tenant which shall survive the expiration of
the Term, the obligations of Tenant to pay Additional Rent and of
Landlord to refund any Excess Expense Adjustment provided for in
this Section 2 shall survive the expiration or termination of
this Lease.
-13-<PAGE>
(g) No Decrease in Base Rent.
In no event shall the calculation of Additional Rent
result in a decrease of the Base Rent payable hereunder as set
forth in Section 1 hereof (as adjusted as set forth herein).
(h) Additional Rent.
All amounts payable by Tenant as or on account of
Additional Rent shall be deemed to be additional rent becoming
due under this Lease.
(i) Adjustment to Base Rent. Commencing with, and
including, the first day of the second Lease Year, the Base Rent
shall be adjusted for each Lease Year to an amount which is the
product of: (i) the then current Base Rent (as adjusted from
time to time in accordance with this Section 2(i)), multiplied by
(ii) one hundred and two percent (102%). As an example of the
foregoing calculation on a per square foot basis, the Adjusted
Base Rent for the Term assuming an initial Base Rent of $8.20 per
square foot per annum would be as follows:
Lease Year Adjusted Base Rent
Two $ 8.20 x 102% = $ 8.36
Three $ 8.36 x 102% = $ 8.53
Four $ 8.53 x 102% = $ 8.70
Five $ 8.70 x 102% = $ 8.87
Six $ 8.87 x 102% = $ 9.05
Seven $ 9.05 x 102% = $ 9.23
Eight $ 9.23 x 102% = $ 9.41
Nine $ 9.41 x 102% = $ 9.60
Ten $ 9.60 x 102% = $ 9.79
Eleven $ 9.79 x 102% = $ 9.99
Twelve $ 9.99 x 102% = $10.19
Thirteen (seven
months) $10.19 x 102% = $10.40
3. Early Occupancy
Tenant shall, in accordance with Section 25 hereof, be
entitled to possession of the Premises: (a) on September 1, 1995
(herein referred to as the "Possession Date") for the purpose of
performing Tenant's Work pursuant to, and in accordance with, the
terms and provisions of the Workletter, and (b) on July 1, 1996
for commencement of Tenant's occupancy of the Premises for the
purposes set forth in Section 4 hereof (subject to Section 5(c)
of the Workletter). In the event Tenant takes possession of the
Premises as aforesaid on or after the Possession Date, all of the
covenants and conditions of this Lease and the Workletter shall
apply to and shall control such possession, except that the
payment of Rent shall not commence until the Commencement Date.
-14-<PAGE>
4. Use of Premises.
(a) Tenant shall use and occupy the Premises for
executive and general offices and for any other lawful purpose
permitted under applicable zoning ordinances (consistent with a
first class office building) (including, without limitation, and
to the extent permitted by applicable zoning ordinances for (i)
the preparation and service of food and beverages from a pantry
kitchen or lounge all for the exclusive use by officers,
employees and business guests of Tenant (but not for use as a
public restaurant or by other tenants of the Building), (ii) the
operation of vending machines for the exclusive use of officers,
employees and business guests of Tenant, provided that each
vending machine, where necessary, shall be installed in a manner
reasonably approved by Landlord and/or Main Landlord and designed
to avoid water leakage, and (iii) the installation, maintenance
and operation of electronic data processing equipment, computer
processing facilities and business machines, provided that such
equipment is contained within the Premises and does not cause
unreasonable (consistent with a first class office building)
vibrations, noise, electrical interference or other unreasonable
(consistent with a first class office building) disturbance to
other tenants of the Building or the elevators or other equipment
in the Building), provided that the foregoing uses are not
inconsistent with a first class office building. Tenant shall
not use or occupy the Premises or permit the use or occupancy of
the Premises for any purpose or in any manner which (i) is
unlawful or in violation of any applicable legal or governmental
requirement, ordinance or rule; (ii) is dangerous or clearly may
be dangerous to persons or property; (iii) invalidates, increases
or clearly will invalidate or increase the amount of premiums for
any policy of insurance affecting the Real Property, unless any
additional amounts of insurance premiums so incurred, are paid by
Tenant to Landlord; or (iv) creates or clearly will create a
nuisance, unreasonably disturbs any other tenant of the Building
or injures the reputation of the Building.
(b) With respect to any use permitted under this
Section 4, Tenant shall not use the Premises so as to violate any
laws or requirements of public authorities, constitute a public
or private nuisance, unreasonably interfere with or cause
physical discomfort to any of the other tenants or occupants of
the Building, interfere with the operation of the Building or the
maintenance of same as a first-class office building, or violate
any of Tenant's other obligations under this Lease.
5. Services. Landlord shall cause Main Landlord to
furnish subject to, and in accordance with, the terms and
provisions of the Main Lease, the following services, which shall
all be deemed Expenses (except to the extent to be paid entirely
by Tenant, as hereinafter provided):
-15-<PAGE>
(a) Air-cooling and heat in accordance with the
heating, ventilating and air conditioning ("HVAC") Specifications
on Attachment A to the Workletter of the Main Lease, daily from
7:00 A.M. to 6:00 P.M. (Saturdays 8:00 A.M. to 1:00 P.M.),
Sundays and Holidays excepted. The term "Holidays" as used
herein shall mean those days customarily recognized as holidays
by other first-class office buildings in downtown Chicago.
(i) Subject to the provisions of subsection (ii)
below, whenever Tenant's use or occupation of the Premises
exceeds the design loads, as specified on Attachment A to
the Workletter of the Main Lease, for the system that
provides heat and air-cooling, or Tenant's use of lighting
or heat generating machines or equipment in the Premises
exceed such design loads and affect the temperature
otherwise maintained by the heating, ventilating and
air-conditioning system in the Premises or Building,
Landlord and/or Main Landlord, as the case may be, may
temper such excess loads by installing supplementary heat or
air-conditioning units in the Premises or elsewhere where
necessary, and the cost of such units and the expense of
installation, including, without limitation, the reasonable
cost of preparing working drawings and specifications, shall
be paid by Tenant as Additional Rent within thirty (30) days
after receipt of invoices therefor. The expense, except for
electricity directly billed to Tenant, resulting from the
operation and maintenance of any such supplementary heat or
air-conditioning units shall be paid by the Tenant to the
Landlord as Additional Rent at rates fixed by Landlord
and/or Main Landlord, as the case may be (but not both);
such rates shall be the lesser of: (A) the actual cost of
such operation and maintenance, plus five percent (5%) of
such actual cost for Landlord's and/or Main Landlord's
overhead (but not both), or (B) the amount actually charged
by Main Landlord to Landlord for such supplementary units
under the Main Lease. Notwithstanding the foregoing, Tenant
shall maintain, at Tenant's sole cost and expense, the
additional air conditioning units ("Additional HVAC Units")
being installed by Tenant in the Premises pursuant to the
terms and provisions of the Workletter.
(ii) The agreements hereunder are subject to
governmental restrictions on energy use. Furthermore, if
Tenant requests air-cooling and heat during times other than
the hours described above, then the provision of such
additional service shall be pursuant to Section 5(h) hereof.
(b) In common with other tenants, cold water from the
City of Chicago mains for drinking, lavatory and toilet purposes
drawn through fixtures installed in the Premises by Landlord,
Main Landlord or by Tenant with Landlord's and (to the extent
required under the Main Lease) Main Landlord's written consent,
-16-<PAGE>
and hot water in common with other tenants for lavatory purposes
from regular Building supply. Tenant shall pay Landlord as
Additional Rent at rates fixed by Landlord and/or Main Landlord,
as the case may be (but not both), for all tenants (which rates
shall not exceed the rates charged by the public utility
providing same, plus one hundred five percent (105%) of the cost
of heating hot water) for domestic water and hot water furnished
for any purpose other than as set forth in the first sentence of
this Section 5(b). The Tenant shall not waste or permit the
waste of water. Tenant shall pay the cost of acquisition,
installation, repair, maintenance and replacement of any
equipment required to be obtained to supply Tenant's special hot
water needs.
(c) Janitorial and cleaning service in accordance with
the cleaning specifications attached as Exhibit G to the Main
Lease ("Cleaning Specifications") in and about the Premises,
Saturdays, Sundays and Holidays excepted.
(d) Passenger elevator service consisting of not less
than eight (8) elevators (not including any elevators which are
temporarily out of service or otherwise temporarily unavailable
for use) located in that portion of the bank of eight (8)
elevators as shown on Attachment A to the Workletter of the Main
Lease serving exclusively floors 2 through 15 of the Building,
both inclusive, including each of floors six (6) through twelve
(12), both inclusive, in common with Landlord, Main Landlord and
other persons at such times as Landlord is permitted to use such
elevators subject to, and in accordance with, the Main Lease.
Landlord shall also cause Main Landlord to provide subject to,
and in accordance with, the Main Lease, freight elevator service
in common with Landlord, Main Landlord and other persons, at such
time or times as may be established by Main Landlord or Landlord
including the right, in common with Landlord, AT&T and their
successors and assigns, to the use of the separate single freight
elevator provided by Main Landlord for their exclusive use
pursuant to Section 5(d) of the Main Lease. Such full elevator
service, passenger or freight, if furnished at other times shall
be optional with Landlord and/or Main Landlord and shall never be
deemed a continuing obligation. Landlord, however, shall cause
the Main Landlord to provide subject to, and in accordance with,
the terms and provisions of the Main Lease, limited (but not less
than two (2)) passenger elevator service daily at all other
times. Operatorless automatic elevator service shall be deemed
"elevator service" within the meaning of this paragraph. In
addition, Tenant shall be entitled to use, on a non-exclusive
basis, the executive passenger elevator which is express to the
60th floor of the Building for so long as the conferencing center
on such floor is available to Tenant pursuant to subsection 5(k)
below.
-17-<PAGE>
(e) Electricity shall not be furnished by Landlord or
Main Landlord, but shall be furnished by an approved electric
utility company serving the area. Landlord shall permit the
Tenant to receive such service direct from such utility company
at Tenant's cost, and shall permit Landlord's and Main Landlord's
(to the extent permitted under the Main Lease) wire and conduits
to be used for such purposes to the extent available and
suitable. Notwithstanding anything contained herein to the
contrary, Landlord shall cause Main Landlord to provide subject
to, and in accordance with, the terms and provisions of the Main
Lease, at no expense to Tenant, sufficient wire and conduit to
meet the requirements as indicated on Attachment A to the
Workletter of the Main Lease. Tenant shall make all necessary
arrangements with the utility company for metering and paying for
electric current furnished by the utility company to Tenant and
Tenant shall pay for all charges for electric current consumed on
the Premises during Tenant's occupancy thereof. The electricity
used during the performance of janitor service, the making of
alterations or repairs in the Premises (provided same are for
Tenant's benefit), and for the operation of the Building's HVAC
system at times other than as provided in paragraph (a) hereof at
the request of Tenant, or the operation of any special air
conditioning systems which may be required for data processing
and computer equipment or for other special equipment or
machinery installed by Tenant, shall be paid for by Tenant.
Tenant shall make no alterations or additions to the electric
equipment or appliances without the prior written consent of the
Landlord and Main Landlord (to the extent required under the Main
Lease) in each instance, which consent as to Landlord shall not
be unreasonably withheld; provided, however, Tenant shall have
the right, without the consent of Landlord, to install, relocate
and/or remove any equipment owned or leased by Tenant or subject
to a purchase and/or financing arrangement with Tenant within the
Premises (as long as such relocation does not adversely affect
any Building systems and is done in accordance with any
applicable Rules and Regulations). Tenant may, but shall not be
obligated, to purchase from the Landlord or the Main Landlord
lamps, used in the Premises during the Term hereof which shall be
offered at a reasonably competitive price established by Main
Landlord plus a fee for storage and handling not to exceed five
percent (5%) of the cost of such lamps and for installation not
to exceed the rates set forth in the Budget. In the event Tenant
elects not to purchase lamps, Tenant will give Landlord four (4)
months notice of such election. Tenant agrees that all lamps
shall be appropriate for their intended use and shall be
consistent with the color rendition of the lamps in the balance
of the Building. Tenant covenants and agrees that at all times
its use of electric current shall never exceed the capacity
available as stated in Attachment A to the Workletter of the Main
Lease; provided, however, Landlord agrees to cause the Main
Landlord to provide subject to, and in accordance with, the terms
of the Main Lease, additional capacity, at Tenant's request if
-18-<PAGE>
(i) it is reasonably feasible to do so, and (ii) Tenant pays for
the cost of same.
(f) Window washing of all exterior windows in the
Premises, both inside and out, weather permitting, in accordance
with the Cleaning Specifications.
(g) Tenant and its employees and visitors may use
below-grade enclosed parking areas in the Parking Garage for
passenger vehicles in common with Main Landlord, Landlord and
other tenants of the Building and their employees and visitors,
all subject to the Rules and Regulations (as hereinafter defined)
including, without limitation, the right to allocate specific
parking spaces to certain tenants in the Building and to charge
periodic user fees for the use of such parking spaces. Tenant
shall have available for its use forty (40) of such spaces in a
specific location determined by Landlord; provided, however, in
the event Tenant fails to pay for the use of any such spaces,
such spaces not so paid for will automatically revert back to
Landlord. Tenant shall pay the periodic user fees charged
generally to tenants of the Building to the extent it contracts
for use of such spaces.
(h) Landlord may, upon the reasonable request of
Tenant, provide such extra or additional services as it is
reasonably possible for the Landlord to provide (or, at Tenant's
option, Tenant can request that Landlord or any agent of Landlord
(designated by Landlord in writing as Landlord's agent from time
to time) cause the Main Landlord to provide such extra or
additional services as is reasonably possible for Main Landlord
to provide subject to, and in accordance with, the terms of the
Main Lease), within a reasonable period of time after such extra
or additional services are requested. Tenant shall, for such
extra or additional services, pay the lesser of (i) the amounts
charged by Main Landlord pursuant to Section 5(h)(a) and (b) of
the Main Lease, or (ii) one hundred five percent (105%) of all of
Landlord's and/or Main Landlord's, as the case may be, (but not
both) reasonable costs which are incurred in providing same, such
amount to be considered Additional Rent hereunder. Landlord's
and/or Main Landlord's cost, as the case may be, (but not both)
shall include, but shall not be limited to, fees and other
charges paid by Landlord and/or Main Landlord, as the case may
be, (but not both) to architects, engineers and other consultants
retained by Landlord and/or Main Landlord to determine whether or
not, and on what terms and conditions, such extra or additional
services may be provided, as aforesaid. All charges for such
extra or additional services shall be due and payable within
twenty (20) days after they are billed. Interest at the rate set
forth in Section 26(h) shall accrue commencing at the expiration
of such twenty (20) day period. Any such billings (not more than
once a month) for extra or additional services shall include an
itemization of the extra or additional services rendered, and the
-19-<PAGE>
charge for each such service. At Tenant's request, Landlord
shall provide (or cause Main Landlord to provide) Tenant with the
rates for additional services as requested by Tenant and shall
promptly notify Tenant of any changes in such rates.
(i) Security at Building lobby entrance comparable to
that provided in first class non-institutionally owned office
buildings in downtown Chicago.
(j) Tenant, in common with other tenants, shall have
the right to use the loading docks at the Project subject to
prior scheduling with Landlord and Main Landlord. In addition,
Tenant shall have the right, in common with Landlord and AT&T, to
use the thirty (30) foot loading dock and the approximately 400
square foot storage area shown on Exhibit I of the Main Lease, as
said location may change in accordance with the terms and
provisions of the Main Lease, and shall have the further right,
at time of initial move-in and move-out, to use in common with
Landlord and AT&T the single fifty (50) foot over-the-road
loading berth.
(k) Tenant, in common with other tenants, AT&T and
Landlord, shall have the right to use the conferencing center on
the 60th floor of the Building at such rates as may from time to
time be established on a non-discriminatory basis with other
tenants in the Building (except that Landlord, AT&T and/or any
entity which is affiliated with Landlord and/or AT&T may receive
preferential treatment), subject to prior scheduling with the
Landlord and Main Landlord; provided, however, such right can be
revoked by Landlord at any time, in its sole discretion, if Main
Landlord, Landlord or AT&T desires to use such space for its own
purposes or grants another tenant or its subtenant exclusive use
of such space.
Tenant agrees that neither Landlord nor Main Landlord,
nor their respective agents or employees shall be liable in
damages, by abatement of Rent or otherwise, except in the event
of the negligence, intentional act or omission of Landlord, Main
Landlord or their respective agents and employees, for failure to
furnish (or causing to be furnished) or delay in furnishing any
service when such failure or delay is occasioned, in whole or in
part, by repairs, renewals or improvements, by any strike,
lockout or other labor trouble, by inability to secure elec-
tricity, gas, water, or other fuel at the Building after
reasonable effort so to do, by any accident or casualty
whatsoever, by the act or default of Tenant or other parties, or
by any cause beyond the reasonable control of Landlord or Main
Landlord. Tenant shall notify Landlord if any service shall be
stopped, delayed or diminished, and Landlord will proceed
diligently to attempt to cause the Main Landlord to restore such
service subject to, and in accordance with, the terms of the Main
Lease, as soon as reasonably possible, subject to the provisions
-20-<PAGE>
of this Section 5. Notwithstanding the foregoing, if as a result
of any failure or delay in providing (or causing to be provided)
HVAC, plumbing, water, electricity or elevator service (other
than any such failure or delay caused by the utility company
providing same or a failure or delay which affects buildings in
the area in which the Building is located, or failure or delay
caused by the negligence or intentional act of Tenant or its
agents, employees, guests or invitees) the Premises, or any
material portion of a floor of the Premises is rendered unusable:
(i) for a period in excess of three (3) consecutive business
days, then Rent for the portion of the Premises rendered unusable
shall abate until such portion is rendered usable, and (ii) for a
period in excess of (A) one hundred eighty (180) consecutive
business days or (B) one hundred eighty (180) days during any
three hundred sixty (360) day period, then Tenant shall have the
right, upon ten (10) days prior written notice from Tenant to
Landlord, to terminate the Lease in its entirety or, in the event
only a floor or portion of a floor of the Premises is rendered
unusable as aforesaid, only in half floor units which would
include the affected portion thereof (unless the Premises or
portion thereof are rendered usable prior to receipt of the
aforesaid notice from Tenant). Tenant agrees to cooperate fully,
at all times, with Landlord in abiding by all Rules and
Regulations and other requirements which Landlord and/or Main
Landlord may prescribe for the proper functioning and protection
of all utilities and services reasonably necessary for the
operation of the Premises and the Building. Landlord and Main
Landlord, throughout the Term of this Lease, shall have access to
any and all mechanical installations within the Premises on
reasonable notice to Tenant, and Tenant agrees that there shall
be no construction or partitions or other obstructions which will
materially interfere with the moving of the servicing equipment
of Landlord or Main Landlord to or from the enclosures containing
said installations. Tenant further agrees that neither Tenant
nor its employees, agents, licensees, invitees or contractors
shall at any time tamper with, adjust or otherwise in any manner
affect Landlord's or Main Landlord's mechanical installations
unless authorized by Landlord or Main Landlord (as the case may
be). All services provided (or caused to be provided by Main
Landlord subject to, and in accordance with, the Main Lease)
pursuant to the terms hereof shall be of a quality level
consistent with a first class non-institutionally owned office
building in downtown Chicago. Landlord shall use (or, at
Landlord's option, shall cause Main Landlord to use subject to,
and in accordance with, the terms and provisions of the Main
Lease) reasonable efforts to provide such services in a cost-
effective manner.
If Landlord shall fail to perform (or fail to cause
Main Landlord to perform subject to, and in accordance with the
Main Lease) the services set forth in Section 5(c) above
("Cleaning Services") (and such failure is not otherwise excused
-21-<PAGE>
as set forth in this Section 5) and such failure continues for a
period of ten (10) consecutive business days after written notice
from Tenant to Landlord, then the Tenant, in addition to the
right to abate Rent as set forth above, shall have the right to
perform such Cleaning Services not performed by (or caused to be
performed by) Landlord until such time as the Landlord cures (or
causes the cure of) the failure to perform. Such time period
shall not be extended by Force Majeure. Tenant shall bill
Landlord for all reasonable and verifiable costs of performance
by the Tenant of such Cleaning Services plus five percent (5%)
thereof for overhead. In the event Landlord does not pay same
within thirty (30) days of receipt of such invoice, then Tenant
shall have the right to set off such amount against amounts owed
by the Tenant to the Landlord under this Lease.
6. Condition and Care of Premises. No promises of the
Landlord to alter, remodel, improve, repair, decorate or clean
the Premises or any part thereof have been made, and no
representation respecting the condition of the Premises or the
Building has been made to Tenant by or on behalf of Landlord
except to the extent expressly set forth herein. This Lease does
not grant any rights to light or air over or about the Real
Property of Main Landlord except as set forth in Section 30
hereof. Except for (i) any damage resulting from any negligent
or intentional act or omission of Landlord, AT&T or their
employees or agents, and (ii) Landlord's Repair Obligations
defined below, and, subject to the provisions of Sections 13 and
14 hereof, Tenant shall at its own expense keep the Premises and
Tenant's leasehold improvements and contents in good repair and
tenantable condition and shall promptly and adequately repair all
damage to the Premises caused by Tenant or any of its employees,
contractors, agents, invitees, or licensees including replacing
or repairing all damaged or broken glass, fixtures and
appurtenances resulting from any such damage. If Tenant does not
do so promptly and adequately, Landlord may (upon not less than
fifteen (15) days' notice to Tenant except in an emergency) but
need not, make such repairs and replacements and Tenant, shall
pay Landlord the reasonable and verifiable cost thereof within
thirty (30) days after billing, plus five percent (5%) of such
cost for Landlord's overhead. Interest at the rate set forth in
Section 26(h) shall accrue commencing at the expiration of such
thirty (30) day period.
Landlord hereby agrees to cause Main Landlord to
perform the following repair and maintenance obligations subject
to, and in accordance with, the terms and provisions of the Main
Lease ("Landlord's Repair Obligations"): all maintenance,
repairs and replacements to the common areas of the Building and
Building service systems not specifically due to the Tenant's
negligent or intentional act or omission. Without limiting the
generality of the foregoing sentence or the following, the
Landlord shall cause Main Landlord to maintain, repair and keep
-22-<PAGE>
in good order, safe and clean condition subject to, and in
accordance with, the terms of the Main Lease (1) the plumbing,
sprinkler, HVAC, any supplemental systems installed pursuant to
Section 5(a)(i) (such units to be maintained by Main Landlord at
Tenant's expense); provided, however, Tenant, at its sole cost
and expense, may install or cause to be installed and shall
maintain or cause to be maintained the Additional HVAC Units
described in Section 5(a)(i) above)); security systems of the
Building (other than as installed by Tenant); electrical and
mechanical systems and equipment, and Main Landlord's elevators
and boilers, all as described in Attachment A to the Workletter
of the Main Lease ("Standard Items") or any substitutions for
such Standard Items or additions requested by Landlord and
approved by Main Landlord pursuant to the terms of the Main Lease
(provided that, to the extent such substitutions or additions are
to be installed in the Premises, Landlord agrees it will also
obtain the consent of Tenant, which consent shall not be
unreasonably withheld or delayed), all of which are located in or
serve the Premises and common areas of the Building, broken or
damaged glass (unless caused by the negligent or intentional act
or omission of the Tenant or specifically required to be repaired
or replaced by Tenant pursuant to the preceding paragraph); (2)
underground utility lines and transformers and interior and
exterior structure of the Building, including the roof (except as
set forth in Section 30 and in the Direct Lease Option and
Consent Agreement), exterior walls, bearing walls, support beams,
foundation, columns, exterior doors and windows and lateral
support to the Building; (3) the interior walls, ceilings, floors
and floor coverings of the common areas of the Building; (4) the
exterior improvements to the Land, including shrubbery,
landscaping and fencing; and (5) the common areas located within
or outside the Building, including the common entrances,
corridors, doors and windows, loading dock, stairways and
lavatory facilities and access ways therefor.
7. Return of Premises.
(a) At the termination of this Lease by lapse of time
or otherwise or upon termination of Tenant's right of possession
without terminating this Lease, Tenant shall surrender possession
of the Premises to Landlord and deliver all keys to the Premises
to Landlord and make known to the Landlord the combination of all
locks of vaults then remaining in the Premises, and shall,
subject to the following paragraph, return the Premises and all
equipment and fixtures of the Landlord therein to Landlord, in
good repair and tenantable condition, ordinary wear and tear,
loss or damage by fire or other insured casualty, and damage
resulting from condemnation and/or the negligence, intentional
act or omission of Landlord and/or Main Landlord excepted,
failing which Landlord may restore the Premises and such
equipment and fixtures to such good and tenantable condition and
Tenant shall pay the cost thereof to Landlord within thirty (30)
-23-<PAGE>
days of receipt of an invoice together with five percent (5%) of
such cost as Landlord's overhead. Interest at the rate set forth
in Section 26(h) shall accrue commencing at the expiration of
such thirty (30) day period. In no event shall Tenant remove
items, the removal of which would cause damage to the structure
of the Building, without Landlord's and (to the extent required
under the Main Lease) Main Landlord's consent, which consent
shall not be unreasonably withheld. If such consent is obtained,
Tenant shall repair all damage at its expense. It is understood
and agreed that, in accordance with the terms and provisions of
the Workletter, Tenant may elect, in its sole discretion, as part
of the Tenant's Work, to demolish certain portions of the
Premises as they exist on the date possession of the Premises is
delivered to Tenant, including without limitation the right to
demolish all or any portion of the eleventh (11th) floor
improvements, and, with respect to such demolition, Tenant shall
not be obligated, at the termination of this Lease, to restore
said demolished portions to their original condition prior to the
demolition thereof by Tenant.
(b) All installations, additions, partitions,
hardware, light fixtures, non-trade fixtures and improvements,
temporary or permanent, except movable furniture, personal
property and equipment belonging to Tenant, in or upon the
Premises, placed there by Tenant shall be Landlord's property and
shall remain upon the Premises, all without compensation,
allowance or credit to Tenant; provided, however, Tenant may
elect at its discretion to remove custom millwork, cabinetry,
equipment from the telephone equipment room, computer wiring,
microwave and other communication equipment (to the extent owned
or leased by Tenant), carpeting, track lighting, special lighting
fixtures and office display modules, in which event Tenant shall,
prior to the end of the Term or seven (7) days after the earlier
termination of the Lease or Tenant's right to possession, repair
any damage to the Premises caused by such removal, failing such
repair by Tenant, Landlord may repair the Premises and Tenant
shall pay the cost thereof to Landlord within thirty (30) days of
receipt of an invoice, together with five percent (5%) of such
cost for Landlord's overhead. Interest at the rate set forth in
Section 26(h) shall accrue commencing at the expiration of such
thirty (30) day period. Landlord shall, at the time of its
consent to any installations, additions, partitions, fixtures or
improvements given pursuant to Section 11 hereof or the
Workletter, provide Tenant with written notice stating whether or
not Landlord shall require Tenant to remove the same upon
termination of this Lease (except no such removal will be
required if such installations, additions, partitions, fixtures
or improvements are of at least building standard quality, as
reasonably determined by Landlord), and if such removal is
required, Tenant, at Tenant's sole cost and expense, shall
promptly remove such of the installations, additions, partitions
and fixtures designated in such notice and repair any damage to
-24-<PAGE>
the Premises caused by such removal, failing which either
Landlord or Main Landlord, as the case may be, may remove the
same and repair the Premises and Tenant shall pay the expense to
Landlord or Main Landlord, as the case may be, (but not both) of
doing the same.
(c) Tenant shall remove Tenant's furniture, machinery,
safes, trade fixtures and other items of movable personal
property of every kind and description from the Premises and
restore any damage to the Premises caused thereby, such removal
and restoration to be performed prior to the end of the Term or
seven (7) days following termination of this Lease or Tenant's
right of possession, whichever might be earlier, failing which
either Landlord or Main Landlord (but not both) may do so in
accordance with the terms and provisions hereof or of the Main
Lease and thereupon the provisions of Section 15(f) shall apply.
(d) All obligations of Tenant pursuant to this Section
7 shall survive the expiration of the Term or sooner termination
of this Lease; provided, however, if Landlord has not made a
written claim against Tenant within ninety (90) days after the
expiration of the Term or termination of the Lease, all such
obligations of Tenant under this Section 7 shall terminate and
Landlord shall have no further rights with respect to the
foregoing. Nothing contained herein shall relieve Tenant from
its obligations pursuant to Section 2(f) hereof.
8. Holding Over. The Tenant shall pay Landlord for
each day Tenant retains possession of the Premises or any part
thereof subsequent to the expiration of the Term, an amount which
is two hundred percent (200%) of the amount of Rent, as set forth
in Sections 1 and 2 hereof, for each day (computed on a year of
365 days) applicable to that portion of the Premises being held-
over. Tenant shall also pay all direct actual damages and
consequential damages sustained by Landlord by reason of such
retention. Nothing contained in this Section shall be construed
or operate as a waiver of Landlord's right of re-entry or any
other legal or equitable right or remedy to gain possession of
that portion of the Premises being held-over. In no event shall
consequential damages payable by Tenant under this Section 8
exceed the total amount of damages which Landlord is liable to
pay Main Landlord under the Main Lease as a result of such
holdover.
9. Rules and Regulations.
(a) Tenant agrees to observe and not to interfere with
the rights reserved to Landlord contained in Section 10 hereof
(and the rights reserved to Main Landlord contained in Section 10
of the Main Lease) and agrees, for itself, its employees, agents,
contractors, invitees and licensees, to comply with the rules and
regulations set forth in Exhibit J of the Main Lease and any
-25-<PAGE>
additional rules and regulations applicable to Tenant as shall be
adopted by Landlord pursuant to Section 10 of this Lease (and/or
Main Landlord pursuant to and in accordance with Section 10 of
the Main Lease) (collectively, "Rules and Regulations").
(b) Any violation by Tenant of any of the Rules and
Regulations may be restrained; but whether or not so restrained,
Tenant acknowledges and agrees that it shall be and remain liable
for all damages, loss, costs and expense resulting from any
violation by the Tenant of any of said Rules and Regulations.
Landlord shall use its reasonable efforts to cause Main Landlord
to enforce, in accordance with the terms and provisions of the
Main Lease, those Rules and Regulations which are adopted by Main
Landlord against any other tenant. The cost of such enforcement
shall be an Expense hereunder, provided that (i) all leases with
tenants in the Building shall contain a provision specifying that
such tenant shall be liable for all costs and expenses, including
attorneys' fees incurred, by Main Landlord in enforcing the Rules
and Regulations against such tenant and (ii) Main Landlord uses
reasonable efforts to collect such costs, fees and expenses.
(c) Landlord agrees not to discriminate against Tenant
in the approval, adoption or enforcement of any Rules and
Regulations adopted by it and applicable to all other subtenants
of the Main Premises or approved by it under the Main Lease and
applicable to the Premises.
10. Rights Reserved to Landlord. Landlord reserves
the following rights, exercisable at its election with prior
written notice to Tenant:
(a) The location and style of the suite number and
identification sign or lettering for the Premises occupied by the
Tenant (and any other signage) shall be subject to the approval
of Landlord and (to the extent required under the Main Lease)
Main Landlord which approval as to Landlord shall not be
unreasonably withheld; provided, however, Tenant shall have the
right, without the prior consent of Landlord, to install signs
within the Premises on the floors of the Premises consisting of
complete floors.
(b) To retain at all times, and, subject to the
provisions of subsection (d) below, to use in appropriate
instances, passkeys to the Premises.
(c) To exhibit the Premises (on reasonable notice to
Tenant) to prospective assignees and mortgagees.
(d) To enter the Premises at reasonable hours for
reasonable purposes, including inspection and supplying janitor
service or other service to be provided to Tenant hereunder
-26-<PAGE>
subject, however, (with the exception of janitor service) to the
following:
(i) The Landlord will give an employee designated in
writing by the Tenant, advance oral notice of its desire to
enter the Premises and the purposes for such entry; and
(ii) The Landlord agrees that neither it nor any of
its representatives, employees, invitees or agents will
enter into or move about the Premises unless accompanied by
a representative of the Tenant; and
(iii) The Landlord agrees that if, prior to such
entry, it is impracticable for the Tenant to secure
classified or confidential material, the Tenant may prevent
the Landlord from access to the area where such material is
located until same is secured; provided, however, that in
the event of an emergency, the Tenant will secure the same
promptly; and
(iv) The Landlord will use all reasonable efforts not
to disturb the Tenant's use and occupancy of the Premises;
and
(v) Notwithstanding the foregoing, Tenant agrees that
Landlord shall have immediate access to the Premises in the
event of an emergency. Tenant agrees to provide Landlord
with a reasonable means of access for such emergencies.
(e) Provided that reasonable access to the Premises
shall be maintained and the business of Tenant shall not be
interfered with unreasonably, to make repairs, alterations,
additions and improvements, structural or otherwise, in or to the
Main Premises or any part thereof. During such work described
herein, Landlord may enter the Premises, subject to the
requirements of Section 10(d)(i)-(v), and take into and upon or
through any part of the Building, including the Premises, all
materials that may be necessary for such work. Landlord shall,
at its expense, repair all damage caused by Landlord to the
Premises (and cause Main Landlord to repair all damage caused by
Main Landlord) and restore the Premises to their original
condition. Landlord and/or Main Landlord, as the case may be,
shall obtain all appropriate insurance or cause its contractors
to carry such insurance. All such work shall comply with all
insurance requirements and all applicable laws and ordinances and
rules and regulations of governmental departments or agencies.
Landlord or Main Landlord may, at their option, make any repairs,
alterations, improvements and additions in and about the Building
and the Premises during ordinary business hours; provided,
however, if the conduct of Tenant's business is materially and
adversely affected by same, at Tenant's reasonable request, such
-27-<PAGE>
work (other than emergency work) shall be done during other than
business hours, at no cost or expense to Tenant.
(f) To designate parking spaces in the Building for
the exclusive use of one or more subtenants (subject to Tenant's
rights herein set forth).
(g) From time to time to make and adopt on a non-
discriminatory basis such reasonable rules and regulations for
the protection and welfare of the Main Premises and its
subtenants and occupants, as the Landlord may reasonably
determine and not solely or primarily for the benefit of
Landlord, and the Tenant agrees to abide by and comply with all
such reasonable rules and regulations.
11. Alterations.
(a) Except with respect to work being performed by or
on behalf of Tenant pursuant to, and in accordance with, the
Workletter, Tenant shall not make alterations, improvements and
additions in the Premises including, but not limited to HVAC,
electrical and plumbing systems, and fire, smoke detection and
temperature control systems ("Alterations") without Landlord's
advance written consent in each instance, which approval shall
not be unreasonably withheld, and (to the extent required under
the Main Lease) the consent of the Main Landlord. Landlord shall
not be deemed to have acted unreasonably if it withholds its
consent because: Main Landlord has disapproved such Alteration
(to the extent Main Landlord's approval is required); such work
when completed by Tenant will, in the reasonable opinion of
Landlord or Landlord's architect, adversely affect building
systems or the structure or safety of the Building and its
occupants; such work will increase Landlord's or Main Landlord's
cost of furnishing services (unless Tenant agrees to reimburse
Landlord or Main Landlord, as the case may be, for such increased
costs) or otherwise will materially adversely affect Landlord's
or Main Landlord's ability to furnish services to Tenant or other
tenants. The foregoing reasons, however, shall not be exclusive
of the reasons for which Landlord may withhold consent, whether
or not such other reasons are similar or dissimilar to the
foregoing. Landlord shall have thirty (30) days within which to
review, and have its consultants review, the proposed Alterations
and Landlord shall be entitled to reimbursement for its
reasonable costs incurred in such review and determination, plus
five percent (5%) of such costs for Landlord's overhead. In no
event shall Tenant be required to pay or reimburse both the
Landlord and the Main Landlord for the same matter nor shall
Tenant's cost with respect to such matters exceed the cost which
Landlord would have been required to pay to Main Landlord under
the Main Lease. Landlord agrees to proceed diligently with such
review and to inform Tenant of its consent or disapproval
promptly. Notwithstanding the foregoing, Tenant may make the
-28-<PAGE>
alterations, improvements or additions to the Premises as listed
below without the Landlord's or Main Landlord's consent:
(i) Activate, cap or relocate voice/data outlets;
(ii) Minor alteration of interior tenant space walls
and wall/power/voice/data outlets and circuits as long as
equipment connected to said outlets does not affect HVAC;
(iii) Relocate light fixtures (minor relocations not
affecting switching);
(iv) Minor relocation of air diffusers within flex
range;
(v) Repainting, wallpapering or recarpeting of the
Premises;
(vi) Minor carpentry such as decorating, picture
hanging, furniture/cabinet securing, carpet changes and
repainting and re-wallpapering not covered by (v) above; and
(vii) All furniture additions, removals or relocations,
including wall panel systems.
Items (i) through (v) are hereinafter referred to as
"Non-Structural Alterations". Except as set forth in the next
sentence, Tenant shall notify Landlord with specificity in
writing of all Non-Structural Alterations at least twenty-four
(24) hours prior to their commencement including, without
limitation, the nature and location of the Non-Structural
Alterations. Tenant shall notify Landlord of Non-Structural
Alterations described in (i) above on a monthly basis. Tenant
shall also promptly notify Landlord of any material changes to
the Non-Structural Alterations previously described to Landlord.
(b) All work of the nature herein contemplated may be
done by contractors chosen by Tenant; provided, however, the
Tenant's choice of contractors shall be subject to the approval
of Landlord and Main Landlord (to the extent required under the
Main Lease), which approval, as to Landlord, shall not be
unreasonably withheld. All contractors chosen by Tenant shall be
of good reputation, have financial capacity to complete the work,
be experienced in the area of work for which they have been
hired, shall to the extent relevant, be familiar with high-rise
construction, have good labor relations and utilize union labor.
Tenant shall supply Landlord prior to commencement of the work
with copies of all contracts and warranties with respect to
Alterations and permits required in connection with such work and
evidence of insurance coverage, including coverage of Landlord
and Main Landlord as additional insured parties. Working
drawings and specifications with respect to Alterations shall be
-29-<PAGE>
prepared at Tenant's expense by architects or engineers retained
by Tenant and approved by Landlord and Main Landlord (to the
extent required under the Main Lease), which approval, as to
Landlord, shall not be unreasonably withheld. Within a
reasonable time after a request by Tenant, Landlord shall
provide, at no cost to Tenant, all base building information,
drawings and specifications in Landlord's possession (and will
request Main Landlord to provide, at no cost to Tenant, copies of
any other base building information, drawings and specifications
in Main Landlord's possession), to the extent the same are
reasonably requested by Tenant. After completion of the
Alterations, Tenant shall furnish Landlord with final
construction drawings marked to show all changes. If reasonably
requested by Landlord, Tenant shall furnish Landlord on
completion thereof with field drawings and plans and
specifications, if any, for information purposes only. In the
event Tenant elects to use contractors employed by Landlord or
Main Landlord for Alterations, then Tenant shall pay the cost of
such work plus a fee to Landlord or Main Landlord, as the case
may be (but not both) as set forth in Landlord's or Main
Landlord's, as the case may be, bid for such work. In the event
Tenant employs its own contractors, then neither Landlord nor
Main Landlord shall be entitled to any fee but, Tenant shall
reimburse Landlord for its reasonable out-of-pocket costs and
expenses in connection with its supervision of only the
structural portions of the Alterations.
(c) All work of the nature herein contemplated shall
be at Tenant's expense, and shall comply with all insurance
requirements and with all ordinances and regulations of the City
of Chicago or any department or agency thereof, and with the
requirements of all statutes and regulations of the State of
Illinois or of any department or agency thereof. All work done
by Tenant or its contractors pursuant hereto shall be done in a
first-class workmanlike manner, using only premium grades of
materials at least equal to the building standards described on
Attachment A to the Workletter of the Main Lease and shall comply
with all insurance requirements and all applicable laws and
ordinances and rules and regulations of governmental departments
or agencies and the Rules and Regulations. Tenant shall obtain
all appropriate insurance or cause its contractors to carry such
insurance. Tenant shall defend and hold Landlord, Main Landlord,
their agents and employees harmless from all costs, damages,
liens and expenses related to such work.
12. Assignment and Subletting.
(a) Except as hereinafter provided, Tenant shall not,
without the prior written consent of Landlord and Main Landlord
(to the extent Main Landlord's consent is required under the Main
Lease) in each instance, either prior or subsequent to the
commencement of the Term, (i) assign, transfer, mortgage, pledge,
-30-<PAGE>
hypothecate or encumber or subject to or permit to exist upon or
be subjected to any lien or charge, this Lease or any interest
under it, (ii) allow to exist or occur any transfer of or lien
upon this Lease or the Tenant's interest herein by operation of
law, (iii) sublet the Premises or any part thereof, or
(iv) permit the use or occupancy of the Premises or any part
thereof for any purpose not provided for under Section 4 of this
Lease. In no event shall this Lease be assigned or assignable by
voluntary or involuntary bankruptcy proceedings or otherwise, and
in no event shall this Lease or any rights or privileges
hereunder be an asset of Tenant under any bankruptcy, insolvency
or reorganization proceedings. The foregoing provisions shall
apply to any permitted assignee or subtenant of Tenant
(including, without limitation, any Permitted Transferee).
(b) Without thereby limiting the generality of the
foregoing provisions of this Section 12, Tenant expressly
covenants and agrees not to enter into any lease, sublease,
license, concession or other agreement for use, occupancy or
utilization of the Premises which provides for rental or other
payment for such use, occupancy or utilization based in whole or
in part on the net income or profits derived by any person from
the property leased, used, occupied or utilized (other than an
amount based on a fixed percentage or percentages of receipts or
sales), and that any such purported lease, sublease, license,
concession or other agreement shall be absolutely void and
ineffective as a conveyance of any right or interest in the
possession, use, occupancy or utilization of any part of the
Premises.
(c) Consent by Landlord to any assignment, subletting,
use or occupancy, or transfer or assignment, subletting or
transfer by Tenant which is permitted hereunder without
Landlord's consent, shall not be deemed to be a consent to or
relieve Tenant from obtaining Landlord's consent to any
subsequent assignment, transfer, lien, charge, subletting, use or
occupancy.
(d) Tenant shall, by notice in writing
("Assignment/Sublease Notice"), advise Landlord of its intention
to assign this Lease or sublet any part or all of the Premises.
Landlord will not unreasonably withhold or delay its consent to
Tenant's assignment of this Lease or subletting of the space
covered by its Assignment/Sublease Notice. Landlord shall not be
deemed to have unreasonably withheld its consent to a sublease of
part or all of the Premises or an assignment of this Lease if its
consent is withheld because: (i) Tenant is then in default
hereunder (for purposes of this Section 12, "default" shall mean
either (x) a material default which is not cured or (y) a
Default); (ii) the proposed use of the Premises by the subtenant
or assignee does not conform with the use set forth in Section 4
hereof; (iii) in the reasonable judgment of Landlord, the
-31-<PAGE>
proposed subtenant or assignee is of a character or is engaged in
a business which would be deleterious to the reputation of the
Building as a first-class non-institutionally owned office
building; (iv) the proposed use by the subtenant or assignee is
prohibited by the Chicago, Illinois zoning ordinance; (v) the
proposed use by the subtenant or assignee is not consistent with
first-class non-institutionally owned office buildings in the
central business district area of Chicago, Illinois; (vi) the
proposed use by the subtenant or assignee involves the sale of
food or liquor for consumption on the Premises by other than
employees or guests; (vii) the proposed use by the subtenant or
assignee is an amusement establishment or a "sexually-oriented
business establishment"; (viii) the proposed use by the subtenant
or assignee involves increases in pedestrian traffic through the
common areas of the Building to the extent that a material
increase in security or janitorial service is necessary; (ix)
Main Landlord has withheld its consent to Tenant's proposed
assignment of this Lease or subletting of the space covered by
the notice (to the extent such consent is required under the Main
Lease); or (x) the proposed use by the subtenant or assignee is
for the provision, sale, lease or manufacture of (1)
telecommunication equipment or services, (2) data processing
equipment or services or (3) typewriting equipment; provided,
however, that the foregoing are merely examples of reasons for
which Landlord may withhold its consent and shall not be deemed
exclusive of any other reasons for reasonably withholding
consent, whether similar or dissimilar to the foregoing examples.
Tenant shall furnish Landlord with copies of all documents
relating to any such sublease or assignment including financial
statements of the assignee or subtenant if requested by Landlord.
(e) Tenant shall remain obligated under this Lease in
the event of any sublease or assignment; provided, however,
Tenant shall be released from liability hereunder in the event of
an assignment of all of its right, title and interest in this
Lease to a Permitted Transferee in accordance with Section 12(f)
below. Each such sublease or assignment shall contain a covenant
by the sublessee or assignee to comply with the terms of this
Lease and the Main Lease insofar as they relate to such sublessee
or assignee.
(f) Notwithstanding the foregoing provisions, Landlord
agrees that any assignment of this Lease, once or successively,
to an entity as a result of a merger, consolidation or sale of
all or substantially all of the assets of Tenant shall not
require Landlord's consent, provided that: (i) such entity,
immediately following such merger, consolidation or sale, has
total assets of not less than Four Hundred Million and 00/100
Dollars ($400,000,000.00), (ii) such entity, immediately
following such merger, consolidation or sale, has a Net Worth (as
herein defined), reasonably determined by Landlord, which is
equal to or in excess of One Hundred Forty Million and 00/100
-32-<PAGE>
Dollars ($140,000,000.00), and (iii) the conditions specifically
set forth in Section 12(d)(i), (ii), (iv), (v), (vi), (vii) and
(x) are satisfied (such entity herein called a "Permitted
Transferee"). The phrase "Net Worth", as used herein, shall mean
total assets minus total liabilities as determined in accordance
with generally accepted accounting principles. Such Permitted
Transferee shall be subject to all of the terms and conditions of
this Lease and shall in writing agree to assume and to comply
with the terms of this Lease. At least thirty (30) days prior to
the effective date of any assignment to a Permitted Transferee,
Tenant shall give Landlord and Main Landlord notice of the
identity of such Permitted Transferee and evidence, reasonably
satisfactory to Landlord, of the total assets and Net Worth of
such Permitted Transferee.
(g) If Tenant shall sublet the Premises or any part
thereof in accordance with the terms and provisions of this Lease
at a Net Rental Rate (as hereinafter defined) in excess of the
Rent due hereunder ("Excess Net Rent"), then Tenant shall be
entitled, as long as Tenant is not in Default hereunder, to
retain such Excess Net Rent. Upon and during the continuance of
a Default hereunder by Tenant, any and all Excess Net Rent
collected shall immediately become the property of and be payable
to the Landlord. The phrase "Net Rental Rate" shall mean any and
all rent and other consideration paid or payable by the
applicable subtenant after reimbursement to the Tenant for any
reasonable and out-of-pocket costs and expenses incurred by the
Tenant in connection with such subletting for: (a) tenant
improvements, and (b) leasing commissions.
(h) Without in any way limiting the foregoing
provisions of this Section 12, the Tenant agrees that, in
connection with any transfer by Tenant of all or substantially
all of the assets of Tenant to another entity, Tenant shall
transfer to such entity, and such entity shall assume, all of
Tenant's right, title and interest in this Lease. Any transfer
of all or substantially all of the assets of Tenant without a
corresponding transfer to such entity, and the assumption by such
entity, of this Lease shall be deemed an assignment of this Lease
and shall be subject to all of the provisions of this Section 12,
including the requirement, if any, that Tenant obtain Landlord's
prior written consent thereto.
13. Damage or Destruction by Casualty.
(a)(i) If the Premises or any part of the Building or
machinery or equipment used in operation of the Building shall be
damaged by fire or other casualty and if such damage does not
render all or a substantial portion of the Premises or the
Building untenantable, then Landlord shall proceed to cause the
Main Landlord to repair and restore the same with reasonable
promptness to the extent the Main Landlord is obligated to do so
-33-<PAGE>
in accordance with, and subject to, the terms and provisions of
the Main Lease, subject to Force Majeure and reasonable delays
for insurance adjustment. Notwithstanding the foregoing, if the
Premises or the portion of the Building so damaged which renders
the Premises unusable are not repaired or restored by the Main
Landlord as aforesaid within two hundred eighty (280) days from
the date of damage, then, notwithstanding anything contained
herein to the contrary, Tenant shall have the right to terminate
this Lease, by written notice to the Landlord not later than
twenty (20) days after the expiration of said two hundred eighty
(280) day period but in any event prior to substantial completion
of such repair or restoration work. Such termination shall be
effective as of the date of such notice. Rent shall abate from
the date of such damage.
(ii) If any such damage renders all or a substantial
portion of the Premises or the Building untenantable, Landlord
shall, with reasonable promptness after the occurrence of such
damage, estimate the length of time that will be required to
substantially complete such repair and restoration of such damage
and shall, by written notice, advise Tenant of such estimate;
provided, however, such estimate shall be based upon Main
Landlord's estimate delivered pursuant to Section 13 of the Main
Lease. If it is so estimated that the amount of time required to
substantially complete such repair and restoration will exceed
two hundred eighty (280) days from the date such damage occurred,
then either Landlord or Tenant shall have the right to terminate
this Lease as of the date of such damage upon giving notice to
the other at any time within ten (10) days after Landlord gives
Tenant the notice containing said estimate (it being understood
that Landlord may, if it elects to do so, also give such notice
of termination together with the notice containing said
estimate). Unless this Lease is terminated as provided in the
preceding sentence, or the Main Lease is terminated pursuant to
Section 13 of the Main Lease, Landlord shall proceed with
reasonable promptness to cause the Main Landlord to repair and
restore the Premises to the extent the Main Landlord is obligated
to do so in accordance with, and subject to, the terms and
provisions of the Main Lease, subject to reasonable delays for
insurance adjustments and Force Majeure, and also subject to
zoning laws and building codes then in effect. Landlord shall
have no liability to Tenant, and Tenant shall not be entitled to
terminate this Lease (except as hereinafter provided) if such
repairs and restoration are not in fact completed within the time
period estimated by Landlord, as aforesaid, or within said two
hundred eighty (280) days so long as Landlord or Main Landlord
shall proceed with reasonable promptness and due diligence.
Notwithstanding anything contained herein to the contrary, if the
Premises are not repaired or restored as aforesaid within three
hundred sixty (360) days after the date of such fire or other
casualty, then Tenant may terminate this Lease, effective as of
the date of such fire or other casualty, by written notice to
-34-<PAGE>
Landlord not later than twenty (20) days after the expiration of
said three hundred sixty (360) days, but prior to substantial
completion of repair or restoration. Notwithstanding anything to
the contrary herein set forth, (a) Landlord shall have no duty
pursuant to this Section 13 to repair or restore (or to cause the
Main Landlord to repair and restore) any portion of the Premises
Restoration Work (as hereinafter defined), (b) Tenant shall not
have the right to terminate this Lease pursuant to this
Section 13 if the damage or destruction was caused by the
neglect, intentional act or omission of Tenant, its agents or
employees, and (c) in the event Landlord elects to terminate this
Lease pursuant to Section 13(ii) above, or the Main Lease (in its
capacity as a tenant thereunder) pursuant to Section 13 thereof,
then, concurrently with the exercise by Landlord of its
termination right under the Main Lease or this Lease (as the case
may be), and provided that: (1) Tenant is not in Default
hereunder (either at the time of the fire or other casualty or at
the time Landlord elects to terminate as aforesaid), and (2) the
fire or casualty giving rise to the termination of this Lease was
not caused by the neglect, intentional act or omission of Tenant,
its agents or employees, Landlord shall pay to Tenant, in a lump
sum, an amount equal to the amount, if any, by which: (A) the
most recent determination of the Fair Market Rent (as defined and
determined in accordance with Section 43 hereof) for the Rentable
Area of the Premises for the remainder of the Term of this Lease
(not including any Option Terms) discounted to present value on
the basis of an eight percent (8%) per annum discount, exceeds
(B) the Base Rent under this Lease for the remainder of the Term
of this Lease (not including any Option Terms) discounted to
present value on the basis of an eight percent (8%) per annum
discount (herein referred to as the "Casualty Termination
Payment"); provided, however, in no event will the Casualty
Termination Payment exceed the following limits: if the
termination occurs anytime during the (i) period from the date
hereof through and including the first Lease Year =
$15,000,000.00, (ii) second Lease Year = $13,000,000.00, (iii)
third Lease Year = $11,000,000.00, (iv) fourth Lease Year =
$9,000,000.00, (v) fifth Lease Year = $7,000,000.00, (vi) sixth
Lease Year = $5,000,000.00, (vii) seventh Lease Year =
$3,000,000.00, and (viii) eighth Lease Year through and including
the end of the Term = $0.00. The Casualty Termination Payment
shall be due and payable by Landlord to Tenant as aforesaid
within twenty (20) business days after the election by Landlord
to terminate this Lease or the Main Lease as aforesaid (as the
case may be).
(b) In the event any such fire or casualty damage
renders the Premises untenantable and if this Lease shall not be
terminated pursuant to the foregoing provisions of this Section
13 (or the Main Lease shall not be terminated pursuant to Section
13 of the Main Lease) by reason of such damage, then Rent shall
abate during the period beginning with the date of such damage
-35-<PAGE>
and ending with the Main Landlord Completion Date (as defined
below), subject to an additional abatement period as set forth in
Section 13(c) below. Such abatement shall be in an amount
bearing the same ratio to the total amount of Rent for such
period as the portion of the Premises rendered untenantable,
unfit or inaccessible for use by Tenant with respect to each
floor of the Premises bears to the entire Premises. Rent shall
not recommence as to the damaged portion of such floor until the
Main Landlord Completion Date for such damaged portion (subject
to an additional abatement period as set forth in Section 13(c)
below); provided, however, that Landlord shall not be responsible
for, and rental shall not abate during any delay in substantial
completion caused by Tenant or its agents or employees. In the
event of termination of this Lease pursuant to this Section 13,
Rent shall be apportioned on a per diem basis and be paid to the
date of the fire or casualty.
(c) In the event of any such fire or other casualty,
and if this Lease is not terminated pursuant to the foregoing
provisions, then, commencing on the date the Main Landlord
substantially completes ("Main Landlord Completion Date") its
repair and restoration obligations pursuant to, and in accordance
with, the Main Lease ("Main Landlord's Restoration Work"), Tenant
shall repair and restore any and all alterations, additions and
improvements required to return the Premises to their condition
prior to the fire or other casualty (with such modifications or
alterations as Tenant may desire to make subject to, and in
accordance with, Section 11 hereof but excluding the need to
restore any specialized communication equipment, alternative
power source equipment and any other machinery or equipment used
in connection with Tenant's business) which are not included in
the Main Landlord's Restoration Work ("Premises Restoration
Work"). Tenant shall be entitled to an additional abatement of
Rent hereunder for a period equal to the lesser of: (i) one
hundred and five (105) days after the Main Landlord Completion
Date, or (ii) the number of days after the Main Landlord
Completion Date reasonably necessary to substantially complete
the Premises Restoration Work (as reasonably determined by the
Tenant's Architect (as hereinafter defined)). Landlord agrees to
deposit into an escrow at Chicago Title and Trust Company
(pursuant to an escrow agreement mutually satisfactory to
Landlord and Tenant) ("Restoration Escrow") the amount of any
insurance proceeds received by Landlord to the extent such
proceeds relate to the Landlord Restoration Obligation (as
hereinafter defined) (as reasonably determined by the Tenant's
Architect); provided, however, to the extent such proceeds are
insufficient, in the reasonable opinion of the Tenant's
Architect, to complete the Landlord Restoration Obligation, the
Landlord agrees to deposit the amount of the deficiency into the
Restoration Escrow (the amounts deposited in the Restoration
Escrow by Landlord pursuant to this sentence are herein referred
to as the "Landlord Restoration Amount"). In the event Landlord
-36-<PAGE>
disputes the amount to be paid by the Landlord as determined by
the Tenant's Architect pursuant to the foregoing sentence, the
terms and provisions of subsection 13(e) below shall resolve said
dispute. The cost of the Restoration Escrow shall be paid for by
Landlord. Interest shall accrue on the Landlord Restoration
Amount for the benefit of Landlord. Tenant shall be entitled to
disbursements from the Restoration Escrow in an amount equal to
the amount actually spent by Tenant in completing the Landlord
Restoration Obligation, subject to, and in accordance with, the
following terms and conditions: (1) Tenant shall be entitled to
no more than two (2) disbursements from the Restoration Escrow:
(A) the initial disbursement ("Initial Disbursement") shall occur
at the time when the Tenant's Architect issues a certificate in
favor of Landlord and Tenant that the Premises Restoration Work
has been at least fifty percent (50%) completed in accordance
with the plans and specifications approved by Landlord ("Initial
Certificate") which Initial Disbursement shall be in an amount
not to exceed fifty percent (50%) of the total amount allocated
to complete the Landlord Restoration Obligation, and (B) the
final disbursement ("Final Disbursement") shall occur at the time
when the Tenant's Architect issues a certificate in favor of
Landlord and Tenant that the Premises Restoration Work has been
substantially completed in accordance with the plans and
specifications approved by Landlord (other than minor punchlist
items) ("Final Certificate"), and (2) prior to both the Initial
Disbursement and Final Disbursement (collectively, the
"Disbursements"), Tenant shall have delivered to Landlord (in
form and substance reasonably satisfactory to Landlord) the
following: (A) the Initial Certificate or Final Certificate (as
the case may be), (B) a certificate from the Tenant's Architect
that the amount of the Disbursement requested by the Tenant from
the Restoration Escrow is attributable solely to the Landlord
Restoration Obligation (provided that in the event Landlord
disputes the amount set forth in said certificate, the terms and
provisions of subsection 13(e) below shall resolve said dispute),
(C) mechanic's lien waivers, contractor's statements, a photocopy
of the invoices and other back-up information reasonably
requested by Landlord (to the extent such other back-up
information is maintained and available to Tenant) in support of
the amount requested by Tenant in connection with the applicable
Disbursement, and (D) any of the "Disbursement Documentation"
described in Section 6(b) of the Workletter. In the event the
Landlord Restoration Amount is insufficient to pay in full the
amount required to reimburse the Tenant for the completion of the
Landlord Restoration Obligation, and provided that the Landlord
has received the certificates and other information set forth
above, the Landlord shall promptly pay to Tenant the amount of
the deficiency. In the event, after reimbursement to Tenant of
the amount required to fully pay the Landlord Restoration
Obligation as aforesaid, there remains any Landlord Restoration
Amount in the Restoration Escrow, the amount so remaining shall
be promptly returned to Landlord. The term "Landlord Restoration
-37-<PAGE>
Obligation" as used herein shall mean that portion of the
Premises Restoration Work which is attributable to the repair and
restoration of the Premises to substantially the same condition
which existed prior to the applicable fire or casualty, but
specifically excluding the following: (y) any alterations,
improvements or other work done by or on behalf of Tenant
including, without limitation, pursuant to Section 11 hereof or
the Tenant Work as reflected on the Plans (as defined in the
Workletter) and including, without limitation, the repair and
restoration of any portion of the Premises which has been
demolished by Tenant, and (z) the Main Landlord's Restoration
Work. The parties hereto acknowledge that Exhibit A attached
hereto accurately describes the floor plan and layout of the
Premises as of the date hereof. Tenant agrees to proceed
diligently in completing any and all Premises Restoration Work
and shall furnish to Landlord (and Main Landlord, to the extent
required under the Main Lease), for their review and reasonable
approval, any and all plans and specifications in connection with
the Premises Restoration Work. Unless Landlord shall furnish
Tenant written notice of its disapproval specifying the
disapproved items and the corrective action needed for such
Landlord approval within twenty (20) business days from
Landlord's receipt of the plans and specifications for such
Premises Restoration Work, such plans and specifications shall be
deemed approved by Landlord. In addition, any and all
contractors performing all or any part of the Premises
Restoration Work shall be subject to the prior written approval
of Landlord, not to be unreasonably withheld, which approval
shall be deemed given if not objected to within twenty (20)
business days from Landlord's receipt of the contractor listing.
In addition to the one hundred and five (105) day abatement
period set forth in this Section 13(c) for the completion of the
Premises Restoration Work, Tenant shall be given a day-for-day
abatement of Rent for each day beyond the aforesaid twenty (20)
business day period that Landlord unreasonably withholds its
consent to any contractor submitted to Landlord for approval by
Tenant.
(d) Notwithstanding the foregoing, and subject to the
terms and provisions below, in the event any fire or casualty
damage which renders the Premises untenantable occurs during the
last Lease Year of this Lease, the Tenant shall have the right to
terminate this Lease by giving Landlord written notice thereof
within thirty (30) days after the date of any such fire or
casualty damage; provided, however, the foregoing provisions of
this Section 13(d) shall not apply in the event: (i) the damage
or destruction was caused by the neglect, intentional act or
omission of Tenant, its agents or employees, or (ii) Tenant has
exercised its Extension Option as set forth in Section 42
hereof and/or its Direct Lease Option as set forth in Section 2.3
of the Direct Lease Option and Consent Agreement.
-38-<PAGE>
(e) Any dispute specifically required by the terms of this
Lease to be resolved by the terms and provisions of this Section
13(e), shall be resolved as follows: Each of Landlord and Tenant
shall select an architect (which in the case of Tenant may be Tenant's
Architect) who is licensed in the State of Illinois, which selections
shall be made within ten (10) days of notice given by either party
that the dispute be resolved in accordance with this Section 13(e).
The two (2) architects selected by Landlord and Tenant as aforesaid
shall, within ten (10) days of their selection, select a third
architect who is licensed in the State of Illinois. The matter in
dispute shall then be submitted to the aforesaid panel of three (3)
architects. If the matter in dispute involves the determination of a
dollar amount, each architect shall, within ten (10) days of their
selection, render its decision of such dollar amount. The average of
the determinations of the three (3) architects as aforesaid shall be
the dollar amount for the purposes hereof, but in no event more than
the amount initially determined by the Tenant's Architect. In the
event Landlord is disputing only a portion of the amounts determined
by Tenant's Architect, the amounts which are not in dispute shall be
acceptable for the purposes set forth herein. With respect to any
amounts determined by Tenant's Architect which are disputed by
Landlord as aforesaid, in the event the determination made by the
three (3) architect procedure described in this Section 13(e) equals
that of the determination initially made by the Tenant's Architect,
and Tenant has pursuant to the terms hereof disbursed such amount and
is entitled to reimbursement of such amounts from Landlord pursuant to
the terms hereof, Landlord agrees to pay interest to Tenant on the
amounts so disbursed at the rate set forth in Section 26(h) hereof
from the date of the disbursement by Tenant to the date of the
reimbursement by Landlord as aforesaid.
(f) Notwithstanding the foregoing, in the event of any
fire or other casualty occurring on or before the Possession
Date, the terms and provisions of Section 25(b)(iii) shall apply
to the extent of any inconsistencies with this Section 13.
14. Eminent Domain. If the entire Building or a
substantial part thereof, or any part thereof which includes all
or a substantial part of the Premises, shall be taken or
condemned by any competent authority for any public or quasi-
public use or purposes, the Term of this Lease shall end upon and
not before the earlier of the date when the possession of the
part so taken shall be required for such use or purpose or the
effective date of the taking. If (i) any part of the Real
Property is taken such that reasonable access to the Premises for
the conduct of Tenant's business is no longer possible, or (ii)
there is a taking of a portion of the Premises (but not
substantially all) and Tenant determines that, in its reasonable
judgment, continued occupancy of the balance of the Premises
would not be sufficient for the beneficial conduct of Tenant's
business therein, then Tenant shall have the right to terminate
this Lease by written notice to Landlord no later than twenty
(20) days after the effective date of such taking, such
termination to be effective upon service of such notice. If any
-39-<PAGE>
condemnation proceeding shall be instituted in which it is sought
to take or damage any part of the Building, the taking of which
would, in Landlord's reasonable opinion, prevent the economical
operation of the Building, or if the grade of any street or alley
adjacent to the Building is changed by any competent authority,
and such taking, damage or change of grade makes it necessary or
desirable to substantially remodel the Building to conform to the
taking, damage or changed grade, and provided further that Main
Landlord has terminated leases on at least twenty-five percent
(25%) of the Rentable Area of the Building (excluding the
Premises), then Landlord shall have the right to terminate this
Lease upon not less than sixty (60) days' written notice prior to
the date of termination designated in the notice. In any of the
events above referred to, Rent at the then current rate shall be
apportioned as of the date of the termination. In the event of a
taking of part (but not substantially all) of the Premises and
neither Landlord nor Tenant has exercised its termination rights
(and the Main Lease has not been terminated pursuant to Section
14 thereof), Rent shall abate in proportion to the area of the
Premises so taken from and after the effective date of the
taking. Further, in such event, Landlord shall promptly cause
the Main Landlord to repair and restore the remaining portion of
the Premises to an architectural whole in accordance with, and
subject to, the terms and provisions of the Main Lease. In the
event Landlord fails to cause the Main Landlord to repair and
restore the remaining portion of the Premises as aforesaid within
three hundred sixty (360) days after such taking, then Tenant may
terminate this Lease by written notice to Landlord within twenty
(20) days after the expiration of such three hundred sixty (360)
day period, but prior to substantial completion of the repair or
restoration work.
Notwithstanding the termination of this Lease as
aforesaid, Landlord and Tenant hereby agree that Tenant shall not
have a right to share in the condemnation award; provided,
however, in the event Landlord receives any portion of the Award
Balance (as defined in the Main Lease), Tenant shall be entitled
to receive a percentage of the Award Balance recovered by
Landlord equal to the Rentable Area within the Premises affected
by such eminent domain proceeding divided by the total Rentable
Area within the Main Premises affected by such eminent domain
proceeding.
If the use and occupancy of the whole or any material
part of the Premises is temporarily taken for a public or quasi-
public use for a period in excess of twelve (12) months, then at
the Tenant's option to be exercised in writing and delivered to
the Landlord not later than forty (40) days after the date the
Tenant is notified in writing of such taking, this Lease and the
Term remaining hereunder shall terminate as of the date
possession is taken. If this Lease remains in effect, the Tenant
shall be entitled to a proportionate abatement of Rent.
-40-<PAGE>
15. Default: Landlord's Rights and Remedies.
(a) The occurrence of any one or more of the following
matters constitutes a default by Tenant under this Lease
("Default"):
(i) Failure by Tenant to pay any past due Rent within
five (5) days after written notice thereof from Landlord to
Tenant that same is due hereunder; provided, however, that
if Tenant fails to pay the Rent when due more than three (3)
times in one calendar year, then for the balance of such
year there shall be no five (5) day grace period;
(ii) Failure by Tenant to pay, within five (5) days
after written notice thereof from Landlord to Tenant, any
other past due moneys required to be paid by Tenant under
this Lease unless a longer period is specifically stated
herein;
(iii) Failure by Tenant to cure an unpermitted
assignment or subletting as set forth in Section 12 within
twenty (20) days after written notice thereof from Landlord
to Tenant;
(iv) Failure by Tenant to cure forthwith, immediately
after receipt of written notice from Landlord, any hazardous
condition which Tenant has created in violation of law or of
this Lease;
(v) Failure by Tenant to observe or perform any other
non-monetary covenant, agreement, condition or provision of
this Lease, if such failure shall continue for twenty (20)
days after written notice thereof from Landlord to Tenant,
except that if such default (other than defaults which
create situations dangerous to persons or property) cannot
be cured within said twenty (20) day period, this period
shall be extended, provided that Tenant commences to cure
such default within the twenty (20) day period and proceeds
diligently thereafter to effect such cure ("Extended Cure
Period"); provided, however, Landlord may terminate such
Extended Cure Period on written notice to Tenant at any time
after expiration of eighty (80) days from the first notice
of default sent to Tenant if any of the following have
occurred due to Tenant's default: (1) Main Landlord is in
default under any First Mortgage or any Second Mortgage (as
such terms are defined in the Main Lease), (2) Main Landlord
is in default under any other space lease in the Building or
Landlord is in default under any other sublease of the Main
Premises, (3) such default materially and adversely affects
Main Landlord's ownership, maintenance, management, repair
or operation of the Building or Landlord's leasehold
interest in the Main Premises, or (4) Landlord is in default
under the Main Lease or any Leasehold Mortgage (as
hereinafter defined);
-41-<PAGE>
(vi) The levy upon, either under execution or the
attachment by legal process of, the leasehold interest of
Tenant, or the filing or creation of a lien in respect of
such leasehold interest, except as may be permitted herein,
which lien shall not be released or discharged within sixty
(60) days from the date of such filing;
(vii) The Tenant becomes insolvent or bankrupt or makes
an assignment for the benefit of creditors, or applies for
or consents to the appointment of a trustee or receiver for
the Tenant or for the major part of its property;
(viii) A trustee or receiver is appointed for the
Tenant or for the major part of its property and is not
discharged within sixty (60) days after such appointment; or
(ix) Bankruptcy, reorganization, arrangement,
insolvency or liquidation proceedings, or other proceedings
for relief under any bankruptcy law, or similar law for the
relief of debtors, are instituted (A) by the Tenant or (B)
against the Tenant and are allowed against it or are
consented to by it or are not dismissed within sixty (60)
days after such institution.
(b) If a Default occurs, Landlord shall have the
rights and remedies hereinafter set forth, which shall be
distinct, separate and cumulative and shall not operate to
exclude or deprive the Landlord of any other right or remedy
allowed it by law.
(i) Landlord may terminate this Lease by giving to
Tenant ten (10) days, prior written notice of the Landlord's
election to do so, in which event the Term of this Lease
shall end, and all right, title and interest of the Tenant
hereunder shall expire, on the date stated in such notice;
(ii) Landlord may terminate the right of the Tenant to
possession of the Premises without terminating this Lease by
giving Tenant ten (10) days, prior written notice that
Tenant's right of possession shall end on the date stated in
such notice, whereupon the right of the Tenant to possession
of the Premises or any part thereof shall cease on the date
stated in such notice; and
(iii) Landlord may enforce the provisions of this
Lease and may enforce and protect the rights of the Landlord
hereunder by a suit or suits in equity or at law for the
specific performance of any covenant or agreement contained
herein, or for the enforcement of any other appropriate
legal or equitable remedy, including recovery of all moneys
due or to become due from the Tenant under any of the
provisions of this Lease.
-42-<PAGE>
(c) If Landlord exercises either of the remedies
provided for in subparagraphs (i) and (ii) of the foregoing
Section 15(b), Tenant shall surrender possession and vacate the
Premises and immediately deliver possession thereof to the
Landlord, and Landlord may then or at any time thereafter re-
enter and take complete and peaceful possession of the Premises,
with process of law, and Landlord may remove all occupants and
property therefrom.
(d) If Landlord terminates the right of Tenant to
possession of the Premises without terminating this Lease, such
termination of possession shall not release Tenant, in whole or
in part, from Tenant's obligation to pay the Rent hereunder for
the full Term. Landlord shall have the right, from time to time,
to recover from the Tenant, and the Tenant shall remain liable
for all Additional Rent and any other sums thereafter accruing as
they become due under this Lease during the period from the date
of such notice of termination of possession to the stated end of
the Term. In any such case, the Landlord shall comply with all
requirements of the law with respect to mitigation of damages in
reletting of the Premises or any part thereof for the account of
the Tenant for such Rent, for such time (which may be for a term
extending beyond the Term of this Lease) and upon such terms as
the Landlord in the Landlord's reasonable discretion shall
determine, and the Landlord shall not unreasonably withhold its
consent to any assignee or subtenant proffered by Tenant,
provided such assignee or subtenant is financially capable of
satisfying Tenant's obligations hereunder and would not otherwise
be objectionable under Section 12(d). Also in any such case, the
Landlord may make reasonable repairs, alterations and additions
in or to the Premises and redecorate the same to the extent
deemed by the Landlord necessary or desirable and, in connection
therewith, change the locks to the Premises and the Tenant shall
upon receipt of an invoice pay the cost thereof to the extent set
forth in the next sentence together with the Landlord's
reasonable expenses of reletting. Tenant shall be required to
pay for such repairs, alterations, additions and redecoration
only to the extent the cost of the same does not exceed the cost
of demolition plus the cost of building standard improvements in
effect at such time, and shall be obligated to pay all of
Landlord's expenses of re-entry and the cost of reletting,
including, but not limited to, brokerage commissions. Landlord
may collect the rents from any such reletting and apply the same
to the payment of Rent herein provided to be paid by the Tenant,
and any excess or residue shall operate only as an offsetting
credit against the amount of Rent due and owing as the same
thereafter becomes due and payable hereunder, but the use of such
offsetting credit to reduce the amount of Rent due Landlord, if
any, shall not be deemed to give Tenant any right, title or
interest in or to such excess or residue and any such excess or
residue shall belong to Landlord solely; provided that in no
event shall Tenant be entitled to a credit on its indebtedness to
-43-<PAGE>
Landlord in excess of the aggregate sum (including Base Rent and
Additional Rent) which would have been paid by Tenant for the
period for which the credit to Tenant is being determined, had no
Default occurred. No such re-entry or repossession, repairs,
alterations and additions, or reletting shall be construed as an
eviction or ouster of the Tenant or as an election on Landlord's
part to terminate this Lease, unless a written notice of such
intention be given to Tenant, or shall operate to release the
Tenant in whole or in part from any of the Tenant's obligations
hereunder, and the Landlord may, at any time and from time to
time, sue and recover judgment for any deficiencies from time to
time remaining after the application from time to time of the
proceeds of any such reletting.
(e) In the event of the termination of this Lease by
Landlord as provided for by subparagraph (i) of Section 15(b)
Landlord shall be entitled to recover from Tenant all the fixed
dollar amounts of Rent accrued and unpaid for the period up to
and including such termination date, as well as all other
additional sums payable by the Tenant, or for which Tenant is
liable or in respect of which Tenant has agreed to indemnify
Landlord under any of the provisions of this Lease, which may be
then owing and unpaid, and all costs and expenses, including
court costs and reasonable attorneys' fees incurred by Landlord
in the enforcement of its rights and remedies hereunder, and, in
addition, Landlord shall be entitled to recover as damages for
loss of the bargain and not as a penalty (x) the unamortized
portion of Landlord's Allowance (as defined in the Workletter
attached hereto as Exhibit "B" and made a part hereof), (y) the
aggregate sum which, at the time of such termination, represents
the excess, if any, of the present value of the aggregate Rent at
the same annual rate for the remainder of the Term as then in
effect pursuant to the applicable provisions of Sections 1 and 2
of this Lease, over the then present value of the then aggregate
fair rental value of the Premises for the balance of the Term;
such present worth to be computed in each case on the basis of an
8% per annum discount from the respective dates upon which such
rentals would have been payable hereunder had this Lease not been
terminated, and (z) any damages in addition thereto, including,
without limitation, reasonable attorneys' fees and court costs,
which Landlord shall have sustained by reason of the breach of
any of the covenants of this Lease other than for the payment of
Rent, and any damages suffered by Landlord under the Main Lease
as a result of such default by Tenant.
(f) All property owned by Tenant and removed from the
Premises by Landlord pursuant to any provisions of this Lease or
of law may be handled, removed or stored by the Landlord at the
cost and expense of the Tenant, and the Landlord shall in no
event be responsible for the value, preservation or safekeeping
thereof. Tenant shall pay Landlord for all expenses incurred by
Landlord in such removal and storage charges against such
-44-<PAGE>
property so long as the same shall be in Landlord's possession or
under Landlord's control. All such property not removed from the
Premises or retaken from storage by Tenant within thirty (30)
days after the end of the Term, however terminated, shall, at
Landlord's option, (i) be conclusively deemed to have been
conveyed by Tenant to Landlord by bill of sale without further
payment or credit by Landlord to Tenant; or (ii) be removed by
Landlord at Tenant's sole expense.
(g) Tenant shall pay all of Landlord's costs, charges
and expenses, including court costs and attorneys' fees,
reasonably incurred in enforcing Tenant's obligations under this
Lease or incurred by Landlord in any litigation, negotiation or
transactions in which Tenant causes the Landlord, without
Landlord's fault, to become involved or concerned.
(h) In the event that Tenant shall be adjudged
bankrupt, or a trustee in bankruptcy shall be appointed for
Tenant, the provisions of Section 29 hereof shall apply.
16. Mortgagee Protection. Tenant agrees to give any
holder of any First Mortgage, the holder of any Second Mortgage
and the holder of any Leasehold Mortgage (as defined in the Main
Lease) by registered or certified mail, a copy of any notice or
claim of default served upon the Landlord by Tenant, provided
that prior to such notice Tenant has been notified in writing of
the address of such First Mortgage holder, such Second Mortgage
holder or Leasehold Mortgage holder. Tenant further agrees that
if Landlord shall have failed to cure such default within the
applicable grace period, or if no grace period is specified,
within thirty (30) days after such notice to Landlord (or if such
default cannot be cured or corrected within that time, then such
additional time as may be necessary if Landlord has commenced
within such thirty (30) days and is diligently pursuing the
remedies or steps necessary to cure or correct such default, but
in no event beyond sixty (60) days after such notice), then the
holder of the First Mortgage and/or the holder of any Leasehold
Mortgage shall have sixty (60) days beyond the initial thirty
(30) day period within which to cure or correct such default if,
in their sole and absolute discretion, they elect to do so (which
sixty (60) day period as to the holder of the First Mortgage and
Leasehold Mortgage shall run concurrently). Notwithstanding the
foregoing, provided that Tenant continues to have effective use
and occupancy of the Premises for the normal operation of
Tenant's business, the holder of the First Mortgage shall have
sixty (60) days after the date upon which it obtains possession
of the Building (and the holder of any Leasehold Mortgage shall
have sixty (60) days after which it obtains possession of the
Premises) to cure or correct such default, if such default is of
such a nature that it cannot be cured by the holder of the First
Mortgage and/or the holder of any Leasehold Mortgage until it
obtains such possession and such holder of the First Mortgage
-45-<PAGE>
and/or the holder of any Leasehold Mortgage diligently proceeds
to pursue its remedies.
17. Quiet Enjoyment. Upon payment by the Tenant of
the Rent (including Base Rent and Additional Rent), and upon the
observance and performance of all the covenants, terms and
conditions on Tenant's part to be observed and performed, and
further subject to the provisions of Section 15 hereof, Tenant
shall peaceably and quietly hold and enjoy the Premises for the
Term hereby demised without hindrance or interruption by Landlord
or any other person or persons lawfully or equitably claiming by,
through or under the Landlord, subject nevertheless, to the terms
and conditions of this Lease and the Main Lease.
18. Subrogation and Insurance.
(a) Landlord and Tenant agree to use their best
efforts (including payment of extra premiums of a reasonable
amount) to have all fire and extended coverage and material
damage insurance which may be carried by either of them, endorsed
with a clause providing that any release from liability of or
waiver of claim for recovery from the other party entered into in
writing by the insured thereunder prior to any loss or damage
shall not affect the validity of said policy or the right of the
insured to recover thereunder and, providing further, that the
insurer waives all rights of subrogation which such insurer might
have against the other party.
The Landlord and Tenant each hereby waive its right of
recovery against the other and each releases the other from any
claim arising out of loss, damage or destruction to the Building,
Premises or contents thereon or therein, to the extent its
property is covered by a valid policy of insurance, and to the
extent of recovery collectible under such policy (or is otherwise
self insured as provided and permitted herein), whether or not
such loss, damage or destruction may be attributable to the
negligence of either party or its respective agent, visitor,
contractor, servant or employee.
(b) Tenant shall carry insurance during the entire
Term hereof (including any extensions) insuring Tenant and
Landlord, Main Landlord, Landlord's or Main Landlord's agents and
beneficiaries and other parties, reasonably requested in writing
by Landlord, as their interests may appear, with terms, coverages
and in companies reasonably satisfactory to Landlord and with
such commercially reasonable increases in limits as Landlord may
from time to time request, but initially Tenant shall maintain
the following coverages in the following amounts:
(i) comprehensive general public liability insurance,
including contractual liability, in an amount not less than
$10,000,000.00 combined single limit or such other type of
-46-<PAGE>
liability coverage customarily carried by tenants in first
class office buildings.
(ii) insurance against fire, sprinkler leakage,
vandalism, and the extended coverage perils for the full
replacement cost of all Tenant's leasehold improvements,
plus all additions, improvements and alterations thereto,
owned or made by or on behalf of Tenant, if any, on the
Premises.
Tenant shall, prior to the commencement of the Term,
furnish to Landlord policies or certificates evidencing such
coverage, which policies or certificates shall state that such
insurance coverage may not be reduced, cancelled or not renewed
without at least thirty (30) days prior written notice to
Landlord and Tenant (unless such cancellation is due to non-
payment of premium, and in that case only ten (10) days prior
written notice shall be sufficient).
Landlord agrees to cause Main Landlord to maintain
during the Term hereof (including any extensions), and subject
to, and in accordance with, the terms and provisions of the Main
Lease: (i) all risk insurance based on full replacement cost of
the Building, and (ii) comprehensive general liability insurance,
including contractual liability insuring Main Landlord's
obligations under the Main Lease, in an amount not less than
$25,000,000.00 combined single limit, or such other type of
liability coverage customarily carried by landlords of first
class office buildings.
(c) Tenant shall comply with all applicable laws and
ordinances, all orders and decrees of court and all requirements
of other governmental authority, and shall not directly or
indirectly make any use of the Premises which (i) is thereby
prohibited or dangerous to person or property or, (ii)
jeopardizes any insurance coverage, or (iii) increases the cost
of insurance or requires additional insurance coverage, unless
Tenant agrees to pay such increased premium.
(d)(i) Notwithstanding anything contained herein to the
contrary, Landlord agrees that Tenant (only for so long as Tenant
is the Chicago and North Western Transportation Company, a
Delaware corporation or any company resulting from a change of
name without any material change in assets) may self-insure with
respect to all insurance required to be carried by Tenant under
this Lease. It is expressly understood and agreed that, except
with respect to a Permitted Transferee as set forth in subsection
(ii) below, the provisions of this Section 18(d) shall not apply
with respect to any assignee or subtenant of Tenant.
(ii) Notwithstanding the provisions of subsection
18(d)(i) above, Landlord agrees that any Permitted Transferee may
-47-<PAGE>
self-insure for: (A) insurance required to be carried under
subsection 18(b)(i) above in an amount not to exceed
$5,000,000.00, and (B) insurance required to be carried under
subsection 18(b)(ii) above in an amount not to exceed
$2,500,000.00, provided that such Permitted Transferee maintains
sufficient liquidity, as reasonably determined by Landlord, to
pay claims in the amount of the insurance which Tenant would
otherwise be required to maintain pursuant to Section 18(b)
hereof.
19. Nonwaiver. No waiver of any condition expressed
in this Lease shall be implied by any neglect of Landlord to
enforce any remedy on account of the violation of such condition
whether or not such violation be continued or repeated
subsequently, and no express waiver shall affect any condition
other than the one specified in such waiver and that one only for
the time and in the manner specifically stated. Without limiting
the Landlord's rights under the provisions of Section 8, it is
agreed that no receipt of moneys by Landlord from Tenant after
the termination in any way of the Term or of Tenant's right of
possession hereunder or after the giving of any notice shall
reinstate, continue or extend the Term or affect any notice given
to Tenant prior to the receipt of such moneys. It is also agreed
that after the service of notice or the commencement of a suit or
after final judgment for possession of the Premises, Landlord may
receive and collect any moneys due, and the payment of said
moneys shall not waive or affect said notice, suit or judgment.
20. Estoppel Certificate.
(a) Tenant agrees that from time to time upon not less
than fifteen (15) days' prior written request by Landlord, Main
Landlord, the holder of any First Mortgage, Second Mortgage,
Leasehold Mortgage or any ground lessor, Tenant (or any permitted
assignee, subtenant, licensee, concessionaire or other occupant
of the Premises claiming by, through or under Tenant) will
deliver to Landlord, Main Landlord, the holder of any First
Mortgage, Second Mortgage, Leasehold Mortgage or ground lessor
(as the case may be), a statement in writing signed by Tenant
certifying (i) that this Lease is unmodified and in full force
and effect (or if there have been modifications, that the Lease
as modified is in full force and effect and identifying the
modifications); (ii) the date upon which Tenant began paying Rent
and the dates to which the Rent and other charges have been paid;
(iii) that the Landlord is not in default under any provision of
this Lease, or, if in default, the nature thereof in detail; (iv)
that, to the best of Tenant's knowledge, the Premises have been
completed in accordance with the terms hereof and Tenant is in
occupancy and paying Rent on a current basis with no rental
offsets or claims (or if there are any offsets or claims, the
nature and amount thereof in detail); (v) that there has been no
prepayment of Rent; (vi) that there are no actions, whether
-48-<PAGE>
voluntary or otherwise, pending against Tenant under the
bankruptcy laws of the United States or any State thereof; and
(vii) such other matters as may be reasonably requested by the
Landlord, Main Landlord, holder of the First Mortgage, Second
Mortgage, Leasehold Mortgage or ground lessor. For purposes of
this subsection 20(a) only, the time period for curing a default
as set forth in subsection 15(v) shall be reduced to a fifteen
(15) day period.
(b) Landlord agrees that, from time to time upon not
less than fifteen (15) days prior written request by Tenant (but
no more often than one time in any three hundred and sixty day
period), Landlord will deliver to Tenant a statement in writing
signed by Landlord certifying (i) that this Lease is unmodified
and in full force and effect (or if there have been
modifications, that the Lease as modified is in full force and
effect and identifying the modifications); (ii) that, to the best
of Landlord's knowledge, the Tenant is not in default under any
provision of this Lease, or, if in default, the nature thereof in
detail; (iii) that there has been no prepayment of Rent; and (iv)
that there are no actions, whether voluntary or otherwise,
pending against Landlord under the bankruptcy laws of the United
States or any State thereof.
21. Tenant Authorization. Tenant represents that this
Lease has been duly authorized, executed and delivered by and on
behalf of the Tenant and constitutes the valid and binding
agreement of the Tenant in accordance with the terms hereof.
22. Landlord Authorization. Landlord represents that
this Lease has been duly authorized, executed and delivered by
and on behalf of the Landlord and constitutes the valid and
binding agreement of the Landlord in accordance with the terms
hereof.
23. Real Estate Brokers. Landlord and Tenant
represent and warrant that neither party has dealt with any
broker in connection with this Lease other than Julien J.
Studley, Inc. and Stein & Company Corporate Services, Inc. (whose
commission, if any, shall be paid by Landlord pursuant to
separate agreement) and agree to indemnify and hold harmless one
another from all damages, liability and expense (including
reasonable attorneys' fees) arising from any claims or demands of
any other broker, or brokers or finders claiming to have dealt
with such parties for any commission alleged to be due such
broker or brokers or finders in connection with the negotiation
of this Lease.
24. Notices. In every instance where it shall be
necessary or desirable for Landlord to serve any notice or demand
upon Tenant, it shall be served (x) personally or sent by United
States registered or certified mail, postage prepaid, and (y) by
-49-<PAGE>
telecopy at 312/559-6018, in each case addressed, until further
notice from Tenant, to Chicago and North Western Transportation
Company, One North Western Center, 165 North Canal Street,
Chicago, Illinois 60606, Attention: Senior Vice President -
Finance and Accounting, with separate counterparts to Tenant at
the same address, Attention: Assistant Vice President - Leasing
and Office Services, and Attention: Senior Corporate Real Estate
Counsel. Mailed communications to Tenant shall be deemed to have
been served at the time that same were posted. Any such notice
or demand to be given by Tenant to Landlord shall be served (x)
personally or sent by United States registered or certified mail,
postage prepaid, and (y) by telecopy at (908) 953-9113, in each
case addressed, until further notice from Landlord (or any other
party to whom Landlord notifies Tenant to be its agent), to
Landlord with separate counterparts to AT&T Communications, Inc.,
c/o AT&T Resource Management Corporation, 222 Mt. Airy Road,
Basking Ridge, New Jersey 07920, Attention: District Manager,
Real Estate Joint Ventures, and Attention: Senior Attorney, and
Stein & Company Asset Services, Inc., Suite 3400, 227 West Monroe
Street, Chicago, Illinois 60606, Attention: Vice President/Asset
Management, and with a copy to Elizabeth K. McCloy, Esq. or
Anthony J. Aiello, Esq., Sidley & Austin, One First National
Plaza, Chicago, Illinois 60603. Mailed communications to
Landlord shall be deemed to have been served at the time that
same were posted. Notwithstanding anything contained in this
Section 24 to the contrary, unless otherwise notified in the
manner provided above, routine communications or payments may be
delivered either personally or by United States mail. Delivery
(one set only) of plans and other information pursuant to Section
11 hereof or the Workletter may be delivered personally or by
United States mail, and in the case of the Landlord, such plans
and other information shall be delivered to the office of Stein &
Company (or any other party to whom Landlord notifies Tenant to
be its agent for this purpose).
25. Delivery of Possession.
(a) Possession of the Premises shall be delivered by
Landlord to the Tenant on the Possession Date (September 1,
1995), with the Premises being in broom clean condition, but
otherwise in substantially the same condition as the Premises
were in on January 27, 1993, ordinary wear and tear excepted,
subject to the terms and provisions set forth below and the terms
and provisions of Section 3 hereof. Representatives of Landlord
and Tenant have jointly inspected the Premises and the Furniture
(as hereinafter defined) and jointly had the opportunity to
videotape (the "Videos") portions of the Premises and Furniture
to the extent allowed by Landlord, which Videos were actually
taken by a representative of Landlord on or about June 15, 1993
and are more particularly identified on Exhibit H attached
hereto. Landlord and Tenant each have a duplicate copy of the
Videos and approve of the Videos as reflecting the general
-50-<PAGE>
condition of the Premises and Furniture as of June 15, 1993.
Notwithstanding the fact that the Videos were taken after January
27, 1993 and that they only cover a portion of the Premises and
Furniture, Landlord and Tenant mutually agree that (i) the Videos
are deemed to have been taken as of January 27, 1993 and (ii) are
deemed to reflect the "as-is" condition of the entire Premises
and Furniture as of January 27, 1993.
(b) Notwithstanding anything to the contrary contained
within this Lease, the following provisions of this Subsection
25(b) shall control in the event the Landlord has failed to
deliver possession of the Premises to Tenant on the Possession
Date as aforesaid:
(i) If the Landlord has failed to deliver possession
of the Premises to Tenant on the Possession Date as set forth in
Subsection 25(a) above for any reason other than a Landlord
Delivery Force Majeure Event (as defined below), time being of
the essence, then, Landlord shall have until ninety (90) days
after written notice from Tenant to Landlord ("Possession
Notice") to deliver possession as aforesaid. If, after the
expiration of the aforesaid ninety (90) day period, Landlord has
not delivered possession of the Premises to Tenant in accordance
with Subsection 25(a) above, then Tenant, as its sole and
exclusive remedy hereunder, shall have the right, upon written
notice given to Landlord on or before the fifteenth (15th) day
immediately following the expiration of the aforesaid ninety (90)
day period (hereinafter referred to as the "Exercise Date") to
either:
(A) Terminate this Lease effective as of the date
which is fifteen (15) days after the expiration of the aforesaid
ninety (90) day period, in which case this Lease shall be of no
further force and effect except that Landlord shall pay to
Tenant, within twenty (20) business days after the effective
termination date, the following amounts as liquidated damages:
(1) the sum of Two Million Five Hundred Thousand and no/100
Dollars ($2,500,000.00), and (2) any and all of Tenant's
reasonable and out-of-pocket costs and expenses actually incurred
by Tenant in connection with the negotiation and execution of
this Lease through and including September 1, 1995 (including,
without limitation, design, architectural, engineering,
contracting, legal and permit costs and expenses), provided that
Tenant furnishes Landlord with a photocopy of the invoices and
other back-up information reasonably requested by Landlord (to
the extent such other back-up information is maintained by and
available to Tenant) (collectively the foregoing amounts are
hereinafter referred to as the "Late Delivery Termination
Amount"); provided, however, it is understood and agreed that in
no event will Tenant be entitled to any recovery for loss of
profit or bargain in connection with the termination of the
Lease; or
-51-<PAGE>
(B) Exercise in a reasonably diligent manner any
equitable remedies Tenant may have for the purpose of obtaining
possession of the Premises (and not for the purpose of obtaining
or seeking damages, other than damages attributable solely to the
amounts Tenant is entitled to from Landlord pursuant to, and in
accordance with, this Section 25(b)(i)(B)), time being of the
essence, including a suit or suits in equity for specific
performance, in which event: (1) the Commencement Date shall be
extended to the date which is three hundred and sixty-five (365)
days after the date that Tenant obtains possession of the
Premises or possession of the Premises are actually delivered by
Landlord to Tenant, whichever is earlier (in each case possession
to be given in accordance with Section 25(a) above) (such date
being herein referred to as the "Actual Possession Date"), (2)
Landlord shall reimburse Tenant, within twenty (20) business days
after demand therefore, and upon presentation to Landlord of a
photocopy of the invoices and other back-up information
reasonably requested by Landlord (to the extent such other back-
up information is maintained by and available to Tenant), for any
and all reasonable and out-of-pocket costs and expenses incurred
by Tenant and attributable to the failure of Landlord to deliver
possession of the Premises to Tenant on the Possession Date, time
being of the essence; provided, however, in no event shall
amounts payable by Landlord under this Subsection (2) exceed an
amount equal to $50,000.00 per calendar month on a cumulative
basis from September 1, 1995 to the Actual Possession Date (the
amounts payable under this subsection (2) being referred to
herein as the "Delay Costs"), (3) Landlord shall reimburse
Tenant, within twenty (20) business days after demand therefore,
for the amount of any Hold-over Rent (as hereinafter defined)
actually paid by Tenant for the period prior to the Actual
Possession Date, provided that Tenant furnishes Landlord with
evidence, reasonably satisfactory to Landlord, that said amounts
have actually been paid by Tenant (including, without limitation,
a photocopy of any invoices or receipts), and (4) Tenant shall be
entitled to two (2) days of free Rent after the Commencement Date
for each day between the Possession Date (September 1, 1995) and
the Actual Possession Date.
(C) Notwithstanding the provisions of subsections (A)
and (B) above, in the event Landlord fails to deliver possession
of the Premises to Tenant on the Possession Date as set forth in
subsection 25(a) above for any reason other than a Landlord
Delivery Force Majeure Event, but Landlord is able to deliver
said possession: (i) within the period from and including the
thirty-first (31st) day through and including the sixtieth (60th)
day after Tenant delivers the Possession Notice described in
subsection 25(b)(i) above, then, as Tenant's sole and exclusive
remedy hereunder: (1) Landlord shall reimburse Tenant, within
twenty (20) business days after demand therefore, and upon
presentation to Landlord of a photocopy of the invoices and other
back-up information reasonably requested by Landlord (to the
-52-<PAGE>
extent such other back-up information is maintained by and
available to Tenant) for any Delay Costs, and (2) Tenant shall be
entitled to one (1) day of free Rent after the Commencement Date
for each day between the Possession Date and the Actual
Possession Date; or (ii) within the period from and including the
sixty-first (61st) day through and including the ninetieth (90th)
day after Tenant delivers the Possession Notice described in
subsection 25(b)(i) above, then, as Tenant's sole and exclusive
remedy hereunder: (1) Landlord shall reimburse Tenant, within
twenty (20) business days after demand therefore, and upon
presentation to Landlord of a photocopy of the invoices and other
back-up information reasonably requested by Landlord (to the
extent such other back-up information is maintained by and
available to Tenant) for any Delay Costs, and (2) Tenant shall be
entitled to one and one half (1-1/2) days of free Rent after the
Commencement Date for each day between the Possession Date and
the Actual Possession Date.
In the event Tenant fails to give a written notice on
or before the Exercise Date as aforesaid, Tenant shall be deemed
to have elected the option set forth in subsection 25(b)(i)(B)
above. In addition, in the event Tenant elects, or is deemed as
have elected, the option set forth in subsection 25(b)(i)(B), and
Tenant fails to commence the exercise of its equitable remedies
within ninety (90) days after the Exercise Date, then during the
thirty (30) day period immediately following the expiration of
the aforesaid ninety (90) day period, either Landlord or Tenant
shall have the right, at their option, to terminate this Lease
upon written notice to the other, in which case this Lease shall
be of no further force and effect except that Landlord shall pay
to Tenant, as liquidated damages, within twenty (20) business
days after the termination of the Lease as aforesaid, the Late
Delivery Termination Amount. In the event neither Landlord nor
Tenant exercises the termination right set forth in the preceding
sentence within the aforesaid thirty (30) day period, this Lease
shall be deemed to have automatically terminated and be of no
further force and effect except that Landlord shall pay to Tenant
as liquidated damages, within twenty (20) business days after
termination of the Lease as aforesaid, the Late Delivery
Termination Amount.
(ii) If the Landlord has failed to deliver possession
of the Premises to Tenant on the Possession Date in accordance
with subsection 25(a) above as a result of a Landlord Delivery
Force Majeure Event (other than Casualty Damage (as hereinafter
defined)), then, Landlord shall have until December 1, 1995
("Extended Possession Date") to deliver possession to Tenant as
aforesaid. In the event Landlord has not, by the Extended
Possession Date, either: (A) delivered possession of the
Premises to Tenant in accordance with subsection 25(a) above, or
(B) delivered to Tenant an Existing Landlord Commitment (as
hereinafter defined), then Tenant shall have the right ("Force
-53-<PAGE>
Majeure Termination Right"), as its sole and exclusive remedy, to
be exercised by written notice to Landlord no later than December
15, 1995, to terminate this Lease effective as of December 15,
1995, in which event this Lease shall terminate and be of no
further force and effect. If either: (1) Landlord delivers to
Tenant the Existing Landlord Commitment as aforesaid, or (2)
Tenant is entitled to, but fails to, exercise the Force Majeure
Termination Right as aforesaid, then this Lease shall remain in
full force and effect except that the Commencement Date shall be
extended to the date which is three hundred and sixty-five (365)
days after the Actual Possession Date.
(iii) In the event of any Casualty Damage occurring on
or before the Possession Date, the Landlord shall promptly give
Tenant written notice thereof ("Pre-Possession Casualty Notice").
Tenant shall, within forty-five (45) days of its receipt of a
Pre-Possession Casualty Notice, obtain a Determination (as
defined below) from the Tenant's Architect (as defined below).
If a Casualty Damage has occurred on or before the Possession
Date, and in the event this Lease shall not be terminated
pursuant to Section 13 hereof (or the Main Lease shall not be
terminated pursuant to Section 13 of the Main Lease) the Landlord
shall have until the Extended Possession Date to perform the Pre-
Possession Restoration Obligation (as hereinafter defined). In
the event the Landlord has not, by the Extended Possession Date,
either: (A) performed the Pre-Possession Restoration Obligation,
or (B) delivered to Tenant an Existing Landlord Commitment, then
Tenant shall have the right ("Pre-Possession Casualty Termination
Right"), as its sole and exclusive remedy, to be exercised by
written notice to Landlord no later than December 15, 1995, to
terminate this Lease effective as of December 15, 1995, in which
event this Lease shall terminate and be of no further force and
effect. If either: (1) Landlord delivers to Tenant the Existing
Landlord Commitment as aforesaid, or (2) the Tenant is entitled
to, but fails to, exercise the Pre-Possession Casualty
Termination Right then this Lease shall remain in full force and
effect except that the Commencement Date shall be the date which
is the later of: (x) September 1, 1996, or (y) three hundred and
sixty-five (365) days after the date that Landlord performs the
Pre-Possession Restoration Obligation; provided, however, in the
case of this subsection 25(a)(iii)(y), in the event the Tenant
has not completed its Tenant Work (as defined in the Workletter)
by the end of said three hundred and sixty-five (365) days as a
result of Force Majeure delays then said time period shall be
extended on a day-for-day basis for each day of Force Majeure
delay, but in no event to exceed one hundred and twenty (120)
days after the expiration of said three hundred and sixty-five
(365) day period. In the event Landlord has performed option (2)
of the Pre-Possession Restoration Obligation (as hereinafter
defined), the Tenant agrees to accept possession of the Premises
in "as-is" condition after completion of the Main Landlord's
Restoration Work and to perform all additional work necessary to
-54-<PAGE>
complete the Tenant Work in accordance with the terms of the
Workletter. In such event, the Tenant shall, in addition to the
Landlord Allowance, be entitled to the Extra Restoration
Allowance (as defined below) which shall be reasonably estimated
by the Tenant's Architect and disbursed in the same manner as the
Landlord Allowance except that the Extra Restoration Allowance
shall be used solely in connection with completing the Landlord's
Pre-Possession Repair Obligation. In the event the Extra
Restoration Allowance originally estimated by the Tenant's
Architect is insufficient to pay in full the total cost of
completing the Landlord's Pre-Possession Repair Obligation (as
reasonably determined by the Tenant's Architect), then the
Landlord shall, within twenty (20) business days, increase the
amount of the Extra Restoration Allowance to account for such
deficiency. In the event, the Extra Restoration Allowance
exceeds the amount required to pay in full the total cost of
completing the Landlord's Pre-Possession Repair Obligation (as
reasonably determined by the Tenant's Architect), then the amount
of such excess shall not be available to Tenant and shall remain
Landlord's. In the event Landlord disputes the amount of the
Extra Restoration Allowance estimated by the Tenant's Architect
as aforesaid, said dispute shall be resolved in accordance with
the terms and provisions of subsection 13(e) hereof.
(iv) With respect to subsections (i), (ii) and (iii)
above, Tenant acknowledges that Landlord may attempt to negotiate
with the Existing Landlord in an effort to reduce the hold-over
obligations of the Tenant under the Existing Lease (as
hereinafter defined) by modifying or amending the Existing Lease
or otherwise. In that regard, if requested by Landlord, Tenant
agrees to act in good faith, to cooperate in a timely manner with
Landlord and to execute and deliver any and all documents and
send any and all notices reasonably requested by Landlord,
provided (A) such documents and notices do not materially and
adversely affect the Tenant, and (B) any documents, agreements or
notices which Landlord requests Tenant to execute shall be
subject to Tenant's reasonable approval. Tenant hereby
represents and warrants that, as of the date hereof, there are no
subleases or other occupancy agreements in effect with respect to
the Existing Premises (as hereinafter defined). Without the
prior written consent of the Landlord, which consent shall not be
unreasonably withheld or delayed, Tenant hereby agrees that it
shall not either (x) amend, modify or revise the terms of the
Existing Lease (except to the extent that such amendment does
not, in Tenant's reasonable opinion, increase the obligations of
Landlord with respect to Hold-over Rent (as hereinafter
defined)), or (y) enter into any sublease of, or assign, the
Existing Lease. Landlord and Tenant agree to promptly furnish
each other with copies of any notice they receive from the
Existing Landlord in connection with the hold-over of the
Existing Premises.
-55-<PAGE>
(v) The following terms as used herein, shall have the
following meanings:
(A) "Casualty Damage" - shall mean any damage to the
Premises or the Building caused by fire or other casualty.
(B) A "Determination" - a written opinion from the
Tenant's Architect delivered and certified to Tenant and Landlord
concerning the extent of the Casualty Damage together with an
estimate of the total cost to repair and restore the same and an
estimate of the portion of the total cost attributable to the
Landlord's Pre-Possession Repair Obligation. In the event
Landlord disputes the amounts estimated by the Tenant's Architect
as aforesaid, said dispute shall be resolved in accordance with
the terms and provisions of Section 13(e) hereof.
(C) "Existing Landlord" - the owner of the building at
One North Western Center, Chicago, Illinois.
(D) "Existing Lease" - the lease to Tenant dated
October 7, 1980, as amended and modified, a complete certified
copy of which (excluding Exhibits) has been delivered by Tenant
to Landlord.
(E) "Existing Landlord Commitment" - a written
agreement between Landlord and Existing Landlord pursuant to
which Landlord agrees to pay on behalf of Tenant any actual hold-
over rent due Existing Landlord calculated in accordance with
Section 35 of the Existing Lease ("Hold-over Rent"), on a per
diem basis for the number of days from December 1, 1995 through
(1) the Actual Possession Date, in the case of subsection
25(b)(ii) hereof, or (2) the date the Landlord performs the Pre-
Possession Restoration Obligation, in the case of subsection
25(b)(iii) hereof.
(F) "Extra Restoration Allowance" - shall mean an
extra allowance given by Landlord to Tenant equal to the amount
reasonably required to complete the portion of any Casualty
Damage attributable to the Landlord's Pre-Possession Repair
Obligation. The amount of the Extra Restoration Allowance shall
be added to the Landlord Allowance (but without adjustment in the
Base Rent) and disbursed in accordance with the Workletter, but
shall be used solely for the purpose of paying the reasonable
costs associated with completing the Landlord's Pre-Possession
Repair Obligation.
(G) "Landlord Delivery Force Majeure Event" - shall
mean any Force Majeure event which, directly or indirectly,
causes Landlord to fail to deliver possession of the Premises to
Tenant on the Possession Date in accordance with subsection 25(a)
hereof; provided, however, a Landlord Delivery Force Majeure
Event shall not be deemed to have occurred if the failure on the
-56-<PAGE>
part of the Landlord to deliver possession of the Premises as
aforesaid is attributable solely to the Landlord not having
sufficient available space to relocate its personnel occupying
the Premises as of the date hereof.
(H) "Landlord's Pre-Possession Repair Obligation" -
shall mean: (i) prior to the time the Plans are complete and
approved in accordance with the terms and provisions of the
Workletter, the repair and restoration of the Premises to
substantially the same condition as existed prior to the Casualty
Damage, but specifically excluding the Main Landlord's
Restoration Work and (ii) from and after the time the Plans are
complete and approved in accordance with the terms and provisions
of the Workletter, the repair and restoration of the Premises to
substantially the same condition as existed prior to the Casualty
Damage, but specifically excluding the following: (A) any
alterations, improvements or other work reflected on the Plans
including, without limitation, the repair and restoration of any
portion of the Premises which has been demolished by Tenant, and
(B) the Main Landlord's Restoration Work.
(I) "Pre-Possession Restoration Obligation" - shall
mean, at Landlord's option, either: (1) repairing and restoring,
or causing to be repaired and restored, the portion of the
Premises or the Building damaged by the Casualty Damage to
substantially the same condition as existed prior to the Casualty
Damage (as determined by a certificate issued by the Tenant's
Architect and delivered to Landlord and Tenant), or (2) causing
the Main Landlord to repair and restore that portion of the
Casualty Damage which is Main Landlord's Restoration Work and
agreeing to provide Tenant with the Extra Restoration Allowance.
(J) "Tenant's Architect" - an architect licensed in
the State of Illinois engaged by Tenant and reasonably approved
by Landlord (for which purpose those architects identified on
Schedule A to the Workletter are approved by Landlord).
Notwithstanding the foregoing, in the event a determination or
other decision or action is required to be made hereunder by
Tenant's Architect, and if at such time, either: (i) there is no
Tenant's Architect then engaged by Tenant, or (ii) the Tenant's
Architect then engaged by Tenant fails to render its
determination, decision or take such action within the later of:
(A) five (5) days after demand therefore by either party hereto,
or (B) the time period specified herein for the Tenant's
Architect to act, then Tenant shall have a period of five (5)
business days after written notice from Landlord to Tenant to:
(1) in the case of subsection (i) above, engage a Tenant's
Architect (subject to the approval of Landlord as set forth
above) and obtain the determination, decision or action of such
Tenant's Architect, or (2) in the case of subsection (ii) above,
to obtain the determination, decision or action of the existing
Tenant's Architect. In the event Tenant fails to perform its
-57-<PAGE>
obligations set forth in subsection (1) or (2) above (as the case
may be) within said five (5) business day period as aforesaid,
Landlord may engage an architect licensed in the State of
Illinois who for the purposes of such determination, decision or
action shall be deemed to be Tenant's Architect hereunder.
(c)(i) Notwithstanding anything to the contrary
contained in this Lease or the Workletter, Tenant acknowledges
and agrees that from and after the date hereof and until the
Possession Date, Landlord shall be entitled to use and possess
the Premises in accordance with the terms and provisions of the
Main Lease applicable to the Premises.
(ii) Notwithstanding the provisions of subsection
25(c)(i) above, Landlord agrees to give the Tenant prior written
notice ("Structural Alteration Notice") describing in reasonable
detail any alterations or improvements to the structure of the
Premises which Landlord intends to make during the period prior
to August 31, 1995; provided, however, with respect to floors
seven (7) through ten (10) inclusive, only to the extent such
structural alterations or improvements, in the reasonable opinion
of the Landlord, would cost more than $25,000.00 individually or
$100,000.00 in the aggregate to be completed ("Structural
Landlord Alterations"). Within twenty (20) business days of
Tenant's receipt of a Structural Alteration Notice, Tenant shall
deliver to Landlord evidence setting forth Tenant's reasonable
estimate (which may be obtained by Tenant from the Tenant's
Architect or Tenant's in-house engineer) of the amount by which
the Structural Landlord Alteration will increase Tenant's costs
of improving the Premises pursuant to, and in accordance with,
the Workletter ("Alteration Cost Differential"). Landlord shall
have the right, after receipt of Tenant's estimate of the
Alteration Cost Differential, to elect to either: (A) perform
such Structural Landlord Alteration and reimburse Tenant, within
thirty (30) days after demand therefore, for the actual amount of
such Alteration Cost Differential (provided, however, with
respect to floors seven (7) through ten (10) inclusive, only that
portion of the Alteration Cost Differential which exceeds
$100,000), but in no event more than the total amount of said
estimated Alteration Cost Differential (upon presentation to
Landlord from Tenant of reasonably appropriate back-up
information), or (B) not perform such Structural Landlord
Alteration. After Landlord's completion of any Structural
Landlord Alterations to the Premises, Landlord shall furnish to
Tenant construction drawings marked to show all changes from the
Landlord's as-built floor plans. In the event Landlord disputes
either the actual or estimated Alteration Cost Differential,
Landlord may elect to submit the matter to arbitration in
accordance with subsection 13(e) hereof and the determination
shall be final and binding on the parties. In the event Tenant
fails to provide Landlord with its estimate of the Alteration
Cost Differential within the aforesaid twenty (20) business day
-58-<PAGE>
period, Landlord shall be entitled to make said Structural
Landlord Alterations without any obligation to reimburse Tenant
for any Alteration Cost Differential.
(d) Notwithstanding the foregoing provisions of this
Section 25, and without in any way limiting any of the other
provisions of this Lease, the parties hereto expressly
acknowledge and agree that: (i) Landlord shall not be in
violation of this Lease, and Tenant shall not be entitled to the
rights and remedies described in this Section 25, if the failure
on the part of the Landlord to deliver possession of the Premises
to Tenant on the Possession Date as aforesaid is caused, either
directly or indirectly, by the acts or omissions of Tenant, its
agents, employees or contractors, and (ii) the terms and
provisions of this Section 25 are expressly subject to the rights
of the Landlord and Tenant to terminate this Lease as set forth,
and in accordance with, Sections 13 and 14 hereof, as well as the
rights of the Main Landlord and Landlord to terminate the Main
Lease (and, correspondingly, this Lease) pursuant to Sections 13
and 14 of the Main Lease.
26. Miscellaneous.
(a) Each provision of this Lease shall extend to and
shall bind and inure to the benefit not only of Landlord and
Tenant, but also their respective heirs, legal representatives,
successors and assigns, but this provision shall not operate to
permit any transfer, assignment, mortgage, encumbrance, lien,
charge, or subletting contrary to the provisions of this Lease.
(b) All of the agreements of Landlord and Tenant with
respect to the Premises are contained in this Lease and the
Direct Lease Option and Consent Agreement; and no modification,
waiver or amendment of this Lease or of any of its conditions or
provisions shall be binding upon Landlord or Tenant unless in
writing signed by Landlord and Tenant.
(c) Submission of this instrument for examination
shall not constitute a reservation of or option for the Premises
or in any manner bind Landlord and no lease or obligation on
Landlord or Tenant shall arise until this instrument is signed
and delivered by Landlord and Tenant.
(d) The word "Tenant," whenever used herein, shall be
construed to mean Tenants or any one or more of them in all cases
where there is more than one Tenant; and the necessary
grammatical changes required to make the provisions hereof apply
to corporations or other organizations, partnerships or other
entities, or individuals, shall, in all cases, be assumed as
though in each case fully expressed.
-59-<PAGE>
(e) Clauses, plats, and riders, if any, signed by
Landlord and Tenant and endorsed on or affixed to this Lease are
a part hereof.
(f) The headings of Sections are for convenience only
and do not limit, expand or construe the contents of the
Sections.
(g) Time is of the essence of this Lease and of each
and all provisions hereof.
(h) All amounts (including, without limitation, Base
Rent and Additional Rent) owed by Tenant to Landlord (or by
Landlord to Tenant) pursuant to any provision of this Lease shall
bear interest from the date of the expiration of the applicable
required notice period until paid at the annual rate of one
percent (1%) in excess of the rate of interest announced from
time to time by Continental Bank N.A. (or other bank or other
financial institution designated by Landlord), at Chicago,
Illinois, as its prime rate, changing as and when said prime rate
changes, unless a lesser rate shall then be the maximum rate
permissible by law with respect thereto, in which event said
lesser rate shall be charged.
(i) The invalidity of any provision of this Lease
shall not impair or affect in any manner the validity,
enforceability or effect of the rest of this Lease.
(j) All understandings and agreements, oral or
written, heretofore made between the parties hereto with respect
to the Premises are merged in this Lease, which alone fully and
completely expresses the agreement between Landlord (and its
beneficiaries and their agents) and Tenant.
(k) Except as specifically set forth herein, whenever
the approval or consent of either Landlord or Tenant is required
hereunder, such consent or approval shall not be unreasonably
withheld or delayed. Notwithstanding any of the terms and
conditions contained herein, with respect to approvals or
consents required pursuant to the terms of this Lease, Landlord
shall have no obligation to deal with any subtenant of Tenant,
but may look solely to Tenant for the same.
(l) In computing any period of time pursuant to this
Lease, the day of the act, date of notice, event or default from
which the designated period of time begins to run will not be
included. The last day of the period so counted will be
included, unless it is a Saturday, Sunday or a Holiday, in which
event the period runs until the end of the next day which is not
a Saturday, Sunday or such Holiday.
-60-<PAGE>
(m) Tenant shall be entitled to a total of 250 strips
on the directory in the Monroe Street lobby of the Building with
a cross reference to the Monroe Street lobby directory in the
other lobby directories of the Building on the following terms
and conditions: (i) Tenant's use of said strips shall be subject
to the Rules and Regulations, and (ii) the cost associated with
the initial installation of the strips shall be borne by
Landlord; provided, however, any additional costs associated with
said strips (including, without limitation, as a result of any
changes or modifications thereto) shall be borne by Tenant. On
or before September 1, 1995, subject to Force Majeure, Landlord
will substantially complete (or cause to be substantially
completed) the "Lobby Work" described on Exhibit I attached hereto.
27. Landlord. The term "Landlord" as used in this
Lease means only the Landlord as tenant under the Main Lease and
any successors and assigns of Landlord under the Main Lease so
that in the event of any assignment, transfer or conveyance once
or successively, of the Landlord's interest in the Main Lease,
said Landlord making such transfer, conveyance or assignment
shall be and hereby is entirely freed and relieved of all
covenants and obligations of Landlord hereunder accruing after
such transfer, conveyance or assignment, provided such transferee
or assignee has assumed the covenants and obligations of Landlord
accruing after such transfer, conveyance or assignment, and
Tenant agrees to look solely to such transferee or assignee with
respect thereto. The holder of a mortgage or trust deed (or
assignment in connection with a mortgage or trust deed) shall not
be deemed such an assignee under this Section 27. This Lease and
the obligations, benefits and privileges of Tenant hereunder
shall not be affected by any such assignment, transfer or
conveyance and Tenant agrees to attorn to the grantee or
assignee.
28. Title and Covenant Against Liens. The Landlord's
and Main Landlord's title is and always shall be paramount to the
title of the Tenant and nothing in this Lease contained shall
empower the Tenant to do any act which can, shall or may encumber
the title of the Landlord or Main Landlord. Tenant covenants and
agrees not to suffer or permit any lien of mechanics or
materialmen to be placed upon or against the Premises, the
Building, the Land or against the Tenant's leasehold interest in
the Premises and, in case of any such lien attaching, to
immediately pay and remove same. Notwithstanding the foregoing,
Tenant shall have the right to contest the validity of any such
lien provided such lien is bonded or Tenant has otherwise
provided adequate security to Landlord for such lien claim.
Tenant has no authority or power to cause or permit any lien or
encumbrance of any kind whatsoever, whether created by act of
Tenant, operation of law or otherwise, to attach to or be placed
upon the Premises, the Land or the Building, and any and all
liens and encumbrances created by Tenant shall attach only to
-61-<PAGE>
Tenant's interest in the Premises. If any such liens so attach
and Tenant fails to pay and remove same within thirty (30) days,
or to bond same or provide adequate security as aforesaid,
Landlord, at its election, may pay and satisfy the same and in
such event the sums so paid by Landlord, with interest from the
date of payment to the date of reimbursement at the rate set
forth in Section 26(h) hereof for amounts owed Landlord by Tenant
shall be deemed to be Additional Rent due and payable by Tenant
upon receipt of an invoice for same.
29. Bankruptcy or Insolvency.
(a) Termination of Lease.
(i) Neither Tenant's interest in the Lease nor any
estate hereby created in Tenant shall pass to any trustee,
except as may specifically be provided pursuant to the
provisions of the Bankruptcy Code, 11 U.S.C. 101 et seq.
(the "Bankruptcy Code"), or receiver or assignee for the
benefit of creditors or otherwise by operation of law.
(ii) In the event Tenant's executors, administrators,
or assigns, if any, shall be adjudicated insolvent pursuant
to the provisions of any state law, or if Tenant is
adjudicated insolvent by a Court of competent jurisdiction
other than the United States Bankruptcy Court, or if a
receiver or trustee of the property of Tenant shall be
appointed by reason of the insolvency or inability to pay
its debts, other than an appointment pursuant to the
provisions of the Bankruptcy Code, or if any assignment
shall be made of the property of Tenant for the benefit of
creditors, excepting an assignment by a trustee pursuant to
the provisions of the Bankruptcy Code, then and in any such
event, this Lease and all rights of Tenant hereunder shall
automatically cease and terminate with the same force and
effect as though the date of such event were the date
originally set forth herein and fixed for expiration of the
Term of this Lease, and Tenant shall vacate and surrender
the Property.
Tenant shall not suffer or permit the appointment of a
trustee or receiver of the assets of Tenant by reason of the
insolvency or inability of Tenant to pay its debts and shall not
make any assignment for the benefit of creditors, or become or be
adjudicated insolvent. The allowance of any petition under any
insolvency law, except under the Bankruptcy Code, or the
appointment of a trustee or receiver of Tenant shall be
conclusive evidence that Tenant caused or gave cause therefor,
unless such allowance of the petition, or the appointment of a
trustee or receiver, is vacated within ninety (90) days after
such allowance or appointment. Landlord does, in addition,
-62-<PAGE>
reserve any and all other remedies provided in this Lease or in
law.
(b) Protection by Tenant. Upon the filing of a
petition by or against Tenant under the Bankruptcy Code, Tenant,
as debtor and as debtor in possession, and any trustee who may be
appointed agree to adequately protect Landlord as follows: (1)
perform each and every obligation of Tenant under this Lease,
including the payment of Rent hereunder, arising from and after
the order for relief within sixty (60) days after the date of
such order, until such time as this Lease is either rejected or
assumed by order of the United States Bankruptcy Court; and (2)
to give Landlord prior written notice of any proceeding relating
to any assumption of this Lease; and (3) to give Landlord written
notice of the intention of Tenant and the trustee to reject this
Lease; and (4) to provide Landlord with adequate assurance of
future performance under the Lease as that term is used in 11
U.S.C. 361.
(c) Waivers by Landlord. No default of this Lease by
Tenant, either prior to or subsequent to the filing of a petition
under the Bankruptcy Code, shall be deemed to have been waived
unless expressly done so in writing by Landlord.
(d) Assumption of Lease. If Tenant or a trustee
elects to assume this Lease subsequent to the filing of a
petition under the Bankruptcy Code, Tenant, as debtor and as
debtor in possession, and any trustee who may be appointed agree
as follows: (1) to cure each and every existing default within
not more than ninety (90) days after assumption of this Lease;
and (2) to compensate Landlord, or provide adequate assurance
that Tenant or the trustee will compensate Landlord, for any
actual pecuniary loss resulting from any existing default,
including, without limitation, Landlord's reasonable costs,
expenses and attorneys' fees incurred as a result of the default,
as determined by the Bankruptcy Court, within ninety (90) days of
assumption of this Lease; and (3) in the event of an existing
default, to provide Landlord with adequate assurance of Tenant's
future performance under the Lease as determined by the
Bankruptcy Court; and (4) the assumption will be subject to all
of the provisions of this Lease unless the prior written consent
of Landlord is obtained. If Tenant, as debtor-in-possession, or
such Trustee shall fail to elect this Lease within sixty (60)
days after the filing of the petition by or against Tenant,
unless such time period is extended by the Bankruptcy Court, this
Lease shall be deemed to have been rejected and unless Landlord
receives adequate assurance for continued possession after
rejection of the Lease, Landlord shall be thereupon immediately
entitled to possession of the Premises without further obligation
to the Tenant or said Trustee, and this Lease shall be cancelled,
but Landlord's right to be compensated for damages in any such
bankruptcy proceeding shall survive.
-63-<PAGE>
(e) Assignment of Lease and Adequate Assurances to
Landlord. If Tenant assumes this Lease and proposes to assign
the same pursuant to the provisions of the Bankruptcy Code to any
person or entity who shall have made a bona fide offer to accept
an assignment of this Lease on terms acceptable to the Tenant,
any person or entity to which this Lease is assigned pursuant to
the provisions of the Bankruptcy Code shall be deemed without
further act or deed to have assumed all of the obligations
arising under this Lease on and after the date of such
assignment. Any such assignee shall upon demand execute and
deliver to Landlord an instrument confirming such assumption.
The adequate assurance to be provided Landlord to
assure the assignee's future performance under the Lease shall be
determined by the Bankruptcy Court.
(f) Amounts Payable by Tenant Constitute Rent.
Notwithstanding anything in this Lease to the contrary, all
amounts payable by Tenant to or on behalf of Landlord under this
Lease, whether or not expressly denominated as Rent, shall
constitute rent for the purposes of Section 502(b)(6) of the
Bankruptcy Code.
(g) Application by Landlord of Payments from Tenant.
Any payment received from Tenant may be applied by Landlord
against any obligation due and owing by Tenant under this Lease,
notwithstanding any statement appearing on or referred to in any
remittance from Tenant or any prior application of such payment.
If a petition under the Bankruptcy Code is initiated within
ninety (90) days after receipt by Landlord of any such payment,
the payment shall be deemed applicable to any unpaid obligations
then due in the inverse order of their maturity.
30. Roof Rights. Landlord hereby agrees that the
Premises shall include approximately 175 square feet of
contiguous flat space on the roof described on Exhibit C attached
hereto and made a part hereof ("Tenant Roof Space"). The Tenant
Roof Space shall be used by Tenant solely for the purposes of the
construction, installation, operation, maintenance and use of
telecommunications equipment and an enclosed equipment room.
Subject to the terms and provisions set forth herein, Tenant
shall have access to the Tenant Roof Space on a 24-hour basis,
seven (7) days a week. No Rent shall be paid for the Tenant Roof
Space, nor shall Tenant's Proportionate Share be increased to
reflect the Tenant Roof Space. Installation and maintenance of
the telecommunications equipment and enclosed equipment room on
the Tenant Roof Space shall be at Tenant's expense and shall be
subject to the Landlord's prior written approval (not to be
unreasonably withheld) (including, without limitation, with
respect to the location, appearance and size thereof). Landlord
shall cause Main Landlord to be responsible for maintenance and
repair of the entire roof of the Building pursuant to, and in
-64-<PAGE>
accordance with, the terms of the Main Lease with the exception
of repairs (i) necessitated by installation, maintenance or
repair of the telecommunications equipment and/or enclosed
equipment room, or (ii) due to Tenant's (or its employees, agents
or invitees) negligence, intentional acts or omissions. Tenant
shall be responsible for repairs necessitated by (i) or (ii)
above. Tenant agrees that it will contract with Main Landlord or
Landlord for the installation of the telecommunications equipment
and/or enclosed equipment room by contractors to be reasonably
approved by Tenant and Landlord at a cost to be reasonably
negotiated at such time. Tenant further agrees to reimburse
Landlord for any reasonable insurance premiums incurred by
Landlord or Main Landlord, which are directly due to Tenant's
installation and/or maintenance of the telecommunications
equipment and/or enclosed equipment room on the roof. Landlord
agrees to exercise reasonable efforts to cause Main Landlord to
allow Tenant, at Tenant's sole cost and expense, to connect the
antenna to the Premises through the vertical risers in the
Building pursuant to plans and specifications reasonably approved
by Landlord and Main Landlord. In the event Main Landlord agrees
to the foregoing, Tenant specifically acknowledges and agrees
that the aforesaid right is subject to the Rules and Regulations.
In no event shall Tenant's installations on the roof interfere
with Landlord's, Main Landlord's or other tenants' use of
existing telecommunications equipment. Landlord agrees that any
new installations of equipment on the roof by Landlord will not
interfere with Tenant's installations shown on Exhibit C hereto.
Tenant hereby agrees that it shall not have the right to assign
or sublease the use of the Tenant Roof Space separately from a
sublease or assignment of a portion of the Premises, it being the
parties' intention to prohibit Tenant from using the Tenant Roof
Space as an independent profit-making operation separate and
apart from Tenant's use of the Premises or for other than
telecommunications purposes. Tenant shall not sublet or assign
an immaterial portion of the Premises with the intent or purpose
of primarily affording the sublessee or assignee the right to use
the Tenant Roof Space. Tenant shall construct, install, operate
and use the Tenant Roof Space in compliance with all laws,
ordinances and regulations (including, without limitation, zoning
and building codes), and any Rules and Regulations. Tenant will
indemnify and hold Landlord and Main Landlord harmless from and
against any and all loss, cost or liability suffered or incurred
by Landlord or Main Landlord, their officers, or agents as a
result of the construction, installation, operation or use of the
Tenant Roof Space as aforesaid.
31. Attorneys' Fees. Landlord shall pay all of
Tenant's costs, charges and expenses, including court costs and
attorneys' fees, incurred in enforcing Landlord's obligations
under this Lease or incurred by Tenant in any litigation,
negotiation or transaction in which Landlord causes Tenant,
without Tenant's fault, to become involved or concerned.
-65-<PAGE>
32. Waiver. No waiver of any condition expressed in
this Lease shall be implied by any neglect of Tenant to enforce
any remedy or on account of the violation of such condition
whether or not such violation be continued or repeated
subsequently.
33. Mutual Indemnity and Waiver.
(a) To the extent not expressly prohibited by law,
Landlord and Tenant each (in either case, the "Indemnitor")
agrees to hold harmless and indemnify the other, its agents and
employees (the "Indemnitee") from any claim and liabilities
imposed upon or incurred by or asserted against the Indemnitee,
including reasonable attorney's fees and expenses, for death or
injury to third parties or loss of or damage to property of third
parties that may arise from or be caused directly or indirectly
by any act or omission of the Indemnitor, its agents, contractors
or employees or from any breach or default on the part of the
Indemnitor in the performance of any covenant or agreement on the
part of the Indemnitor to be performed pursuant to the terms of
this Lease. In case any action, suit or proceeding is brought
against the Indemnitee by reason of any such act of Indemnitor,
Indemnitor will, at Indemnitor's expense, by counsel approved by
Indemnitee (which approval shall not be unreasonably withheld),
resist and defend such action, suit or proceeding.
(b) To the extent not expressly prohibited by law and
except for claims arising from the negligent or intentional act
or omission of Landlord or its agents or employees, Tenant
releases Landlord and its agents and employees, from and waives
all claims for damages to person or property sustained by the
Tenant, its guests and invitees or by any occupant of the
Premises and said occupant's guests and invitees, or the
Building, or by any other person, resulting directly or
indirectly from any act or neglect of any tenant or other
occupant of the Building or any part thereof.
To the extent not expressly prohibited by law and
except for claims arising from the negligent or intentional act
or omission of Tenant, its agents or employees, Landlord releases
Tenant, and its agents and employees, from and waives all claims
for damages to person or property sustained by the Landlord, or
by any other person, resulting directly or indirectly from any
act or neglect of any tenant or other occupant of the Building or
any part thereof.
34. "Force Majeure" is hereby defined to mean any
strike, lockout, labor trouble, civil disorder, inability to
procure materials, governmental laws and regulations, riots,
insurrections, war, fuel shortages, accidents, casualties, acts
of God, acts caused directly or indirectly by the other party to
the Lease (or its agents, employees, contractors, licensees, or
-66-<PAGE>
invitees) or any other cause beyond the reasonable control of the
performing party.
35. Arbitration. Any dispute specifically required by
the terms of this Lease to be settled by arbitration shall be
submitted for arbitration to the Chicago, Illinois office of the
American Arbitration Association in accordance with its
Commercial Arbitration Rules then in effect, except where such
rules are contrary to the provisions set forth in this Lease.
The award or decision rendered by the arbitrators shall be final,
and judgment may be entered upon it in accordance with applicable
law in any court having jurisdiction. The arbitrators may award
any relief which they shall deem proper in the circumstances,
without regard to the relief which would otherwise be available
to any party hereto in a court of law or equity including,
without limitation, specific performance and injunctive relief.
It is understood that the arbitration provisions of this Section
35 shall be the sole remedy of the parties under this Agreement
with respect to disputes subject to arbitration under this
Section 35. Notwithstanding the foregoing, the parties agree
that Landlord or Tenant may apply to a court of competent
jurisdiction for equitable relief if such is appropriate during
the pendency of the arbitration proceeding.
Notice of the demand for arbitration shall be filed in
writing with the Landlord and Tenant. Unless otherwise agreed to
in writing by the Landlord and Tenant, upon receipt of a demand,
each party shall designate an arbitrator within ten (10) business
days. The two designated arbitrators shall then select a third
arbitrator to complete the full arbitration panel within ten (10)
business days, or as otherwise agreed. The arbitrators selected
pursuant to the terms of this Section 35 shall not be employees
of or hold any ownership interest in, the party selecting them.
Each such arbitrator shall have at least five years of experience
relevant to the general subject matter of the dispute.
If the arbitrators selected by each party fail to agree
upon a third arbitrator within the time limits set by this Lease,
either party may request the American Arbitration Association to
select the neutral arbitrator. If either party fails to appoint
an arbitrator within the time period set forth, the other party
may apply to any court having jurisdiction over this Lease to
compel arbitration and that court shall be empowered to select
the failing party's arbitrator.
The arbitration panel shall commence hearings within
thirty (30) days of the selection of the panel, unless Landlord
and Tenant or the arbitration panel (with approval of Landlord
and Tenant) agree upon a delayed schedule of hearings. Any party
may send out requests to compel document production from the
other party. Disputes concerning the scope of document
production and enforcement of the document requests shall be
-67-<PAGE>
subject to agreement by Landlord and Tenant, or may be ordered by
the arbitrators to the extent reasonable. The arbitrators may
obtain independent legal counsel to aid in their resolution of
legal questions presented in the course of arbitration to the
extent they consider that such counsel is absolutely necessary to
the fair resolution of the dispute, and to the extent that it is
economical to do so considering financial consequences of the
dispute.
If any party subject to the terms of this arbitration
provision fails or refuses to appear at and participate in an
arbitration hearing after due notice, the arbitration panel may
hear and determine the controversy upon evidence produced by the
appearing party.
The arbitration costs (including filing fees, court
reporters' fees and transcript costs) shall be borne equally by
each party, except that each party shall be responsible for its
own expenses and the costs of the arbitrator selected by it.
36. Use of Name. Tenant agrees that it will not
utilize the name of Landlord, AT&T-RMC or of American Telephone
and Telegraph Company, a New York corporation ("AT&T"), or of an
affiliate of Landlord, AT&T-RMC or of AT&T in any advertising,
publicity, promotion, writing, radio or television broadcast, or
in any other way, concerning the Building or this Lease, except
for use in the name of the Building if called the AT&T Corporate
Center or other similar name, without the prior written consent
of Landlord.
37. Direct Lease Option and Consent Agreement.
Concurrently with the execution and delivery of this Lease, the
parties hereto shall enter into that certain Direct Lease Option,
Attornment, Recognition and Consent Agreement with the Main
Landlord, Landlord, AT&T and The Travelers Insurance Company in
the form attached hereto as Exhibit D ("Direct Lease Option and
Consent Agreement"). Except as specifically provided within the
terms and provisions of the Direct Lease Option and Consent
Agreement, the terms and provisions of the Direct Lease Option
and Consent Agreement will terminate and be of no further force
and effect concurrently with the termination of this Lease for
any reason whatsoever.
38. Agreements Regarding Main Lease. (a) Landlord and
Tenant hereby agree as follows: (i) except with respect to
certain terms, provisions and exhibits reflecting economic
matters and concerns in connection with the Main Lease, the
Landlord has furnished Tenant with a true, correct and complete
copy of the Main Lease (excluding the agreements referred to in
Section 26(K) thereof) and an amendment thereto dated July 29,
1988 a copy of which is attached hereto and made a part hereof as
Exhibit G and Landlord will furnish Tenant with copies of any
-68-<PAGE>
future amendments to the Main Lease with economic terms excised
(provided, however, it is expressly understood and agreed that
Tenant shall not, except as expressly set forth in Section 42(b)
hereof, have the right to consent to, or approve, any amendment
or modification to the Main Lease, the aforesaid copies being
furnished to the Tenant merely for informational purposes); and
(ii) Landlord will not, as long as Tenant is not in Default
hereunder, terminate the Main Lease with respect to the Premises
pursuant to the termination rights given to Landlord under
Sections 32 and 44 of the Main Lease, (b) Tenant agrees: (i) to
accept performance by Main Landlord of any of the terms,
provisions and agreements contained herein which are obligations
of Landlord under this Lease, and (ii) to the extent Landlord
hereunder has agreed to cause Main Landlord to perform
obligations pursuant to, and in accordance with, the terms and
provisions of the Main Lease, Tenant will accept performance of
such obligations directly from Landlord in the event Landlord, in
its sole discretion, elects to perform such obligations; and (c)
except as specifically set forth in this Lease, the Tenant is not
entitled to the rights, privileges and benefits of the Landlord
under the Main Lease (including, without limitation, the rights,
privileges and benefits set forth in Sections 30, 31, 32, 33, 34,
37, 38 & 48 thereof and including any rights to any contributions
or other financial accommodations made by Main Landlord in favor
of Landlord under the Main Lease).
39. Furniture. Landlord agrees to sell to Tenant, and
Tenant agrees to purchase from Landlord, Landlord's right, title
and interest in and to the furniture located on the sixth (6th)
through twelfth (12th) floors of the Building as more
particularly described on Exhibit E attached hereto ("Furniture")
at the purchase price of ONE MILLION SIX HUNDRED THOUSAND AND
NO/100 DOLLARS ($1,600,000.00) ("Furniture Price"), on the
following terms and conditions:
(a) Tenant shall pay the Furniture Price to Landlord
on the later of: (a) the Possession Date or (2) the Actual
Possession Date ("Furniture Purchase Date"), at Tenant's option,
either: (i) in a lump sum payment by cashiers or certified
check, or (ii) $10,413.56 on a monthly basis, due on the first
day of each month of the Term beginning with but no earlier than
the Commencement Date, said amount to constitute Additional Rent
hereunder;
(b) The Furniture shall be sold by Landlord to Tenant
in "as-is" condition on the Furniture Purchase Date ordinary wear
and tear excepted from and after January 27, 1993, and without
any warranties of any kind by Landlord to Tenant except for a
warranty that the Furniture is free and clear of all liens and
encumbrances;
-69-<PAGE>
(c) The Furniture shall be conveyed by Landlord to
Tenant pursuant to a bill of sale on the Furniture Purchase Date;
and
(d) Landlord agrees to carry insurance on (or self
insure with respect to) the Furniture in the amount of
$1,600,000.00 (the "Landlord Insured Amount"), which insurance
shall be carried by a company of Landlord's choice, for the
period beginning as of the date of this Lease and ending upon the
Furniture Purchase Date. Tenant may, at its option, and at its
cost, carry insurance on the Furniture in excess of the Landlord
Insured Amount. With respect to uninsured losses, Landlord
agrees to indemnify and hold Tenant harmless from and against any
and all loss, cost and expense arising out of any damage or
destruction of the Furniture, or any item or items thereof, and
agrees to reimburse Tenant in an amount equal to the repair cost,
or if destroyed or not susceptible to repair, the replacement
cost of the damaged or destroyed item, or items, except in no
event shall Landlord's liability hereunder exceed the Landlord
Insured Amount.
40. Short Form of Lease. The parties shall execute,
concurrently with the execution and delivery of this Lease, a
short form of this Lease for recording purposes, in form and
substance reasonably satisfactory to Landlord and Tenant which
form will include a reference to the term of this Lease, Tenant's
Extension Options contained herein and the Direct Lease Option
and Consent Agreement.
41. Basement Storage Space. In the event Landlord
acquires any basement storage space in the Building ("Basement
Storage Space") pursuant to Section 34 of the Main Lease,
Landlord shall give to Tenant an option ("Basement Space
Option"), on the following terms and conditions, to sublease
Tenant's Proportionate Share of such Basement Storage Space from
Landlord:
(a) Within thirty (30) days of Landlord acquiring any
such Basement Storage Space, Landlord shall give Tenant written
notice thereof ("Landlord Basement Notice");
(b) Tenant shall have the right, to be exercised upon
written notice to Landlord ("Tenant Basement Notice") within
thirty (30) days after its receipt of the Landlord Basement
Notice, to elect to sublease Tenant's Proportionate Share of the
Basement Storage Space from Landlord, in a location determined by
Landlord in its sole discretion ("Tenant Basement Space");
(c) Tenant must not be in Default hereunder at the
time it gives Landlord the Tenant Basement Notice;
-70-<PAGE>
(d) In the event Tenant exercises the Basement Space
Option, the Tenant Basement Space shall become part of the
Premises under this Lease on all the terms and provisions set
forth herein (but subject to the terms and provisions under the
Main Lease pursuant to which Landlord acquired such space),
except that the Rent due hereunder for the Tenant Basement Space
shall be at the same rate charged to Landlord for such space
under Section 34 of the Main Lease. Landlord and Tenant shall,
upon the exercise of the Basement Space Option, execute an
amendment to this Lease in form and substance mutually
satisfactory to Landlord and Tenant setting forth the foregoing
terms and conditions; and
(e) If Tenant fails to exercise the Basement Space
Option as aforesaid within the aforesaid time period, the
Basement Space Option shall be deemed waived by Tenant and of no
further force and effect.
42. Option to Extend.
(a) Subject to the terms and provisions of subsection
42(e) below, and provided that this Lease is then in full force
and effect and that Tenant is not in Default under this Lease,
both on the date the Landlord receives the Option Notice (as
hereinafter defined) and at the expiration of the initial Term or
first Option Term (as hereinafter defined), as the case may be,
Landlord hereby grants to Tenant two (2) options (individually an
"Extension Option" and collectively the "Extension Options") to
extend the Term of this Lease for two (2) consecutive periods of
five (5) years each after the expiration of the Term or the
expiration of the first Option Term (as the case may be)
(individually an "Option Term" and collectively the "Option
Terms") on the same terms, conditions and provisions as contained
in this Lease except that the Base Rent for the Option Terms
shall be governed by Section 42(b) below. Each Extension Option
shall be irrevocably exercised by written notice ("Option
Notice") from Tenant to Landlord and Main Landlord in the form
attached hereto as Exhibit J given no later than five hundred and
fifty (550) days prior to the expiration of the Term or the
expiration of the first Option Term, as the case may be, time
being of the essence. If not so exercised, the Extension Options
under this Section 42 shall thereupon expire.
(b) The Base Rent for each Option Term shall be the
"Option Term Base Rent" calculated in accordance with the terms
and provisions of Section 31 of the Main Lease ("Option Term Base
Rent"). Landlord hereby agrees that, without the prior written
consent of Tenant (which consent shall not be unreasonably
withheld or delayed), it shall not amend, modify or revise the
provisions of Section 31 of the Main Lease (except to the extent
such amendment does not, in Landlord's reasonable opinion,
increase the Option Term Base Rent cost to Tenant for each Option
-71-<PAGE>
Term). Without in any way limiting the foregoing, it is
expressly understood and agreed that Landlord may, without the
consent of Tenant, amend, modify or revise the provisions of
Section 31 of the Main Lease in a manner which would permit
Landlord to extend the term of the Main Lease for portions of
the, as well as the entire, Main Premises; provided, however, if
Landlord amends or modifies the Main Lease as aforesaid, and
Tenant delivers the Option Notice described above and is
otherwise entitled to the Extension Options described herein, in
the event Landlord exercises its corresponding option to extend
the term of the Main Lease pursuant to, and in accordance with,
Section 31 of the Main Lease, Landlord will do so with respect to
all and not part of the Premises. Within ten (10) business days
of the determination of the Option Term Base Rent as aforesaid,
Landlord shall deliver to Tenant a written notice which shall
specify the annual Option Term Base Rent under this Lease and the
monthly installments thereof.
(c) In the event Tenant exercises its Extension Option
for the first Option Term, and Landlord exercises its
corresponding option to extend the Main Lease pursuant to, and in
accordance with, Section 31 of the Main Lease, Landlord agrees,
prior to the commencement of such Option Term to cause Main
Landlord subject to, and in accordance with, the terms and
provisions of the Main Lease, to repaint and recarpet the
Premises at its expense (the paint and carpet to be of similar
quality to the paint and carpet presently in the Premises when
installed). Landlord will allow Tenant a reasonable choice of
color with respect to any carpet to be installed in the Premises.
In the event Main Landlord fails to repaint and recarpet the
Premises as aforesaid, Landlord agrees to do so at no additional
cost to Tenant.
(d) Upon the valid exercise by Tenant of each
Extension Option, at the request of either party hereto and
within thirty (30) days after such request, Landlord and Tenant
shall enter into a written supplement to this Lease incorporating
the terms, conditions and provisions applicable to the Option
Term as determined in accordance herewith.
(e) The parties hereto acknowledge and agree that the
Tenant's election to exercise its Extension Options pursuant to,
and in accordance with, this Section 42, shall be deemed a
concurrent exercise by Tenant of its Direct Lease Options
pursuant to, and in accordance with, Section 2.3 of the Direct
Lease Option and Consent Agreement. Notwithstanding the
foregoing, if, after Landlord's receipt of the Option Notice:
(i) Landlord exercises its corresponding option to extend the
Main Lease pursuant to, and in accordance with, Section 31 of the
Main Lease, and such option to extend actually takes effect, then
Tenant's exercise of the Direct Lease Option pursuant to Section
2.3 of the Direct Lease Option and Consent Agreement shall
-72-<PAGE>
automatically be null and void and Tenant shall be deemed to have
solely exercised the Extension Option hereunder; or (ii) Landlord
does not exercise its corresponding option to extend the Main
Lease pursuant to, and in accordance with, Section 31 of the Main
Lease, or such option to extend after being exercised fails to
actually take effect, then Tenant's exercise of the Extension
Option hereunder shall automatically be null and void and Tenant
shall be deemed to have solely exercised the Direct Lease Option
pursuant to, and in accordance with, the Direct Lease Option and
Consent Agreement. Landlord agrees to give Tenant a copy of the
notice sent to the Main Landlord by Landlord under Section 31 of
the Main Lease exercising Landlord's option to extend the Main
Lease.
43. Fair Market Rent.
(a) Within thirty (30) days after the end of each
calendar year from and after the date hereof through and
including the calendar year in which the first day of the eighth
(8th) Lease Year begins, the Landlord shall deliver to Tenant a
written notice ("Landlord's Rent Notice") specifying the
Landlord's opinion of the then current Fair Market Rent (as
defined below). Should Tenant disagree with the Fair Market Rent
so determined by the Landlord in the Landlord's Rent Notice and
should Landlord and Tenant be unable to mutually agree as to what
the Fair Market Rent should be, Tenant may demand by giving
written notice to Landlord, at any time within twenty (20) days
of Tenant's receipt of Landlord's Rent Notice, that the
determination of Fair Market Rent be submitted to arbitration in
accordance with the terms and provisions below ("Rent Arbitration
Notice"); provided, however, in the event Tenant fails to give
the Rent Arbitration Notice to Landlord within the aforesaid
twenty (20) day period, Tenant shall be deemed to have accepted
Landlord's determination of Fair Market Rent. The arbitration
shall be conducted in Chicago, Illinois, in accordance with the
following: The Tenant shall designate simultaneously with the
delivery of its Rent Arbitration Notice, and the Landlord shall
designate within fifteen (15) days after receipt of a Rent
Arbitration Notice, the name of an arbitrator who holds an M.A.I.
designation or its equivalent and who is familiar with the
Chicago Business District Market (as hereinafter defined)
rentals. Within twenty (20) days after the designations as
aforesaid, the two (2) arbitrators chosen shall each make their
written decision as to Fair Market Rent. In the event the two
(2) arbitrators agree on the determination of Fair Market Rent,
said amount shall be the Fair Market Rent for the purposes
hereof. Should such arbitrators disagree as to Fair Market Rent,
but should the higher determination of Fair Market Rent be equal
to or within ten percent (10%) of the lower determination, the
average of the amounts determined by the two (2) arbitrators
shall be deemed the Fair Market Rent. In the event the two (2)
arbitrators are in excess of ten percent (10%) apart, and in the
-73-<PAGE>
further event, Landlord and Tenant cannot mutually agree as to
the Fair Market Rent within ten (10) days after receipt of the
determination by such two (2) arbitrators, the two (2)
arbitrators shall appoint a third arbitrator of equal
qualification who shall determine Fair Market Rent within thirty
(30) days of appointment. In such event, the average of the
amounts determined by the three (3) arbitrators shall be deemed
the Fair Market Rent. Any determination of the arbitrators as
aforesaid shall be binding upon Landlord and Tenant for the
purposes of this Section 43. The cost of the arbitration
pursuant to this Section 43 shall be split equally between the
Landlord and Tenant. Until such time as the Fair Market Rent
shall be changed or modified pursuant to the foregoing
provisions, the Fair Market Rent for the purposes of this Section
43 shall be the most recent determination of Fair Market Rent.
Until such Fair Market Rent is determined as aforesaid, the Fair
Market Rent for the purposes hereof shall be considered to be
$6.92 per square foot of Rentable Area of the Premises. Until
the Rentable Area of the Premises and the Base Rent is determined
as set forth herein, for the purposes of calculating the Casualty
Termination Payment only, the Rentable Area of the Premises shall
be considered to be 225,861 square feet and the Base Rent shall
be considered to be $6.92 per square foot.
(b) "Fair Market Rent" for the purposes of this
Section 43 shall mean the base rental which would be offered to a
tenant for comparable space of comparable size to the Premises in
office buildings comparable to the Building (herein the "Chicago
Business District Market") as of the time such Fair Market Rent
is being determined, assuming reasonable improvement allowances,
abatements and tenant concessions as are then being offered to
prospective tenants and for a term equal to the initial term of
the Lease.
-74-<PAGE>
IN WITNESS WHEREOF, the parties have caused this Lease
to be executed as of the date first above written.
LANDLORD:
AT&T COMMUNICATIONS, INC., a
Delaware corporation
By: /s/ G. A. Decker
Its: Real Estate
Vice President
TENANT:
CHICAGO AND NORTH WESTERN
TRANSPORTATION COMPANY, a
Delaware corporation
By: /s/ Robert Schmiege
Its: President
-75-<PAGE>
SCHEDULE OF EXHIBITS
EXHIBIT A - Premises
EXHIBIT B - Workletter
EXHIBIT C - Tenant Roof Space
EXHIBIT D - Direct Lease Option and Consent Agreement
EXHIBIT E - Furniture
EXHIBIT F - Economic Terms
EXHIBIT G - Main Lease
EXHIBIT H - Videos
EXHIBIT I - Lobby Work
EXHIBIT J - Option Notice
-76-<PAGE>
EXHIBIT A
PREMISES
The premises is a minimum of 206,697 rentable square
feet and a maximum of 245,025 rentable square feet to be located
on contiguous floors six (6) through eleven (11), seven (7)
through twelve (12) or six (6) through twelve (12) in the
building known as AT&T Corporate Center, 227 West Monroe, County
of Cook, Illinois 60606.
Rentable square footage, per floor, is as follows:
FLOOR RSF
6 38,328
7 35,231
8 35,137
9 34,503
10 34,330
11 34,330
12 33,166
-77-<PAGE>
EXHIBIT B
WORKLETTER
OFFICE SUBLEASE
AT&T CORPORATE CENTER
CHICAGO, ILLINOIS
This is the Workletter referred to in the foregoing Office
Sublease by and between AT&T Communications, Inc. ("Landlord"),
and Chicago and North Western Transportation Company ("Tenant")
(the "Lease") wherein Tenant agrees to lease from Landlord the
Premises in the Building at 227 West Monroe Street, Chicago,
Illinois. The words "Premises" and "Building" and other
capitalized or defined terms used herein shall have the
respective meanings assigned to them in the Lease, except as
otherwise provided or defined herein.
For and in consideration of the agreement to lease the
Premises and the mutual covenants contained herein and in the
Lease, Landlord and Tenant agree as follows:
1. Work.
(a) Shell and Core Work. Main Landlord, at its sole cost
and expense, has constructed the shell and core of the Building,
as described on Attachment A to the Workletter of the Main Lease.
In connection with the construction of the Tenant Work (as
hereinafter defined), Landlord agrees, to the extent the same are
within Landlord's control or possession, to make available to
Tenant the working drawings and specifications with respect to
the Premises and to request Main Landlord, to the extent the same
are within Main Landlord's control or possession, to make the
working drawings and specifications for the Building available to
Tenant in the Landlord's office in the Building at reasonable
times and upon the prior written request of Tenant.
(b) Tenant Work. At Tenant's sole cost and expense, except
as provided hereinafter, Tenant shall provide (or cause to be
provided) the material, hardware, equipment and labor used to
construct and install improvements to the Premises as described
on the Plans (as hereinafter defined), such items and labor being
herein referred to as the "Tenant Work". In connection with the
Tenant Work, Tenant shall, at no additional cost, have reasonable
access to, use of, and the right to make utility connections
with, the facilities and equipment described in Attachment A to
the Workletter of the Main Lease, including all substitutions
therefor and replacements thereof, but only to the extent the
same are described and set forth in the Plans. Tenant shall
proceed diligently to cause the Tenant Work to be completed at or
-78-<PAGE>
before the Commencement Date; provided, however, in the event of
any delay in the Tenant Work caused solely by: (i) any breach or
default by Landlord of its obligations under this Workletter
(other than as a result of a Force Majeure event), or (ii) the
negligence or willful misconduct of Landlord, Main Landlord, or
their respective contractors, agents or employees (collectively,
the delays described in subsections (i) and (ii), are referred to
as "Landlord Delays"), then, as Tenant's sole and exclusive
remedy hereunder, and provided Tenant has given Landlord written
notice of any such Landlord Delay and a period of five (5) days
to cure the same, the Commencement Date shall be extended for
each day of a Landlord Delay. Landlord agrees to reasonably
cooperate with Tenant, its architect, contractors and suppliers
and shall cause Main Landlord to do so (to the extent provided in
the Main Lease), such cooperation to include coordination and
scheduling of all work being performed in the Building and the
availability of building services for the performance of Tenant
Work.
2. Cost of Tenant Work. Except for Landlord's Allowance
as provided in this Workletter, the "Cost of the Tenant Work"
shall be paid for by Tenant and Landlord shall have no
responsibility or liability for the same. The "Cost of the
Tenant Work" shall include, but not be limited to: (i) the hard
costs and soft costs of construction (including any demolition to
the extent set forth in the Plans); (ii) general conditions
(including rubbish removal, hoisting, permits, temporary
facilities, safety and protection, cleaning, tools, blueprints
and reproduction, telephone, temporary power, field supervision
and the like); (iii) the cost of workers' compensation, public
liability, casualty and other insurance charged by contractors;
(iv) contractors' charges for overhead and fees; (v)
architectural and engineering fees incurred by Tenant and
Landlord (subject to Subsection 3(b) hereof) in connection with
the Tenant Work; (vi) the cost and expense of all base building
modifications required in order to accommodate the Tenant Work;
(vii) the cost of all labor and materials; (viii) reimbursement
of Landlord's actual out-of-pocket costs and expenditures for
supervising the Tenant Work; and (ix) the cost of providing
electrical and other incidental building charges during the
construction of the Tenant Work; provided, however, the Tenant's
liability for the costs and expenses described in subsection
(viii) and (ix) above shall not in the aggregate exceed Ten
Thousand and No/100 Dollars ($10,000.00) ("Supervision Fee").
3. Proposed and Final Plans.
(a) Proposed Plans. Tenant shall cause to be prepared and
delivered to Landlord, for Landlord's approval, on or before
March 1, 1995, the following proposed drawings and specifications
("Proposed Plans") for all Tenant Work to be completed in the
Premises.
-79-<PAGE>
(i) Architectural drawings (consisting of floor
construction plan, space plan, ceiling lighting and layout,
power and telephone plan).
(ii) Mechanical drawings (consisting of HVAC,
electrical, telephone and plumbing, including, without
limitation, the Additional HVAC Units).
(iii) Finish schedule (consisting of wall finishes
and floor finishes and miscellaneous details).
(iv) Drawings of the demolition work, if any, to
be performed to the Premises, subject to, and in accordance
with, the terms and provisions of the Lease.
(b) Plan Preparation. The Proposed Plans shall be prepared
at Tenant's sole cost and expense by the Tenant's Architect
designated and employed by Tenant, which Proposed Plans and
Tenant's Architect are subject to the prior written approval of
Landlord and (to the extent required by the Main Lease) Main
Landlord. Landlord hereby acknowledges that any one of the
architects listed on Schedule A hereto are acceptable to Landlord
as a Tenant's Architect for the Tenant's Work. Landlord agrees
to reasonably cooperate with Tenant and the Tenant's Architect in
the development of the Proposed Plans. Tenant shall deliver
three sets of reproducible architectural drawings to Landlord.
Tenant shall reimburse Landlord for Landlord's direct cost of
hiring outside architects and engineers, provided Landlord agrees
to only hire outside architects and engineers to the extent that
Landlord does not have the applicable in-house expertise. Tenant
shall reimburse Landlord for all Landlord's direct outside
architect or engineer costs to review the Proposed Plans with
funds from the next draw under the Landlord's Allowance which is
next available after receipt of a demand from Landlord for such
payment. In no event shall Tenant incur any cost for Main
Landlord's review of any plans or inspection or supervision of
any Tenant Work. All architects and engineers employed by
Tenant, in addition to the Tenant's Architect, shall be competent
professional architects and/or engineers who are proficient in
the building code of the City of Chicago. All architects and
engineers employed by Tenant, in addition to the Tenant's
Architect, shall first be approved by Landlord and (to the extent
required by the Main Lease) Main Landlord, and any subsequent
changes thereto shall also require the prior written approval of
Landlord and (to the extent required by the Main Lease) Main
Landlord. Such approvals by Landlord shall not be unreasonably
withheld or delayed.
(c) Landlord's Approval. Landlord shall review the
Proposed Plans and notify Tenant in writing whether Landlord
approves or disapproves of such Proposed Plans within twenty (20)
business days after their delivery to Landlord. Landlord shall
-80-<PAGE>
give Tenant its reasons for any disapproval in writing, which
writing may consist of handwritten remarks or markings on a copy
of the Proposed Plans. If Landlord disapproves of the Proposed
Plans, Tenant shall revise the Proposed Plans disapproved by
Landlord and resubmit such plans to Landlord. Landlord shall,
within ten (10) business days after receipt of Tenant's revised
plans, advise Tenant in writing of any additional changes which
may be required to obtain Landlord's approval. If Landlord
disapproves of the revised plans, Landlord shall specify in
writing the reason therefor (as aforesaid) and Tenant shall
revise such plans and resubmit them to Landlord. Landlord shall,
again within ten (10) business days after receipt of the revised
plans, advise Tenant in writing of further changes, if any,
required for Landlord's approval. This process shall continue
until Landlord has approved (or is deemed to have approved, as
hereinafter provided) Tenant's revised Proposed Plans, which
approval (unless deemed approved) shall be in writing. In the
event the revisions made are of material nature and are not
changes Landlord has requested, Landlord shall have twenty (20)
business days from their delivery to Landlord to review the
revised plans and respond to Tenant in writing as to its approval
or reasons for disapproval. Failure of Landlord to respond to
Tenant in writing within the times as aforesaid shall be deemed
Landlord's approval of the Proposed Plans and/or any revised
plans. "Plans" shall mean the Proposed Plans, as revised, which
have been approved by Landlord in writing (or deemed approved
without any writing) and will be described on Attachment A
attached hereto and made a part hereof. Upon approval as
aforesaid, the Landlord shall be authorized to describe such
Plans on Attachment A hereto. Notwithstanding the foregoing time
frames, Tenant shall be required to complete the final Plans no
later than May 30, 1995. Tenant shall have the right, at any
time after the Plans are approved (or deemed approved), to
request changes to the Plans in writing (each a "Change Order")
to reflect revisions desired by Tenant to the Tenant Work. All
Change Orders shall be approved (or deemed approved) by Landlord
in the same manner as provided for approval or disapproval of the
Proposed Plans. Landlord shall not unreasonably withhold, delay
or condition any of the foregoing approvals, provided it shall be
reasonable for Landlord to object to any work that will
materially adversely affect the Main Premises, or if Main
Landlord has disapproved the Proposed Plans or Plans to the
extent its approval is required under the Main Lease. The Plans
may not be revised without the prior written approval (or deemed
approval) of Landlord and (to the extent required under the Main
Lease) Main Landlord, which approval shall not be unreasonably
withheld, delayed or conditioned.
(d) Compliance with Requirements. All Proposed Plans and
Plans shall comply with all applicable laws, ordinances, rules,
regulations and orders of all federal, state, local or other
political subdivision or any other entity exercising
-81-<PAGE>
administrative functions of or pertaining to government having
jurisdiction over the Real Property or Tenant (collectively,
"Requirements"). Neither review nor approval by Landlord of the
Proposed Plans or Plans shall constitute a representation or
warranty by Landlord that such plans either (i) are complete or
suitable for their intended purpose, or (ii) comply with
applicable Requirements, it being expressly agreed by Tenant that
Landlord assumes no responsibility or liability whatsoever to
Tenant or to any other person or entity for such completeness,
suitability or compliance. In any event, Tenant shall not occupy
the Premises unless it is legally permitted to do so.
4. Landlord's Allowance. Subject to the terms and
provisions contained herein, and provided Tenant is not in
default hereunder or in Default under the Lease, Landlord shall
contribute the sum of the product of the Landlord's Allowance Per
SQ/FT (as set forth in the Premises Amendment) times the Rentable
Area of the Premises (as set forth in the Premises Amendment)
("Landlord's Allowance") to be used solely toward (a) the Cost of
the Tenant Work; (b) any moving expenses incurred by Tenant in
connection with Tenant's move from its Existing Premises to the
Premises, and (c) the costs and expenses of purchasing and
installing any furniture and fixtures in connection with the
Premises; provided, however, at least seventy-five percent (75%)
of the Landlord's Allowance must be used for the total hard cost
(including, labor, material and wiring) of construction of the
Tenant Work. Landlord's Allowance shall be disbursed and paid to
Tenant subject to, and in accordance with, the terms and
provisions of Section 6 hereof. In the event the Cost of the
Tenant Work (and the cost of the other items set forth in (b) and
(c) above) shall be less than the Landlord's Allowance, Tenant
shall be entitled to such excess in the form of a credit toward
Base Rent due and payable under the Lease.
5. Agreements Regarding the Tenant Work.
(a) Permits. Tenant, at its sole cost and expense, shall
file the Plans with the appropriate governmental authorities
having jurisdiction over the Tenant Work. Tenant shall be
responsible for obtaining all permits, authorizations and
approvals necessary to complete the Tenant Work, but Landlord
shall reasonably cooperate with Tenant with regard thereto.
Tenant shall not commence the Tenant Work until the required
permits, authorizations and approvals for such work are obtained
and delivered to Landlord.
(b) Contractors. Tenant shall submit to Landlord, not less
than thirty (30) days prior to the commencement of the
construction of the Tenant Work, the following information and
items:
-82-<PAGE>
(i) The names and addresses of the contractors
(including, without limitation, any general contractor)
performing all or any part of the Tenant Work ("Tenant's
Contractors"). Landlord and Main Landlord (to the extent
required under the Main Lease) shall have the right to
approve or disapprove (which approval as to Landlord shall
not be unreasonably withheld or delayed) Tenant's general
contractor and its primary subcontractors and any
substitutions or additions thereto, and Tenant shall employ,
as Tenant's Contractors, only those persons or entities
approved by Landlord and Main Landlord (to the extent
required under the Main Lease). All of Tenant's Contractors
must be licensed contractors, possessing good labor
relations, capable of performing quality workmanship and
working in harmony with Landlord's, Main Landlord's and
other tenants' contractors and subcontractors and with other
contractors and subcontractors on the job site. Landlord
hereby acknowledges that the contractors listed on Schedule
B hereto are acceptable as Tenant's Contractors for the
Tenant Work and that the specialized items listed on
Schedule C hereto to be installed in the Premises as part of
the Tenant Work are also acceptable.
(ii) The scheduled commencement date of
construction, the estimated dates of completion of
construction work and the estimated date of occupancy of the
Premises by Tenant.
(iii) Itemized statement of estimated construction
costs, and estimated costs of permits and fees,
architectural, engineering, and contracting fees, and all
other estimated costs of the construction of the Tenant
Work. Such itemized statement shall provide a breakdown of
hard costs and soft costs.
(iv) Not less than ten (10) days prior to the
commencement of the construction of the Tenant Work,
certificates of insurance as hereinafter described. Tenant
shall not permit Tenant's Contractors to enter into the
Building or to commence work until the required insurance
has been obtained and certified copies of policies or
certificates have been delivered to Landlord.
(c) Access to Premises. Tenant and Tenant's Contractors
shall, subject to, and in accordance with, the terms and
provisions of the Lease, have access to the Premises commencing
on the Possession Date (but not before) to perform the Tenant
Work, provided that Tenant and Tenant's Contractors work in
harmony and do not unreasonably interfere with the performance of
other work in the Building by Main Landlord, Landlord, their
respective contractors, other tenants or occupants of the
Building or their contractors, or with other tenants' use of
-83-<PAGE>
their premises. If at any time such entry shall cause such
disharmony or interference, Landlord may terminate such
permission upon 24 hours' written notice to Tenant and Tenant's
failure to cure within a reasonable time under the circumstances,
and thereupon, Tenant and Tenant's Contractors causing such
disharmony or interference shall immediately withdraw from the
Premises and the Building until Landlord determines such
disturbance no longer exists. Notwithstanding anything to the
contrary set forth herein or in the Lease, Tenant shall not
occupy the Premises for the purposes set forth in Section 4 of
the Lease until July 1, 1996. From and after July 1, 1996,
Tenant may begin occupancy of the Premises for the purposes set
forth in Section 4 of the Lease by moving into the Premises on a
staged basis in units of no less than one-quarter (1/4) of a
floor per day.
(d) Inspection and Correction of Work. The Landlord, Main
Landlord and their architects, contractors and representatives
shall, upon notice to Tenant during Business Hours (as
hereinafter defined), have access to the Premises and the Tenant
Work for the purpose of inspecting and reviewing the same during
the construction of the Tenant Work.
(e) Landlord's Right to Perform. Landlord shall have the
right, but not the obligation, to perform (or cause to be
performed), on behalf of and for the account of Tenant, subject
to reimbursement by Tenant, any of the Tenant Work which (i) is
not in substantial compliance with the Plans, (ii) constitutes a
safety hazard or (iii) constitutes a risk to the Main Premises
and/or Building, provided Landlord has notified Tenant of the
fact that such work needs to be done and Tenant fails to do such
work within a reasonable amount of time taking into consideration
the nature of such work, including work that (x) pertains to
structural components or mechanical systems of the Building or
(y) pertains to the erection of temporary safety barricades or
signs during construction (collectively, "Landlord's Work").
(f) Additional Conditions for the Tenant Work. In addition
to the terms and conditions set forth in the body of this
Workletter, Tenant agrees that it shall cause the construction of
the Tenant Work to be performed in accordance with the additional
terms and conditions set forth on Schedule 1 attached hereto and
made a part hereof, which additional terms are hereby
incorporated into this Workletter by this reference, and in
accordance with the Rules and Regulations. All workmen or other
employees engaged by either Tenant or Tenant's Contractors shall
comply with the Rules and Regulations, the rules and regulations
set forth on Schedule 1 and with all Requirements.
(g) Protection of Building. Tenant acknowledges that
Landlord, Main Landlord and/or other tenants will be performing
other tenant improvement work in the Building from time to time.
-84-<PAGE>
Such work by Landlord, Main Landlord or such other tenants shall
not be deemed to be an actual or constructive eviction, and any
obligations of Tenant under the Lease or this Workletter shall
not be affected or reduced. All work performed by Tenant and
Landlord shall be performed and coordinated by Landlord and
Tenant so as not to unreasonably interfere with the others' work
or with Main Landlord and other tenants and occupants of the
Building. Tenant and Landlord will each take all reasonable and
customary precautionary steps to protect their facilities and the
facilities of others affected by their work and to properly
police same. Construction equipment and materials to be used in
connection with the Tenant Work are to be located in confined
areas and delivery and loading of equipment and materials shall
be done at such reasonable locations and, subject to subsections
5(h) and (i) hereof, at such time as Landlord and/or Main
Landlord shall reasonably direct so as not to unreasonably
interfere with the use or operation of the Building. Tenant
shall at all times keep the Premises and adjacent areas free from
accumulations of waste materials or rubbish caused by its
suppliers, contractors or workmen. Landlord may require daily
clean-up and reserves the right to do clean-up at the expense of
Tenant if Tenant fails to comply with Landlord's reasonable
cleanup requirements. At the completion of the Tenant Work,
Tenant's Contractors shall forthwith remove all rubbish and all
tools, equipment and surplus materials from and about the
Premises and Building. Any damage caused by Tenant's Contractors
to any portion of the Building or to any property of Main
Landlord, Landlord or other tenants shall be promptly repaired
forthwith after written notice from Landlord to Tenant to its
condition prior to such damage by Tenant at Tenant's expense.
Any damage to the Premises caused by Landlord or Landlord's
contractors shall be promptly repaired forthwith after written
notice from Tenant to Landlord to its condition prior to such
damage at Landlord's expense.
(h) Freight Elevator. Landlord will provide (or cause to
be provided) freight elevator service in the Building, to include
the separate single freight elevator ("Separate Freight
Elevator") provided by Main Landlord to Landlord pursuant to
Section 5(d) of the Main Lease (collectively, the "Freight
Elevators") during the construction of the Tenant Work on the
following terms and conditions. Main Landlord or its agents will
at all times be responsible for the operation and maintenance of
the Freight Elevators. The Rules and Regulations with respect to
the use of the Freight Elevators shall be observed by Tenant and
Tenant's Contractors. Subject to the terms specified below,
during the construction of the Tenant Work and installation of
Tenant's furniture, fixtures and equipment, Tenant and Tenant's
Contractors shall have the non-exclusive right to use the Freight
Elevators daily between 7:00 a.m. and 6:00 p.m. (Saturdays
between 8:00 a.m. and 1:00 p.m.) (such daily and Saturday service
collectively, the "Business Hours") free of charge, provided,
-85-<PAGE>
however, that such use shall be consistent and in harmony with
the use by all other parties and, provided further, with respect
to the Separate Freight Elevator, Landlord shall endeavor (but
shall not be obligated) to give Tenant priority use of the
Separate Freight Elevator between 7:00 a.m. (8:00 a.m. on
Saturdays) and 9:00 a.m. during Business Hours. Tenant's and
Tenant's Contractors' use of the Freight Elevators shall be
coordinated through the Landlord and/or Main Landlord. Tenant,
however, shall be obligated to reimburse Landlord or Main
Landlord (as applicable) for all of Landlord's or Main Landlord's
incremental costs and expenses of operating the Freight Elevators
("Freight Elevator Expenses") on weekends (unless during Business
Hours), Holidays and after Business Hours (collectively "After
Hours"). Tenant shall promptly pay to Landlord and/or Main
Landlord such costs within (30) days after receipt by Tenant of
an invoice from Landlord and/or Main Landlord.
(i) Loading Dock. Landlord will provide (or cause to be
provided) the loading dock in the Building, to include Tenant's
use of the separate thirty (30) foot loading dock and storage
area provided by Main Landlord to Landlord pursuant to Section
5(j) of the Main Lease ("Separate Dock and Storage")
(collectively, the "Loading Docks") during the construction of
the Tenant Work on the following terms and conditions. Main
Landlord or its agents will at all times be responsible for the
operation and maintenance of the Loading Docks. The Rules and
Regulations with respect to the use of the Loading Docks shall be
observed by Tenant and Tenant's Contractors. Subject to the
terms specified below, during the construction of the Tenant Work
and installation of Tenant's furniture, fixtures and equipment,
Tenant and Tenant's Contractors shall have the non-exclusive
right to use the Loading Docks during Business Hours free of
charge; provided, however, that such use shall be consistent and
in harmony with the use by all other parties and, provided
further, with respect to the Separate Dock and Storage, Landlord
shall endeavor (but shall not be obligated) to give Tenant
priority use of the Separate Dock and Storage between 7:00 a.m.
(8:00 a.m. on Saturdays) and 9:00 a.m. during Business Hours.
Tenant's and Tenant's Contractors' use of the Loading Dock shall
be coordinated through the Landlord and/or Main Landlord.
Tenant, however, shall be obligated to reimburse Landlord or Main
Landlord (as applicable) all of Landlord's or Main Landlord's
incremental costs and expenses of operating the Loading Docks
After Hours. Tenant shall promptly pay to Landlord and/or Main
Landlord such costs within (30) days after receipt by Tenant of
an invoice from Landlord and/or Main Landlord.
(j) Tenant's Move to the Premises. Tenant's move to the
Premises shall be scheduled and coordinated through Landlord
and/or Main Landlord and shall be performed under the supervision
and control of Landlord and/or Main Landlord. Tenant may not use
the front door or passenger elevators for its move-in. Landlord
-86-<PAGE>
recognizes Tenant's desire to minimize move-in costs into the
Building and the Premises and will, to the extent reasonably
possible, and subject to the terms and provisions of subsection
(c), (h) and (i) above, cooperate with Tenant in the scheduling
of Tenant's move into the Premises.
(k) Compliance by all Tenant's Contractors. Tenant shall
impose and enforce all terms hereof on Tenant's Contractors and
its designers, architects and engineers. Landlord shall have the
right to order Tenant or any of Tenant's Contractors, designers,
architects or engineers who violate the terms of this Workletter
to cease work and remove himself or itself and his or its
equipment and employees from the Building if Tenant or any such
parties do not cease violating the terms of this Workletter
within twenty-four (24) hours after written notice from Landlord.
(l) Accidents, Notice to Landlord. Tenant's Contractors
shall assume responsibility for the prevention of accidents to
its agents and employees and shall take all reasonable safety
precautions with respect to the work to be performed and shall
comply with all reasonable safety measures initiated by the
Landlord and/or Main Landlord, the Rules and Regulations and with
all applicable Requirements for the safety of persons or property
in connection with the Tenant Work. Tenant shall advise Tenant's
Contractors to report to the Landlord any injury to any of its
agents or employees and shall furnish Landlord a copy of the
accident report filed with its insurance carrier within thirty
(30) days of its occurrence.
(m) Required Insurance. Tenant shall, or shall cause
Tenant's Contractors to, secure, pay for, and maintain during the
performance of the Tenant Work, insurance in the following
minimum coverages and limits of liability.
(i) Workmen's Compensation and Employer's
Liability Insurance with limits of not less than $1,000,000
and as required by any employee benefit acts or other
statutes applicable where the work is to be performed as
will protect Tenant's Contractors from liability under the
aforementioned acts.
(ii) Commercial General Liability Insurance
(including Owner's and Contractor's Protective Liability) in
an amount not less than $5,000,000 per occurrence, whether
involving bodily injury liability (or death resulting
therefrom) or property damage liability or a combination
thereof with a minimum aggregate limit of $5,000,000 and
with umbrella coverage with limits of not less than
$10,000,000.00 (except not less than $2,000,000 per
occurrence and a minimum aggregate limit of $2,000,000 if
the umbrella coverage is increased by at least $5,000,000).
Such insurance shall provide for explosion and collapse,
-87-<PAGE>
completed operations coverage with a two-year extension
after completion of the Tenant Work, and broad form blanket
contractual liability coverage and shall insure Tenant's
Contractors against any and all claims for bodily injury,
including death resulting therefrom and damage to the
property of others and arising from its operations under the
contracts whether such operations are performed by Tenant's
Contractors, or by anyone directly or indirectly employed by
any of them. Tenant's subcontractors shall maintain
Commercial General Liability Insurance in an amount not less
than $2,000,000 per occurrence, whether involving bodily
injury, property damage or a combination thereof with a
minimum aggregate limit of $2,000,000.
(iii) Business Automobile Liability Insurance,
including the ownership, maintenance, and operation of any
automotive equipment, owned, hired, or non-owned in an
amount not less than $2,000,000 for injuries sustained by
two or more persons in each occurrence and property damage
in an amount not less than $2,000,000 for each occurrence.
Tenant's subcontractors shall maintain such Comprehensive
Automobile Liability Insurance in amounts not less than
$1,000,000. Such insurance shall insure Tenant's
Contractors against any and all claims, subject to standard
exclusions, for bodily injury, including death resulting
therefrom, and damage to the property of others arising from
its operations under the contracts, whether such operations
are performed by Tenant's Contractors, or by anyone directly
or indirectly employed by any of them.
(iv) "All-risk" builder's risk insurance upon the
entire Tenant Work to the full insurable value thereof.
Such insurance shall include the interest of Tenant and
Landlord (and their respective contractors and
subcontractors of any tier to the extent of any insurable
interest therein) in the Tenant Work and shall insure
against the perils of fire and extended coverage and shall
include "all-risk" builder's risk insurance for physical
loss or damage including, without duplication of coverage,
theft, vandalism, and malicious mischief. If portions of
the Tenant Work are stored off the site of the Building or
in transit to such site are not covered under such "all-
risk" builder's risk insurance, then Tenant shall effect and
maintain similar property insurance on such portions of the
Tenant Work. The waiver of subrogation provisions contained
in the Lease shall apply to the "all-risk" builder's risk
insurance policy to be obtained by Tenant or Tenant's
Contractors pursuant to this paragraph.
All policies (except the workmen's compensation) shall be
endorsed to include, as additional insured parties, the Landlord,
Main Landlord and their respective officers, employees, and
-88-<PAGE>
agents, mortgagees, and such additional persons as Landlord may
reasonably designate. Tenant shall exercise its best efforts to
have all policies endorsed to provide that all carriers shall
furnish to the additional insured parties thirty (30) days' prior
written notice of any cancellation of coverage by certified mail,
return receipt requested (except that (10) days' notice shall be
sufficient in the case of cancellation for non-payment of
premium) and shall provide that the insurance coverage afforded
to the additional insured parties thereunder shall be primary to
any insurance carried independently by such additional insured
parties. Landlord shall exercise reasonable efforts to furnish a
list of names and addresses of parties to be named as additional
insureds by a date which is no later than fifteen (15) days after
Tenant gives Landlord written notice that it has commenced the
Tenant Work. The insurance policies required hereunder shall be
considered as the primary insurance and shall not call into
contribution any insurance then maintained by Landlord, Main
Landlord or any other additional named insured. Additionally,
where applicable, such policy shall contain a cross-liability and
severability of interest clause.
To the fullest extent permitted by law, Tenant shall
indemnify and hold harmless the Landlord, its agents and
employees, from and against all claims, damages, liabilities,
losses and expenses of whatever nature, including but not limited
to reasonable attorneys' fees and expenses, the cost of any
repairs to the Premises or Building necessitated by activities of
the Tenant or Tenant's Contractors, bodily injury to persons or
damage to property of the Landlord, Main Landlord, other tenants,
and their employees, agents, invitees, licensees, or others,
arising out of or resulting from the performance of the Tenant
Work by the Tenant or Tenant's Contractors, except to the extent
the same are caused by the negligence or willful misconduct of
Main Landlord, Landlord, Landlord's contractors and its and their
employees, agents, contractors, invitees or licensees. Except as
otherwise provided for herein, the foregoing indemnity shall be
in addition to the insurance requirements set forth above and
shall not be in discharge or substitution of the same, and shall
not be limited in any way by any limitations on the amount or
type of damages, compensation or benefits payable by or for
Tenant's Contractors under Workers' or Workmen's Compensation
Acts, disability benefit acts or other employee benefit acts.
(n) Utilities. Utility costs or charges for any service
(including HVAC) to the Premises during performance of the Tenant
Work shall be the responsibility of the Tenant from the
Possession Date, but, with respect to such charges incurred
during Business Hours, in no event in excess of the Supervision
Fee. Tenant shall not, however, be charged for elevators or
elevator operators, during the period from the Possession Date to
Commencement Date, unless Tenant or Tenant's Contractors require
a manned elevator during such period.
-89-<PAGE>
(o) Quality of Work. The Tenant Work shall be performed in
a first-class workmanlike manner using only good grades of
material and in compliance with the Plans, all insurance
requirements, applicable Requirements, the Rules and Regulations
and the rules and regulations set forth on Schedule 1.
(p) "As-Built" Plans. Within thirty (30) days of final
completion of the Tenant Work, Tenant shall furnish Landlord with
"as built" plans for the Premises and an occupancy permit for the
Premises (to the extent customarily available) or such other
evidence reasonably satisfactory to Landlord that Tenant may
legally occupy the Premises for its business operations.
6. Disbursements of Landlord's Allowance.
(a) Method of Disbursement. Landlord shall disburse, in
the amount set forth in Tenant's request, portions of the
Landlord's Allowance to Tenant (or, at Landlord's or Tenant's
option, directly into an escrow at Chicago Title and Trust
Company, pursuant to an escrow agreement in form and substance
reasonably satisfactory to Landlord and Tenant, and to which
Tenant would be a party, to be disbursed directly to Tenant
pursuant to the terms hereof and of said escrow agreement), from
time to time, within twenty (20) business days after receipt of
all of the materials and documentation specified in Subsection
(b) below. Disbursements of the Landlord's Allowance shall not
be made more frequently than monthly and shall not exceed the
amounts then payable (as certified to the Landlord by the
Tenant's Architect) to contractors, subcontractors and
materialmen with respect to the portion of the Tenant Work
theretofore completed and for which the disbursement was
requested. In the event Landlord or Tenant requests that
disbursements be made through a construction escrow at Chicago
Title and Trust Company, the party requesting the escrow shall
pay the cost of such escrow.
(b) Disbursement Documentation. Landlord's obligation to
make disbursements of the Landlord's Allowance shall be subject
to Landlord's receipt of: (i) a request for such disbursement
from Tenant signed by an officer of Tenant identifying what the
disbursements are to be used for and certifying that all of
Landlord's Allowance previously disbursed has been used for
permitted purposes and to pay all previously unpaid invoices and
bills furnished to Landlord in all prior requests (ii) copies of
all invoices or bills for the Tenant Work completed and materials
furnished in connection with the Tenant Work and incorporated in
the Premises and which is the subject for the payment of the
requested disbursement, (iii) a certificate of the Tenant's
Architect certifying the percentage of completion then attained
with respect to the portion of the Tenant Work theretofore
completed and for which the disbursement is requested was
performed in a good and workmanlike manner and in accordance with
-90-<PAGE>
all Requirements and the Plans, (iv) if requested by Landlord,
copies of all contracts, subcontracts, purchase orders, work
orders, change orders and other materials relating to the work or
materials which is the subject of the requested disbursement, and
a list of all contractors, subcontractors and suppliers
performing work or supplying materials in connection with the
Tenant Work, whether directly to Tenant or through or on behalf
of any agent of Tenant, (v) waivers of lien, contractor's
statements and affidavits (and such other documents reasonably
required by Landlord and/or the escrowee (in the event
disbursements are being made through an escrow as set forth in
Subsection (a) above)) from all Tenant's Contractors and
materialmen involved in the performance of the Tenant Work, (vi)
a true and correct copy of the application for payment by
Tenant's Contractors for the Tenant Work completed to date,
including contractor's affidavits and sworn statements evidencing
the cost of the Tenant Work to date (or in the case of
subcontractors and materialmen, affidavits for the last preceding
draw request), and (vii) such other documents or instruments
reasonably requested by Landlord and/or the escrowee (in the
event disbursements are being made through an escrow as set forth
in Subsection (a) above) in order to protect Landlord and/or Main
Landlord from any potential mechanics or other liens. In the
event Landlord notifies Tenant in writing within twenty (20)
business days from a disbursement request that it has identified
an inconsistency in any of the aforementioned information and
documentation, then Landlord shall fund the Landlord's Allowance
only to the extent such information and documentation is
consistent and Landlord and Tenant hereby agree to promptly work
in good faith to resolve any such inconsistencies as soon as
possible. In the event Landlord shall fail to disburse any
portion of the Landlord's Allowance when the same is due and
payable, Tenant shall have all rights and remedies available at
law or equity, including the right to set-off such amounts of the
Landlord's Allowance which are due and payable and not paid by
the Landlord against the Rent due Landlord from Tenant under the
Lease.
(c) Landlord's Maximum Obligation. In no event shall the
aggregate amount paid by Landlord to Tenant for the Tenant Work
under the Lease or this Workletter exceed the amount of the
Landlord's Allowance. It is understood and agreed that Tenant
shall complete, at its expense, the Tenant Work whether or not
the Landlord's Allowance is sufficient to fund such completion.
(d) Lien Waivers. Within thirty (30) business days after
completion of the Tenant Work, Tenant shall deliver to Landlord
general releases and final waivers of lien from Tenant's
Contractors, and all contractors, subcontractors and materialmen
involved in the performance of the Tenant Work and the materials
furnished in connection therewith (except no general releases and
final waivers of lien shall be required where Tenant is in good
-91-<PAGE>
faith contesting any claim for labor furnished or material
supplied to the Premises during the pendency of any such claim
provided that Tenant furnish Landlord with a satisfactory bond,
title insurance or indemnity), and a certificate from the
Tenant's Architect certifying that the Tenant Work has been
substantially completed in accordance with the Lease and this
Workletter, all Requirements and the Plans.
(e) Additional Costs. Tenant agrees to reimburse Landlord
for the following costs: (i) the Supervision Fee, (ii) all
Landlord's direct and outside costs and expenses reasonably
incurred in performing the Landlord's Work and (iii) to the
extent any additional services are requested by Tenant (or
necessitated by Requirements and not performed by Tenant or
Tenant's Contractors), Landlord's direct costs in connection
therewith. Bills for the foregoing work by Landlord shall be due
and payable no later than thirty (30) days after delivery of such
bills to Tenant. If Tenant further fails to pay, then Landlord
may, in addition to any other rights and remedies, deduct such
amounts from the Landlord's Allowance. Landlord agrees that any
and all such bills are subject to audit by Tenant within 60 days
after Tenant's receipt thereof and agrees to provide Tenant's
representative access, during Business Hours at the Main
Premises, to any and all records supporting such bills and/or to
provide Tenant with a copy of all supporting records.
7. Miscellaneous.
(a) Except as herein or in the Lease expressly set forth,
Landlord has no agreement with Tenant and has no obligation to do
any other work or pay any amounts with respect to the Premises.
Any other work in the Premises which Tenant may be permitted by
Landlord to perform prior to commencement of the Term shall be
done at Tenant's sole cost and expense and in accordance with the
terms and conditions of the Lease, including, without limitation,
Section 11, and such other requirements as Landlord reasonably
deems necessary. Any additional work or alterations to the
Premises desired by Tenant after the Commencement Date shall be
subject to the provisions of Section 11 of the Lease.
(b) No modification, waiver or amendment hereof shall be
binding upon Landlord or Tenant unless in writing and signed by
Landlord, Tenant and (to the extent required under the Main
Lease) Main Landlord.
(c) Time is of the essence under this Workletter.
(d) Any person signing this Workletter on behalf of
Landlord or Tenant warrants and represents he has authority to do
so.
-92-<PAGE>
(e) Tenant and Landlord agree that, in connection with the
construction of the Tenant Work and Tenant's use of the Premises
prior to the Commencement Date, Tenant shall have those rights,
duties and obligations with respect thereto that it has pursuant
to the Lease during the Term, except the obligation for payment
of the Rent.
(f) Except as otherwise herein provided, any amounts owed
by Tenant or Landlord hereunder and not paid when due or upon
Tenant's or Landlord's failure to perform any of their other
obligations hereunder, Tenant and Landlord shall each have all of
the rights and remedies granted to them under the Lease for
nonpayment by Tenant or Landlord of any amounts owed thereunder
or failure by Tenant or Landlord to perform any of their other
obligations thereunder.
(g) Notices under this Workletter shall be given in the
same manner as under the Lease.
(h) Neither Main Landlord, Landlord, AT&T nor Stein &
Company shall have any responsibility for construction means,
methods or techniques or safety precautions in connection with
the Tenant Work, or for the accuracy or completeness of the Plans
or any design error therein or any costs attributable to any lack
of adequacy of or any design error in the Plans.
(i) This Workletter shall be governed by and construed in
accordance with Illinois law.
(j) Nothing contained herein shall be deemed or construed
as creating the relationship of principal and agent, or a
partnership or a joint venture between the parties hereto, nor
shall any acts of the parties hereto, be deemed to create any
relationship of licensor and licensee. The Tenant's Contractors
shall not hold themselves out to any third party either as
partner, joint venturer with the Landlord or as agent for the
Landlord, nor shall the Landlord's contractors hold themselves
out to any third party either as a partner, joint venturer with
the Tenant or as an agent for or employee of the Tenant.
(k) Clauses, plats, exhibits, schedules, attachments and
riders, if any, endorsed on or affixed to this Workletter are
hereby incorporated into this Workletter and made a part hereof.
(l) The headings of Sections and Subsections are for
convenience only and do not limit, expand, or construe the
contents of such Sections and Subsections.
(m) Tenant agrees: (i) to accept performance by Main
Landlord of any of the terms, provisions and agreements contained
herein which are obligations of Landlord under the Lease or this
Workletter, and (ii) to the extent Landlord hereunder has agreed
-93-<PAGE>
to cause Main Landlord to perform obligations pursuant to, and in
accordance with, the terms and provisions of the Main Lease,
Tenant will accept performance of such obligations directly from
Landlord in the event Landlord, in its sole discretion, elects to
perform such obligations.
-94-<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed
this Workletter as of the date of the Lease.
LANDLORD:
AT&T COMMUNICATIONS, INC.,
a Delaware Corporation
By: /s/ G. A. Decker
Its: Real Estate
Vice President
TENANT:
CHICAGO AND NORTH WESTERN
TRANSPORTATION COMPANY,
a Delaware corporation
By: /s/ Robert Schmiege
Its: President
-95-<PAGE>
SCHEDULE 1
A. Requirements of Tenant's Contractors.
1. Temporary Services. Subject to Landlord's and (to the
extent required under the Main Lease) Main Landlord's prior
approval, all temporary services shall be provided as follows:
(a) Toilets: Tenant's Contractors shall be allowed to use
the base building toilets in the Premises, provided
that same are returned to Landlord in their original
condition and maintained in an operable condition, all
in conformity with local regulations. Tenant's
Contractors shall clean the facilities regularly.
(b) To the extent that in addition to the use of the
existing electrical service Tenant's Contractors
require temporary feeder cables, service panels, cut-on
switches, and other equipment necessary to carry
service to required locations from the nearest source
such additional service shall be furnished and
installed at the expense of the Tenant's Contractors
and removed by same when no longer required. It shall
be the responsibility of the Tenant's Contractors to
determine the necessary power and light requirements
for all trades. Defective work will not be excused on
the plea that insufficient light and power were
provided. Tenant's Contractors shall pay for all
necessary permits from proper authorities.
(c) Temporary water supply: To the extent that in addition
to the use of the existing water supply Tenant's
Contractors require a temporary water supply, Tenant's
Contractors shall make all necessary arrangements for
the provision of water including temporary piping and
hose extensions required for construction purposes.
The cost of such arrangements, but not the cost of any
water used by Tenant or Tenant's Contractors, shall be
the sole obligation of either Tenant or Tenant's
Contractors. The Tenant's Contractors shall use the
utmost care in the use of water. Damage resulting from
the use of water by the Tenant's Contractors shall be
repaired at its own expense.
(d) Removal of temporary services: Temporary services
installed by the Tenant's Contractors shall be removed
by the Tenant's Contractors upon completion of the
contract or as directed by the Landlord. Any repairs
or alterations necessitated by such removal shall be
made by the Tenant's Contractors.
-96-<PAGE>
2. Security. Only previously authorized personnel will be
permitted on the construction site. The Tenant's Contractors
shall, prior to the commencement of the Tenant Work, submit to
the Landlord the names of all subcontractors, material suppliers
and personnel employed or engaged by the Tenant's Contractors who
will be present on the site.
3. Safety. The Tenant's Contractors shall take all
necessary precautions for the safety of employees and protection
of the Tenant Work, the Building and of adjoining property, and
shall comply with all applicable Requirements and Rules and
Regulations to prevent accidents, injury to person, loss of life
and damage to property.
(a) The Tenant's Contractors shall not permit any part of
the Building to be loaded in excess of the load limits
established by Main Landlord.
(b) The Tenant's Contractors shall erect and properly
maintain at all times, as required by conditions and
the progress of the work, all necessary safeguards for
the protection of workmen, the Landlord, Main Landlord,
and the public in accordance with all applicable
Requirements and Rules and Regulations.
(c) The Tenant's Contractors shall provide Landlord
adequate notice of any smoke producing operations.
These operations shall be prohibited during Business
Hours unless approved in writing by the Landlord.
Notwithstanding anything contained herein to the
contrary, it is expressly agreed that in no event is Landlord
responsible or liable to any person or entity for Tenant, its
employees or agents' compliance with safety regulations,
Requirements and Rules and Regulations. Tenant covenants that
all contracts with respect to the Tenant Work shall contain
language releasing Landlord from any liability for same.
4. Protection of Work, Property, and Persons. Tenant
shall require in its contract with Tenant's Contractors that such
contractor protect the Tenant Work and the employees, equipment
and property of Landlord from damage caused by Tenant's
Contractor and its employees.
(a) Tenant agrees that it will not enter into any
agreements with Tenant's Contractors, or waive or
release any rights or claims (whether existing or
future) against Tenant's Contractors that would in any
way limit Landlord or Main Landlord from pursuing
Tenant's Contractors for any injury, loss, or damage to
the Building caused by Tenant's Contractors or their
employees, agents, or subcontractors; and in the event
-97-<PAGE>
of such injury, loss, or damage, Tenant will cooperate
with Landlord to cause Tenant's Contractor to promptly
make such repairs or replacements as required by
Landlord, without additional cost to the Landlord or
Tenant.
(b) The Tenant's Contractors shall, if necessary, seal off
their work so as not to interfere with the Landlord's,
Main Landlord's and other tenants' business operations.
(c) During the progress of the work, the Tenant's
Contractors shall protect the Building and all finished
work as soon as same is erected and shall maintain such
protection until such time as it is no longer required.
5. Cleaning. The Tenant's Contractors shall at all times
keep the Premises reasonably free from accumulation of waste
materials or rubbish caused by its employees, subcontractors, or
Tenant Work, and shall coordinate such cleaning and removal of
materials with Landlord in accordance with Rules and Regulations.
6. Life Safety Systems. Tenant and/or Tenant's
Contractors shall give prior notice to and engage in prior
consultation with Landlord and/or Main Landlord, or such person
as Landlord and/or Main Landlord shall designate, with respect to
the connections with any life safety systems.
-98-<PAGE>
Schedule A
APPROVED TENANT'S ARCHITECT LISTING
ISI
600 W. Fulton
Chicago, IL 60606
312/454-9100
Lieber Architect, Inc.
444 N. Michigan Avenue
Chicago, IL 60611
312/527-0800
Mekus Johnson, Inc.
455 E. Illinois
Chicago, IL 60611
312/661-0778
Perkins & Will
123 N. Wacker Drive
Chicago, IL 60606
312/977-1100
Powell-Kleinschmidt
645 N. Michigan Avenue
Chicago, IL 60611
312/642-6450
DeStephano Partners
445 E. Illinois, Suite 650
Chicago, IL 60611
312/836-4321
VOA
(Vickrey-Ovresat-Awsumb Associates)
224 S. Michigan Avenue
Chicago, IL 60604
312/554-1400
-99-<PAGE>
Schedule B
APPROVED TENANT'S CONTRACTOR LISTING
PEPPER CONSTRUCTION
643 N. Orleans
Chicago, IL
312/266-4700
LA SALLE PARTNERS CONSTRUCTION
11 S. LaSalle
Chicago, IL
312/726-6103
INTERIOR ALTERATIONS, INC.
550 W. Jackson
Chicago, IL
312/454-1599
SCHAL ASSOCIATES
200 W. Hubbard
Chicago, IL
312/245-1000
REED ILLINOIS CORPORATION
930 W. Division
Chicago, IL
312/943-8100
KROESCHEEL ENGINEERING CO.
215 W. Ontario
Chicago, IL
312/649-7980
MIDWEST INTERSTATE ELECTRICAL
CONSTRUCTION CO.
1355 W. North Avenue
Chicago, IL
312/342-2600
-100-<PAGE>
Schedule C
APPROVED EQUIPMENT LISTING
1. LIEBERT (HVAC) UNITS.
2. Use of a halon replacement substance as a fire suppression
agent in critical Tenant designated areas (would be in lieu
of water sprinkling system) provided such replacement
substance is permitted under applicable laws, ordinances and
codes (including, without limitation, the City of Chicago
building code).
-101-<PAGE>
Attachment A
PLANS
The Plans will be submitted by Tenant to Landlord and
Main Landlord for review and approval. These Plans will include,
but not be limited to, construction, electrical, mechanical,
plumbing, communications and finishing drawings and
specifications for the Tenant improvements.
-102-<PAGE>
EXHIBIT C
TENANT ROOF SPACE
Tenant's roof space consists of 175 square feet of
contiguous flat space on the roof of the building known as AT&T
Corporate Center, 227 West Monroe, Chicago, County of Cook,
Illinois 60606. Tenant roof space will be used solely for the
puporses of construction, installation, operation, maintenance
and use of telecommunications equipment and an enclosed equipment
room.
-103-<PAGE>
EXHIBIT D
DIRECT LEASE OPTION, ATTORNMENT, RECOGNITION
AND CONSENT AGREEMENT
THIS DIRECT LEASE OPTION, ATTORNMENT, RECOGNITION AND
CONSENT AGREEMENT ("Agreement") is entered into as of October 25,
1993, by AMERICAN NATIONAL BANK AND TRUST COMPANY OF CHICAGO, not
personally but solely as Trustee under Trust Agreement dated
April 1, 1985, and known as Trust No. 64020 ("Main Landlord"),
AT&T COMMUNICATIONS, INC., a Delaware corporation ("Landlord"),
AMERICAN TELEPHONE AND TELEGRAPH COMPANY, a New York corporation
(successor-in-interest to AT&T Information Systems) ("AT&T"),
CHICAGO AND NORTH WESTERN TRANSPORTATION COMPANY, a Delaware
corporation ("Tenant") and THE TRAVELERS INSURANCE COMPANY, a
Connecticut corporation ("Mortgagee").
ARTICLE I
Recitals
A. This is the Direct Lease Option, Attornment,
Recognition and Consent Agreement referred to in the Office
Sublease by and between Landlord and Tenant of even date herewith
("Lease") wherein Tenant agrees to sublease from Landlord, and
Landlord agrees to sublease to Tenant, certain Premises in the
Building at 227 West Monroe Street, Chicago, Illinois. The words
"Premises" and "Building" and other capitalized or defined terms
used herein shall have the respective meanings assigned to them
in the Lease, except as otherwise provided or defined herein.
B. The parties hereto acknowledge that Landlord has
succeeded to the leasehold interest of AT&T Resource Management
Corporation, a New York corporation ("AT&T-RMC") by assignment
and is currently the tenant under that certain Office Lease made
as of December 31, 1985, but actually executed on May 16, 1986,
as amended by that certain First Amendment to Office Lease dated
July 29, 1988, and as the same has been, or may be, further
amended or modified from time to time ("Main Lease") by and
between Landlord (as successor-in-interest to AT&T-RMC), as
tenant, and Main Landlord, as landlord, which Main Lease covers
certain space in the Building, including, without limitation, the
Premises. AT&T is currently a tenant in the Building under its
Office Lease with Main Landlord made as of December 31, 1985, but
actually executed on May 16, 1986, as the same has been, or may
be, amended or modified from time to time ("AT&T Lease").
C. To evidence a loan made by Mortgagee to Main
Landlord in the principal amount of Three Hundred Seventy Million
Dollars ($370,000,000.00), Main Landlord executed that certain
Mortgage Note dated August 23, 1989, in the amount of Three
Hundred Seventy Million Dollars ($370,000,000.00) payable to the
-104-<PAGE>
order of Mortgagee, which is secured by that certain First
Mortgage and Security Agreement dated August 23, 1989 executed by
the Main Landlord in favor of Mortgagee, together with the
Joinder, executed by AT&T/Stein Partnership and recorded in the
Cook County Recorder's Office on August 24, 1989, as Document No.
89394999, as the same has been, or may be, amended or modified
from time to time ("Mortgage").
D. Mortgagee and Landlord entered into that certain
Subordination, Non-Disturbance and Attornment Agreement dated
August 24, 1989, a copy of which is attached hereto as Exhibit A
("SNDA").
E. Main Landlord and Mortgagee acknowledge having
received a copy of the Lease (including the attached Workletter)
and that each has had an opportunity to review the Lease
(including the attached Workletter).
F. As a condition to entering into the Lease,
Landlord and Tenant require the execution and delivery of this
Agreement in order to establish certain additional rights and
obligations among the parties hereto as more particularly set
forth herein.
NOW, THEREFORE, in consideration of the covenants,
terms, conditions, agreements and demises herein contained, and
for other good and valuable consideration, each to the other, the
receipt and sufficiency of which are hereby acknowledged, the
parties hereto agree, covenant and warrant as follows:
ARTICLE II
Agreements
2.1 Consent to Lease. Mortgagee and Main Landlord (to
the extent their respective consents are required) hereby consent
to, and approve of, the terms and provisions of the Lease
(including, without limitation, the Workletter and the terms and
provisions set forth in Sections 5, 7, 11, 12, 18(d), 25, 30, and
42 thereof); provided, however, this Agreement shall in no way
release Landlord from any of its covenants, agreements,
liabilities and duties under the Main Lease. It is further
agreed that, except as specifically provided in subsection 3(o)
hereof, Landlord shall be responsible for the collection of all
Rent due it from Tenant under the Lease, it being understood and
agreed that Main Landlord is not a party to the Lease, and except
as otherwise stated in the Main Lease or in this Agreement, is
not obligated to Landlord or Tenant for any of the duties or
obligations contained in the Lease.
-105-<PAGE>
2.2 Specific Agreements Regarding Main Lease.
(a) Upon either: (i) termination of the Main Lease as
a result of a "Default" (as such term is defined in the Main
Lease) thereunder by Landlord (other than any Default caused, in
whole or in part, directly or indirectly, as a result of a
default by Tenant under the Lease or any other act or omission of
Tenant, its agents, employees or invitees), (ii) the rejection of
the Main Lease by Landlord as debtor-in-possession or by
Landlord's trustee in bankruptcy, or (iii) any other termination
of the Main Lease other than: (A) pursuant to Sections 13 and 14
thereof, (B) as a result of a "Default" (as such term is defined
in the Main Lease) thereunder by Landlord which is caused, in
whole or in part, directly or indirectly, as a result of a
default by Tenant under the Lease or any other act or omission of
Tenant, its agents, employees or invitees, or (C) as a result of
the expiration of the term of the Main Lease (each of the
foregoing being referred to herein as a "Termination Event"), and
provided that at the time of such Termination Event the Lease is
in full force and effect and Tenant is not in Default thereunder,
Tenant shall attorn to and recognize Main Landlord as Tenant's
lessor under the Lease and Main Landlord agrees to accept such
attornment and to recognize Tenant as its lessee and itself as
lessor under the Lease. Upon such attornment, the Lease,
including any and all amendments or modifications thereto, shall
continue in full force and effect as a direct lease between
Tenant and Main Landlord with direct privity of estate and
contract, upon all the terms and conditions contained in the
Lease as though the Lease was originally made as a direct lease
between Main Landlord and Tenant (modified only to reflect a
conversion from a sublease to a direct lease) and Main Landlord
shall recognize and give effect to the Lease and the rights of
Tenant thereunder (including, without limitation, Tenant's right
to receive services pursuant to, and in accordance with, Section
5 of the Lease) and shall not disturb the peaceful possession and
quiet enjoyment of Tenant in and to the Premises, except as
permitted in accordance with the terms of the Lease. Any such
attornment shall be effective and self-operative as of the date
of such Termination Event without the execution of any further
instrument; provided, however, that upon the written request of
Main Landlord or Tenant, Main Landlord and Tenant shall execute
and deliver any such instruments as shall be reasonably
satisfactory to Main Landlord and Tenant to confirm such
attornment. Such attornment shall provide Main Landlord with all
rights and obligations of the Landlord under the Lease and Tenant
shall thereafter be obligated to Main Landlord to perform all of
the obligations of Tenant thereunder. Main Landlord shall have
no liability to Tenant prior to any such attornment, nor shall
the performance by Tenant of its obligations under the Lease,
whether before or after any such attornment, be subject to any
abatement, reduction, set-off (except to the extent expressly set
forth in subsection 5(k) of the Lease and in this Agreement),
-106-<PAGE>
counterclaim, defense or deduction, or otherwise be affected, by
reason of any default by Landlord in the performance of any
obligation to be performed by Landlord under the Lease.
Notwithstanding anything contained herein to the contrary, upon
the occurrence of a Termination Event and attornment as
aforesaid, Main Landlord and Tenant will enter into an amendment
or modification to the Lease which will give Tenant the benefit
of the Direct Lease Option set forth in subsection 2.3 hereof as
though the same were an extension option given to Tenant (and the
foregoing shall be in lieu of the Extension Options described in
Section 42 of the Lease).
(b) Notwithstanding anything to the contrary contained
herein or in the Lease, Main Landlord shall have no obligations
or liabilities under the Lease unless and until an attornment as
described above has occurred and, in such event, only with
respect to obligations and liabilities which first arise upon and
after the date of such attornment.
(c) As set forth in the first full paragraph of the
Main Lease, the Main Landlord hereby acknowledges and agrees that
in no event will a default under the AT&T Lease constitute a
default under the Main Lease.
(d) Main Landlord and Landlord hereby confirm that the
"Commencement Date" of the Main Lease is April 1, 1989 and that
the Lease-Up Period (as defined in the Main Lease) has expired.
(e) In the event both Landlord and Main Landlord have
the right to consent to, or approve, any matter contained in the
Lease with respect to Tenant, Landlord shall be deemed to have
consented to or approved such matter if Main Landlord shall have
consented to and approved such matter; provided, however, the
foregoing terms and provisions of this subsection 2.2 (e) shall
only be applicable for so long as the Main Landlord (or the sole
beneficiary of Main Landlord in the event Main Landlord is an
Illinois land trust) is an entity which is more than fifty
percent (50%) owned by AT&T or an entity owned or controlled by
AT&T. Notwithstanding the foregoing proviso, approval by
Landlord of the Plans (as defined in the Workletter) for the
Tenant Work, the Tenant's Architect, Tenant's Contractors (as
defined in the Workletter) and the specialized items described on
Exhibit C to the Workletter shall be deemed to be approval by the
Main Landlord. Tenant acknowledges and agrees that any approvals
or consents of the Main Landlord hereunder or under the Lease or
Workletter may be given by the sole beneficiary of the Main
Landlord in the event the Main Landlord is an Illinois land
trust.
(f) Landlord agrees to promptly furnish Tenant with
copies of any and all notices received from or delivered to Main
Landlord under the Main Lease to the extent such notices contain
-107-<PAGE>
information which, in the reasonable opinion of Landlord, is
reasonably likely to have a material and adverse economic impact
on Tenant's tenancy as a subtenant under the Lease. A material
and adverse change in the level, quality or extent of services to
be furnished pursuant to Section 5 of the Lease shall be deemed,
for the purposes hereof, as reasonably likely to have a material
and adverse economic impact on Tenant's tenancy.
(g) Main Landlord agrees to promptly furnish Tenant
with copies of any and all notices it delivers to Landlord under
the Main Lease to the extent such notices contain information
which, in the reasonable opinion of Main Landlord, is reasonably
likely to have a material and adverse economic impact on Tenant's
tenancy as a subtenant under the Lease. A material and adverse
change in the level, quality or extent of services to be
furnished pursuant to Section 5 of the Lease shall be considered
as reasonably likely to have a material and adverse economic
impact on Tenant's tenancy.
(h) Main Landlord agrees that Tenant or its
representative shall have the right to examine Main Landlord's
books and records showing "Expenses" and "Taxes" (as such terms
are defined in the Main Lease), to the same extent, and subject
to the same terms and conditions, Landlord has the right to do so
under the Main Lease, upon reasonable prior notice and during
normal business hours at any time within fifty (50) days after
Tenant receives the copy of Landlord's Statement as set forth in
subsection 2(d) of the Lease. If Tenant objects to any item set
forth in Landlord's Statement it must furnish Landlord and Main
Landlord with written notice of such objection within said fifty
(50) day period ("Objection Notice"). Unless the Tenant shall
deliver the Objection Notice within the aforesaid fifty (50) day
period, such Landlord's Statement shall be considered as final
and accepted by the Tenant. Notwithstanding the foregoing, the
terms and provisions of this subsection 2.2(h) shall only be
applicable for so long as the Main Landlord (or the sole
beneficiary of the Main Landlord in the event the Main Landlord
is an Illinois land trust) is an entity which is more than fifty
percent (50%) owned by AT&T or an entity owned or controlled by
AT&T.
(i) Nothing herein contained or contained in the Lease
(i) shall be deemed a waiver or modification of the Main
Landlord's rights under the Main Lease, (ii) shall create any new
obligations for Main Landlord under the Main Lease, or (iii)
expand or modify in any way any of Main Landlord's obligations
under the Main Lease.
(j) Nothing contained in this subsection 2.2 shall
create any new obligations for Landlord or expand or modify in
any way any of Landlord's obligations under the Lease.
-108-<PAGE>
(k) Whenever Tenant is required to obtain the consent
of Main Landlord under the terms and provisions of the Lease,
Main Landlord agrees that such consent shall not be unreasonably
withheld or delayed.
(l) Main Landlord agrees that prior to January 1,
1996, Main Landlord will use reasonable efforts to notify any
tenants in the Building constructing any improvements on the roof
of the Building after the date hereof of the rights of the Tenant
under Section 30 of the Lease.
2.3 Direct Lease Option. (a) Subject to the terms and
provisions of subsection 2.3(c) below, Tenant is hereby given the
option ("Direct Lease Option") to enter into a direct lease with
Main Landlord after the expiration of the initial Term of the
Lease ("Direct Lease"); provided, however, such Direct Lease
Option shall be subject to, and conditioned upon, the following:
(i) Tenant shall give Landlord and Main Landlord
written notice in the form attached hereto as Exhibit B ("Direct
Lease Notice") of its intent to exercise the Direct Lease Option
at least five hundred and fifty (550) days prior to the
expiration of the initial Term of the Lease (in the event Tenant
fails to deliver Landlord and Main Landlord the Direct Lease
Notice as aforesaid, the Direct Lease Option shall be deemed
waived by Tenant);
(ii) At the time Landlord and Main Landlord receive
the Direct Lease Notice set forth in subsection 2.3 (a)(i) above,
and at the expiration of the initial Term of the Lease, Tenant
shall not be in Default under the terms and provisions of the
Lease and the Lease shall be in full force and effect;
(iii) The Direct Lease shall be on the same terms and
conditions as set forth in the Lease, except: (A) such
modifications and revisions as are necessary to reflect the
conversion from a sublease to a direct lease, (B) the initial
term of the Direct Lease shall be for five (5) Lease Years, (C)
the Base Rent for the Direct Lease shall be ninety-five percent
(95%) of the then current Market Base Rent (as hereinafter
defined), and (D) the terms and provisions of Section 42 of the
Lease shall not be applicable, but Tenant shall (subject to
subsection 2.3(c) below) have one (1) option to extend the
initial term of the Direct Lease for a period of five (5)
additional Lease Years ("Direct Lease Extension Option"),
provided that: (I) Tenant gives Main Landlord and Landlord
written notice ("Extension Notice") at least five hundred and
fifty (550) days prior to the expiration of the initial term of
the Direct Lease of its intent to exercise the Extension Option
(in the event Tenant fails to deliver Main Landlord and Landlord
the Extension Notice as aforesaid, the Direct Lease Extension
Option shall be deemed waived by Tenant), (II) Tenant is not in
-109-<PAGE>
Default under the Direct Lease either at the time of the delivery
of the Extension Notice or at the expiration of the initial term
of the Direct Lease, and (III) the Base Rent under the Direct
Lease for the term of the Direct Lease Extension Option shall be
ninety-five percent (95%) of the then current Market Base Rent.
(b) "Market Base Rent" for the purposes of this
subsection 2.3 shall be negotiated in good faith by the parties
and shall mean the base rental rate which would be offered to a
tenant for space of comparable size to the Premises in office
buildings comparable to the Building in the same geographic area
as the Building (herein the "Chicago Business District Market")
as of the time the Direct Lease Notice or Extension Notice (as
the case may be) is delivered; provided, however, Market Base
Rent as determined in this subsection 2.3(b) shall assume that
the proposed lease obligation would: (i) not impose on the Main
Landlord any cost for brokerage services to identify a tenant;
(ii) be a direct, full recourse obligation of an entity with the
creditworthiness of Chicago and North Western Transportation
Company, a Delaware corporation, as of the date the Direct Lease
Notice or Extension Notice (as the case may be) is delivered,
(iii) not provide Tenant with any tenant improvement construction
allowances, rent abatement or other concessions typical for a new
tenant; and (iv) provide for immediate commencement of Tenant's
obligation to pay rent without any delay because of, or cost with
respect to, marketing of space or the need to construct
improvements.
Main Landlord shall deliver to Tenant a written notice
within sixty (60) days after Main Landlord's receipt of the
Direct Lease Notice or Extension Notice (as the case may be)
("Main Landlord's Rent Notice") which shall specify the annual
Market Base Rent for the Direct Lease or Direct Lease Extension
Option (as the case may be) and monthly installments thereof.
Should Tenant disagree with the Market Base Rent so determined by
Main Landlord in the Main Landlord's Rent Notice and should
Tenant and Main Landlord be unable to mutually agree as to what
Market Base Rent should be, Tenant may demand by giving written
notice to Main Landlord, at any time within thirty (30) days of
Tenant's receipt of Main Landlord's Rent Notice, that the
determination of Market Base Rent be submitted to arbitration
("Arbitration Notice"); provided, however, in the event Tenant
fails to give the Arbitration Notice to Main Landlord within the
aforesaid thirty (30) day period, Tenant shall be deemed to have
accepted Main Landlord's determination of Market Base Rent. Such
arbitration shall be conducted in Chicago, Illinois in accordance
with the following: The Tenant shall designate simultaneously
with the delivery of its Arbitration Notice, and the Main
Landlord shall designate within fifteen (15) days after receipt
of an Arbitration Notice, the name of an arbitrator who holds an
M.A.I. designation or its equivalent and who is familiar with the
Chicago Business District Market rentals. Within thirty (30)
days after the designations, as aforesaid, the two (2)
arbitrators chosen shall each make their written decision as to
-110-<PAGE>
the Market Base Rent. In the event the two (2) arbitrators agree
on the determination of Market Base Rent, said agreed amount
shall be the Market Base Rent for the purposes hereof. Should
such arbitrators disagree as to the Market Base Rent, but should
the higher determination of Market Base Rent be equal to or
within ten (10%) percent of the lower determination, the average
of the amounts determined by the two (2) arbitrators shall be
deemed the Market Base Rent; provided, however, in the event
Tenant is not satisfied with the amount of the Market Base Rent
as determined by the two (2) arbitrators as aforesaid, Tenant
shall have the right, to be exercised by written notice to
Landlord and Main Landlord ("Revocation Notice #1") within ten
(10) days after receipt of the written determination of the two
(2) arbitrators, to revoke its Direct Lease Notice or Extension
Notice (as the case may be) (but not the Option Notice given
pursuant to Section 42 of the Lease) in which event the Lease or
Direct Lease (as the case may be) shall remain in full force and
effect as if such Direct Lease Notice or Extension Notice (as the
case may be) had not been given by Tenant (in the event, however,
Tenant fails to give Revocation Notice #1 as aforesaid, it shall
be deemed to have approved and accepted the amount of Market Base
Rent determined by the two (2) arbitrators as aforesaid). In the
event the two (2) arbitrators are in excess of ten percent (10%)
apart, and, in the further event, Main Landlord and Tenant cannot
mutually agree as to the Market Base Rent within ten (10) days
after receipt of the determination by such two (2) arbitrators,
the two (2) arbitrators shall appoint a third arbitrator of equal
qualification who shall determine Market Base Rent within thirty
(30) days of appointment. In such event, the average of the
amounts determined by the three (3) arbitrators shall be deemed
the Market Base Rent; provided, however, in the event Tenant is
not satisfied with the amount of the Market Base Rent as
determined by the three (3) arbitrators as aforesaid, Tenant
shall have the right, to be exercised by written notice to
Landlord and Main Landlord ("Revocation Notice #2") within ten
(10) days after receipt of the written determination of the three
(3) arbitrators, to revoke its Direct Lease Notice or Extension
Notice (as the case may be) (but not the Option Notice given
pursuant to Section 42 of the Lease) in which event the Lease or
Direct Lease (as the case may be) shall remain in full force and
effect as if such Direct Lease Notice or Extension Notice (as the
case may be) had not been given by Tenant (in the event, however,
Tenant fails to give Revocation Notice #2 as aforesaid, it shall
be deemed to have approved and accepted the amount of Market Base
Rent determined by the three (3) arbitrators as aforesaid).
Unless Tenant delivers either Revocation Notice #1 or Revocation
Notice #2 as aforesaid, any determination shall be binding upon
Tenant and Main Landlord, and be enforceable by any court
exercising jurisdiction over the parties. The cost of the
arbitration, excluding fees of counsel for Main Landlord and
Tenant ("Cost of the Arbitration"), shall be divided equally
between the parties; provided, however, Tenant shall be solely
responsible for the Cost of the Arbitration in the event Tenant
delivers either Revocation Notice #1 or Revocation Notice #2 (as
-111-<PAGE>
the case may be). In the event the arbitration is not resolved
at the end of the initial Term of the Lease (or initial Term of
the Direct Lease, as the case may be), the Direct Lease or
Extension Option (as the case may be) shall become effective
(subject to the terms of subsection 2.3(c) below and of the next
sentence) and Tenant shall pay as Base Rent during the initial
Term of the Direct Lease or Extension Option (as the case may be)
the Base Rent then being paid by Tenant under the Lease or the
Direct Lease (as the case may be). In such event, upon
determination of the Market Base Rent, the Rent paid during the
period of dispute shall be retroactively adjusted and appropriate
payment made; provided, however, in such event, the Tenant shall
have the right to be exercised upon written notice delivered to
Main Landlord and Landlord (except only Main Landlord in the case
of the Direct Lease Extension Option) within ten (10) days of
Tenant's receipt of the arbitrators' written determination of
Market Base Rent ("Arbitration Determination"), to terminate the
Direct Lease or Extension Option (as the case may be) effective
three hundred and sixty five (365) days from Tenant's receipt of
the Arbitration Determination. In the event Tenant fails to
deliver the termination notice within the aforesaid ten (10) day
period, Tenant shall be deemed to have accepted the Arbitration
Determination and shall no longer have the right to terminate the
Direct Lease as aforesaid.
(c) The parties hereto acknowledge and agree that the
Tenant's election to exercise its Direct Lease Option pursuant
to, and in accordance with, this subsection 2.3, shall be deemed
a concurrent exercise by Tenant of its Extension Option pursuant
to, and in accordance with, Section 42 of the Lease.
Notwithstanding the foregoing, if, after Landlord's receipt of
the Direct Lease Notice: (i) Landlord exercises its
corresponding option to extend the Main Lease pursuant to, and in
accordance with, Section 31 of the Main Lease, and such option to
extend actually takes effect, then Tenant's exercise of the
Direct Lease Option pursuant to this subsection 2.3 shall
automatically be null and void and Tenant shall be deemed to have
solely exercised the Extension Option pursuant to Section 42 of
the Lease; (ii) Landlord does not exercise its corresponding
option to extend the Main Lease pursuant to, and in accordance
with, Section 31 of the Main Lease, or such option to extend
after being exercised fails to actually take effect, then
Tenant's exercise of the Extension Option under the Lease shall
automatically be null and void and Tenant shall be deemed to have
solely exercised the Direct Lease Option pursuant to, and in
accordance with, this subsection 2.3; or (iii) Landlord elected
to exercise the first of its Extension Options pursuant to
Section 31 of the Main Lease, Tenant elected to exercise the
first of its Extension Options pursuant to Section 42 of the
Lease, and Landlord does not exercise its second Extension Option
pursuant to Section 31 of the Main Lease, then Tenant shall be
entitled to the Direct Lease Option pursuant to and in accordance
with the terms and provisions of subsection 2.3(a) above after
the expiration of the Tenant's first Extension Option except that
-112-<PAGE>
the "Direct Lease Extension Option" discussed in subsection
2.3(a)(iii)(D) above shall not be applicable with respect
thereto. Landlord agrees to give Tenant a copy of the notice
sent to the Main Landlord by Landlord under Section 31 of the
Main Lease exercising Landlord's option to extend the Main Lease.
Notwithstanding anything to the contrary in subsection 2.3(b), in
the event subsection 2.3(c)(i) above is applicable, Landlord
shall be solely responsible for the Cost of the Arbitration.
2.4 Subordination, Non-Disturbance and Attornment
Agreement and Specific Agreements with Mortgagee.
(a) Mortgagee hereby represents, warrants and
covenants to Tenant as of the date hereof that Mortgagee is the
holder and owner of the Mortgage.
(b) Main Landlord represents, warrants and covenants
to Tenant as of the date hereof that the Main Lease is not
subordinate to any mortgage or ground lease, except the Mortgage.
(c) Mortgagee agrees that, for so long as the Lease
(including any extensions thereof) is in full force and effect,
Tenant (as the sublessee of Landlord under the Lease) shall be
entitled to the rights and benefits afforded to Landlord under
the SNDA and that the rights and benefits afforded to Landlord
under the SNDA shall, to the extent applicable, extend to the
Additional Tenant Rights (as hereinafter defined) and periods
covered by the Direct Lease.
(d) Tenant acknowledges and agrees that, in addition
to the consent of the Landlord and Main Landlord as set forth in
Section 12 of the Lease, the prior written consent of the
Mortgagee shall be required in connection with any mortgage by
Tenant of its interest in the Lease.
(e) Notwithstanding anything to the contrary set forth
herein or in the Lease, in no event will Mortgagee be liable for,
or be obligated to make, the Casualty Termination Payment set
forth in Section 13(a)(ii) of the Lease (including, without
limitation, in the event Mortgagee succeeds to the interests of
the Landlord under the Lease).
(f) Except as expressly set forth herein, nothing
contained in this subsection 2.4 shall create any new obligations
for Mortgagee or expand or modify in any way any of Mortgagee's
obligations under the SNDA.
ARTICLE III
Miscellaneous
3. (a) This Agreement is executed by American
National Bank and Trust Company of Chicago, not personally but
solely as Trustee under the provisions of a certain Trust
Agreement dated April 1, 1985, and known as Trust No. 64020. All
-113-<PAGE>
the covenants and conditions to be performed hereunder by
American National Bank and Trust Company of Chicago are
undertaken by it solely as Trustee, as aforesaid and not
individually, and no personal liability shall be asserted or be
enforceable against American National Bank and Trust Company
Trust No. 64020, the beneficiaries of American National Bank and
Trust Company Trust No. 64020 or any partners of the
beneficiaries of American National Bank and Trust Company Trust
No. 64020 by reason of any of the covenants, statements,
representations or warranties contained in this Agreement.
(b) Each provision of this Agreement shall extend to
and shall bind and inure to the benefit not only of Mortgagee,
Main Landlord, AT&T, Landlord and Tenant, but also their
respective heirs, legal representatives, successors and assigns
(subject in the case of Tenant to subsection (m) below).
(c) No modification, waiver or amendment of this
Agreement or of any of its conditions or provisions shall be
binding upon Mortgagee, Main Landlord, AT&T, Landlord or Tenant
unless in writing signed by Main Landlord, AT&T, Landlord, Tenant
and Mortgagee (as the case may be).
(d) The word "Tenant," whenever used herein, shall be
construed to mean Tenants or any one or more of them in all cases
where there is more than one Tenant; and the necessary
grammatical changes required to make the provisions hereof apply
to corporations or other organizations, partnerships or other
entities, or individuals, shall, in all cases, be assumed as
though in each case fully expressed.
(e) The headings of Sections are for convenience only
and do not limit, expand or construe the contents of the
Sections.
(f) Time is of the essence of this Agreement and of
each and all provisions hereof.
(g) The invalidity of any provision of this Agreement
shall not impair or affect in any manner the validity,
enforceability or effect of the rest of this Agreement.
(h) In computing any period of time pursuant to this
Agreement, the day of the act, date of notice, event or default
from which the designated period of time begins to run will not
be included. The last day of the period so counted will be
included, unless it is a Saturday, Sunday or a legal holiday in
the State of Illinois, in which event the period runs until the
end of the next day which is not a Saturday, Sunday or such legal
holiday.
(i) All notices, demands, requests, consents and other
communications required or permitted to be given hereunder shall
be in writing and shall be personally served or sent by
-114-<PAGE>
registered or certified mail, postage prepaid, return receipt
requested, or by an overnight courier service which provides
receipts of service, or by telecopy (with the hard copy thereof
sent by one of the other methods of delivery authorized by this
Section), addressed to the party to be so notified as at their
respective addresses as follows:
To Mortgagee: The Travelers Insurance Company
2215 York Road
Suite 504
Oak Brook, Illinois 60521
Attention: Managing Director and
John C. Murray
Telecopy: (708) 574-2208
with a copy to: The Travelers Insurance Company
One Towers Square
Hartford, Connecticut 06187
Attention: General Counsel
Telecopy: (203) 954-2620
To Tenant: Chicago and North Western
Transportation Company
One North Western Center
165 North Canal Street
Eighth Floor
Chicago, Illinois 60606
Attention: Senior Vice President -
Finance and Accounting and
Senior Corporate Real Estate
Counsel
Telecopy: (312) 559-6018
To Main Landlord: American National Bank and Trust
Company of Chicago as Trustee
under Trust No. 64020
33 North LaSalle Street
Chicago, Illinois 60690
Attention: Trust Officer
Telecopy: (312) 661-5373
To Landlord: AT&T Communications, Inc.
c/o AT&T Resource Management
Corporation
222 Mt. Airy Road
Basking Ridge, New Jersey 07920
Attention: District Manager, Real
Estate Joint Ventures
and
Attention: Senior Attorney
Telecopy: (908) 953-9113
Mailed communications shall be deemed to have been delivered upon
actual receipt thereof. Any person entitled to receive notice
-115-<PAGE>
may change its address by notice given in accordance with this
Section.
(j) This Agreement may be signed in counterparts, each
of which shall be deemed an original but which together shall
constitute one and the same instrument, but in making proof, it
shall only be necessary to produce one such counterpart.
(k) The parties hereto each represent and warrant that
they are duly authorized to enter into this Agreement and perform
their obligations hereunder.
(l) This Agreement shall not be recorded, but a
reference to this Agreement (including the Direct Lease Option)
for notice purposes may be included in any short form of lease
which is recorded pursuant to the terms and provisions of the
Lease.
(m) Except in connection with an assignment of the
Lease as permitted in accordance with the terms and provisions
thereof, Tenant shall not assign, convey, encumber or transfer
any of its rights, duties or obligations under this Agreement
without the consent of Main Landlord and Landlord.
(n) The term "Main Landlord" as used in this Agreement
means only the landlord under the Main Lease and any successors
and assigns of Main Landlord under the Main Lease so that in the
event of any assignment, transfer or conveyance once or
successively, of the Main Landlord's interest in the Main Lease
to any other party who assumes the Main Landlord's obligations
under the Main Lease, said Main Landlord making such transfer,
conveyance or assignment shall be and hereby is entirely freed
and relieved of all covenants and obligations of Main Landlord
hereunder accruing after such transfer, conveyance or assignment,
and Tenant agrees to look solely to such transferee, or assignee
with respect thereto. The holder of a mortgage or trust deed (or
assignment in connection with a mortgage or trust deed) shall not
be deemed such an assignee under this paragraph. This Agreement
and the rights and obligations of Tenant hereunder shall not be
affected by any such assignment, transfer or conveyance and
Tenant agrees to attorn to the grantee or assignee.
(o) From and after the time that Tenant receives a
written notice from Main Landlord that Landlord is in "Default"
(as such term is defined in the Main Lease) under the Main Lease,
and only for so long as said "Default" (as such term is defined
in the Main Lease) is continuing and has not been cured, and
provided that: (i) the Main Lease and the Lease are still in
full force and effect, (ii) the "Default" (as such term is
defined in the Main Lease) by Landlord under the Main Lease was
not caused, directly or indirectly, as a result of a default by
Tenant under the Lease, and (iii) Tenant is not in Default under
the Lease, then Tenant may, and upon the request of Main Landlord
shall, pay all Rent and other amounts due under the Lease
-116-<PAGE>
directly to Main Landlord at such place as Main Landlord may
direct, and in the absence of such direction, at the address of
the Main Landlord specified in Section 3(i) above. Concurrently
with the payment of any Rent by Tenant to Main Landlord as
aforesaid, Tenant shall deliver to Landlord written evidence that
such payments were made. Any payments of Rent by Tenant to Main
Landlord under this Section shall satisfy Tenant's obligations to
make said Rent payments under the Lease.
(p) Main Landlord hereby certifies to Tenant that, as
of the date hereof: (i) to the best of Main Landlord's knowledge
and belief, Landlord is not in Default under the Main Lease, (ii)
to the best of Main Landlord's knowledge and belief, Landlord is
paying Rent due under the Main Lease on a current basis with no
rental offsets or claims, and (iii) that there are no actions,
whether voluntary or otherwise, pending against Main Landlord
under the bankruptcy laws of the United States or any State
thereof.
(q) Landlord hereby certifies to Tenant that, as of
the date hereof: (i) to the best of Landlord's knowledge and
belief, Main Landlord is not in default of its obligations under
the Main Lease beyond applicable notice and cure periods, (ii)
that Landlord is paying Rent under the Main Lease on a current
basis with no rental offsets or claims, and (iii) that there are
no actions, whether voluntary or otherwise, pending against
Landlord under the bankruptcy laws of the United States or any
State thereof.
(r) Except as specifically set forth in subsection
2.2(a) hereof, this Agreement will terminate concurrently with
the termination of the Lease.
(s) Subject to the terms and provisions set forth
below, and provided that Tenant is not in Default under the terms
and provisions set forth in the Lease, Landlord and Main Landlord
hereby acknowledge and agree that Tenant shall have the following
additional rights ("Additional Tenant Rights") throughout the
Term of the Lease (including any extensions thereof and/or
pursuant to Tenant's possessory rights under the Direct Lease
Option) at no additional cost or charge to Tenant except as
specifically set forth below: (i) the right to use that portion
of the sixteenth (16th) floor mezzanine of the Building
consisting of approximately 800 square feet and more particularly
described on Exhibit C attached hereto ("Alternate Power Source
Space"), which Alternate Power Source Space shall be used by
Tenant solely for the purpose of constructing, installing,
operating, maintaining, inspecting, using and replacing an
uninterruptable power system ("UPS") and a second source power
system ("SSPS") for service to the computers and appurtenances
thereto from time to time installed in the Premises by Tenant
(without in any way limiting the foregoing, it is expressly
understood and agreed that the Alternate Power Source Space shall
not be used for office purposes); (ii) to the extent that the
-117-<PAGE>
Main Landlord determines, in its sole discretion, that there is
sufficient space in the basement or on the roof of the Building,
Tenant shall have the right to use up to 500 square feet of such
space in the aggregate on such terms and conditions, and in such
location, as Main Landlord may determine (except that no rent
shall be charged therefore) ("Additional Power Source Space"),
which Additional Power Source Space shall be used by Tenant
solely for the purpose of installing and using an additional
standby power system ("SPS") in connection with the Premises; and
(iii) the right to use sufficient "chase", conduit, "raceways",
wire and pipes in the Building for plumbing and electrical
services from the UPS, SSPS and SPS to the Premises, or any part
thereof, all in accordance with: (A) the Upper Level 16 Piping
Plan, prepared by SOM and dated 5/28/87, (B) Lower Level 16
Piping Plan, prepared by SOM and dated 5/28/87, (C) Level 15
Piping Plan, prepared by SOM and dated 5/28/87 and (D) Level 2-14
Piping Plan, prepared by SOM and dated 5/28/87 (copies of (A),
(B), (C) and (D) have been delivered to, and received by,
Tenant). No rent shall be charged for the Additional Tenant
Rights, and Tenant's Proportionate Share shall not be increased
to reflect Tenant's use of the Alternate Power Source Space or
Additional Power Source Space. Tenant shall be solely
responsible for making all necessary arrangements with the
utility company for electric current consumed in connection with
the UPS, SSPS and SPS. In addition, any and all costs and
expenses incurred in connection with the construction,
installation, operation, maintenance, inspection, use and repair
of the UPS, SSPS and SPS shall be borne exclusively by Tenant.
The Tenant's construction and installation of the UPS, SSPS and
SPS as well as the rights set forth in subsection (iii) above,
shall be done pursuant to plans and specifications approved by
Main Landlord and Landlord, which approval shall not be
unreasonably withheld (including, without limitation, as to roof
installations, Main Landlord's and Landlord's approval of the
location, appearance and size thereof). In no event shall
Tenant's installations on the roof interfere with Landlord's,
Main Landlord's or other tenants use of existing roof top
installations. Tenant shall exercise the Additional Tenant
Rights in compliance with all laws, ordinances and regulations
(including, without limitation, zoning and building codes) and
any Rules and Regulations. Main Landlord and Landlord
acknowledge and agree that the UPS, SSPS and SPS shall be for
Tenant's exclusive use. Tenant hereby agrees that it shall not
have the right to assign or sublet any of the Additional Tenant
Rights separately from a sublease or assignment of a portion of
the Premises. Without in any way limiting the foregoing, Tenant
agrees to: (A) reimburse Main Landlord and/or Landlord for any
insurance premiums incurred by Main Landlord and/or Landlord (as
the case may be) which are attributable to the Additional Tenant
Rights, and (B) to indemnify and hold Main Landlord and Landlord
harmless from and against any and all loss, cost or liability
suffered or incurred by Main Landlord and/or Landlord, their
respective officers, partners, directors, employees or agents
-118-<PAGE>
arising out of, or in connection with, the Additional Tenant
Rights.
(t) Neither Landlord nor Main Landlord shall require
Tenant to hoist any materials, equipment, machinery, furniture or
any other property in connection with the performance of Tenant's
Work (as defined in the Workletter) or Tenant's initial move into
the Premises.
-119-<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed
this Agreement effective as of the date first above written.
THE TRAVELERS INSURANCE COMPANY, a
Connecticut corporation
BY: /s/ Gene S. Thompson
Its: Assistant Secretary
AMERICAN NATIONAL BANK AND TRUST
COMPANY OF CHICAGO, not personally
but solely as Trustee under Trust
Agreement dated April 1, 1985, and
known as Trust No. 64020
BY: /s/ A. Smith
Its: Trust Officer
AT&T COMMUNICATIONS, INC., a
Delaware corporation
BY: /s/ G. A. Decker
Its: Real Estate
Vice President
AMERICAN TELEPHONE AND TELEGRAPH
COMPANY, a New York corporation
BY: /s/ G. A. Decker
Its: Real Estate
Vice President
CHICAGO AND NORTH WESTERN
TRANSPORTATION COMPANY, a Delaware
corporation
BY: /s/ Robert Schmiege
Its: President
-120-<PAGE>
EXHIBIT A
TRAVELER'S SNDA
SEE ATTACHED
-121-<PAGE>
TIC Loan No.: 205361
Address: 227 West Monroe Street
Chicago, Illinois 60603
Tax No. 17-16-209-012
SUBORDINATION, NON-DISTURBANCE AND
ATTORNMENT AGREEMENT
THIS SUBORDINATION, NON-DISTURBANCE AND ATTORNMENT AGREEMENT
(the "Agreement") made this 20th day of August, 1989 between:
THE TRAVELERS INSURANCE COMPANY, a Connecticut corporation,
herein for convenience referred to as "Mortgagee"; and
AT&T COMMUNICATIONS, INC., a Delaware corporation, as
assignee of AT&T RESOURCE MANAGEMENT CORPORATION, a New York
corporation, herein for convenience referred to as "Tenant":
R E C I T A L S:
A. Pursuant to the terms and conditions of that certain
Office Lease dated December 31, 1985 between American National
Bank and Trust Company of Chicago, as Trustee under Trust
Agreement dated April 1, 1985 and known as Trust No. 64020, as
landlord ("Landlord"), and Tenant, as tenant, as amended by that
certain First Amendment to Office Lease dated July 29, 1988
(collectively, the "Lease Agreement"), Tenant leased from
Landlord the premises (the "Leased Premises") as located in the
property legally described on Exhibit "A" attached hereto and
made a part hereof (the "Property").
B. To evidence a loan made by Mortgagee to Landlord in the
principal amount of THREE HUNDRED SEVENTY MILLION DOLLARS
($370,000,000.00) ("Loan"), Landlord executed its note dated
August 23, 1989, payable to the order of Mortgagee, which is
secured by a mortgage conveying the Property (of which Leased
Premises is a part), in favor of Mortgagee, recorded in the
Office of the Recorder of Deeds of Cook County, Illinois ad
Document Number 89394999 ("Mortgage").
C. As a condition to the initial disbursement of the
proceeds of Loan, Mortgagee requires that the interest of Tenant
in and to Leased Premises and Lease Agreement be subordinated to
the lien of Mortgage; PROVIDED, HOWEVER, that upon Tenant's
performance of all of the terms, covenants, conditions and
agreements required of it pursuant to Lease Agreement, Tenant's
possession of Leased Premises shall not be disturbed.
Page 1 of 7 Pages<PAGE>
NOW, THEREFORE, in consideration of the mutual covenants,
agreements and promises herein contained, the sufficiency of
which is hereby acknowledged, IT IS HEREBY AGREED AS FOLLOWS:
1. Lease Agreement is and shall continue hereafter to be
subject and subordinate to the lien of Mortgage, subject,
however, to the provisions of this Agreement.
2. In the event that Mortgagee or its successors, assigns,
nominees or any other party claiming by, through or under
Mortgagee (collectively "Successors") shall take possession of
Leased Premises by foreclosure, deed in lieu of foreclosure or
otherwise and Tenant is not then in default (beyond any grace
period set forth in Lease Agreement for curing the same) of any
covenant or condition of Lease Agreement to be performed by
Tenant, Tenant shall peaceably hold and enjoy Leased Premises for
the remainder of the unexpired term (including any extensions
thereof), which possession shall be without hindrance or
interruption.
3. Tenant shall not be joined as a party-defendant in any
action or proceeding which may be instituted or taken by
Mortgagee by reason of any fault of a term or provision of the
Mortgage.
4. In the event Mortgagee or Successors shall succeed to
the rights of Landlord pursuant to Lease Agreement:
(a) Tenant will attorn to Mortgagee or Successors and
will perform, for the benefit of Mortgagee or
Successors, all of the terms, covenants and
conditions contained in Lease Agreement to be kept
and performed by it and shall, at the request of
Mortgagee or Successors, execute and deliver a
written agreement of attornment; and
(b) Mortgagee or Successors shall not be (i) liable
for any act or omission of any prior landlord
(including Landlord); (ii) subject to any offsets
or defenses which Tenant may have against Landlord
or any prior landlord except as provided in Lease
Agreement; or (iii) bound by any prepayment of
rent or additional rent which Tenant may have paid
for more than the current month to Landlord or any
prior landlord.
5. The term "Mortgagee" shall mean the holder of Mortgage
(as the same may be assigned from time to time) and the term
"Mortgage" shall mean Mortgage (as the same may be renewed,
modified, replaced, extended or consolidated with mortgages
placed on the Property, dated subsequent to the date of Lease
Agreement).
Page 2 of 7 Pages<PAGE>
6. Any and all notices to be given pursuant hereto shall
be sufficient if in writing and mailed by United States certified
or registered mail, postage prepaid, addressed to Mortgagee and
Tenant as follows:
If to Mortgage: 2215 York Road
Oak Brook, Illinois 60521
Attention: Richard G. Griffith
Regional Vice President
With a copy to: John C. Murray, Esq.
The Travelers Insurance Company
2215 York Road
Oak Brook, Illinois 60521
If to Tenant: AT&T Communications, Inc.
Attention: B. C. Hoette, Manager
Real Estate Planning
300 South Riverside
2nd Floor
Chicago, Illinois 60606
With a copy to: AT&T Resources Management Corporation
222 Mt. Airy Road
Basking Ridge, New Jersey 07920
Attention: Manager, Real Estate
Department, Vice
President, and General
Attorney
All notices shall be deemed to have been received three (3) days
following the postmark dates thereof.
7. This Agreement and the covenants, conditions and
promises herein contained shall inure to the benefit of and be
binding upon Mortgagee and Tenant, their respective successors,
assigns, grantees and legal representatives.
Page 3 of 7 Pages<PAGE>
IN WITNESS WHEREOF, Mortgagee and Tenant have caused this
Agreement to be executed by their duly authorized officers and
their respective corporate seals to be affixed hereto, as of the
day and year first above written.
Mortgagee THE TRAVELERS INSURANCE
COMPANY, a Connecticut
corporation
By: /s/ RICHARD G. GRIFFITH
Title: Regional Vice President
ATTEST:
/s/ GEORGE PSARAS
Title: Assistant Secretary
Tenant AT&T COMMUNICATIONS, INC.,
a Delaware corporation,
as assignee of AT&T RESOURCE
MANAGEMENT CORPORATION,
a New York corporation
By: /s/ B. C. HOETTE
Its: Manager - Real Estate
Page 4 of 7 Pages<PAGE>
STATE OF ILLINOIS )
) SS.
COUNTY OF DU PAGE )
The undersigned, a Notary Public in and for said County, in
the State aforesaid, DO HEREBY CERTIFY that Richard G. Griffith
of THE TRAVELERS INSURANCE COMPANY, a Connecticut corporation
("Mortgagee"), and George Psaras, thereof, personally known to me
to be the same persons whose names are subscribed to the
foregoing instrument as such Regional V.P. and Assistant
Secretary, respectively, appeared before me this day in person
and acknowledged that they signed and delivered the said
instrument as their own free and voluntary act, and as the free
and voluntary act of Mortgagee, for the uses and purposes therein
set forth; and the said Regional V.P. did also then and there
acknowledge that he, as custodian of the corporate seal of
Mortgagee, did affix the same to said instrument as his own free
and voluntary act, and as the free and voluntary act of
Mortgagee, for the uses and purposes therein set forth.
GIVEN under my hand and Notarial Seal this 27th day of
September 1989.
/s/ SUSAN HOCHRIEM
Notary Public
My Commission Expires 4/27/92
STATE OF ILLINOIS )
) SS.
COUNTY OF COOK )
The undersigned, a Notary Public in and for said County, in
the State aforesaid, DOES HEREBY CERTIFY that B. C. Hoette as
Manager Real Estate of AT&T COMMUNICATIONS, INC., a Delaware
corporation ("Tenant"), personally known to me to be the same
person whose name is subscribed to the foregoing instrument as
such _______________, appeared before me this day in person and
acknowledged that he signed and delivered the said instrument as
his/her own free and voluntary act, and as the free and voluntary
act of Tenant, for the uses and purposes therein set forth; and
the said _______________ did also then and there acknowledge that
he, as custodian of the corporate seal of Tenant, did affix the
same to said instrument as his/her own free and voluntary act,
and as the free and voluntary act of Tenant, for the uses and
purposes therein set forth.
GIVEN under my hand and Notarial Seal this 24th day of
August, 1989.
/s/ NADIA K. CHOMKO
Notary Public
My Commission Expires 1/30/90
Page 5 of 7 Pages<PAGE>
EXHIBIT A
LEGAL DESCRIPTION OF THE PROPERTY
PARCEL 1
Lot 1 (except the West 40.00 feet thereof taken or used or
Franklin Street) and all of Lots 2 and 3 in Block 3 in Block 93
in School Section Addition to Chicago in Section 16, Township 39
North, Range 14, East of the Third Principal Meridian, in Cook
County, Illinois.
PARCEL 2
Easement for the benefit of Parcel 1 aforesaid as created by
instrument dated June 20, 1984 made by Chicago Title and Trust
Company, as Trustee under Trust Agreement dated December 7, 1973
and known as Trust Number 63493, recorded on June 21, 1984 as
Document 271040707 and rerecorded June 14, 1985 as Document
85060359 for ingress and egress over, across and upon the
following described property:
The South 22 feet 10 inches of Lot 9 in Bolles
Subdivision of Lot 4 in Block 93 in School Section
Addition to Chicago in Section 16, Township 39 North,
Range 14 East of the Third Principal Meridian, in Cook
County, Illinois
and
The South 22 feet 10 inches of that part of original
Lot 4 lying West of the West line of the Subdivision of
original Lot 4 and East of the line of original Lot 3
(said East line of Lot 3 being also the East line of
the 10 foot private alley in Block 93 in School Section
Addition to Chicago in Section 16, Township 39 North,
Range 14 East of the Third Principal Meridian, in Cook
County, Illinois.
PARCEL 3
Easement for the benefit of Parcel 1 as created by declaration
dated August 30, 1986 and recorded October 28, 1986 as Document
86504773 made by American National Bank and Trust Company of
Chicago, as Trustee under Trust Agreement dated March 15, 1986
and known as Trust Number 66917 to American National Bank and
Trust Company of Chicago, as Trustee under Trust Agreement dated
April 1, 1985 and known as Trust Number 64020.
Page 6 of 7 Pages<PAGE>
(a) To construct, install, maintain and replace such portions of
subsurface foundation and caissons as shall encroach;
(b) To maintain such inadvertent encroachments of the subsurface
and above ground structure as shall result from
construction, shifting, or settlement thereof; and
(c) For ingress and egress to the extent reasonably necessary to
permit construction, maintenance, repair, and replacement of
the building on the land.
Over, under, and across the following described property:
That part of Field and Perkin's Subdivision of Lots 5, 6 and 7
and that part of Lot 8 lying east of the east line of Franklin
Street in Block 93 in School Section Addition to Chicago in
Section 16, Township 39 North, Range 14 East of the Third
Principal Meridian described as follows:
Beginning at the south west corner of Lot 1 of Field and Perkin's
Subdivision aforesaid; thence north along the west line of Lot 1
of aforesaid a distance of 199.04 feet to the north west corner
of Lot 1 aforesaid; thence east along the north line of Field and
Perkin's Subdivision aforesaid and that part of the vacated east
and west 20 foot public alley as described in Document Number
86067142 a distance of 196.76 feet to the point of intersection
with the northerly extension of the east line of Lot 2 in Field
and Perkin's Subdivision aforesaid; thence south along the east
line of Lot 2 and its northerly extension aforesaid a distance of
199.39 feet to the south east corner of Lot 2 aforesaid; thence
west along the south line of Field and Perkin's Subdivision
aforesaid, being also the north line of West Adams Street, a
distance of 196.805 feet to the point of beginning, in Cook
County, Illinois.
Page 7 of 7 Pages<PAGE>
EXHIBIT B
OPTION NOTICE
CHICAGO AND NORTH WESTERN TRANSPORTATION COMPANY ("TENANT")
227 WEST MONROE STREET
CHICAGO, ILLINOIS
AT&T Communications, Inc. ("Landlord")
c/o AT&T Resource Management Corporation
222 Mt. Airy Road
Basking Ridge, New Jersey 07920
Attention: District Manager, Real Estate Joint Ventures
and
Attention: Senior Attorney
and
Stein & Company Asset Services, Inc.
Suite 3400
227 West Monroe Street
Chicago, Illinois 60606
Attention: Vice President/Asset Management
and
American National Bank and
Trust Company of Chicago ("American National")
not personally but solely as Trustee under
Trust Agreement dated April 1, 1985, and
known as Trust 64020 ("Main Landlord")
33 North LaSalle Street
Chicago, Illinois 60603
Attention: Land Trust Department
Re: Notice of Extension Option and Direct Lease Option
Dear Ladies and Gentlemen:
In accordance with Section 42 of the Office Sublease
between Landlord and Tenant dated as of October 25, 1993
("Lease"), and subsection 2.3 of the Direct Lease Option,
Attornment, Recognition and Consent Agreement among Landlord,
Tenant, Main Landlord, The Travelers Insurance Company, American
National, not personally but as Trustee under Trust Agreement
dated April 1, 1985, and known as Trust No. 64020, dated as of
October 25, 1993 ("Option Agreement"), Tenant hereby notifies you
-122-<PAGE>
that tenant desires to exercise its irrevocable Extension Option
with respect to the Lease and revocable Direct Lease Option under
the Option Agreement.
Sincerely,
CHICAGO AND NORTH WESTERN
TRANSPORTATION COMPANY, a Delaware
corporation
BY: /s/ Robert Schmiege
Its: President
-123-<PAGE>
EXHIBIT C
ALTERNATE POWER SOURCE SPACE
Attached to this Exhibit is an Exhibit C print which
identifies approximately 800 square feet located in the southwest
corner of the 16th floor mezzanine of the building known as AT&T
Corporate Center, 227 West Monroe, Chicago, County of Cook,
Illinois 60606, to be used as the alternate power source.
-124-<PAGE>
EXHIBIT E
FURNITURE
SEE ATTACHED
-125-<PAGE>
EXHIBIT E OF THE OFFICE SUBLEASE
The furniture inventory, dated August 18, 1993,
contains the furniture and audio/visual equipment located on
floors 6 through 12 at the AT&T Corporate Center, 227 West
Monroe, Chicago, County of Cook, Illinois 60606. Floors 6
through 10 and 12 contain the following Steelcase Series 9000
panel wall units:
42"H x 30"W - 3,101
45"H x 30"W - 3
53"H x 30"W - 694
65"H x 30"W - 2,663
Floors 6 through 10 and 12 contain the following Steelcase Series
9000 panel system components:
BOOK BINS - 2,385
CENTER DRAWERS - 812
3-DRAWER PEDESTALS - 841
2-DRAWER PEDESTALS - 1,694
25" X 60" WORK SURFACES - 827
30" X 60" WORK SURFACES - 222
30" X 90" WORK SURFACES - 1,044
KEYBOARD TRAYS - 3
TABLES - 66
CURVED TABLES - 11
CUBE TYPE 37-1 - 1
CUBE TYPE 37-2 - 4
CUBE TYPE 56A - 199
CUBE TYPE 56B1 - 258
CUBE TYPE 56B2 - 2
CUBE TYPE 56B3 - 1
CUBE TYPE 75D - 212
CUBE TYPE 75B - 42
CUBE TYPE 75BM1 - 1
CUBE TYPE 75BM2 - 5
CUBE TYPE 75BM3 - 1
CUBE TYPE 75BM4 - 1
CUBE TYPE 75BM6 - 1
CUBE TYPE 112A - 66
CUBE TYPE 112B - 11
CUBE TYPE 112C1 - 11
CUBE TYPE 112C2 - 3
CUBE TYPE 112C3 - 9
CUBE TYPE 112C4 - 2
Floors 6 through 10 and 12 contain the following miscellaneous
furniture:
2' X 5' TABLES - 41
3' X 8' TABLES - 4
SMALL ROUND TABLE - 1
Page 1 of 4 Pages<PAGE>
MEDIUM ROUND TABLES - 39
LARGE ROUND TABLE - 1
END TABLE - 1
OVAL CONFERENCE TABLE - 1
WOOD CONFERENCE TABLE - 1
4' x 8' CONFERENCE TABLE - 1
2-DOOR LATERAL FILE CABINETS - 22
3-DOOR LATERAL FILE CABINETS - 50
4-DOOR LATERAL FILE CABINETS - 507
5-DOOR LATERAL FILE CABINETS - 102
2-SHELF BOOKCASES - 7
3-SHELF BOOKCASES - 2
4-SHELF BOOKCASE - 1
5-SHELF BOOKCASES - 6
STAND-ALONE CLOSETS - 115
STORAGE CABINETS - 10
STANDARD OFFICE CHAIRS - 1,006
ARM CHAIRS - 28
SIDE CHAIRS - 437
EXECUTIVE CHAIRS - 30
CONFERENCE CHAIRS - 216
EXECUTIVE CONFERENCE CHAIRS - 29
60" COUCHES - 2
90" COUCH - 1
DESKS - 8
RECEPTION DESK - 1
DESKS WITH RETURN - 28
DESK WITH OVERHEAD RETURN - 1
CREDENZAS - 15
CREDENZAS WITH OVERHEAD - 27
ROUND DESKS - 3
30" X 30" TRAINING TABLES - 4
30" X 60" TRAINING TABLES - 30
30" X 90" TRAINING TABLES - 56
FILES - 4
WALL WHITE BOARDS - 7
Floor 11 contains the following furniture:
DESKS - 12
CONFERENCE TABLES - 8
SMALL ROUND CONFERENCE TABLES - 7
COFFEE TABLES - 9
END TABLES - 18
DINING TABLES - 4
CREDENZAS - 3
CONSOLES - 6
TABLE DESK - 1
LAMP TABLE - 1
FLOOR LAMP - 1
MEDIA CART - 1
PODIUM AND WING - 1
4-DRAWER LATERAL FILES - 8
EXECUTIVE CHAIRS - 140
Page 2 of 4 Pages<PAGE>
SIDE CHAIRS - 87
UPHOLSTERED CHAIRS - 22
CLERICAL CHAIRS - 20
DINING CHAIRS - 32
SOFAS - 11
Floor 11 contains the following audio visual equipment:
BRYSTON 4B - AUDIO AMP - 1
BRYSON 2B - AUDIO AMP - 1
KLARK TEKNIK DN332 - WIDE BAN EQUALIZER - 1
OXMOOR DCA-2 - AUDIO CONTROLS - 1
OXMOOR DCA-3 - AUDIO CONTROLS - 1
TASCAM 44-OB-4 CHANNEL REEL TO REEL - 1
TASCAM CD-501 - CD PLAYER - 1
YORK CD-24 - SYSTEM CONTROLS - 1
YORK CD-18 - SYSTEM CONTROLS - 2
YORK POWER S24110 - 1
TASCAM 133B - 3 CHANNEL CASSETTE DECK - 1
YAMAHA M406 - 6 CHANNEL AUDIO MIXER - 1
NAKAMICHI MR-1 - CASSETTE DECK - 1
SONY V07600 - 3/4" VIDEO PLAYER - 1
RTS SYSTEMS 444 - SYSTEM EQUIPT. - 5
YORK AS8 - SYSTEM CONTROLS - 3
PANASONIC AG7500 - 1/2" VIDEO RECORDER - 2
GVG 10-XL - VIDEO SWITCH - 1
GVG DECODER (CV-20) - 1
GVG DECODER CARD (CV-24) - 1
GVG POWER SUPPLY - 2
GVG POWER SUPPLY CARD - 1
BARCO RCVDS 400 QUAD - SWITCHING SYS - 1
BARCO A/V INPUT MODULE - 6
BARCO RGBS INPUT MODULE - 4
GVG 8500 DA FRAME - 1
SONY CAMERA CONTROL UNIT - 1
SONY PVM 91-BW CAMERA MONITOR - 1
SONY CMA8 - CAMERA AUX POWER - 1
GVG 8501 DA CARDS - AMPS - 4
KODAK III AMT PROJECTOR - 2
MAST 137-S43 PROJECTOR - 2
ISCO 60 MM 2.35 LENS - 4
CHIEF MSU-300 PROJ RACK - 3
CHIEF PROJECTOR STANDS - 0
LIBERTY MIRROR 756 MIRROR - 2
AVL DOVE X2 DISSOLVE - SLIDE PROJ CONTRL - 2
YORK PR-1 PRESET PANEL - 1
YORK RAC-3 R/A CONTROLLER - 2
YORK RAD-2 R/A DISSOLVE-SLIDE PROJ CONTRL - 1
35 MM SLIDE PROJECTORS - 4
BEYER M500 MICROPHONES & STANDS - 4
STORAGE BOXES - 6
TALL MICROPHONE STANDS - 3
SONY 1031Q VIDEO PROJECTOR - 1
B&W MONITOR SPEAKERS - 2
Page 3 of 4 Pages<PAGE>
MITSUBISHI MONITORS - 2
MONITOR SELECT PANEL - 1
YORK LCD TOUCH PANEL CPC576 - 2
PANASONIC A505 REMOTE CONTROLLER - 1
SONY AUTO SEARCH CONTRL BUTTON RX353 - 1
BARCO TELECOMMANDER RCVDS4 - 1
STEREO CORD (RED) - 24
MONO CORD (RED) - 6
SHORT VIDEO PATCH (PINK) - 12
18" VIDEO PATCH (PINK) - 11
PHONO CORD (RED) - 10
FEMALE AUDIO CORD (BLACK TOP) - 6
MALE AUDIO CORD (BLACK TOP) - 4
5 FT. VIDEO CABLES - 8 PAIR
MICROPHONE CABLES - 5 PAIR
MASTER SET OF SCHEMATICS FOR AUDIO - 1 SET
REVOX B285 - AM/FM RECV AMP - 6
JVC 1/2" VCR HR-S 7000U - 6
REVOX B226 - CD PLAYER - 6
SONY ST-72TV - TV TUNER - 6
MEMOREX CB-8 UNIVERSAL CONTROL - 6
MITSUBISHI 35" MULTISYNC TV MONITOR - 6
POWER SWITCH - 6
M3 CAMERA - 1
FUJINON CAMERA CONTROL BUTTON - 1
Page 4 of 4 Pages<PAGE>
EXHIBIT F
ECONOMIC TERMS
A. BASE RENT AND LANDLORD'S ALLOWANCE
The Base Rent and Landlord's Allowance designated by
Tenant pursuant to Section 2(a)(xiv) of the Lease shall be
determined in accordance with the following options:
BASE RENT PER SQ/FT LANDLORD'S ALLOWANCE
PER ANNUM PER SQ/FT
$5.65 = $ 5.00
$6.28 = $10.00
$6.92 = $15.00
$7.56 = $20.00
$8.20 = $25.00
Tenant may also request a Landlord's Allowance between
$5.00 per square foot and $25.00 per square foot which is not in
a multiple of $5.00, in which case Base Rent per square foot will
be ratably adjusted on the basis of the Landlord's Allowance
selected by Tenant. It is understood and agreed that in no event
will: (a) the Base Rent per square foot designated by Tenant as
aforesaid be less than $5.65 per square foot or more than $8.20
per square foot, and (b) the Landlord's Allowance be less than
$5.00 per square foot or more than $25.00 per square foot.
B. RENTABLE AREA OF PREMISES
The Rentable Area of the relevant floors of the
Building for the purposes of this Lease shall be as follows:
1. 6th Floor = 38,328
2. 7th Floor = 35,231
3. 8th Floor = 35,137
4. 9th Floor = 34,503
5. 10th Floor = 34,330
6. 11th Floor = 34,330
7. 12th Floor = 33,166
Total = 245,025
The Rentable Area of the Premises designated by Tenant
pursuant to Section 2(a)(xiv) of the Lease shall: (a) consist of
between 206,697 rentable square feet and 245,025 rentable square
feet, (b) be located on contiguous floors six (6) through eleven
(11), seven (7) through twelve (12) or six (6) through twelve
(12) of the Building, and (c) contain no more than one (1)
partial floor, which partial floor, if any, shall be located on
the twelfth (12) floor of the Building and shall be in such
location designated by Tenant which is reasonably acceptable to
Landlord.
-126-<PAGE>
EXHIBIT G
MAIN LEASE
SEE ATTACHED
-127-<PAGE>
0084.0.0
FORM OF
AT&T CORPORATE CENTER
OFFICE LEASE
BETWEEN
AMERICAN NATIONAL BANK AND TRUST COMPANY OF CHICAGO,
AS TRUSTEE UNDER TRUST NO. 64020
(as Landlord)
and
AT&T RESOURCE MANAGEMENT CORPORATION
(as Tenant)
Dated: December 31, 1985
Page 0 of 74 Pages<PAGE>
0085.0.0
OFFICE LEASE
TABLE OF CONTENTS
Page
1. Base Rent............................................... 2
2. Additional Rent......................................... 2
3. Prior Occupancy......................................... 19
4. Use of Premises......................................... 19
5. Services................................................ 20
6. Condition and Care of Premises.......................... 25
7. Return of Premises...................................... 27
8. Holding Over............................................ 28
9. Rules and Regulations................................... 29
10. Rights Reserved to Landlord............................. 29
11. Alterations............................................. 32
12. Assignment and Subletting............................... 35
13. Damage or Destruction by Casualty....................... 39
14. Eminent Domain.......................................... 41
15. Default: Landlord's Rights and Remedies................. 42
16. Subordination........................................... 46
17. Mortgagee Protection.................................... 48
18. Quiet Enjoyment......................................... 48
19. Subrogation and Insurance............................... 49
20. Nonwaiver............................................... 50
21. Estoppel Certificate.................................... 50
22. Tenant Authorization.................................... 51
23. Landlord Authorization.................................. 51
24. Real Estate Brokers..................................... 51
25. Notices................................................. 52
26. Delivery of Possession and Liquidated Damages........... 52
27. Miscellaneous........................................... 53
28. Landlord................................................ 55
29. Title and Covenant Against Liens........................ 55
30. Leasing of Additional Premises.......................... 56
31. Option to Extend........................................ 59
32. Tenant Release Rights................................... 60
33. Relocation Rights....................................... 61
34. Right of First Offer.................................... 62
35. Bankruptcy or Insolvency................................ 63
36. Tenants................................................. 65
37. Abatement of Lease Payments............................. 66
38. Building Name and Signage............................... 66
39. Roof Rights............................................. 66
40. Attorneys' Fees......................................... 67
41. Waiver.................................................. 67
42. Short Form of Lease..................................... 67
43. Partnership Default..................................... 68
44. Termination Rights...................................... 68
45. Mutual Indemnity and Waiver............................. 68
Page i of ii Pages<PAGE>
0086.0.0
Page
46. "Force Majeure"......................................... 69
47. Arbitration............................................. 69
48. Investment Tax Credit................................... 70
49. Use of Name............................................. 71
50. Exculpatory Provisions.................................. 71
EXHIBITS
Exhibit A: Floor Plan
Exhibit B: Workletter
Exhibit C: Commercial Space
Exhibit D: Legal Description of Land
Exhibit E: Rentable Area
Exhibit F: CPI Adjustment
Exhibit G: Cleaning Specifications
Exhibit H: Area of Tenant Guard Station
Exhibit I: Tenant Storage Area
Exhibit J: Rules and Regulations
Exhibit K: AT&T EEOC Requirements
Exhibit L: Expansion Area
Exhibit M: Joint Action Agreement
Exhibit N: Relocation Clause
Exhibit 0: Schedule of Business and Commercial
Activities
Exhibit P: Tenant Roof Area
Exhibit Q: Investment Tax Credit Election Form
Page ii of ii Pages<PAGE>
OFFICE LEASE
THIS LEASE, is made as of the 31st day of December,
1985, but is actually executed on the 16th day of May, 1986,
WITNESSETH: AMERICAN NATIONAL BANK AND TRUST COMPANY OF CHICAGO,
not personally but solely as Trustee under Trust Agreement dated
April 1, 1985, and known as Trust No. 64020 (herein called
"Landlord"), hereby leases to AT&T RESOURCE MANAGEMENT
CORPORATION, a New York corporation (herein called "Tenant"), and
Tenant hereby accepts the premises as outlined on the floor plan
attached hereto as Exhibit A (herein called "Premises") on
partial floors three (3) and fourteen (14) and complete floors
four (4) through thirteen (13) of the building to be located at
225 W. Monroe Street, Chicago, Illinois (herein called
"Building"), for a term (herein called "Term") commencing on a
date ("Commencement Date") described in the Workletter attached
hereto as Exhibit B and ending on a date which is the earlier of
twenty (20) years following the Commencement Date of this Lease
or twenty (20) years following the Commencement Date of that
certain lease by and between Landlord and AT&T Information
Systems Inc. ("ATT-IS") executed concurrently herewith
("Termination Date"), unless sooner terminated or extended as
provided herein, and subject to the agreements herein contained,
paying as rent therefor the sums hereinafter provided, without
any set-off, abatement, counterclaim or deduction whatsoever
except as expressly herein set forth or as may, from time to
time, be provided for by law. In no event shall a default under
the lease with ATT-IS ("ATT-IS Lease") constitute a default
hereunder nor shall the decision by ATT-IS to not extend its
Lease in any way affect Tenant's extension option pursuant to
Section 31 hereof. Following the establishment of the
Commencement Date hereunder and the Commencement Date of the
ATT-IS Lease, Landlord and Tenant shall enter into an amendment
to this Lease setting forth the Commencement Date and the
Termination Date.
Landlord specifically excepts and reserves to itself
the use of any roof decks, except as otherwise set forth herein,
the exterior portions of the Premises, and any areas in the
Premises such as within walls, ceiling and floors, to the extent
required for installation of utility lines and other
installations required to provide services for other tenants of
the Building and to maintain and repair same, provided, however
that any such work shall be subject to the provisions of Section
10(f) hereof. Landlord specifically excepts and reserves to
itself, unless otherwise specifically provided, all rights to the
land, air rights and improvements below the improved floor level
of the Premises, to the improvements and air rights above the
Premises and to the land, air rights and improvements located
outside the demising walls of the Premises.
Page 1 of 74 Pages<PAGE>
IN CONSIDERATION THEREOF, THE PARTIES HERETO COVENANT
AND AGREE:
1. Base Rent. Tenant shall pay an annual base rent
(herein called the "Base Rent") to Landlord for the Premises of
payable in able in equal monthly installments of
($ ).
Monthly installments of Base Rent are herein called "Monthly Base
Rent" and, subject to the provisions of Section 37 hereof, shall
be payable, in advance on the first day of the first full
calendar month and on the first day of each calendar month
thereafter of the Term, and at the same rate for fractions of a
month if the Term shall begin on any date except the first day,
or shall end on any day except the last day of a calendar month.
Base Rent, Additional Rent (as hereinafter defined), Additional
Rent Progress Payment (as hereinafter defined) and all other
amounts becoming due from Tenant to Landlord hereunder (herein
collectively called the "Rent") shall be paid in lawful money of
the United States to Landlord at the office of Landlord, or as
otherwise designated from time to time by written notice from
Landlord to Tenant. The payment of Rent hereunder is independent
of each and every other covenant and agreement contained in this
Lease except as expressly herein set forth or as may, from time
to time be provided for by law. [Note: Base Rent to be determined
at the rate of $ per rentable square foot of Rentable Area
of the Premises, as defined in Paragraph 2(a)(ix), as finally
determined pursuant to Paragraph 2(a)(x) hereof.]
2. Additional Rent. In addition to paying the Base
Rent specified in Section 1 hereof, Tenant shall also pay as
additional rent the amounts determined in accordance with this
Section 2 ("Additional Rent"):
(a) Definitions. As used in this Lease,
(i) "Adjustment Date" shall mean the first day of the
Term and each January 1 thereafter falling within the Term.
(ii) "Adjustment Year" shall mean each calendar year
during which an Adjustment Date falls.
(iii) "Commercial Space" shall mean all areas of the
Building devoted to retail tenants, but excluding the lobby
and other common areas of the Building as shown on Exhibit
C.
(iv) "Expenses" shall mean and include those costs and
expenses paid by the Landlord for managing, operating,
maintaining and repairing the Building and the personal
property used in conjunction therewith (said Building and
personalty being herein collectively called the "Project"),
including (without limitation) maintenance of alarm and
security systems, snow and ice and trash removal, cleaning
and sweeping, planting and replacing decorations, flowers
Page 2 of 74 Pages<PAGE>
and landscaping, maintenance and repair of utility systems,
elevators, electricity, steam, water, gas, sewers, fuel,
heating, lighting, air conditioning, window cleaning,
janitorial service, insurance, including, but not limited
to, fire, extended coverage, all risk, liability, workmen's
compensation, elevator, or any other insurance carried by
the Landlord and applicable to the Project, to the extent
same is customarily carried by owners of first-class
non-institutional office buildings, painting, uniforms,
management fees not to exceed three percent (3%) of the
amounts upon which the management fee is calculated under
the applicable management agreement (including the amount of
the rent abatement pursuant to Section 37) (whether or not
the management agent is affiliated with Landlord or its
beneficial owner) supplies, sundries, sales or use taxes on
supplies or services, cost of wages and salaries of all
persons engaged in the operation, management, maintenance
and repair of the Project, and so-called fringe benefits, as
customarily paid by Owners of first-class office buildings,
including social security taxes, unemployment insurance
taxes, cost for providing coverage for disability benefits,
cost of any pensions, hospitalization, welfare or retirement
plans, or any other similar or like expenses incurred under
the provisions of any collective bargaining agreement, the
charges of any independent contractor who, under contract
with the Landlord or its representatives, does any of the
work of operating, managing, maintaining or repairing of the
Project, legal and accounting expenses, including, but not
to be limited to, such expenses related to seeking or
obtaining reductions or preventing increases in assessed
valuations in connection with real estate taxes or any other
expense or charge, whether or not hereinbefore mentioned,
which, in accordance with generally accepted accounting and
management principles, would be considered as an expense of
managing, operating, maintaining or repairing the Project,
except as hereinafter provided. Expenses shall not include
costs or other items included within the meaning of the term
"Taxes" (as hereinafter defined), costs of alterations of
the premises of tenants of the Building, expenses of
renovating or otherwise decorating vacant or previously
leased space for tenants; costs of capital improvements to
the Building (excluding repairs to Building equipment)
depreciation charges, interest and principal payments on
mortgages, ground rental payments, expenses incurred in
leasing or procuring tenants including, without limitation
advertising costs and real estate brokerage and leasing
commissions, any expenditures for services which are
provided to one or more tenants and which are not available
generally to all office tenants, any expenditures for which
Landlord has been reimbursed (other than pursuant to
additional rent provisions in leases), except as hereinafter
provided; legal costs in leasing space or incurred in
disputes with tenants, except as set forth in Section 9(b)
hereof; electricity and other utility services which are
directly billed to tenants; wages, salaries or other
Page 3 of 74 Pages<PAGE>
compensation paid to any executive employees above the grade
of building manager; wages, salaries and so-called fringe
benefits of clerks or attendants in concessions or
newsstands operated by the Landlord; the cost of correcting
defects (latent or otherwise) in the construction of the
Building or in the Building equipment; the cost of repair or
rebuilding in the event of fire or other casualty or eminent
domain; the cost of installing, operating and maintaining a
specialty improvement including, without limitation, an
observatory or broadcasting facility, cafeteria or dining
facility, an athletic, luncheon or recreational club, and
any cost or expense paid to a related entity or entity not
dealt with on an "arms'-length" basis which is in excess of
the amount which would be paid in the absence of such
relationship. Notwithstanding anything contained herein to
the contrary, Expenses directly applicable to or solely
utilized in connection with the Commercial Space (including,
but not limited to utilities, scavenger services, janitorial
and window washing) shall be paid for directly by tenants of
the Commercial Space or if such direct payment is not
feasible then Landlord shall require such tenants'
proportionate share of such Expenses to be adjusted to
reflect their increased use of any service over and above
customary office use.
Tenant shall pay all Expenses attributable to the
operation and maintenance of equipment installed at Tenant's
request for Tenant's exclusive use with the exception of (a)
equipment necessary for the performance of Landlord's
obligations as set forth herein, and (b) elevators and
loading docks comprising part of the Shell and Core Work (as
defined in the Workletter) devoted to Tenant's exclusive
use.
Notwithstanding anything contained herein to the
contrary, Landlord and Tenant hereby agree that (1) in the
event the Parking Garage (as hereinafter defined) is
operated pursuant to a lease or license agreement under
which the lessee or licensee is obligated to pay Expenses of
the Parking Garage, from the revenue received by said lessee
or licensee (as opposed to being an Expense of the
Building), then expenses relating to the Parking Garage to
the extent required to be paid by the lessee or licensee
shall not be included in Expenses, and (2) in the event (1)
above is not applicable, in no event shall Tenant be
required to pay a percentage of Parking Garage Expenses
greater than the ratio of the average number of spaces
contracted for by Tenant on an annual basis over the total
number of spaces in the Parking Garage. Tenant shall be
deemed to use all spaces for which it pays no periodic fee
pursuant to the provisions of Section 5(g).
Notwithstanding anything contained in this clause (iv)
of Section 2(a) to the contrary,
Page 4 of 74 Pages<PAGE>
(A) The cost of any capital improvements to the
Building made after the date of this Lease which
(i) reduce Expenses or (ii) which are required under
any governmental laws, regulations, or ordinances which
were not applicable to the Building at the time it was
constructed, amortized on a straight line basis over
the then anticipated useful life of the capital
improvement (as determined in accordance with generally
accepted accounting principles), together with interest
on the unamortized cost of any such improvement (at the
prevailing loan rate available to Landlord on the date
the cost of such improvement was incurred) shall be
included in Expenses, provided, however, as to (i)
above, costs shall be included in Expenses only to the
extent Expenses are actually reduced unless Tenant has
previously approved such capital improvement in
accordance with Section 2(i).
(B) If ninety-five percent (95%) of the rentable
area of the Building is not leased by tenants during
all or a portion of any Adjustment Year, then Landlord
may elect to make an appropriate adjustments for such
year of the components of Expenses and the amounts
thereof, which may vary depending upon the occupancy
level of the Building, to reflect a 95% occupancy
level, employing sound accounting and management
principles in so doing. Any such adjustments shall be
deemed costs and expenses paid or incurred by Landlord
and included in Expenses for such year, as if the
Building had been ninety five percent (95%) occupied
and the Landlord had paid or incurred such costs and
expenses for such year. In no event, however, shall
Tenant be required to pay an amount in excess of the
total of actual costs and expenses less the amounts due
from other tenants in the Building.
(C) If any item of Expenses, though paid in one
year, relates to more than one calendar year, such item
shall be proportionately allocated at the option of
Landlord among such related calendar years. Landlord
shall be entitled to allocate such items of Expense to
one calendar year if the contract for such Expense item
requires payment in one year. At the termination of the
Lease, Tenant shall be reimbursed for any
disproportionate allocations of Expense items.
(v) "Land" shall mean the parcel of real estate
legally described on Exhibit D hereto.
(vi) "Parking Garage" shall mean two underground levels
to contain approximately 170 spaces.
(vii) "Taxes" shall mean general real estate taxes,
assessments, (whether they be general or special) sewer
rents, rates and charges, water taxes, transit taxes, taxes
Page 5 of 74 Pages<PAGE>
based upon the receipt of rent, and any other federal, state
or local governmental charge, general, special, ordinary or
extraordinary (but not including income or franchise taxes,
personal property replacement taxes or any other taxes
imposed upon or measured by the Landlord's general net
income or profits of the Building), which may now or
hereafter be levied, assessed or imposed against the
Building and/or the Land (the Building and said Land
collectively referred to herein as "Real Property") and
shall also mean leasehold taxes imposed upon the Landlord in
connection with the leasing and operation of the Building or
the Real Estate, except to the extent such taxes constitute
income or other taxes imposed upon or measured by the
general net income or profits of the Landlord.
In the event that Landlord is required by federal,
state or local statute or ordinance to collect taxes imposed
upon Tenant in connect;on with this Lease, Tenant shall
cooperate with Landlord in the collection and payment of
same, shall execute and deliver such forms and other
documents as shall be required to enable Landlord to collect
and pay such taxes and shall remit to Landlord all required
payments, including interest and penalties prior to the date
said taxes are due and payable. In the event that such taxes
may be paid directly by Tenant, Tenant shall cooperate with
Landlord in making any requests or applications to enable
Tenant, rather than Landlord, to pay such tax, and Tenant
shall pay such tax directly to the appropriate governmental
authorities after the required approvals are obtained.
Notwithstanding anything contained in this clause (vii)
of Section 2(a) to the contrary,
(A) If at any time the method of taxation then
prevailing shall be altered so that any new or
additional tax, assessment, levy, imposition or charge
or any part thereof shall be imposed upon Landlord in
place or partly in place of general real estate taxes,
and shall be measured by or be based in whole or in
part upon the Real Property or the rents or other
income therefrom, then all such new taxes, assessments,
levies, impositions or charges or part thereof, to the
extent that they replace general real estate taxes,
shall be included in Taxes levied, assessed or imposed
against the Real Property to the extent that such items
would be payable if the Real Property were the only
property of Landlord subject thereto and the income
received by Landlord from the Real Property were the
only income of Landlord.
(B) Notwithstanding the year for which any such
taxes or assessments were levied, assessed or otherwise
imposed, Taxes for any year shall mean (i) the taxes or
special assessments (plus any interest payable thereon)
due and payable during such year, and (ii) if any taxes
Page 6 of 74 Pages<PAGE>
or assessments payable during any calendar year shall
be computed with respect to a period in excess of
twelve calendar months, then taxes or assessments
applicable to the excess period shall be included in
Taxes for that year only if due and payable in that
year. Except as provided in the preceding sentence, all
references to Taxes "for" a particular year shall be
deemed to refer to taxes levied, assessed or otherwise
imposed for such year without regard to when such taxes
are payable.
(C) Taxes shall also include any personal
property taxes, if any, (attributable to the calendar
year in which paid) imposed upon the furniture,
fixtures, machinery, equipment, apparatus, systems and
appurtenances used in connection with the Real
Property, and excluding equipment or personal property
owned by tenants of the Building.
(D) As soon as practical following the expiration
of the Term of this Lease, Landlord and Tenant shall
adjust the amount of Additional Rent attributable to
Taxes by determining the difference, if any, between
the Additional Rent attributable to Taxes actually paid
by Tenant ("Taxes Paid") during the Term of the Lease
and the Additional Rent attributable to Taxes as
actually assessed ("Taxes Assessed") against the
Building during the Term of the Lease. Tenant shall pay
to Landlord the amount, if any, by which the Taxes
Assessed exceed the Taxes Paid and Landlord shall pay
to Tenant the amount, if any, by which the Taxes Paid
exceed the Taxes Assessed. The foregoing obligations
shall survive the termination of the Lease. Such
payment shall be made within thirty (30) days of such
determination by Landlord and Tenant.
(viii) "Rentable Area of the Building" shall mean the sum
of the areas of all office floors of the Building and
Commercial Space computed by measuring to the interior face
of the exterior glass wall on each entire floor plus the
public ground floor and second floor lobby and excluding
only the public stairs, elevator shafts, flues, stacks, pipe
shafts and vertical ducts ("vertical penetrations"). No
deduction shall be made for columns or projections necessary
to the Building. Rentable Area of the Building shall be
deemed to be 1,453,908 square feet, subject to adjustment as
hereinafter provided.
(ix) "Rentable Area of the Premises" shall be deemed to
be 379,418 square feet, subject to adjustment as hereinafter
provided and shall mean the sum of the areas of all office
floors in the Premises, calculated in the same manner as
provided in (viii) above, except that Rentable Area of the
Premises shall include a proportionate share of the public
Page 7 of 74 Pages<PAGE>
ground floor and second floor lobby area of the Building
calculated as set forth on Exhibit E attached hereto.
(x) "Tenant's Proportionate Share" shall mean 26.096%,
which is the percentage obtained by dividing the Rentable
Area of the Premises by the Rentable Area of the Building.
The square footage calculations in Section 2(a)(viii) and
2(a)(ix) above are based upon preliminary design drawings of
the Building and may be modified as a result of the final
design of the Building.
(A) On completion of Final Shell and Core Plans
as defined in the Workletter, Landlord's architect,
Skidmore, Owings and Merrill ("Landlord's Architect")
shall certify the Rentable Area in the Premises. In the
event the Rentable Area of the Premises as certified by
Landlord's Architect shall increase by more than three
percent (3%) from the number of square feet set forth
in Section 2(ix) above, then the Rentable Area of the
Premises and Tenant's Proportionate Share shall not be
increased by more than three percent (3%),
notwithstanding the actual Rentable Area of the
Premises. Notwithstanding the foregoing, to the extent
such variance is due to changes in the Shell and Core
Work requested by Tenant, the foregoing limitation on
the increase in Rentable Area of the Premises and
Tenant's Proportionate Share shall not apply. For
example, in the event such changes have increased the
Rentable Area of the Premises by two percent and
Landlord's changes have increased the Rentable Area by
four percent, the increase in Tenant's Proportionate
Share and Rentable Area of the Premises shall be
limited to five percent. In the event the Rentable Area
shall decrease by more than five percent (5%) from the
number of square feet set forth in Section 2(ix) above,
then at Tenant's option, one floor of the Expansion
Area as defined in Section 30 shall be added to the
Premises and Tenant's Proportionate Share and Rentable
Area of the Premises shall reflect the actual number of
rentable square feet in the Premises. In the event the
Rentable Area has decreased by ten percent (10%) or
more and such excess variance is not due to changes in
the Shell and Core Work requested by Tenant, then
Landlord shall, at Tenant's option, redesign the Shell
and Core of the Building in order to reduce such
variance to below ten percent. Landlord may but shall
not be obligated (except as may be required by the
Workletter) to request that Tenant approve the changes
which will result in an increase or decrease in the
Rentable Area of the Premises, provided Landlord
specifies the impact on Rentable Area square footage.
Tenant's approval shall not be unreasonably withheld as
to changes which do not exceed the three percent and
five percent standards set forth above, but Tenant may
in its sole discretion disapprove changes in excess of
Page 8 of 74 Pages<PAGE>
same. For purposes of this Section 2(x)(A), "Rentable
Area of the Premises" shall include the Rentable Area
of the Premises under this Lease and the ATT-IS Lease.
(B) Except as set forth in Subsection (A) above,
Tenant's Proportionate Share shall be modified in the
event the final design of the Building is hereafter
modified as permitted herein and in the Workletter such
that Rentable Area of the Premises or Rentable Area of
the Building, or both, differs from the square footage
set forth in Section 2(a)(viii) and 2(a)(ix) above.
Landlord's Architect shall certify the Rentable Area in
the Premises and the Rentable Area of the Building
measured in accordance with Section 2(a)(viii) and (ix)
hereof as based on the final construction drawings for
the Building reflecting all change orders. The decision
of the Landlord's Architect shall be rendered in
writing within fifteen (15) days after substantial
completion of the Premises and such decision shall be
in duplicate and one counterpart thereof shall be
delivered by Landlord's Architect to Landlord and one
counterpart thereof shall be delivered to Tenant. The
decision of Landlord's Architect shall be binding,
final and conclusive on all the parties. Landlord and
Tenant shall enter into a written supplement to this
Lease within thirty (30) days after such approval or
final determination setting forth the certified
Rentable Area of the Premises and the Building, the new
Base Rent, and Tenant Proportionate Share.
(C) In the event any item of Expense is included
as a part of Additional Rent for tenants of the
Building and a tenant of the Building (the "Excluded
Tenant") is responsible for the total amount of such
Expense item with respect to the Excluded Tenant's
premIses (e.g., if Landlord shall have no obligation to
furnish cleaning and janitorial service for the
Excluded Tenant's premises) and the Landlord includes
the cost of such service for all other tenants'
premises as an item of Expense as a part of Rent
Adjustment, then the Rentable Area of the Excluded
Tenant's premises shall be deducted from the Rentable
Area of the Building (for purposes of calculating the
remaining tenants' Proportionate Share with respect
only to such item of expense) and such item of Expense
shall be allocated only among the remaining tenants.
(xi) "Additional Rent" shall mean all amounts
determined pursuant to this Section 2, including any amounts
payable by Tenant to Landlord on account thereof.
(xii) "Adjusted Rent" shall mean the Base Rent plus the
CPI Adjustment.
Page 9 of 74 Pages<PAGE>
(xiii) "Consumer Price Index" (sometimes referred to as
the "CPI Index") shall mean the Consumer Price Index, for
the City of Chicago, Urban Wage Earners and Clerical
Workers, All Items (base index year 1967 = 100), as
published by the United States Department of Labor, Bureau
of Labor Statistics. If the manner in which the Consumer
Price Index, as determined by the Bureau of Labor
Statistics, shall be substantially revised, including,
without limitation, a change in the base index year, an
adjustment shall be made by Landlord in such revised index
which would produce results equivalent, as nearly as
possible, to those which would have been obtained if such
Consumer Price Index had not been so revised. If the
Consumer Price Index shall become unavailable to the public
because publication is discontinued, or otherwise, or if
equivalent data is not readily available to enable Landlord
to make the adjustment referred to in the preceding
sentence, then Landlord will substitute therefor a
comparable index based upon changes in the cost of living or
purchasing power of the consumer dollar published by any
other governmental agency or, if no such index shall be
available, then a comparable index published by a major bank
or other financial institution or by a university or a
recognized financial publication.
(xiv) "CPI Adjustment" shall mean the adjustments
calculated pursuant to the provisions of Section (1).
(xv) "CPI Adjustment Date" shall mean the first day of
the Lease Year and the first day of each subsequent
Lease Year in the Term.
(xvi) "CPI Adjustment Year" shall mean each Lease Year
during which a CPI Adjustment Date falls.
(xvii) "Comparison Consumer Price Index" shall mean the
Consumer Price Index for the calendar month immediately
prior to the beginning of each CPI Adjustment Year. For
purposes of the first CPI Adjustment Date, the Comparison
Consumer Price Index shall be the Consumer Price Index for
the calendar month prior to the beginning of the Lease Year
of the Term.
(xviii) "Current Adjustment Date Consumer Price Index"
shall mean the Consumer Price Index for the last calendar
month of each CPI Adjustment Year.
(xix) "Lease Year" shall mean the twelve month period
commencing on the Commencement Date of the Lease and each
successive twelve consecutive month period thereafter during
the Term of this Lease.
Page 10 of 74 Pages<PAGE>
(b) Computation of Additional Rent - Tax and Expense
Adjustments.
Tenant shall pay Additional Rent in the form of Tax and
Expense Adjustments (as hereinafter defined) for each Adjustment
Year hereinafter specified. Additional Rent payable by Tenant
with respect to each Adjustment Year during which an Adjustment
Date falls shall include the product of the Tenant's
Proportionate Share, multiplied by the amount of Taxes and
Expenses for such Adjustment Year ("Tax and Expense Adjustment").
(c) Payments of Additional Rent; Projections.
Tenant shall pay Additional Rent to Landlord in the
manner hereinafter provided.
(i) Tax and Expense Adjustment. Tenant shall make
payments on account of the Tax and Expense Adjustment (any
such payment with respect to any Adjustment Year being also
called "Additional Rent Progress Payment") effective as of
the Adjustment Date for each Adjustment Year as follows:
(A) Landlord may, prior to each Adjustment Date
or from time to time during the Adjustment Year in
which such Adjustment Date falls, deliver to Tenant a
written notice or notices ("Projection Notice") setting
forth (1) Landlord's reasonable estimates, forecasts or
projections (collectively, the "Projections") of Taxes
and Expenses for such Adjustment Year based on the
Budget, as hereinafter defined, approved by Tenant, and
Landlord's estimate of Taxes (but in no event in excess
of the amount required under any Security Documents, as
hereinafter defined) and (2) Tenant's Additional Rent
Progress Payment for such Adjustment Year based upon
the Projections. Landlord's Budget of Expenses and the
Projections based thereon shall assume ninety-five
percent (95%) occupancy and use of the Building and may
be revised by Landlord from time to time based on
changes in rates and other criteria which are
components of budget items provided that Tenant has
approved all revisions to such Budget to the extent
provided for in Section 2(i) hereof.
(B) Until such time as Landlord furnishes a
Projection Notice for an Adjustment Year, Tenant shall
pay to Landlord a monthly installment of Additional
Rent Progress Payment at the time of each payment of
Monthly Base Rent equal to the latest monthly
installment of Additional Rent Progress Payment. On or
before the first day of the next calendar month
following Landlord's service of a Projection Notice,
and on or before the first day of each month
thereafter, Tenant shall pay to Landlord one-twelfth
(1/12) of the Additional Rent Progress Payment shown in
the Projection Notice. Within thirty (30) days
Page 11 of 74 Pages<PAGE>
following Landlord's service of a Projection Notice,
Tenant shall also pay Landlord a lump sum equal to the
Additional Rent Progress Payment shown in the Project
on Notice less (1) any previous payments on account of
Additional Rent Progress Payment made during such
Adjustment Year and (2) monthly installments on account
of Additional Rent Progress Payment due for the
remainder of such Adjustment Year.
(C) Landlord shall deliver to Tenant on or before
the Commencement Date a statement of the initial
monthly installment of Additional Rent Progress Payment
payable by Tenant. Tenant agrees to pay monthly
installments of Additional Rent Progress Payment equal
to said initial monthly installments from and after the
Commencement Date of the Term hereof until changed
pursuant to a Projection Notice from Landlord as
provided above.
(D) When encumbering the Real Property with a
mortgage, trust deed, ground or underlying lease, or
other such security documents to which this Lease shall
be or become subordinate ("Security Documents"),
Landlord hereby agrees and covenants that it shall
attempt in good faith when negotiating any Security
Documents to obtain the waiver of any term or provision
that would require Landlord to, from time to time,
deposit sums into an account or escrow to be used for
the payment of any or all Taxes ("Tax Escrow"). If,
after using good faith efforts, Landlord is unable to
eliminate or waive the requirement in a Security
Document for a Tax Escrow, then Landlord shall use its
best efforts to obtain the agreement of the lender to
permit deposits made into the Tax Escrow by Landlord to
bear interest. Tenant shall receive Tenant's
Proportionate Share of such interest, dividend or other
income earned from the deposits held in the Tax Escrow,
such earnings to be disbursed from the Tax Escrow when
available pursuant to such Security Documents. In the
event Landlord is successful in obtaining such waiver,
then Tenant shall not be required to make Additional
Rent Progress Payments with regard to Taxes, but shall
make payment in accordance with the following
provisions. Landlord shall promptly provide Tenant with
a copy of any bill for Taxes ("Tax Bill") issued by the
relevant taxing authority. At least three (3) business
days prior to the date on which such Tax Bill is due,
Tenant shall deliver to Landlord a check made payable
to the relevant taxing authority in the amount of
Tenant's Proportionate Share of the Tax Bill. Landlord
agrees to promptly provide Tenant with a copy of the
receipted Tax Bill. If Taxes are reduced or refunded
after Tenant has paid its Tenant Proportionate Share
thereof, Landlord will reimburse Tenant for its
Page 12 of 74 Pages<PAGE>
Proportionate Share of such reduction or refund upon
receipt of same.
Landlord agrees to take all actions appropriate
for the owner of a first-class office building with
respect to Taxes, and to retain legal counsel,
reasonably acceptable to Tenant, to contest increases
in assessed valuation of the Real Property ("Tax
Contest") whenever Landlord, in its reasonable
discretion deems such contest to have merit. Landlord,
at Tenant's request, shall contest increases in
assessed valuation if Landlord has not elected to make
such a contest. The fee structure for such attorney and
the choice of consultants in connection with the Tax
Contest shall all be subject to the reasonable approval
of Tenant. Tenant shall not be deemed to have
unreasonably withheld its approval to such fee
structure if such arrangement is not customarily used
by the profession for comparable work.
(d) Readjustments.
The following readjustments with regard to the Tax and
Expense Adjustment shall be made by Landlord and Tenant:
Following the end of each Adjustment Year and after
Landlord shall have determined the amount of Taxes and
actual Expenses ("Actual Expenses") for such Adjustment
Year, Landlord shall provide Tenant with a written statement
of Actual Expenses and Taxes certified to be true and
correct by Landlord ("Landlord's Statement"). Such
Landlord's Statement shall be a detailed line item statement
ln form reasonably satisfactory to Tenant. If the Tax and
Expense Adjustment owed for such Adjustment Year exceeds the
Additional Rent Progress Payment paid by Tenant during such
Adjustment Year, then Tenant shall, within thirty (30) days
after the date of Landlord's Statement, pay to Landlord an
amount equal to the excess of the Tax and Expense Adjustment
over the Additional Rent Progress Payment paid by Tenant
during such Adjustment Year, provided that such excess is
not due to Budget revisions not previously approved by
Tenant or otherwise permitted hereunder. If the Additional
Rent Progress Payment paid by Tenant during such Adjustment
Year exceed the Tax and Expense Adjustment owed for such
Adjustment Year, then Landlord's payment of such excess
("Excess Expense Adjustment") shall accompany Landlord's
Statement. In the event the amount of the Excess Expense
Adjustment is greater than ten percent (10%) of the Total
Expense Adjustment for reasons not related to the fact that
actual Expenses were less than the Budget of Expenses and
Projections based upon ninety-five percent (95%) occupancy,
pursuant to (c)(i)(A) above, then Landlord shall pay Tenant
interest at the rate set forth below on that portion of the
Excess Expense Adjustment which exceeds ten percent (10%) of
the Total Expense Adjustment for the time period commencing
Page 13 of 74 Pages<PAGE>
with the date as of which the Excess Expense Adjustment was
paid until it shall be repaid hereunder, except to the
extent such Excess Expense Adjustment relates to revisions
to the Budget approved by Tenant. Interest shall be paid at
the annual rate of one percent (1%) in excess of the rate of
interest announced from time to time by The First National
Bank of Chicago, as its prime rate, changing as and when
such prime rate changes unless a lesser rate shall then be
the maximum rate permissible by law with respect thereto, in
which event said lesser rate shall be charged.
(e) Books and Records.
Landlord shall maintain books and records showing
Expenses and Taxes in accordance with sound accounting and
management practices. Tenant or its representative shall have the
right to examine Landlord's books and records showing Expenses
and Taxes upon reasonable prior notice and during normal business
hours at any time within sixty (60) days following the furnishing
by the Landlord to the Tenant of Landlord's Statement provided
for in Section 2(d). Landlord shall furnish to Tenant an audited
statement prepared by an independent certified public accountant
selected by Landlord setting forth in reasonable detail a
calculation of Expenses and Taxes. The cost of such audit shall
be an Expense pursuant to the terms of Section 2(a)(iv) hereof.
Unless the Tenant shall take written exception to any item within
sixty (60) days after the furnishing of the Landlord's Statement
containing said item, such Landlord's Statement shall be
considered as final and accepted by the Tenant.
(f) Proration and Survival.
With respect to any Adjustment Year which does not fall
entirely within the Term, Tenant shall be obligated to pay as
Additional Rent for such Adjustment Year only a pro rata share of
Additional Rent as hereinabove determined, based upon the number
of days of the Term falling within the Adjustment Year. Following
expiration or termination of this Lease, Tenant shall pay to
Landlord or Landlord shall pay to Tenant, as the case may be, any
Additional Rent or Excess Expense Adjustment, as the case may be,
due to the other within thirty (30) days after the date of
Landlord's Statement sent to Tenant. Without limitation on other
obligations of Tenant which shall survive the expiration of the
Term, the obligations of Tenant to pay Additional Rent and of
Landlord to refund any Excess Expense Adjustment provided for in
this Section 2 shall survive the expiration or termination of
this Lease.
(g) No Decrease in Base Rent.
In no event shall the calculation of Additional Rent
result in a decrease of the Base Rent payable hereunder as set
forth in Section 1 hereof.
Page 14 of 74 Pages<PAGE>
(h) Additional Rent.
All amounts payable by Tenant as or on account of
Additional Rent shall be deemed to be additional rent becoming
due under this Lease.
(i) Budget.
At least sixty (60) days before the commencement of
each Adjustment Year during the Term hereof, Landlord shall
furnish to Tenant for its approval a detailed proposed budget of
Expenses for the forthcoming Adjustment Year which budget shall
include any capital improvements proposed to be included in
Expenses pursuant to 2(a)(iv)(A) hereof ("Budget"). The Tenant
agrees to approve or disapprove the Budget in its reasonable
discretion within thirty (30) days of receipt thereof. The Budget
shall contain all appropriate supporting schedules, including
information to indicate competitive bidding undertaken by
Landlord for items which are the subject of a contract and
Landlord's justification for selection of a contractor whose bid
was not the lowest bid. Landlord will competitively bid items
subject to contract when Landlord deems such procedure
appropriate for the particular Budget item in its reasonable
discretion. Tenant's failure to respond to Landlord within such
thirty (30) day time period shall be deemed approval of the
Budget. If disapproved, the Tenant shall set forth in writing
within such thirty (30) day time period, which line items it
disapproves ("Disapproved Items") and shall indicate the reasons
for such disapproval. Landlord shall promptly reprice the
Disapproved Item and use reasonable efforts to obtain a reduction
in such line items. Tenant shall not have the right to disapprove
line items in the Budget for which prices are imposed on Landlord
or are non-negotiable such as, but not limited to, utility rates
or labor rates at union pay scale. In the event the Disapproved
Item is the subject of a contract and Tenant has stated in
writing to Landlord that it believes Landlord can obtain a
service or material of a comparable quality at a lower price and
suggests to Landlord a proposed alternative bidder, and Landlord
agrees that the proposed alternative bidder meets its reasonable
standards of care and responsibility, then Landlord shall
promptly, at its expense, rebid the Disapproved Items. In the
event the Budget disagreement can not be resolved through the
rebidding or repricing process, the issue as to whether Tenant's
disapproval of a particular Budget line item or Landlord's
actions in response thereto are reasonable shall be submitted to
arbitration in accordance with the provisions of Section 48
hereof. Notwithstanding that portions of the Premises may have
been sublet by Tenant, Tenant agrees that Landlord need only
obtain Tenant's approval with respect to the Budget.
If Tenant disapproves the proposed Budget for a given
Adjustment Year, until such time as a revised budget is approved,
the Building shall be operated on the basis of an interim budget
("Temporary Budget"), which Temporary Budget shall contain the
approved portions of the Budget and as to the disapproved items
Page 15 of 74 Pages<PAGE>
one hundred ten (110%) percent of the amount for such line item
set forth in the last approved Budget.
The Budget, after approval by the Tenant shall be
subject to periodic revisions as mutually agreed upon by the
Landlord and Tenant provided, however, that Landlord shall only
be required to obtain the prior written approval of Tenant for
any expenditure or expenditures which would cause a particular
Budget category to be exceeded by more than one hundred ten
(110%) percent of the amount set forth in the applicable Budget
category during a calendar year or which would cause the total
amount of the budgeted expenditures to be exceeded by more than
one hundred ten (110%) percent of the total amount of budgeted
expenditures set forth in the Budget, calculated on an annual
basis. Any increase in the Budget due to emergencies shall be
approved by Tenant hereunder upon notice from Landlord.
(j) Contractors.
All contractors providing services to the Building
shall be subject to the approval of Tenant, which approval shall
not be unreasonably withheld. Landlord may provide a list of such
contractors to Tenant in conjunction with its budget submission
pursuant to Section 2(i) above ln which event Tenant shall have
thirty (30) days in which to approve or disapprove same. If
Tenant disapproves a contractor, Tenant shall discuss the reasons
for such disapproval with the Landlord. Approval of the Budget
shall be deemed approval of the list unless Tenant designates
otherwise. Tenant agrees to approve or disapprove proposed
contractors other than as set forth in the preceding sentence
within ten (10) business days of submission of a list of same to
Tenant. Tenant's failure to respond within said ten (10) day
period shall be deemed approval of such list. Notwithstanding the
foregoing approvals, Landlord shall be entitled to use a con-
tractor not approved as aforesaid if required in the event of an
emergency and Landlord shall notify Tenant of the identity of
such contractor as soon as practical under the circumstances.
(k) Computation of Adjusted Rent - Summary.
Base Rent, as previously adjusted (as hereinafter
described), will be further adjusted based upon of the
Base Rent plus the previous CPI Adjustments times the percentage
increase in the CPI Index during the Term of the Lease, except as
otherwise set forth herein. The CPI Index for the month prior to
the beginning of each Lease Year shall be measured against the
CPI Index for the last month of said Lease Year to determine the
applicable percentage increase in the CPI Index.
The first Lease Year for which CPI Adjustment is to be
paid is the Lease Year, which adjustment shall be paid
entirely at the beginning of the Lease Year. The Base Rent
plus CPI Adjustment for the Lease Year will be Adjusted
Rent payable in the Lease Year. The CPI Adjustment for
the Lease Year and subsequent Lease Years will be based
Page 16 of 74 Pages<PAGE>
upon the Adjusted Rent for the prior Lease Year (i.e., the Base
Rent plus all previous CPI Adjustments). After the expiration of
a Lease Year, the actual percentage increase in the CPI Index
will be determined for that Lease Year and a lump-sum payment
will be made ln the amount of the actual CPI Adjustment for such
Lease Year. Landlord shall not be entitled to estimate or
anticipate the CPI Adjustment but shall only be entitled to
collect the CPI Adjustment in one lump-sum payment after the
expiration of a Lease Year. After the expiration of the Term of
the Lease, a lump-sum payment will remain due for the last Lease
Year of the Term, which shall be payable at such time as the
increase in the CPI Index for such last Lease Year is finally
determined.
There will be a limit or "cap" upon the increase in
rent (Base Rent plus CPI Adjustments) that shall be paid for any
Lease Year of of the sum of the Base Rent plus all
prior CPI Adjustments.
To the extent that the calculation of the Base Rent
plus the CPI Adjustment, based upon of the sum of Base
Rent plus the CPI Adjustments times the percentage increase in
the CPI Index ("Uncapped CPI Adjustment") for any Lease Year,
exceeds Base Rent plus CPI Adjustment times ("Capped CPI
Adjustment"), the excess for any Lease Year will be placed into
an account or "bank" to be used to increase the payment of Base
Rent plus CPI Adjustment in any Lease Year in which the Capped
CPI Adjustment exceeds the Uncapped CPI Adjustment.
The foregoing is merely a summary of CPI Adjustment
procedure as reflected in the subsequent provisions and the
attached Exhibit F and is not, nor shall it be construed to be,
an exhaustive analysis of the calculation of CPI Adjustments.
This summary should only be read in conjunction with and
reference should be made to the subsequent provisions and the
attached Exhibit F for a more complete analysis of calculation of
CPI Adjustment.
(l) CPI Adjustment.
Tenant shall pay Adjusted Rent effective as of the CPI
Adjustment Date for each CPI Adjustment Year, as follows:
(A) Except as set forth in (E) below, Tenant shall pay
to Landlord on or before the first day of each month of each
CPI Adjustment Year an amount equal to one-twelfth (1/12) of
the "Final Adjusted Rent" for the Prior CPI Adjustment Year
calculated in accordance with the provisions of this Section
(1). Landlord shall furnish Tenant with a notice ("CPI
Notice") showing the Consumer Price Index calculations and
the amount of Tenant's Final Adjusted Rent for the Prior CPI
Adjustment Year after Landlord shall have ascertained the
Current Adjustment Date Consumer Price Index and the
Comparison Consumer Price Index to be used in calculating
Final Adjusted Rent for the Prior CPI Adjustment Year.
Page 17 of 74 Pages<PAGE>
(B) Until such time as Landlord determines the Final
Adjusted Rent and furnished a CPI Notice to Tenant as
provided in (A) above, Tenant shall continue to pay to
Landlord monthly installments of Adjusted Rent in an amount
equal to the latest monthly installment of Adjusted Rent
based upon the latest CPI Notice. On or before the first day
of the next calendar month following the Landlord's service
of a CPI Notice, Tenant, in addition to amounts payable
pursuant to (D) below, shall pay any amounts owed by Tenant
for monthly installments of Final Adjusted Rent on account
of and retroactive to the beginning of the period covered by
such CPI Notice. Any amounts previously paid by Tenant in
excess of the Final Adjusted Rent set forth in the CPI
Notice shall be credited against installments of Final
Adjusted Rent payable after the date of receipt of the CPI
Notice until exhausted.
(C) Following the end of each CPI Adjustment Year,
Landlord shall determine the actual percentage increase in
the Consumer Price Index for such CPI Adjustment Year by
comparing the Current Adjustment Date Consumer Price Index
with the Comparison Consumer Price Index and determining the
percentage increase for such period ("Actual Consumer Price
Index Percentage Change"). The actual Adjusted Rent for such
CPI Adjustment Year as finally determined ("Final Adjusted
Rent") shall be the lesser of:
(i) of the
Final Adjusted Rent for the immediately preceding
Lease Year ("Prior Year Final Adjusted Rent"); or
(ii) The sum of:
(a) The Prior Year Final Adjusted Rent; plus
(b) The product of
of the Prior Year Final Adjusted
Rent multiplied by the Actual Consumer Price Index
Percentage Change; plus
(c) A portion (or all and to the extent
available) of the End of Year Bank Balance (as
hereinafter defined) equal to the amount, if any,
by which the amount calculated pursuant to (C)(i)
above exceeds the amount calculated pursuant to
(C)(ii)(a) and (b) above.
For purposes of this Section, the "End of Year Bank Balance"
shall be calculated as follows: for each CPI Adjustment Year
there shall be calculated an "Uncapped Rent" which shall be
the sum of the amounts in Section (C)(ii)(a) and (b) above
and if the Uncapped Rent exceeds the Prior Year Final
Adjusted Rent, the excess, if any, shall for each CPI
Adjustment Year thereafter be entered into an account and
the sum of all such credits entered into the account, after
Page 18 of 74 Pages<PAGE>
deductions from said account as hereinafter provided, as of
the end of any CPI Adjustment Year shall be the "End of Year
Bank Balance." If, in any CPI Adjustment Year, the Prior
Year Final Adjusted Rent exceeds the Uncapped Rent, an
amount shall be withdrawn from the End of the Year Bank
Balance as provided in (C)(ii)(c) above and the End of Year
Bank Balance shall be decreased by the amount of said
withdrawal.
(D) Following the end of each CPI Adjustment Year and
after Landlord shall have delivered to Tenant the CPI
Notice, Tenant shall, within thirty (30) days after the date
of Landlord's CPI Notice, pay to Landlord an amount equal to
the CPI Adjustment for such CPI Adjustment Year.
(E) Notwithstanding the foregoing provisions, payment
of the CPI Adjustment for the Lease Year shall be
deferred until the Final Adjusted Rent is determined at the
beginning of the Lease Year and shall be paid in one lump
sum at such time as the CPI Notice is given to Tenant. Final
Adjusted Rent payable in the Lease Year shall be
based on the CPI Adjustment for the Lease Year
and no CPI Adjustment shall be payable during the
Lease Year.
(F) Exhibit F attached hereto sets forth examples of
the calculation of the CPI Adjustment for each Lease Year,
the calculation of Final Adjusted Rent and the
establishment, increase and decrease of the End of Year Bank
Balance, and is believed by Landlord and Tenant to be
consistent with and illustrative of the calculations
required pursuant to this Section (1) of the Lease.
3. Prior Occupancy. If Tenant takes possession of the
Premises prior to commencement of the Term, all of the covenants
and conditions of this Lease shall apply to and shall control
such pre-Term occupancy.
4. Use of Premises.
(a) Tenant shall use and occupy the Premises for
executive and general offices, for such related purposes as set
forth in (b) below, and for any other lawful purpose permitted
under applicable zoning ordinances, provided such use is not
inconsistent with a first class office building. Tenant shall not
use or occupy the Premises or permit the use or occupancy of the
Premises for any purpose or in any manner which (i) is unlawful
or in violation of any applicable legal or governmental
requirement, ordinance or rule; (ii) is dangerous or clearly may
be dangerous to persons or property; (iii) invalidates, increases
or clearly will invalidate or increase the amount of premiums for
any policy of insurance affecting the Real Property, unless any
additional amounts of insurance premiums so incurred, are paid by
Tenant to Landlord; or (iv) creates or clearly will create a
Page 19 of 74 Pages<PAGE>
nuisance, unreasonably disturbs any other tenant of the Building
or injures the reputation of the Building.
(b) Landlord agrees that, as of the date hereof, no
amendments or approvals are necessary under applicable zoning
ordinances for the following uses of the Premises: (i) the
preparation and service of food and beverages from a pantry
kitchen or lounge all for the exclusive use by officers,
employees and business guests of Tenant (but not for use as a
public restaurant or by other tenants of the Building), (ii) the
operation of vending machines for the exclusive use of officers,
employees and business guests of Tenant, provided that each
vending machine, where necessary, shall be installed in a manner
approved by Landlord and designed to avoid water leakage, and
(iii) the installation, maintenance and operation of electronic
data processing equipment, computer processing facilities and
business machines, provided that such equipment is contained
within the Premises and does not cause unreasonable (consistent
with a first class office building) vibrations, noise, electrical
interference or other unreasonable (consistent with a first class
office building) disturbance to other tenants of the Building or
the elevators or other equipment in the Building.
(c) With respect to any use permitted under this
Section 4, Tenant shall not use the Premises so as to violate any
laws or requirements of public authorities, constitute a public
or private nuisance, unreasonably interfere with or cause
physical discomfort to any of the other tenants or occupants of
the Building, interfere with the operation of the Building or the
maintenance of same as a first-class office building, or violate
any of Tenant's other obligations under this Lease.
5. Services. Landlord shall furnish the following
services, which shall all be deemed Expenses (except to the
extent to be paid entirely by Tenant, as hereinafter provided):
(a) Air-cooling and heat in accordance with the
heating, ventilating and air conditioning ("HVAC") Specifications
on Attachment A to the Workletter, daily from 7:00 A.M. to
6:00 P.M. (Saturdays 8:00 A.M. to 1:00 P.M.), Sundays and
holidays excepted. The term "Holidays" as used herein shall mean
those days customarily recognized as holidays by other
first-class office buildings in downtown Chicago.
(i) Subject to the provisions of subsection (ii)
below, whenever Tenant's use or occupation of the Premises
exceeds the design loads, as specified on Attachment A to
the Workletter, for the system that provides heat and
air-cooling, or Tenant's use of lighting or heat generating
machines or equipment in the Premises exceed such design
loads and affect the temperature otherwise maintained by the
heating, ventilating and air-conditioning system in the
Premises or Building, Landlord may temper such excess loads
by installing supplementary heat or air-conditioning units
in the Premises or elsewhere where necessary, and the cost
Page 20 of 74 Pages<PAGE>
of such units and the expense of installation, including,
without limitation, the reasonable cost of preparing working
drawings and specifications, shall be paid by Tenant as
additional rent within thirty (30) days after receipt of
invoices therefor. The expense resulting from the operation
and maintenance of any such supplementary heat or
air-conditioning units shall be paid by the Tenant to the
Landlord as additional rent at rates fixed by Landlord; such
rates shall include only the actual cost of such operation
and maintenance, plus five percent (5%) of such actual cost
for Landlord's overhead.
(ii) Landlord's agreements hereunder are subject to
governmental restrictions on energy use. Furthermore, if
Tenant requests air-cooling and heat during times other than
the hours described above, then the provision of such
additional service by Landlord shall be pursuant to Section
5(h) hereof.
(b) In common with other tenants, cold water from the
City of Chicago mains for drinking, lavatory and toilet purposes
drawn through fixtures installed in the Premises by Landlord or
by Tenant with Landlord's written consent, and hot water in
common with other tenants for lavatory purposes from regular
Building supply. Tenant shall pay Landlord as additional rent at
rates fixed by Landlord for all tenants (which rates shall not
exceed the rates charged by the public utility providing same,
plus one hundred five percent (105%) of the cost of heating hot
water) for domestic water and hot water furnished for any purpose
other than as set forth in the first sentence of this Section
5(b). The Tenant shall not waste or permit the waste of water.
Tenant shall pay the cost of acquisition, installation, repair,
maintenance and replacement of any equipment required to be
obtained to supply Tenant's special hot water needs.
(c) Janitorial and cleaning service in accordance with
the cleaning specifications attached hereto as Exhibit G
("Cleaning Specifications") in and about the Premises, Saturdays,
Sundays and holidays excepted. Tenant, on six (6) month's written
notice to Landlord, may elect to provide, at its sole cost,
janitorial and cleaning services to the Premises, which services
shall be substantially in accordance with the Cleaning
Specifications and except as hereinafter provided, Landlord shall
have no further obligation to provide such services to Tenant.
Such election may apply to all or any portion of the Premises,
provided such portion of the Premises contains full floors only
with the exception of "security areas" reasonably designated by
Tenant. With Landlord's approval, which shall not be unreasonably
withheld, Tenant may also elect to provide only certain of such
janitorial and cleaning services, with Landlord providing the
balance of same. Landlord's disapproval shall not be deemed
unreasonable if the severance of certain of the services from
Landlord's cleaning contract would result in a higher cost for
the cleaning services retained by Landlord or the severance of
such services is not practical. For purposes of calculating
Page 21 of 74 Pages<PAGE>
"Expenses" pursuant to Section 2 hereof, Expenses (or an
allocable portion thereof reasonably determined by Landlord in
the event of an election as to a portion of the Premises or a
portion of the services) relating to janitor and cleaning
services shall be deleted. Tenant shall employ union labor. Such
cleaning contractor shall be subject to the approval of Landlord,
which approval shall not be unreasonably withheld. Tenant hereby
indemnifies and agrees to hold Landlord harmless in the manner
set forth in Section 46 hereof with regard to the acts and
omissions of such contractor and releases Landlord from any and
all damages caused by such contractor or payments due to or
becoming due to such contractor. On six (6) months prior written
notice, Tenant may elect to have Landlord provide the services
previously undertaken by Tenant. For purposes of calculating
"Expenses" pursuant to Section 2 hereof, Expenses relating to
such services shall be included commencing with Landlord's
provision of such services.
(d) Exclusive use for passenger elevator service of
that portion of the bank of elevators as shown on Attachment A to
the Workletter, serving floors 3 through 14, both inclusive, in
the Building, subject only to the rights of ATT-IS, its
successors and assigns, pursuant to that certain lease of even
date herewith as amended from time to time. Landlord shall
provide in addition one freight elevator for the exclusive use of
Tenant and ATT-IS and their successors and assigns. Operatorless
automatic elevator service shall be deemed "elevator service"
within the meaning of this paragraph.
(e) Electricity shall not be furnished by Landlord,
but shall be furnished by an approved electric utility company
serving the area. Landlord shall permit the Tenant to receive
such service direct from such utility company at Tenant's cost,
and shall permit Landlord's wire and conduits to be used for such
purposes to the extent available and suitable. Notwithstanding
anything contained herein to the contrary, Landlord shall
provide, at no expense to Tenant, sufficient wire and conduit to
meet the requirements as indicated on Attachment A to the
Workletter. Tenant shall make all necessary arrangements with the
utility company for metering and paying for electric current
furnished by it to Tenant and Tenant shall pay for all charges
for electric current consumed on the Premises during Tenant's
occupancy thereof. Landlord shall pay for the cost of initially
metering the Premises in accordance with the standards shown on
Attachment A to the Workletter. The electricity used during the
performance of janitor service, the making of alterations or
repairs in the Premises (provided same are for Tenant's benefit),
and for the operation of the Building's HVAC system at times
other than as provided in paragraph (a) hereof at the request of
Tenant, or the operation of any special air conditioning systems
which may be required for data processing and computer equipment
or for other special equipment or machinery installed by Tenant,
shall be paid for by Tenant. Tenant shall make no alterations or
additions to the electric equipment or appliances without the
prior written consent of the Landlord in each instance, which
Page 22 of 74 Pages<PAGE>
consent shall not be unreasonably withheld. Tenant may, but shall
not be obligated, to purchase from the Landlord or its agent all
Lamps, used in the Premises during the Term hereof which shall be
offered by Landlord at reasonably competitive prices with a fee
for storage and handling not to exceed five percent of the cost
of such Lamps and for installation not to exceed the rates set
forth in the Budget. In the event Tenant elects not to purchase
Lamps from Landlord, Tenant will give Landlord three (3) months
notice of such election. Tenant agrees that all Lamps shall be
appropriate for their intended use and shall be consistent with
the color rendition of the Lamps in the balance of the Building.
Tenant covenants and agrees that at all times its use of electric
current shall never exceed the capacity available as stated in
Attachment A to the Workletter, provided, however, Landlord
agrees to provide additional capacity, at Tenant's request if
(i) it is reasonably feasible to do so, and (ii) Tenant pays for
the cost of same.
(f) Window washing of all exterior windows in the
Premises, both inside and out, weather permitting, in accordance
with the Cleaning Specifications.
(g) Tenant and its employees and visitors may use
below-grade enclosed parking areas for passenger vehicles in
common with Landlord and other tenants of the Building and their
employees and visitors, all subject to such reasonable rules and
regulations as from time to time may be imposed by Landlord
including, without limitation, the right to allocate specific
parking spaces to certain tenants in the Building and to charge
periodic user fees for the use of such parking spaces. Tenant
shall have available for its use, its Tenant's Proportionate
Share of the number of parking spaces in the Parking Garage.
Thirty-five (35) of such spaces in a specific contiguous location
determined by Landlord shall be provided to Tenant without
payment of periodic user fees of any kind. The balance of the
spaces may be in non-contiguous locations and Tenant shall pay
the periodic user fees charged generally to tenants of the
Building to the extent it contracts for use of such spaces.
(h) Landlord may provide such extra or additional
services as it is reasonably possible for the Landlord to
provide, and as the Tenant may from time to time request, within
a reasonable period of time after such extra or additional
services are requested. Tenant shall, for such extra or
additional services, pay the lesser of (a) the charge paid
generally by other tenants in the Building for such services or
(b) one hundred five percent (105%) of all of Landlord's
reasonable costs which are incurred in providing same, such
amount to be considered additional rent hereunder. Landlord's
cost shall include but shall not be limited to fees and other
charges paid by Landlord to architects, engineers and other
consultants retained by Landlord to determine whether or not, and
on what terms and conditions, such extra or additional services
may be provided, as aforesaid. All charges for such extra or
additional services shall be due and payable within thirty (30)
Page 23 of 74 Pages<PAGE>
days after they are billed. Interest at the rate set forth in
Section 27(i) shall accrue commencing at the expiration of such
thirty (30) day period. Any such billings for extra or additional
services shall include an itemization of the extra or additional
services rendered, and the charge for each such service. At
Tenant's request, Landlord shall provide Tenant with the rates
for additional services as requested by Tenant and shall promptly
notify Tenant of any changes in such rates.
(i) Security at Building lobby entrance comparable to
that provided in first class non-institutionally owned office
buildings in downtown Chicago. Tenant shall have the right at all
times during the Term of the Lease to post a guard in the lobby
area shown on Exhibit H and to place a guard station in such area
for the purpose of restricting access to the Premises. The
location, size and design of such guard station shall be
consistent with the first-class nature of the Building and
architectural design of the Building lobby and shall be subject
to Landlord's approval, which shall not be unreasonably withheld.
Landlord and Tenant agree to cooperate in coordinating their
lobby security systems.
(j) Tenant, in common with other tenants, shall have
the right to use the loading docks, provided, however, that
Tenant and ATT-IS shall be given priority use of a single fifty
(50) foot over-the-road loading berth and Tenant and ATT-IS shall
have the exclusive use of a thirty foot loading dock and the
approximately four hundred square feet of storage area described
on Exhibit I, as said location may change in accordance with the
final approved design of the Building. Tenant acknowledges that
the aforesaid rights shall be shared with ATT-IS pursuant to the
ATT-IS Lease.
Tenant agrees that Landlord and its beneficiaries and
their agents shall not be liable in damages, by abatement of Rent
or otherwise, except in the event of the negligence, intentional
act or omission of Landlord, its beneficiaries and their agents
and employees, for failure to furnish or delay in furnishing any
service when such failure or delay is occasioned, in whole or in
part, by repairs, renewals or improvements, by any strike,
lockout or other labor trouble, by inability to secure
electricity, gas, water, or other fuel at the Building after
reasonable effort so to do, by any accident or casualty
whatsoever, by the act or default of Tenant or other parties, or
by any cause beyond the reasonable control of Landlord. Tenant
shall notify Landlord if any service shall be stopped, and
Landlord will proceed diligently to restore such service as soon
as reasonably possible, subject to the provisions of this Section
5. Notwithstanding the foregoing, if as a result of any failure
or delay in providing HVAC, plumbing, water, electricity or
elevator service (other than any such failure or delay caused by
the utility company providing same or a failure or delay which
affects buildings in the area in which the Building is located,
or failure or delay caused by the negligence or intentional act
of Tenant or its agents, employees, guests or invitees) the
Page 24 of 74 Pages<PAGE>
Premises, or any material portion of a floor is rendered unusable
for a period in excess of three (3) consecutive business days,
then Rent for the portion of the Premises rendered unusable shall
abate until such portion is rendered usable. Tenant agrees to
cooperate fully, at all times, with Landlord in abiding by all
reasonable regulations and requirements which Landlord may
prescribe for the proper functioning and protection of all
utilities and services reasonably necessary for the operation of
the Premises and the Building. Landlord, throughout the Term of
this Lease, shall have access to any and all mechanical
installations within the Premises on reasonable notice to Tenant,
and Tenant agrees that there shall be no construction or parti-
tions or other obstructions which will materially interfere with
the moving of the servicing equipment of Landlord to or from the
enclosures containing said installations. Tenant further agrees
that neither Tenant nor its employees, agents, licensees,
invitees or contractors shall at any time tamper with, adjust or
otherwise in any manner affect Landlord's mechanical
installations unless authorized by Landlord or pursuant to the
terms of the following paragraph. All services provided by
Landlord pursuant to the terms hereof shall be of a quality level
consistent with a first class non-institutionally owned office
building. Landlord shall use reasonable efforts to provide such
services in a cost-effective manner.
If Landlord shall fail to perform any of the services
set forth in Section 5, (and such failure is not otherwise
excused as set forth in this Section 5) and such failure
continues for a period of ten (10) business days after written
notice thereof to Landlord from Tenant, then the Tenant, in
addition to the right to abate rent as set forth above, shall
have the right to perform such services not performed by Landlord
until such time as the Landlord cures its failure to perform.
Such time period shall not be extended by Force Majeure. Tenant
shall bill Landlord for all reasonable and verifiable costs of
performance by the Tenant of such services plus five percent (5%)
thereof for overhead. In the event Landlord does not pay same
within thirty (30) days of receipt of such invoice, then Tenant
shall have the right to set off such amount against amounts owed
by the Tenant to the Landlord under this Lease. The provisions of
Section 17 hereof shall not apply to this Section 5.
6. Condition and Care of Premises. No promises of the
Landlord to alter, remodel, improve, repair, decorate or clean
the Premises or any part thereof have been made, and no
representation respecting the condition of the Premises or the
Building has been made to Tenant by or on behalf of Landlord
except to the extent expressly set forth herein, or in the
Workletter attached hereto and made a part hereof. This Lease
does not grant any rights to light or air over or about the
property of Landlord except as set forth in Section 39. Except
for (i) any damage resulting from any negligent or intentional
act or omission of Landlord, its beneficiaries or their employees
and agents, and (ii) Landlord's Repair Obligations defined below,
and, subject to the provisions of Section 13 hereof, Tenant shall
Page 25 of 74 Pages<PAGE>
at its own expense keep the Premises and Tenant's leasehold
improvements and contents in good repair and tenantable condition
and shall promptly and adequately repair all damage to the
Premises caused by Tenant or any of its employees, contractors,
agents, invitees, or licensees including replacing or repairing
all damaged or broken glass, fixtures and appurtenances resulting
from any such damage. If Tenant does not do so promptly and
adequately, Landlord may (upon not less than twenty (20) days'
notice to Tenant except in an emergency) but need not, make such
repairs and replacements and Tenant, shall pay Landlord the cost
thereof within thirty (30) days after billing, plus five percent
(5%) of such cost for Landlord's overhead. Interest at the rate
set forth in Section 27(i) shall accrue commencing at the
expiration on of such thirty (30) day period.
Landlord hereby agrees to fulfill the following repair
and maintenance obligations ("Landlord's Repair Obligations"):
The Landlord will put the Premises, Building and Building service
systems supporting the Premises (including, without limitation,
plumbing, and electrical lines and equipment, heating,
ventilating and air conditioning systems, boilers and elevators)
in good repair and condition, and covenants and agrees that on
completion of the Building, all building service systems will be
in good operating condition. The Landlord shall perform all
maintenance and make all repairs and replacements to the common
areas of the Building and Building service systems not
specifically due to the Tenant's negligent or intentional act or
omission. Without limiting the generality of the foregoing
sentence or the following, the Landlord shall maintain and repair
and keep in good order, safe and clean condition (1) the
plumbing, sprinkler, HVAC (supplemental systems installed
pursuant to Section 5(a)(i) shall be maintained by Landlord at
Tenant's expense); security systems of the Building (other than
as installed by Tenant); electrical and mechanical systems and
equipment, and Landlord's elevators and boilers, all as described
in Attachment A to the Workletter, ("Standard Items") or any
substitutions for such Standard Items or additions thereto
requested by Tenant, provided such substitutions or additions do
not significantly increase Landlord's maintenance or repair
responsibilities, all of which are located in or serve the
Premises and common areas of the Building, broken or damaged
glass (unless caused by the negligent or intentional act or
omission of the Tenant or specifically required to be repaired or
replaced by Tenant pursuant to the preceding paragraph);
(2) underground utility lines and transformers and interior and
exterior structure of the Building, including the roof (except as
set forth in Section 39), exterior walls, bearing walls, support
beams, foundation, columns, exterior doors and windows and
lateral support to the Building; (3) the interior walls,
ceilings, floors and floor coverings of the common areas of the
Building; (4) the exterior improvements to the Land, including
shrubbery, landscaping and fencing; and (5) the common areas
located within or outside the Building, including the common
entrances, corridors, doors and windows, loading dock, stairways
and lavatory facilities and access ways therefor.
Page 26 of 74 Pages<PAGE>
7. Return of Premises.
(a) At the termination of this Lease by lapse of time
or otherwise or upon termination of Tenant's right of possession
without terminating this Lease, Tenant shall surrender possession
of the Premises to Landlord and deliver all keys to the Premises
to Landlord and make known to the Landlord the combination of all
locks of vaults then remaining in the Premises, and shall,
subject to the following paragraph, return the Premises and all
equipment and fixtures of the Landlord therein to Landlord, in
good repair and tenantable condition, ordinary wear and tear,
loss or damage by fire or other insured casualty, and damage
resulting from the negligence, intentional act or omission of
Landlord, its beneficiaries or their employees and agents
excepted, failing which Landlord may restore the Premises and
such equipment and fixtures to such good and tenantable condition
and Tenant shall pay the cost thereof to Landlord within thirty
(30) days of receipt of an invoice together with five percent
(5%) of such cost as Landlord's overhead. Interest at the rate
set forth in Section 27(i) shall accrue commencing at the
expiration of such thirty (30) day period. In no event shall
Tenant remove items, the removal of which would cause damage to
the structure of the Building, without Landlord's consent, which
consent shall not be unreasonably withheld. If Landlord's consent
is obtained, Tenant shall repair all damage at its expense.
(b) All installations, additions, partitions,
hardware, light fixtures, non-trade fixtures and improvements,
temporary or permanent, except movable furniture, personal
property and equipment belonging to Tenant, in or upon the
Premises, placed there by Tenant or by Landlord pursuant to the
Workletter, shall be Landlord's property and shall remain upon
the Premises, all without compensation, allowance or credit to
Tenant provided, however, Tenant may elect at its discretion to
remove custom millwork, cabinetry, equipment from the telephone
equipment room, carpeting, track lighting, special lighting
fixtures and office display modules, in which event Tenant shall,
prior to the end of the Term or ten (10) days after the earlier
Termination of the Lease or Tenant's right to possession, repair
any damage to the Premises caused by such removal, failing which
repair by Tenant, Landlord may repair the Premises and Tenant
shall pay the cost thereof to Landlord within thirty (30) days of
receipt of an invoice, together with five percent (5%) of such
cost for Landlord's overhead. Interest at the rate set forth in
Section 27(i) shall accrue commencing at the expiration of such
thirty 30 day period.
(c) Tenant shall remove Tenant's furniture, machinery,
safes, trade fixtures and other items of movable personal
property of every kind and description from the Premises and
restore any damage to the Premises caused thereby, such removal
and restoration to be performed prior to the end of the Term or
ten (10) days following termination of this Lease or Tenant's
right of possession, whichever might be earlier, failing which
Page 27 of 74 Pages<PAGE>
Landlord may do so and thereupon the provisions of Section 15(f)
shall apply.
(d) All obligations of Tenant pursuant to this Section
7 shall survive the expiration of the Term or sooner termination
of this Lease, provided, however, if Landlord has not made a
written claim against Tenant within ninety (90) days after the
expiration of the Term or termination of the Lease, all such
obligations of Tenant shall terminate and Landlord shall have no
further rights with respect to the foregoing. Nothing contained
herein shall relieve Tenant from its obligations pursuant to
Section 2(f) hereof.
8. Holding Over. Tenant may retain possession of the
Premises or any part thereof for the purpose of preparing to
vacate the Premises for a period of ninety (90) days or less
after termination of the Lease unless (a) Landlord notifies
Tenant on or before sixty (60) days prior to the Lease
Termination Date that a new lease has been entered into with a
new tenant for all or a portion of the Premises, in which event
Tenant shall deliver possession of such portion of the Premises
to Landlord on the Lease Termination Date, or (b) in the event
Landlord executes a lease for all or a portion of the Premises
during the sixty (60) day period prior to the Lease Termination
Date and promptly notifies Tenant of same, in which event Tenant
shall deliver possession of the portion of the Premises subject
to such lease, together with the portions of the Premises
required for access thereto and use thereof, within ninety (90)
days of receipt of such notice. All of the foregoing are
hereinafter referred to as "Permitted Holdovers." Permitted
Holdovers shall be at the Rent applicable under Sections 1 and 2
hereof. Tenant shall not be liable for any damages of Landlord
for such Permitted Holdovers. The Tenant shall pay Landlord for
each day Tenant retains possession of the Premises or any part
thereof subsequent to the expiration of a Permitted Holdover, an
amount which is one hundred fifty percent (150%) of the amount of
Rent, as set forth in Sections 1 and 2 hereof, for each day
(computed on a year of 365 days) applicable to that portion of
the Premises being held-over. Tenant shall also pay all direct
actual damages and, to the extent provided herein, consequential
damages, sustained by Landlord by reason of such retention. In no
event shall consequential damages payable by Tenant pursuant to a
final nonappealable determination by a court having jurisdiction
of the matter, exceed an amount equal to two hundred percent
(200%) of the rent charged by the Landlord for the most recently
leased single full floor in the Building multiplied by the number
of floors being retained for each month, or fraction thereof,
Tenant holds over subsequent to the expiration of a Permitted
holdover. Nothing in this Section contained shall be construed or
operate as a waiver of Landlord's right of re-entry or any other
legal or equitable right or remedy to gain possession of that
portion of the Premises being held-over. Notwithstanding the
foregoing, Tenant shall not be liable for any consequential
damages if the holdover is due to a Force Majeure event as
defined in Section 47 hereof.
Page 28 of 74 Pages<PAGE>
9. Rules and Regulations.
(a) Tenant agrees to observe and not to interfere with
the rights reserved to Landlord contained in Section 10 hereof
and agrees, for itself, its employees, agents, contractors,
invitees and licensees, to comply with the rules and regulations
set forth in Exhibit J attached to this Lease and made a part
hereof. Any additional rules and regulations applicable to Tenant
as shall be adopted by Landlord pursuant to Section 10 of this
Lease shall be subject to Tenant's approval, which approval shall
not be unreasonably withheld. Disapproval of a rule or regulation
solely for the reason that it increases the cost of occupancy for
all Tenants in the Building (provided such increase is, in
itself, not unreasonable) shall be deemed as unreasonable
withholding of approval. Tenant agrees to approve or disapprove
such additional rules and regulations within ten (10) days of
Landlord's submission of same to Tenant. In the event Tenant
disapproves a rule or regulation, Tenant shall notify Landlord
with specificity as to the reason for such disapproval. Failure
to respond within such ten (10) day period shall be deemed to be
approval.
(b) Any violation by Tenant of any of the rules and
regulations set forth on Exhibit I or other Section of this
Lease, or as may hereafter be adopted by Landlord pursuant to
Section 10 of this Lease, and approved by Tenant, may be
restrained; but whether or not so restrained, Tenant acknowledges
and agrees that it shall be and remain liable for all damages,
loss, costs and expense resulting from any violation by the
Tenant of any of said rules and regulations. Landlord shall use
its reasonable efforts to enforce said rules and regulations
against any other tenant or any other persons. The cost of such
enforcement shall be an Expense hereunder provided that (1) all
leases with tenants in the Building shall contain a provision
specifying that such tenant shall be liable for all costs and
expenses, including attorney's fees, incurred by Landlord in
enforcing the rules and regulations against such tenant and
(2) Landlord uses reasonable efforts to collect such costs,
expenses and fees.
(c) Landlord agrees not to discriminate against Tenant
in the enforcement of rules and regulations applicable to all
tenants in the Building.
10. Rights Reserved to Landlord. Landlord reserves the
following rights, exercisable at its election with notice to
Tenant:
(a) To change the street address of the Building,
subject to the prior approval of Tenant. Landlord agrees to
reimburse Tenant for reasonable costs incurred in replacing
stationery or other similar items.
(b) The location and style of the suite number and
identification sign or lettering for the Premises occupied by the
Page 29 of 74 Pages<PAGE>
Tenant shall be subject to the approval of Landlord, which
approval shall not be unreasonably withheld. Landlord and Tenant
shall mutually agree on the size, design and location of Tenant's
identification in the first floor lobby and the signage by which
visitors will be directed to the second floor lobby. Nothing
contained herein shall be deemed to give Landlord approval rights
as to Tenant's name or logo.
(c) To retain at all times, and, subject to the
provisions of subsection (f) below, to use in appropriate
instances, passkeys to the Premises.
(d) To exhibit the Premises on reasonable notice to
Tenant to prospective purchasers and mortgagees and during the
last year of the Term to exhibit the Premises on reasonable
notice to Tenant to prospective tenants.
(e) To have access for Landlord to any mail chutes
according to the rules of the United States Postal Service.
(f) To enter the Premises at reasonable hours for
reasonable purposes, including inspection and supplying janitor
service or other service to be provided to Tenant hereunder
subject, however, (with the exception of janitor service) to the
following:
(i) The Landlord will give an employee designated in
writing by the Tenant, advance oral notice of its desire to
enter the Premises and the purposes for such entry; and
(ii) The Landlord agrees that neither it nor any of its
representatives, employees, invitees or agents will enter
into or move about the Premises unless accompanied by a
representative of the Tenant; and
(iii) The Landlord agrees that if, prior to such entry,
it i impracticable for the Tenant to secure classified or
confidential material, the Tenant may prevent the Landlord
from access to the area where such material is located until
same is secured; provided, however, that in the event of an
emergency, the Tenant will secure the same promptly; and
(iv) The Landlord will use all reasonable efforts not
to disturb the Tenant's use and occupancy of the Premises;
and
(v) Notwithstanding the foregoing Tenant agrees that
Landlord shall have immediate access to the Premises in the
event of an emergency. Tenant agrees to provide Landlord
with a reasonable means of access for such emergencies.
(g) To require all persons entering or leaving the
Building during such hours as Landlord may from time to time
reasonably determine to identify themselves to security personnel
by registration or otherwise in accordance with security controls
Page 30 of 74 Pages<PAGE>
and to establish their right to enter or leave in accordance with
such rules as Landlord shall prescribe. Landlord and Tenant shall
cooperate with respect to the coordination of lobby security.
With the exception of the negligence or intentional acts of
Landlord, its beneficiaries and their agents and employees,
Landlord shall not be liable in damages for any error with
respect to admission to or eviction or exclusion from the
Building of any person. In case of fire, invasion, insurrection,
mob, riot, civil disorder, public excitement or other commotion,
or threat thereof, Landlord reserves the right to limit or
prevent access to the building during the continuance of the
same, shut down elevator service, activate elevator emergency
controls, or otherwise take such action or preventive measures
deemed necessary by Landlord for the safety or security of the
tenants or other occupants of the Building or the protection of
the Building and the property in the Building. Tenant agrees to
cooperate in any reasonable safety or security program developed
by Landlord.
(h) To control and prevent access to common areas and
other non-general public areas of the Building or any portion
thereof, pursuant to the provisions of the applicable rules and
regulations adopted by Landlord.
(i) Provided that reasonable access to the Premises
shall be maintained and the business of Tenant shall not be
interfered with unreasonably, to rearrange, relocate, enlarge,
reduce or change corridors, exits, entrances in or to the
Building and to decorate and to make, at its own expense,
repairs, alterations, additions and improvements, structural or
otherwise, in or to the Building or any part thereof and, such
alterations as are necessary for the connection of the Building
("Connection Work") with the building contemplated by Landlord to
be built adjacent to the Building ("Phase II"). During such
Connection Work and other work described herein, Landlord may
enter the Premises, subject to the requirements of Section
10(f)(i)-(v), and take into and upon or through any part of the
Building, including the Premises, all materials that may be
necessary for such Connection Work and other work described
herein. Landlord shall construct partitions to separate the area
of the Premises in which the Connection Work is taking place in
order to keep noise and dust at a minimum. Landlord shall
partition only that portion of the Premises necessary for the
performance of the Connection Work. Rent shall abate as to that
portion of the Premises used by Landlord for such Connection Work
until the Tenant can reoccupy and use the portion without
unreasonable interference. Landlord shall, at its expense, repair
all damage to the Premises and restore the Premises to their
original condition. Landlord shall obtain all appropriate
insurance or cause its contractors to carry such insurance. All
Connection Work shall comply with all insurance requirements and
all applicable laws and ordinances and rules and regulations of
governmental departments or agencies. Landlord shall defend,
indemnify and hold Tenant harmless from all costs, damages, liens
and expenses related to such work. Landlord may, at its option,
Page 31 of 74 Pages<PAGE>
make any repairs, alterations, improvements and additions in and
about the Building and the Premises during ordinary business
hours, provided, however, if the conduct of Tenant's business is
materially and adversely affected by same, (other than Connection
Work performed in the Premises if Tenant leases space in Phase
II) at Tenant's reasonable request, such work (other than
emergency work) shall be done during other than business hours,
at no cost or expense to Tenant.
(j) To designate parking spaces in the Building for
the exclusive use of one or more tenants (subject to Tenant's
rights herein set forth), to install gates, traffic regulating
devices, security systems, and directional signage, make,
prescribe and adopt such reasonable rules and regulations,
subject to the approval of Tenant, which approval shall not be
unreasonably withheld, in addition to or other than or by way of
amendment or modification of the rules and regulations contained
in Exhibit J attached to this Lease, relating to use of parking
spaces and the underground parking areas including, but not
limited to, vehicle size, direction of traffic, loading and
unloading of vehicles and the like. If Tenant shall disapprove
any rules and regulations, Tenant shall state with specificity
its objections thereto.
(k) From time to time to make and adopt such
reasonable rules and regulations, in addition to or other than or
by way of amendment or modification of the rules and regulations
set forth on Exhibit I attached to this Lease or other Sections
of this Lease, subject to the approval of Tenant, which approval
shall not be unreasonably withheld, for the protection and
welfare of the Building and its tenants and occupants, as the
Landlord may determine, and the Tenant agrees to abide by and
comply with all such reasonable rules and regulations. If Tenant
shall disapprove any rules and regulations, Tenant shall state
with specificity, its objections thereto.
(l) To install and designate areas outside of the
Premises for installation of vending machines and collect all
income from operation thereof, provided, however in no event
shall vending machines be installed in the lobbies of the
Building.
11. Alterations.
(a) Tenant shall not make alterations, improvements
and additions in the Premises that affect the structure of the
Building or, except as set forth in this Section 11(a), that
affect building systems or equipment, including, but not limited
to HVAC, electrical and plumbing systems, and fire, smoke
detection and Temperature Control Systems ("Structural
Alterations") without Landlord's advance written consent in each
instance, which approval shall not be unreasonably withheld.
Landlord shall not be deemed to have acted unreasonably if it
withholds its consent because: such work when completed by Tenant
will, in the reasonable opinion of Landlord or Landlord's
Page 32 of 74 Pages<PAGE>
Architect, adversely affect building systems or the structure or
safety of the Building and its occupants; such work will increase
Landlord's cost of furnishing services (unless Tenant agrees to
reimburse Landlord for such increased costs) or otherwise will
materially adversely affect Landlord's ability to furnish
services to Tenant or other tenants. The foregoing reasons,
however, shall not be exclusive of the reasons for which Landlord
may withhold consent, whether or not such other reasons are
similar or dissimilar to the foregoing. Landlord shall have
thirty (30) days within which to review, and have its consultants
review, the proposed Structural Alterations and Landlord shall be
entitled to reimbursement for its reasonable costs incurred in
such review and determination, plus five percent (5%) of such
costs for Landlord's overhead. Landlord agrees to proceed
diligently with such review and to inform Tenant of its consent
or disapproval promptly. Notwithstanding anything contained
herein to the contrary, Tenant may make the alterations,
improvements or additions to the Premises as listed below without
Landlord's consent.
1. Activate, cap or relocate cellular deck
power/voice/data outlets.
2. Minor alteration of interior tenant space walls and
wall/power/voice/data outlets and circuits as long as
equipment connected to said outlets does not affect
HVAC.
3. Relocate light fixtures (minor relocations not
affecting switching).
4. Minor relocation of air diffusers within flex range.
5. Repainting or recarpeting of a material portion of the
Premises.
6. Minor carpentry such as decorating, picture hanging,
furniture/cabinet-securing, carpet changes and
repainting not covered by 5 above.
7. All furniture additions, removals or relocations.
Items 1 through 5 above are hereinafter referred to as
"Non-Structural Alterations." Except as set forth in the next
sentence, Tenant shall notify Landlord with specificity in
writing of all Non-Structural Alterations at least twenty-four
(24) hours prior to its commencement including, without
limitation, the nature and location of the Non-Structural
Alterations and the identity of the contractor or contractors
performing such work. Tenant shall notify Landlord of
Non-Structural Alterations described in 1 above on a monthly
basis. Tenant shall also promptly notify Landlord of any material
changes to the Non-Structural Alterations previously described to
Landlord.
Page 33 of 74 Pages<PAGE>
(b) All work of the nature herein contemplated may be
done by contractors chosen by Tenant, provided, however, that as
to Structural Alterations, the Tenant's choice of contractors
shall be subject to the approval of Landlord, which approval
shall not be unreasonably withheld. All contractors chosen by
Tenant shall be of good reputation, have financial capacity to
complete the work, be experienced in the area of work for which
they have been hired, shall to the extent relevant, be familiar
with high-rise construction, have good labor relations and
utilize union labor. Tenant shall supply Landlord prior to
commencement of the work with copies of all contracts and
warranties with respect to Structural Alterations and as to
Structural and Non-Structural Alterations, permits required in
connection with such work and evidence of insurance coverage,
including coverage of Landlord as an additional insured party.
Working drawings and specifications with respect to Structural
Alterations only shall be prepared at Tenant's expense by
architects or engineers retained by Tenant and approved by
Landlord, which approval shall not be unreasonably withheld.
After completion of the Structural Alterations, Tenant shall
furnish Landlord with final construction drawings marked to show
all changes. As to Non-Structural Alterations, Tenant shall
furnish Landlord on completion thereof with field drawings and
plans and specifications, if any, for information purposes only.
In the event Tenant elects to use contractors employed by
Landlord for either Structural or Non-Structural Alterations,
then Tenant shall pay the cost of such work plus a fee to
Landlord as set forth in Landlord's bid for such work. In the
event Tenant employs its own contractors, then Landlord shall not
be entitled to any fee as to Non-Structural Alterations but, with
respect to Structural Alterations, Tenant shall reimburse
Landlord for its out-of-pocket architectural and engineering fees
and expenses in connection with the review of working drawings
and specifications plus five percent (5%) of such costs for
Landlord's overhead and for field supervision of Structural Work,
Landlord shall be entitled to reimbursement for its out-of-pocket
architectural and engineering fees and other expenses in
connection with such supervision, plus three percent (3%) of such
costs for Landlord's overhead.
(c) All work of the nature herein contemplated shall
be at Tenant's expense, and shall comply with all insurance
requirements and with all ordinances and regulations of the City
of Chicago or any department or agency thereof, and with the
requirements of all statutes and regulations of the State of
Illinois or of any department or agency thereof. All work done by
Tenant or its contractors pursuant hereto shall be done in a
first-class workmanlike manner, using only premium grades of
materials at least equal to the building standards described on
Attachment A to the Workletter, and shall comply with all
insurance requirements and all applicable laws and ordinances and
rules and regulations of governmental departments or agencies and
the rules and regulations adopted by the Landlord for the
Building. Tenant shall obtain all appropriate insurance or cause
its contractors to carry such insurance. Tenant shall defend and
Page 34 of 74 Pages<PAGE>
hold Landlord, its beneficiaries, agents and employees harmless
from all costs, damages, liens and expenses related to such work.
(d) The Landlord shall not, without the prior written
consent of Tenant, which consent shall not be unreasonably
withheld, make any alterations to the architectural character of
the exterior facade of the Building (including, but not limited
to the exterior color and primary material used thereon) or any
material alteration lo the lobby of the Building, except for
(1) alterations performed in connection with tenant improvements
to the retail area, provided same are consistent with the
first-class nature of the lobby, and (2) ordinary and necessary
repairs and maintenance to the lobby and interior portions of the
Building and replacements to the extent same are consistent With
the initial character of the lobby and exterior portions of the
Building.
12. Assignment and Subletting
(a) Except as hereinafter provided, Tenant shall not,
without the prior written consent of Landlord in each instance,
either prior or subsequent to the commencement of the Term,
(i) assign, transfer, mortgage, pledge, hypothecate or encumber
or subject to or permit to exist upon or be subjected to any lien
or charge, this Lease or any interest under it, (ii) allow to
exist or occur any transfer of or lien upon this Lease or the
Tenant's interest herein by operation of law, (iii) sublet the
Premises or any part thereof, or (iv) permit the use or occupancy
of the Premises or any part thereof for any purpose not provided
for under Section 4 of this Lease. In no event shall this Lease
be assigned or assignable by voluntary or involuntary bankruptcy
proceedings or otherwise, and in no event shall this Lease or any
rights or privileges hereunder be an asset of Tenant under any
bankruptcy, insolvency or reorganization proceedings. The
foregoing provisions shall apply to any permitted assignee or
subtenant of Tenant.
(b) Without thereby limiting the generality of the
foregoing provisions of this Section 12, Tenant expressly
covenants and agrees not to enter into any lease, sublease,
license, concession or other agreement for use, occupancy or
utilization of the Premises which provides for rental or other
payment for such use, occupancy or utilization based in whole or
in part on the net income or profits derived by any person from
the property leased, used, occupied or utilized (other than an
amount based on a fixed percentage or percentages of receipts or
sales), and that any such purported lease, sublease, license,
concession or other agreement shall be absolutely void and
ineffective as a conveyance of any right or interest in the
possession, use, occupancy or utilization of any part of the
Premises.
(c) Consent by Landlord to any assignment, subletting,
use or occupancy, or transfer or assignment, subletting or
transfer by Tenant which is permitted hereunder without
Page 35 of 74 Pages<PAGE>
Landlord's consent, shall not operate to relieve the Tenant from
any covenant or obligation hereunder except to the extent, if
any, expressly provided for in such consent,or be deemed to be a
consent to or relieve Tenant from obtaining Landlord's consent to
any subsequent assignment, transfer, lien, charge, subletting,
use or occupancy.
(d) Tenant shall not assign this Lease or sublet all
or any portion of the Premises except as provided in Section
12(h), (i) or (j) until the earlier of (1) three years from the
Commencement Date or (2) the date on which "Breakeven Leasing" is
reached ("Lease-Up Period"). Breakeven Leasing will be deemed
reached when the net operating income from the Building, after
taking into consideration payment of all costs and expenses
relative thereto (whether or not considered Expenses hereunder)
and all reasonably required reserves consistent with generally
accepted accounting principles and usual and customary management
practices, which is then available for payment of debt service
equals or exceeds the amount required to pay debt service
payments required to service all existing loans (as defined in
Section 16 hereof) and all required payments to equity investors
pursuant to any Second Mortgage (as defined in Section 17
hereof). After the end of the Lease-up Period, Tenant may assign
or sublease all or any portion of the Premises in accordance with
the terms and provisions of this Section 12, provided, however
until Breakeven Leasing is achieved (if not previously reached at
the end of the Lease-up Period) Tenant will not sublease the
Premises or assign the Lease for less than the quoted rate
published by Landlord for comparable space in the Building except
pursuant to Section 12(h), (i) or (j). Landlord agrees to make
such rates available to Tenant on Tenant's request. Once
Breakeven Leasing is achieved, there shall be no further
restrictions on the rate charged by Tenant for subleases or an
assignment. Subsequent thereto, Tenant shall, by notice in
writing, advise Landlord of its intention to assign this Lease or
sublet any part or all of the Premises for the balance or any
part of the Term. Landlord will not unreasonably withhold its
consent to Tenant's assignment of this Lease or subletting of the
space covered by its notice. Landlord shall not be deemed to have
unreasonably withheld its consent to a sublease of part or all of
the Premises or an assignment of this Lease if its consent is
withheld because: (i) Tenant is then in default hereunder (for
purposes of this Section 12, "default" shall mean either (a) a
material default which is not cured, or (b) a Default; (ii) the
proposed use of the Premises by the subtenant or assignee does
not conform with the use set forth in Section 4 hereof; (iii) in
the reasonable judgment of Landlord, the proposed subtenant or
assignee is of a character or is engaged in a business which
would be deleterious to the reputation of the Building as a
first-class non-institutionally owned office building, or the
subtenant or assignee is not sufficiently financially responsible
to perform its obligations under the proposed sublease or
assignment; (iv) the events or matters set forth in Section
12(e)(1), (2), (3) or 4 shall be satisfied, provided, however,
that the foregoing are merely examples of reasons for which
Page 36 of 74 Pages<PAGE>
Landlord may withhold its consent and shall not be deemed
exclusive of any other reasons for reasonably withholding
consent, whether similar or dissimilar to the foregoing examples.
Tenant shall furnish Landlord with copies of all documents
relating to any such sublease or assignment including financial
statements of the assignee or subtenant if requested by Landlord.
(e) Notwithstanding anything contained herein to the
contrary, subsequent to the Lease-up Period, Landlord agrees that
Tenant may enter into sublease(s) of up to fifty percent (50%) of
the Rentable Area of the Premises without the consent of the
Landlord, provided that the standards set forth in Section 12(d)
and below are met.
1. The use is not prohibited by the Chicago, Illinois
zoning ordinance.
2. The use is consistent with first-class non-
institutional office buildings in the central business
district area of Chicago, Illinois.
3. The use does not involve the sale of food or liquor for
consumption on the Premises to anyone other than
employees or guests.
4. The use is not an amusement establishment or a
"sexually-oriented business establishment."
5. The use does not involve increases in pedestrian
traffic through the common areas of the Building to the
extent that a material increase in security or
janitorial service is necessary.
Tenant agrees to notify Landlord of each such sublease, the
portion of the Premises which is subject to such sublease, and
the identity of the subtenant. Tenant shall deliver a true,
complete and correct copy of each sublease to Landlord promptly
following execution thereof. Tenant shall remain obligated under
this Lease in the event of any sublease or assignment, unless
otherwise agreed by Landlord and Tenant. Each such sublease or
assignment shall contain a covenant by the subleasee or assignee
to comply with the terms of this Lease insofar as they relate to
such subleasee or assignee.
(f) If Tenant shall assign this Lease or sublet the
Premises, or any part thereof, at a rental or for other monetary
consideration in excess of the Rent due and payable by Tenant
under this Lease, then Tenant, after deduction of all direct,
out-of-pocket expenses ("Expenses") relating to such assignment
or subletting, including, but not limited to, leasing
commissions, attorney's fees and costs of redecorating and
demising the new premises, shall pay to Landlord as additional
rent 33.33% of any such excess rent or other monetary
consideration, including any lump sum payment made to Tenant
(hereafter referred to as "Landlord's Net Profits") immediately
Page 37 of 74 Pages<PAGE>
upon receipt under any such assignment or, in the case of a
sublease, on the first day of each month during the term of any
sublease; it being agreed, however, that Landlord shall not be
responsible for any deficiency if Tenant shall assign this Lease
or sublet the Premises or any part thereof at a rental less than
that provided for herein.
(g) Landlord hereby agrees that Tenant may mortgage or
pledge its leasehold interest in the Premises ("Leasehold
Mortgage") without obtaining Landlord's approval provided,
however, Tenant shall notify Landlord of such mortgage or pledge.
Landlord shall have no right to disapprove any such mortgage or
pledge unless the mortgagee or pledgee does not have financial
capability to perform the obligations of Tenant hereunder.
Landlord agrees to give the holder of such Leasehold Mortgage by
registered or certified mail, copies of all notices of default
served upon Tenant by Landlord, provided that prior to such
notice Landlord has been notified in writing of the address of
such Leasehold Mortgage holder. Landlord agrees that if Tenant
has failed to cure such default within the applicable grace
period, then the holder of the Leasehold Mortgage shall have an
additional thirty (30) days within which to cure or correct such
default. Any such holder shall be subject to all of the terms,
provisions and covenants of this Lease. Any such holder shall
agree to give to Landlord notice of any default by Tenant under
any such Leasehold Mortgage.
(h) Notwithstanding the foregoing provisions, and in
addition to the rights set forth in Section 12(e) hereof,
Landlord agrees that an assignment of this Lease or a sublease of
all or a portion of the Premises to a wholly-owned subsidiary of
Tenant, a corporation which owns all of the capital stock of
Tenant ("Parent") or a corporation, substantially all of the
stock of which is owned and controlled by the Parent, or other
wholly-owned subsidiaries of Parent, shall not require Landlord's
consent ("Permitted Transferees"). Such Permitted Transferee
shall be subject to all of the terms and conditions of this Lease
and any assignee of the entire Lease shall in writing agree to
assume and to comply with the terms of this Lease. The further
assignment of this Lease either directly, in connection with or
as a result of the sale of the stock or assets of a Permitted
Assignee shall be subject to the consent of Landlord, which
consent shall not be unreasonably withheld in accordance with the
terms of Section 12(d) hereof. In no event shall Landlord have
any right of consent or approval of the sale of such stock or
assets.
(i) Concurrently with the execution of this Lease,
Landlord has executed the ATT-IS Lease. Landlord hereby agrees
that Tenant hereunder and tenant under the ATT-IS Lease may, from
time to time, transfer certain portions of the Premises to one
another. Such transfers may be done without Landlord's consent.
Tenant will promptly notify Landlord in writing as to any such
transfers. In such event the portion of the Premises so
transferred shall be deleted from this Lease and added to the
Page 38 of 74 Pages<PAGE>
ATT-IS Lease on the terms and conditions contained therein and
Tenant shall be released from all liability as to such space
accruing subsequent lo the date of transfer to ATT-IS, provided
that an appropriate amendment to the ATT-IS Lease is executed
adding such portion to the ATT-IS Lease, subject to the terms
hereof. In the event that such portion shall be added to this
Lease and deleted from the ATT-IS Lease, Tenant shall assume the
liability for such additional space upon the terms contained in
this Lease, with the exception of additional rent, if any,
amortizing the cost of leasehold improvements pursuant to
paragraph 50 of the ATT-IS Lease. Landlord, Tenant and ATT-IS
shall enter into amendments to the Lease and the ATT-IS Lease
reflecting such transfer of the Premises.
(j) Landlord acknowledges that as to certain portions
of the Premises ("Common Space") Tenant intends to allow the
tenant under the ATT-IS Lease to use same and in consideration
therefore, Tenant may seek reimbursement of certain costs
associated with the use of the Common Space from the tenant under
the ATT-IS Lease. Landlord consents to such use of the Common
Space and agrees that it shall have no other rights of approval,
consent or notice as to such joint use unless Tenant sublets or
assigns a portion of the Premises to ATT-IS, in which event, the
provisions of Section 12(h) shall apply. In no event shall
Landlord be entitled to any portion of the sums paid to Tenant by
the tenant under the ATT-IS Lease.
13. Damage or Destruction by Casualty.
(a) If the Premises or any part of the Building or
machinery or equipment used in operation of the Building shall be
damaged by fire or other casualty and if such damage does not
render all or a substantial portion of the Premises or the
Building untenantable, then Landlord shall proceed to repair and
restore with reasonable promptness the same, subject to Force
Majeure and reasonable delays for insurance adjustment.
Notwithstanding the foregoing, if the Premises or the portion of
the Building so damaged which renders the Premises unusable are
not repaired or restored within two hundred eighty (280) days
from the date of damage, then, notwithstanding anything contained
herein to the contrary, Tenant, shall have the right to terminate
this Lease, by written notice to the Landlord not later than
thirty (30) days after the expiration of said two hundred eighty
(280) day period but in any event prior to substantial completion
of such repair or restoration work. Such termination shall be
effective as of the date of such notice. Rent shall abate from
the date of such damage.
If any such damage renders all or a substantial portion
of the Premises or the Building untenantable, Landlord shall,
with reasonable promptness after the occurrence of such damage,
estimate the length of time that will be required to
substantially complete the repair and restoration of such damage
and shall, by notice, advise Tenant of such estimate. If it is so
estimated that the amount of time required to substantially
Page 39 of 74 Pages<PAGE>
complete such repair and restoration will exceed two hundred
eighty (280) days from the date such damage occurred, then either
Landlord or Tenant shall have the right to terminate this Lease
as of the date of such damage upon giving notice to the other at
any time within twenty (20) days after Landlord gives Tenant the
notice containing said estimate (it being understood that
Landlord may, if it elects to do so, also give such notice of
termination together with the notice containing said estimate).
Unless this Lease is terminated as provided in the preceding
sentence, Landlord shall proceed with reasonable promptness to
repair and restore the Premises, subject to reasonable delays for
insurance adjustments and Force Majeure, and also subject to
zoning laws and building codes then in effect. Landlord shall
have no liability to Tenant, and Tenant shall not be entitled to
terminate this Lease (except as hereinafter provided) if such
repairs and restoration are not in fact completed within the time
period estimated by Landlord, as aforesaid, or within said two
hundred eighty (280) days so long as Landlord shall proceed with
reasonable promptness and due diligence. Notwithstanding anything
contained herein to the contrary, if the Premises are not
repaired or restored within three hundred sixty (360) days after
date of such fire or other casualty, then Tenant may terminate
this Lease, effective as of the date of such fire or other
casualty, by written notice to Landlord not later than thirty
(30) days after the expiration of said three hundred sixty (360)
days, but prior to substantial completion of repair or
restoration. Notwithstanding anything to the contrary herein set
forth, (a) Landlord shall have no duty pursuant to this Section
13 to repair or restore any portion of the alterations, additions
or improvements owned or made by or on behalf of Tenant in the
Premises, but shall be obligated to repair or restore the
leasehold improvements constructed by Landlord pursuant to the
Workletter and insured by Landlord pursuant to the Insurance
Option set forth in Section 19 hereof, and (b) Tenant shall not
have the right to terminate this Lease pursuant to this Section
13 if the damage or destruction was caused by the neglect,
intentional act or omission of Tenant, its agents or employees.
(b) In the event any such fire or casualty damage
renders the Premises untenantable and if this Lease shall not be
terminated pursuant to the foregoing provisions of this Section
13 by reason of such damage, then Rent shall abate during this
period beginning with the date of such damage and ending with the
date when Landlord tenders the Premises to Tenant as being ready
for occupancy. Such abatement shall be in an amount bearing the
same ratio to the total amount of Rent for such period as the
portion of the Premises rendered untenantable, unfit or
inaccessible for use by Tenant with respect to each floor of the
Premises bears to the entire Premises. Rent shall not recommence
as to the damaged portion of such floor until the repair and
restoration of all of the damaged portion has been substantially
completed and possession of such floor delivered to Tenant,
provided, however, that Landlord shall not be responsible for,
and rental shall not abate during any delay in substantial
completion caused by Tenant and its agents and employees. In the
Page 40 of 74 Pages<PAGE>
event of termination of this Lease pursuant to this Section 13,
Rent shall be apportioned on a per diem basis and be paid to the
date of the fire or casualty.
(c) In the event of any such fire or other casualty,
and if this Lease is not terminated pursuant to the foregoing
provisions, Tenant shall repair and restore any portion of the
alterations, additions and improvements made by or on behalf of
Tenant in the Premises, to enable Tenant to utilize the Premises
for the purposes set forth in this Lease other than work
performed by Landlord pursuant to the Workletter (and insured by
Landlord pursuant to the Insurance Option in Section 19 hereof),
and during such period of Tenant's repair and restoration
following substantial completion of Landlord's work, Rent shall
not abate and shall again be due and payable as if said fire or
casualty had not occurred, unless the damage or destruction was
caused by the neglect, intentional act or omission of Landlord,
its agents or employees.
14. Eminent Domain. If the entire Building or a
substantial part thereof, or any part thereof which includes all
or a substantial part of the Premises, shall be taken or
condemned by any competent authority for any public or
quasi-public use or purposes, the Term of this Lease shall end
upon and not before the earlier of the date when the possession
of the part so taken shall be required for such use or purpose or
the effective date of the taking. If (i) any part of the Real
Property is taken such that reasonable access to the Premises for
the conduct of Tenant's business is no longer possible, or
(ii) there is a taking of a portion of the Premises (but not
substantially all) and Tenant determines that, in its reasonable
judgment, continued occupancy of the balance of the Premises
would not be sufficient for the beneficial conduct of Tenant's
business therein, then Tenant shall have the right to terminate
this Lease by written notice to Landlord no later than thirty
(30) days after the effective date of such taking, such
termination to be effective upon service of such notice. If any
condemnation proceeding shall be instituted in which it is sought
to take or damage any part of the Building, the taking of which
would, in Landlord's reasonable opinion, prevent the economical
operation of the Building, or if the grade of any street or alley
adjacent to the Building is changed by any competent authority,
and such taking, damage or change of grade makes it necessary or
desirable to substantially remodel the Building to conform to the
taking, damage or changed grade, and provided further that
Landlord has terminated leases on at least twenty-five percent
(25%) of the Rentable Area of the Building (excluding the
Premises) then Landlord shall have the right to terminate this
Lease upon not less than ninety (90) days' notice prior to the
date of termination designated in the notice. In any of the
events above referred to, Rent at the then current rate shall be
apportioned as of the date of the termination. In the event of a
taking of part (but not substantially all) of the Premises and
neither Landlord nor Tenant has exercised its termination rights,
Rent shall abate in proportion to the area of the Premises so
Page 41 of 74 Pages<PAGE>
taken from and after the effective date of the taking. Further,
Landlord shall promptly repair and restore the remaining portion
of the Premises to an architectural whole. In the event Landlord
fails to repair and restore the remaining portion of the Premises
within three hundred sixty (360) days after such taking, then
Tenant may terminate this Lease by written notice to Landlord
within thirty (30) days after the expiration of such three
hundred sixty (360) day period, but prior to substantial
completion of the repair or restoration Work.
Notwithstanding the termination of this Lease as
aforesaid, Landlord and Tenant hereby agree that Tenant shall
have a right to share in the condemnation award for (i) the value
of its leasehold interest and (ii) moving and relocation costs.
In no event shall (i) above be less than the value of the
unamortized cost of Tenant's leasehold improvements installed by
or on behalf of Tenant and paid for by Tenant without
reimbursement by Landlord (but regardless of whether the
improvements might be considered as part of the Premises or
become the property of Landlord under this Lease). Condemnation
proceeds shall be delivered first in satisfaction of the claims
of the holder of the First Mortgage and the Second Mortgage, with
the balance ("Award Balance") to Landlord and Tenant in
accordance with their interests as set forth herein. Tenant's
share of the Award Balance, determined as aforesaid, shall in no
event exceed the greater of a) fifty percent, or b) Tenant's
Proportionate Share at the time of the taking, provided, however,
in no event shall Tenant's share pursuant to the terms of (b)
above exceed seventy-five percent (75%) of the Award Balance. For
purposes of calculating Tenant's Proportionate Share only in (b)
above, any portion of the Expansion Area leased by Tenant shall
be excluded in determining the limit on Tenant's share of the
Award Balance. The Expansion Area shall not be excluded in
determining the value of Tenant's leasehold estate.
If the use and occupancy of the whole or any material
part of the Premises is temporarily taken for a public or
quasi-public use for a period in excess of twelve (12) months,
then at the Tenant's option to be exercised in writing and
delivered to the Landlord not later than Sixty (60) days after
the date the Tenant is notified of such taking, this Lease and
the Term remaining hereunder shall terminate as of the date
possession is taken If this Lease remains in effect, the Tenant
shall be entitled to a proportionate abatement of Rent.
15. Default: Landlord's Rights and Remedies.
(a) The occurrence of any one or more of the following
matters constitutes a default by Tenant under this Lease
("Default"):
(i) Failure by Tenant to pay any Rent within ten (10)
days after written notice thereof from Landlord to Tenant
that same is due hereunder; provided, however, that if
Tenant fails to pay the Rent when due more than three (3)
Page 42 of 74 Pages<PAGE>
times in one calendar year, then for the balance of such
year there shall be no ten (10) day grace period;
(ii) Failure by Tenant to pay, within ten (10) days
after written notice thereof from Landlord to Tenant, any
other moneys required to be paid by Tenant under this Lease
unless a longer period is specifically stated herein;
(iii) Failure by Tenant to cure an unpermitted
assignment or subletting as set forth in Section 12 within
thirty (30) days after written notice thereof from Landlord
to Tenant;
(iv) Failure by Tenant to cure forthwith, immediately
after receipt of notice from Landlord, any hazardous
condition which Tenant has created in violation of law or of
this Lease;
(v) Failure by Tenant to observe or perform any other
non-monetary covenant, agreement, condition or provision of
this Lease, if such failure shall continue for thirty (30)
days after notice thereof from Landlord to Tenant, except
that if such default (other than defaults, which create
situations dangerous to persons or properly) cannot be cured
within said thirty (30) day period, this period shall be
extended, provided that Tenant commences to cure such
default within the thirty (30) day period and proceeds
diligently thereafter to effect such cure ("Extended Cure
Period"); provided, however, Landlord may terminate such
Extended Cure Period on written notice to Tenant at any time
after expiration of ninety days from the first notice of
default sent to Tenant if any of the following have occurred
due to Tenant's default: (1) Landlord is in default under
the First Mortgage or the Second Mortgage, (2) Landlord is
in default under any other space lease in the Building, or
(3) such default materially and adversely affects Landlord's
ownership, maintenance, management, repair or operation of
the Building;
(vi) The levy upon, either under execution or the
attachment by legal process of, the leasehold interest of
Tenant, or the filing or creation of a lien in respect of
such leasehold interest, except as may be permitted herein,
which lien shall not be released or discharged within ninety
(90) days from the date of such filing;
(vii) The Tenant becomes insolvent or bankrupt or makes
an assignment for the benefit of creditors, or applies for
or consents to the appointment of a trustee or receiver for
the Tenant or for the major part of its property;
(viii) A trustee or receiver is appointed for the Tenant
or for the major part of its property and is not discharged
within ninety (90) days after such appointment;
Page 43 of 74 Pages<PAGE>
(ix) Bankruptcy, reorganization, arrangement,
insolvency or liquidation proceedings, or other proceedings
for relief under any bankruptcy law, or similar law for the
relief of debtors, are instituted (A) by the Tenant or
(B) against the Tenant and are allowed against it or are
consented to by it or are not dismissed within ninety (90)
days after such institution; or
(b) If a Default occurs, Landlord shall have the
rights and remedies hereinafter set forth, which shall be
distinct, separate and cumulative and shall not operate to
exclude or deprive the Landlord of any other right or remedy
allowed it by law;
(i) Landlord may terminate this Lease by giving to
Tenant ten (10) days, prior written notice of the Landlord's
election to do so, in which event the Term of this Lease
shall end, and all right, title and interest of the Tenant
hereunder shall expire, on the date stated in such notice;
(ii) Landlord may terminate the right of the Tenant to
possession of the Premises without terminating this Lease by
giving Tenant ten (10) days, prior written notice that
Tenant's right of possession shall end on the date stated in
such notice, whereupon the right of the Tenant to possession
of the Premises or any part thereof shall cease on the date
stated in such notice; and
(iii) Landlord may enforce the provisions of this Lease
and may enforce and protect the rights of the Landlord
hereunder by a suit or suits in equity or at law for the
specific performance of any covenant or agreement contained
herein, or for the enforcement of any other appropriate
legal or equitable remedy, including recovery of all moneys
due or to become due from the Tenant under any of the
provisions of this Lease.
(c) If Landlord exercises either the remedies provided
for in subparagraphs (i) and (ii) of the foregoing Section 15(b),
Tenant shall surrender possession and vacate the Premises and
immediately deliver possession thereof to the Landlord, and
Landlord may then or at any time thereafter re-enter and take
complete and peaceful possession of the Premises, with process of
law, and Landlord may remove all occupants and property
therefrom.
(d) If Landlord terminates the right of Tenant to
possession of the Premises without terminating this Lease, such
termination of possession shall not release Tenant, in whole or
in part, from Tenant's obligation to pay the Rent hereunder for
the full Term. Landlord shall have the right, from time to time,
to recover from the Tenant, and the Tenant shall remain liable
for all Additional Rent and any other sums thereafter accruing as
they become due under this Lease during the period from the date
of such notice of termination of possession to the stated end of
Page 44 of 74 Pages<PAGE>
the Term. In any such case, the Landlord shall comply with all
requirements of the law with respect to mitigation of damages in
reletting of the Premises or any part thereof for the account of
the Tenant for such rent, for such time (which may be for a term
extending beyond the Term of this Lease) and upon such terms as
the Landlord in the Landlord's reasonable discretion shall
determine, and the Landlord shall not unreasonably withhold its
consent to any assignee or subtenant proffered by Tenant,
provided such assignee or subtenant is financially capable of
satisfying Tenant's obligations hereunder and would not otherwise
be objectionable under Sections 12(d) and 12(e)(1) through (4)
hereof. Also in any such case, the Landlord may make reasonable
repairs, alterations and additions in or to the Premises and
redecorate the same to the extent deemed by the Landlord
necessary or desirable and, in connection therewith, change the
locks to the Premises, and the Tenant shall upon receipt of an
invoice pay the cost thereof to the extent set forth in the next
sentence together with the Landlord's reasonable expenses of
reletting. Tenant shall be required to pay for such repairs,
alterations, additions and redecoration only to the extent the
cost of same does not exceed the cost of demolition plus the cost
of building standard improvements in effect at such time, and
shall be obligated to pay all of Landlord's expenses of re-entry
and the cost of reletting, including, but not limited to,
brokerage commissions. Landlord may collect the rents from any
such reletting and apply the same to the payment of Rent herein
provided to be paid by the Tenant, and any excess or residue
shall operate only as an offsetting credit against the amount of
Rent due and owing as the same thereafter becomes due and payable
hereunder, but the use of such offsetting credit to reduce the
amount of Rent due Landlord, if any, shall not be deemed to give
Tenant any right, title or interest in or to such excess or
residue and any such excess or residue shall belong to Landlord
solely; provided that in no event shall Tenant be entitled to a
credit on its indebtedness to Landlord in excess of the aggregate
sum (including Base Rent and Additional Rent) which would have
been paid by Tenant for the period for which the credit to Tenant
is being determined, had no Default occurred. No such re-entry or
repossession, repairs, alterations and additions, or reletting
shall be construed as an eviction or ouster of the Tenant or as
an election on Landlord's part to terminate this Lease, unless a
written notice of such intention be given to Tenant, or shall
operate to release the Tenant in whole or in part from any of the
Tenant's obligations hereunder, and the Landlord may, at any time
and from time to time, sue and recover judgment for any
deficiencies from time to time remaining after the application
from time to time of the proceeds of any such reletting.
(e) In the event of the termination of this Lease by
Landlord as provided for by subparagraph (i) of Section 15(b)
Landlord shall be entitled to recover from Tenant all the fixed
dollar amounts of Rent accrued and unpaid for the period up to
and including such termination date, as well as all other
additional sums payable by the Tenant, or for which Tenant is
liable or in respect of which Tenant has agreed to indemnify
Page 45 of 74 Pages<PAGE>
Landlord under any of the provisions of this Lease, which may be
then owing and unpaid, and all costs and expenses, including
court costs and attorneys' fees incurred by Landlord in the
enforcement of its rights and remedies hereunder, and, in
addition, Landlord shall be entitled to recover as damages for
loss of the bargain and not as a penalty (x) the unamortized
portion of Landlord's Contribution to the cost of Tenant
improvements as defined in the Workletter, (y) the aggregate sum
which, at the time of such termination, represents the excess, if
any, of the present value of the aggregate Rents at the same
annual rate for the remainder of the Term as then in effect
pursuant to the applicable provisions of Sections 1 and 2 of this
Lease, over the then present value of the then aggregate fair
rental value of the Premises for the balance of the Term; such
present worth to be computed in each case on the basis of a 8%
per annum discount from the respective dates upon which such
rentals would have been payable hereunder had this Lease not been
terminated, and (z) any damages in addition thereto, including
reasonable attorneys' fees and court costs, which Landlord shall
have sustained by reason of the breach of any of the covenants of
this Lease other than for the payment of rent.
(f) All property of Tenant removed from the Premises
by Landlord pursuant to any provisions of this Lease or of law
may be handled, removed or stored by the Landlord at the cost and
expense of the Tenant, and the Landlord shall in no event be
responsible for the value, preservation or safekeeping thereof.
Tenant shall pay Landlord for all expenses incurred by Landlord
in such removal and storage charges against such property so long
as the same shall be in Landlord's possession or under Landlord's
control. All such property not removed from the Premises or
retaken from storage by Tenant within thirty (30) days after the
end of the Term, however terminated, shall, at Landlord's option,
(i) be conclusively deemed to have been conveyed by Tenant to
Landlord as by bill of sale without further payment or credit by
Landlord to Tenant; or (ii) be removed by Landlord at Tenant's
sole expense.
(g) Tenant shall pay all of Landlord's costs, charges
and expenses, including court costs and attorneys' fees, incurred
in enforcing Tenant's obligations under this lease or incurred by
Landlord in any litigation, negotiation or transactions in which
Tenant causes the Landlord, without Landlord's fault, to become
involved or concerned.
(h) In the event that Tenant shall be adjudged
bankrupt, or a trustee in bankruptcy shall be appointed for
Tenant, the provisions to Section 35 hereof shall apply.
16. Subordination.
(a) Landlord represents that as of the date hereof,
this Lease is not subordinate to any mortgage or ground lease.
Landlord may hereafter from time to time execute and deliver
mortgage or trust deeds in the nature of a mortgage, both
Page 46 of 74 Pages<PAGE>
referred to herein as "Mortgage," against the Land and Building,
or any interest therein, and may sell and lease back the Land. If
requested by the mortgagee or trustee under any Mortgage, or the
lessor of any ground or underlying lease ("ground lessor"),
Tenant will either at the request of Landlord (a) (subject to the
terms of subsection (c) below) subordinate its interest in this
Lease to said Mortgage, and to any and all advances made
thereunder and to the interest thereon, and to all renewals,
replacements, modifications and extensions thereof, or to said
ground or underlying lease, or to both, or (b) make Tenant's
interest in this Lease superior thereto; and Tenant will promptly
execute and deliver such agreement as may be reasonably necessary
or appropriate to give effect to the foregoing requirements.
Tenant covenants it will not subordinate this Lease to any
mortgage or trust deed other than a First Mortgage ("First
Mortgage") and Second Mortgage (as defined in Section 17 hereof)
without the prior written consent of the holder of the First
Mortgage and Second Mortgage. As a condition of any such
subordination of Tenant's interest in this Lease, Landlord will
obtain the approval of the holder of any such Mortgage to the
terms of this Lease.
(b) It is further agreed that (a) if any Mortgage
shall be foreclosed, or if any ground or underlying lease be
terminated, (i) such foreclosure or termination shall not result
in a cancellation or termination of this Lease without the prior
written consent of the holder of the First Mortgage and of any
ground lessor, (ii) the holder of the Mortgage, ground lessor (or
their respective grantees) or purchaser at any foreclosure sale,
as the case may be, shall not be (x) liable for any act or
omission of any prior landlord (including Landlord), (y) provided
Tenant is enjoying its beneficial occupancy of the Premises and
with the exception of Tenant's rights pursuant to Section 5,
subject to any off-sets or counterclaims which Tenant may have
against a prior landlord (including Landlord) and (z) bound by
any prepayment of Base Rent or Additional Rent which Tenant may
have paid in excess of the amounts then due for the current
month, (iii) the liability of the mortgagee or trustee hereunder
shall exist only so long as such trustee or mortgagee is the
owner of the Building and such liability shall not continue or
survive after further transfer of ownership, and (iv) upon
request of the mortgagee or trustee, if the Mortgage shall be
foreclosed, Tenant will attorn, as Tenant under this Lease, to
the purchaser at any foreclosure sale under any Mortgage or upon
request of the ground lessor, if any ground or underlying lease
shall be terminated, Tenant will attorn as Tenant under this
Lease to the ground lessor, and Tenant will execute such
instruments as may be necessary or appropriate to evidence such
attornment; and (b) this Lease may not be modified or amended so
as to reduce the Rent or shorten the Term provided hereunder, or
so as to adversely affect, in any other respect to any material
extent, the rights of the Landlord, nor shall this Lease be
cancelled or surrendered, without the prior written consent, in
each instance, of the mortgagee trustee under any Mortgage and of
any ground lessor.
Page 47 of 74 Pages<PAGE>
(c) Landlord shall obtain and deliver to Tenant, and
Tenant's agreement to subordinate its interest in this Lease is
conditioned upon receipt of a nondisturbance and attornment
agreement from the holder of the Mortgage and the lessor of any
ground or underlying lease. Such nondisturbance and attornment
agreement shall provide that Tenant's possession hereunder shall
not be disturbed in the event of a foreclosure of the Mortgage or
the exercise of any remedies under any such lease so long as
Tenant is not in Default hereunder and shall contain such
additional subordination and other provisions as are customarily
contained in such instruments.
17. Mortgagee Protection. Tenant agrees to give any
holder of any First Mortgage (as defined in Section 16 hereof),
or the holder of any second mortgage which mortgagee is secured
and/or compensated in part by payments of cash flow and/or
residual proceeds derived from operation, sale or refinancing of
the Building ("Second Mortgage") by registered or certified mail,
a copy of any notice or claim of default served upon the Landlord
by Tenant, provided that prior to such notice Tenant has been
notified in writing (by way of service on Tenant of a copy of an
assignment of Landlord's interests in leases, or otherwise) of
the address of such First Mortgage holder or such Second Mortgage
holder. Tenant further agrees that if Landlord shall have failed
to cure such default within the applicable grace period, or if no
grace period is specified, within thirty (30) days after such
notice to Landlord (or if such default cannot be cured or
corrected within that time, then such additional time as may be
necessary if Landlord has commenced within such thirty (30) days
and is diligently pursuing the remedies or steps necessary to
cure or correct such default, but in no event beyond sixty (60)
days after such notice), then the holder of the First Mortgage
shall have sixty (60) days beyond the initial thirty (30) day
period within which to cure or correct such default.
Notwithstanding the foregoing, provided that Tenant continues to
have effective use and occupancy of the Premises for the normal
operation of Tenant's business, the holder of the First Mortgage
shall have sixty days after the date upon which it obtains
possession of the Building to cure or correct such default, if
such default is of such a nature that it cannot be cured by the
holder of the First Mortgage until it obtains possession and such
holder of the First Mortgage diligently proceeds to pursue its
remedies.
18. Quiet Enjoyment. Upon payment by the Tenant of the
rent hereunder (including Base Rent and Additional Rent), and
upon the observance and performance of all the covenants, terms
and conditions on Tenant's part to be observed and performed, and
further subject to the provisions of Sections 16 and 17 hereof,
Tenant shall peaceably and quietly hold and enjoy the Premises
for the Term hereby demised without hindrance or interruption by
Landlord or any other person or persons lawfully or equitably
claiming by, through or under the Landlord, subject nevertheless,
to the terms and conditions of this Lease.
Page 48 of 74 Pages<PAGE>
19. Subrogation and Insurance.
(a) Landlord and Tenant agree to use their best
efforts (including payment of extra premiums of a reasonable
amount) to have all fire and extended coverage and material
damage insurance which may be carried by either of them, endorsed
with a clause providing that any release from liability of or
waiver of claim for recovery from the other party entered into in
writing by the insured thereunder prior to any loss or damage
shall not affect the validity of said policy or the right of the
insured to recover thereunder and, providing further, that the
insurer waives all rights of subrogation which such insurer might
have against the other party.
The Landlord and Tenant each hereby waive its right of
recovery against the other and each releases the other from any
claim arising out of loss, damage or destruction to the Building,
Premises or contents thereon or therein, to the extent its
property is covered by a valid policy of insurance, (which shall
not include self insurance certificates of Tenant) and to the
extent of recovery collectible under such policy, whether or not
such loss, damage or destruction may be attributable to the
negligence of either party or its respective agent, visitor,
contractor, servant or employee.
(b) Tenant shall carry insurance during the entire
Term hereof insuring Tenant and Landlord, Landlord's agents and
beneficiaries and other parties, reasonably requested by
Landlord, as their interests may appear, with terms, coverages
and in companies reasonably satisfactory to Landlord and with
such commercially reasonable increases in limits as Landlord may
from time to time request, but initially Tenant shall maintain
the following coverages in the following amounts:
(1) Comprehensive general public liability insurance,
including contractual liability, in an amount not less than
$10,000,000.00 combined single limit or such other type of
liability coverage customarily carried by tenants in first
class office buildings.
(2) Insurance against fire, sprinkler leakage,
vandalism, and the extended coverage perils for the full
replacement cost of all Tenant leasehold improvements, plus
all additions, improvements and alterations thereto, owned
or made by or on behalf of Tenant, if any, (unless Tenant
has exercised its Insurance Option, as defined below) and of
all office furniture, trade fixtures, office equipment,
merchandise and all other items of Tenant's property on the
Premises.
Tenant shall, prior to the commencement of the Term,
furnish to Landlord policies or certificates evidencing such
coverage, which policies or certificates shall state that such
insurance coverage may not be reduced, cancelled or not renewed
without at least thirty (30) days' prior written notice to
Page 49 of 74 Pages<PAGE>
Landlord and Tenant (unless such cancellation is due to
non-payment of premium, and in that case only ten (10) days'
prior written notice shall be sufficient).
Landlord agrees to maintain (i) all risk insurance
based on full replacement cost of the Building during the Term
hereof and at Tenant's option, ("Insurance Option") Tenant's
leasehold improvements as specified by Tenant, and
(ii) comprehensive general liability insurance, including
contractual liability insuring Landlord's obligations hereunder,
in an amount not less than $25,000,000 combined single limit, or
such other type of liability coverage customarily carried by
Landlords of first class office buildings. Tenant agrees to pay
the portion of the premium applicable to Tenant's leasehold
improvements, if any, within thirty (30) days of Landlord's
submission of an invoice for same. Such invoice shall be
accompanied by a statement from the insurance company or agents
therefore as to the premium allocation.
(c) Tenant shall comply with all applicable laws and
ordinances, all orders and decrees of court and all requirements
of other governmental authority, and shall not directly or
indirectly make any use of the Premises which (i) is thereby
prohibited or dangerous to person or property or,
(ii) jeopardizes any insurance coverage, or (iii) increases the
cost of insurance or require additional insurance coverage,
unless Tenant agrees to pay such increased premium.
(d) Notwithstanding anything contained herein to the
contrary, Landlord agrees that Tenant may self-insure with
respect to all insurance required pursuant to this Lease,
provided that Tenant maintains sufficient liquidity to pay claims
in the amount of the insurance which Tenant would otherwise be
required to maintain pursuant to Section 19(b) hereof.
20. Nonwaiver. No waiver of any condition expressed in
this Lease shall be implied by any neglect of Landlord to enforce
any remedy on account of the violation of such condition whether
or not such violation be continued or repeated subsequently, and
no express waiver shall affect any condition other than the one
specified in such waiver and that one only for the time and in
the manner specifically stated. Without limiting the Landlord's
rights under the provisions of Section 8, it is agreed that no
receipt of moneys by Landlord from Tenant after the termination
in any way of the Term or of Tenant's right of possession
hereunder or after the giving of any notice shall reinstate,
continue or extend the Term or affect any notice given to Tenant
prior to the receipt of such moneys. It is also agreed that after
the service of notice or the commencement of a suit or after
final judgment for possession of the Premises, Landlord may
receive and collect any moneys due, and the payment of said
moneys shall not waive or affect said notice, suit or judgment.
21. Estoppel Certificate. The Tenant agrees that from
time to time upon not less than fifteen (15) days' prior request
Page 50 of 74 Pages<PAGE>
by Landlord, or the holder of any Mortgage or any ground lessor,
the Tenant (or any permitted assignee, subtenant, licensee,
concessionaire or other occupant of the Premises claiming by,
through or under Tenant) will deliver to Landlord or to the
holder of any Mortgage, Second Mortgage or ground lessor, a
statement in writing signed by Tenant certifying (a) that this
Lease is unmodified and in full force and effect (or if there
have been modifications, that the Lease as modified is in full
force and effect and identifying the modifications); (b) the date
upon which Tenant began paying Rent and the dates to which the
Rent and other charges have been paid; (c) that the Landlord is
not in default under any provision of this lease, or, if in
default, the nature thereof in detail; (d) that to the best of
Tenant's knowledge the Premises have been completed in accordance
with the terms hereof and Tenant is in occupancy and paying Rent
on a current basis with no rental offsets or claims; (e) that
there has been no prepayment of Rent other than that provided for
in the Lease; (f) that there are no actions, whether voluntary or
otherwise, pending against Tenant under the bankruptcy laws of
the United States or any State thereof; and (g) such other
matters as may be reasonably requested by the Landlord, holder of
the Mortgage or ground lessor. For purposes of this Section 21
only, the time period for curing a default as set forth in
Section 15(v) shall be reduced to a fifteen (15) day period.
22. Tenant Authorization. Tenant (a) represents that
this Lease has been duly authorized, executed and delivered by
and on behalf of the Tenant and constitutes the valid and binding
agreement of the Tenant in accordance with the terms hereof and
(b) if Landlord so requests, it shall deliver to Landlord or its
agent, concurrently with the delivery of this Lease executed by
Tenant, an opinion of counsel as to (a) above subject to
customary exceptions.
23. Landlord Authorization. Landlord (a) represents
that this Lease has been duly authorized, executed and delivered
by and on behalf of the Landlord and constitutes the valid and
binding agreement of the Landlord in accordance with the terms
hereof, and (b) if Tenant so requests, lt shall deliver to
Tenant, concurrently with the delivery of this Lease executed by
Landlord, an opinion of counsel as to (a) above, subject to
customary exceptions.
24. Real Estate Brokers. Landlord and Tenant represent
and warrant that neither party has dealt with any broker in
connection with this Lease other than CUSHMAN & WAKEFIELD (whose
commission, if any, shall be paid by Landlord pursuant to
separate agreement) and agree to indemnify and hold harmless one
another from all damages, liability and expense (including
reasonable attorneys' fees) arising from any claims or demands of
any other broker, or brokers or finders claiming to have dealt
with such parties for any commission alleged to be due such
broker or brokers or finders in connection with the negotiation
of this Lease.
Page 51 of 74 Pages<PAGE>
25. Notices. In every instance where it shall be
necessary or desirable for Landlord to serve any notice or demand
upon Tenant, it shall be sufficient to send a written or printed
copy of such notice or demand by United States registered or
certified mail, postage prepaid, addressed to AT&T
Communications, Inc., Attn: B.C. Hoette, Manager -- Real Estate
Planning, 300 S. Riverside, 2nd floor, Chicago, Illinois 60606,
with copies to AT&T Resource Management Corporation at
222 Mt. Airy Road, Basking Ridge, New Jersey 07920, Attn:
Manager, Real Estate Department and Vice President and General
Attorney, until further notice from Tenant in which event the
notice or demand shall be deemed to have been served at the time
that same was posted. In each such notice to Tenant, Landlord
shall state the time period in which Tenant is required to
respond, if any, pursuant to the applicable provisions of the
Lease. Any such notice or demand to be given by Tenant to
Landlord shall, until further notice from Landlord or its agent,
be served personally or sent by United States registered or
certified mail, postage prepaid, to Stein & Company, 225 West
Monroe, Inc., Attn: Richard Rosenstein, Esq., Suite 1630,
208 South LaSalle Street, Chicago, Illinois 60604 with a copy of
said Notice to Rudnick & Wolfe, Attention: Howard Kane, Esq. or
Robert H. Goldman, Esq., 30 North LaSalle Street, Chicago,
Illinois 60602. Mailed communications to Landlord shall be deemed
to have been served at the time that same were posted.
26. Delivery of Possession and Liquidated Damages.
Possession of the Premises shall be delivered in
accordance with the Workletter. Notwithstanding anything
contained therein to the contrary, in the event that Landlord
shall fail (for reasons other than Tenant Delay as defined in the
Workletter) to substantially complete (a) the Shell and Core Work
to the level that Tenant is able to occupy and use the Premises
or applicable portion thereof without material and adverse
interference and interruption, with reasonable access to the
Premises and with the areas in and around the Building used by
Tenant to be maintained ln a safe, nonhazardous condition, and
(b) the Tenant Work, for each of the Phases on the dates set
forth in Paragraph l(c) of the Workletter, subject to delays due
to Force Majeure which ln no event, may exceed six months from
the date such Phase of the Tenant Work was to be completed, for
which no liquidated damages may be assessed, Landlord shall pay
Tenant as liquidated damages and as Tenant's sole remedy the
following amounts:
(a) $ First Month for each Phase not
completed
(b) $ Second Month for each Phase not
completed
(c) $ Third Month for each Phase not
completed
Page 52 of 74 Pages<PAGE>
(d) $ Fourth month for each Phase not
completed
(e) $ Fifth Month for each Phase not
completed
(f) $ Sixth Month for each Phase not
completed
(g) $ Monthly thereafter until
substantially complete
Landlord shall pay liquidated damages due and owing
hereunder within ten (10) days after the end of each such month.
In the event Landlord fails to make any such payment ("Defaulted
Payment") Tenant may, at its option, set-off the amount of the
Defaulted Payment, plus interest as set forth below, against Base
Rent due and payable hereunder subsequent to the rent abatement
set forth in Section 37 hereof. Each such Defaulted Payment shall
bear interest from the date due until the date set-off against
Base Rent at the rate of per annum.
In the event Tenant terminates the Lease pursuant to
Section 6(e) of the Workletter, the partnership owning the
beneficial interest in Landlord, AT&T/Stein Partnership has, by
guaranty dated concurrently herewith ("Termination Guaranty"),
guaranteed (i) the payment of any liquidated damages due to
Tenant pursuant to this Section 26 and (ii) the refund to Tenant
of all deposits or payments pursuant to Section 6(e) of the
Workletter. The liability of the AT&T/Stein Partnership shall be
limited to the assets and property of such Partnership.
27. Miscellaneous.
(a) Each provision of this Lease shall extend to and
shall bind and inure to the benefit not only of Landlord and
Tenant, but also their respective heirs, legal representatives,
successors and assigns, but this provision shall not operate to
permit any transfer, assignment, mortgage, encumbrance, lien,
charge, or subletting contrary to the provisions of this Lease.
(b) All of the agreements of Landlord and Tenant with
respect to the Premises are contained in this Lease; and no
modification, waiver or amendment of this Lease or of any of its
conditions or provisions shall be binding upon Landlord or Tenant
unless in writing signed by Landlord and Tenant.
(c) Submission of this instrument for examination
shall not constitute a reservation of or option for the Premises
or in any manner bind Landlord and no lease or obligation on
Landlord or Tenant shall arise until this instrument is signed
and delivered by Landlord and Tenant.
(d) The word "Tenant," whenever used herein, shall be
construed to mean Tenants or any one or more of them in all cases
Page 53 of 74 Pages<PAGE>
where there is more than one Tenant; and the necessary
grammatical changes required to make the provisions hereof apply
to corporations or other organizations, partnerships or other
entities, or individuals, shall, in all cases, be assumed as
though in each case fully expressed.
(e) Clauses, plats, and riders, if any, signed by
Landlord and Tenant and endorsed on or affixed to this Lease are
a part hereof.
(f) The headings of Sections are for convenience only
and do not limit, expand or construe the contents of the
Sections.
(g) The Landlord's title is and always shall be
paramount to the title of Tenant, and nothing in this Lease
contained shall empower Tenant to do any act which can, shall or
may encumber the title of Landlord.
(h) Time is of the essence of this Lease and of each
and all provisions hereof.
(i) All amounts (including, without limitation, Base
Rent and Additional Rent) owed by Tenant to Landlord pursuant to
any provision of this Lease shall bear interest from the date of
the expiration of the applicable required notice period until
paid at the annual rate of one percent (1%) in excess of the rate
of interest announced from time to time by Continental Illinois
National Bank and Trust Company of Chicago (or other Bank or
other financial institution designated by Landlord), at Chicago,
Illinois, as its prime rate, changing as and when said prime rate
changes, unless a lesser rate shall then be the maximum rate
permissible by law with respect thereto, in which event said
lesser rate shall be charged.
(j) The invalidity of any provision of this Lease
shall not impair or affect in any manner the validity,
enforceability or effect of the rest of this Lease.
(k) All understandings and agreements, oral or
written, heretofore made between the parties hereto are merged in
this Lease and in those two certain agreements dated May 16,
1986, which documents alone fully and completely expresses the
agreement between Landlord (and its beneficiaries and their
agents) and Tenant.
(l) Whenever the approval or consent of either
Landlord or Tenant is required, such consent or approval shall
not be unreasonably withheld or delayed. Notwithstanding any of
the terms and conditions contained herein, with respect to
approvals or consents required pursuant to the terms of this
Lease, Landlord shall have no obligation to deal with any
subtenant of Tenant, but may look solely to Tenant for same.
Page 54 of 74 Pages<PAGE>
(m) Landlord and Tenant represent that they will
comply (unless exempted) with Attachments A, B and C, identified
as Exhibit K to this Lease and rules and regulations issued in
connection therewith (collectively the "Attachments") as such
Attachments may be amended from time to time.
(n) In computing any period of time pursuant to this
Lease, the day of the act, date of notice, event or default from
which the designated period of time begins to run will not be
included. The last day of the period so counted will be included,
unless it is a Saturday, Sunday or a legal holiday in the State
of Illinois, in which event the period runs until the end of the
next day which is not a Saturday, Sunday or such legal holiday.
Any time period which commences to run as of the date of this
Lease or as of the date hereof shall be deemed to have commenced
to run as of the date this Lease was executed by Landlord and
Tenant as opposed to December 31, 1985.
28. Landlord. The term "Landlord" as used in this
Lease means only the owner or owners from time to time of the
Building so that in the event of any assignment, transfer,
conveyance or sale, once or successively, of the Building, or any
assignment of this Lease by Landlord, the then Landlord making
such sale, transfer, conveyance or assignment shall be and hereby
is entirely freed and relieved of all covenants and obligations
of Landlord hereunder accruing after such sale, conveyance or
assignment, and Tenant agrees to look solely to such purchaser,
transferee, grantee or assignee with respect thereto. The holder
of a mortgage or trust deed (or assignment in connection with a
mortgage or trust deed) shall not be deemed such a purchaser,
grantee or assignee under this Section 28. This Lease and the
obligations of Tenant hereunder shall not be affected by any such
assignment, transfer, conveyance or sale, and Tenant agrees to
attorn to the purchaser, grantee or assignee.
29. Title and Covenant Against Liens. The Landlord's
title is and always shall be paramount to the title of the Tenant
and nothing in this Lease contained shall empower the Tenant to
do any act which can, shall or may encumber the title of the
Landlord. Tenant covenants and agrees not to suffer or permit any
lien of mechanics or materialmen to be placed upon or against the
Premises, the Building, the Land or against the Tenant's
leasehold interest in the Premises, except as otherwise
permitted, and, in case of any such lien attaching, to
immediately pay and remove same. Notwithstanding the foregoing,
Tenant shall have the right to contest the validity of any such
lien provided such lien is bonded or Tenant has otherwise
provided adequate security to Landlord for such lien claim.
Tenant has no authority or power to cause or permit any lien or
encumbrance of any kind whatsoever, whether created by act of
Tenant, operation of law or otherwise, to attach to or be placed
upon the Premises, the Land or the Building, and any and all
liens and encumbrances created by Tenant shall attach only to
Tenant's interest in the Premises. If any such liens so attach
and Tenant fails to pay and remove same within thirty (30) days,
Page 55 of 74 Pages<PAGE>
or to bond same or provide adequate security as aforesaid,
Landlord, at its election, may pay and satisfy the same and in
such event the sums so paid by Landlord, with interest from the
date of payment to the date of reimbursement at the rate set
forth in Section 27(i) hereof for amounts owed Landlord by Tenant
shall be deemed to be additional rent due and payable by Tenant
upon receipt of an invoice for same.
30. Leasing of Additional Premises.
(a) Provided that this Lease is then in full force and
effect and that Tenant is not in default hereunder, as defined in
Section 31, Tenant shall have the following option rights
("Expansion Option"):
(i) By written notice or notices to Landlord at any
time or times during the period commencing with the date of
execution of this Lease and terminating 547 days after the
Commencement date ("Initial Option Period") Tenant shall
have the option to lease all or any portion, provided such
portion consists of a full floor ("Designated Option Space")
of the area ("Expansion Area") described on Exhibit L. The
Designated Option Space shall, when so leased, be included
in this Lease for the balance of the Term at a Base Rent
calculated at the rate of
per square foot of Rentable Area, and otherwise
subject to the terms, conditions and provisions of this
Lease. The Rentable Area of the Premises as defined in
Section 2(a)(ix) shall be increased by the portion so
leased, and Tenant's Proportionate Share, as defined in
Section 2(a)(x) shall be increased accordingly. Tenant shall
exercise its option during the Initial Option Period so that
the floors are contiguous to one another and contiguous to
the combined Premises hereunder and under the ATT-IS Lease.
As the Designated Option Space is added to the Lease,
Tenant's exclusive use of the portion of the bank of
elevators serving its space (both passenger and freight)
shall be expanded accordingly.
(ii) During the period commencing with the termination
of the Initial Option Period and ending upon the earlier of
(1) three years from the Commencement Date or (2) the date
on which Breakeven Leasing (as defined in Section 12(d))
occurs ("Second Option Period"), Tenant shall have a right
of first offer to lease all or any portion of that portion
of the Expansion Area not leased by Tenant during the
Initial Option Period. In the event that Landlord shall, at
any time during this Second Option Period, desire to lease
all or any portion of the Expansion Area (including all or
any portion of a floor) to another proposed tenant, and
shall have received a serious inquiry to lease all or a
portion of the Expansion Space from such proposed tenant,
Landlord shall so notify Tenant in writing specifying the
name of the proposed Tenant and a description of the space
proposed to be leased.
Page 56 of 74 Pages<PAGE>
(iii) During the period commencing with the termination
of the Second Option Period and terminating on the fifth
anniversary of the Commencement Date of the Lease ("Third
Option Period"), Tenant shall have a right of first offer to
lease all or any portion of that portion of the Expansion
Area not leased by Tenant during the Initial Option Period
and the Second Option Period. In the event that Landlord
shall, at any time during this Third Option Period, desire
to lease all or any portion of the Expansion Area (including
all or any portion of a floor) to another proposed tenant,
and shall be conducting serious negotiations with such
tenant to lease all or a portion of the Expansion Area to
such proposed tenant, Landlord shall so notify Tenant in
writing, specifying the name of the proposed tenant and a
description of the space proposed to be leased.
(b) Tenant shall, within fifteen (15) days after the
receipt by it of a notice pursuant to Subsection (ii) or (iii)
above, notify Landlord as to whether or not it desires to
exercise its option to acquire the space described in such notice
("Offer Option Space"). In the event Tenant either notifies
Landlord that it elects not to acquire the Offer Option Space, or
fails to notify Landlord at all within such fifteen (15) day
period, Landlord shall have the right, during the one hundred
twenty (120) day period commencing with the date Landlord's
notice was received by Tenant, to lease the Offer Option Space to
such proposed tenant. If the Offer Option Space is not leased to
such Tenant as aforesaid within such period, Tenant's option with
respect thereto shall automatically be fully reinstated.
(c) The Offer Option Space shall, when so leased, be
included in this Lease for the balance of the Term at a Base Rent
calculated at the rental rate per square foot required to be
received on all remaining unrented Rentable Area at 95% occupancy
in the Building, after taking into account the Rent received
under this Lease for the Premises, the Designated Option Space
pursuant to Section 30(a)(i) and previously leased Offer Option
Space pursuant to Section 30(a) (ii) or (iii), to pay all debt
service and escrow and reserve requirements on all existing
indebtedness, participating debt and any return (guaranteed or
preferred) payable on equity capital. The Offer Option Space
shall otherwise be subject to the terms, conditions and
provisions of this Lease, except as set forth in (d) below. The
Rentable Area of the Premises as defined in Section 2(a)(ix)
shall be increased by the portion so leased, and Tenant's
Proportionate Share, as defined in Section 2(a)(x) shall be
increased accordingly. To the extent a whole floor (either at one
time or in parts) is added to the Lease, Tenant's exclusive use
of the portion of the bank of elevators serving its space (both
passenger and freight) shall be expanded accordingly to the
extent feasible.
(d) In the event that Tenant exercises its option to
lease the Designated Option Space as set forth in (a)(i) above
during the Initial Option Period, Landlord and Tenant shall
Page 57 of 74 Pages<PAGE>
execute a Workletter in the form attached hereto and the
provisions thereof shall be applicable to the Designated Option
Space, provided, however, that (i) Landlord and Tenant shall
agree on a schedule to be substituted for the "Schedule" attached
to and defined in the Workletter and (ii) the Workletter shall
exclude provisions relating to Shell and Core Work (as defined in
the Workletter) other than provisions relating to the tenant
standard work package; provided, however, that the Commencement
Date of this Lease with respect to the Designated Option Space
shall be the earlier of substantial completion of the tenant
improvements or the first day immediately following the
expiration of the Initial Option Period (the "Designated Option
Space Commencement Date"). In the event that completion of the
tenant work shall occur prior to the termination of the Initial
Option Period, Base Rent for the Designated Option Space with
respect to which the option has been exercised shall not commence
until the first day following the expiration of the Initial
Option Period. Failure to complete the tenant improvements for
the Designated Option Space by the Designated Option Space
Commencement Date shall not affect Landlord's obligation to
compLete such work pursuant to the Workletter or Tenant's
obligation to lease the Designated Option Space upon exercise of
the option set forth in (a)(i) above.
Landlord hereby covenants that all Shell and Core work,
as defined in the Workletter, in the Expansion Area shall be
substantially completed prior to the Commencement Date of the
Lease. On exercise of the Expansion Area option during the
Initial Option Period, Landlord and Tenant shall execute a
workletter in the form attached (with the Expansion Space
Schedule attached thereto) and Landlord shall cooperate with
Tenant to complete tenant improvements expeditiously. Failure on
Landlord's part to comply with the terms of this paragraph shall
delay the commencement of Base Rent for the Designated Option
Space for the period of delay in completion caused by Landlord.
In the event that Tenant exercises its option to lease the Offer
Option Space during the Second Option Period or the Third Option
Period, the provisions of this Subsection (d) shall apply except
that (1) the Commencement Date of this Lease with respect to such
Designated Option Space shall be the earlier of substantial
completion of the tenant improvements or one hundred twenty (120)
days following notice of exercise of the option pursuant to
Sub-section 30(a)(ii) or (iii) above, and (2) Landlord's Contri-
bution as defined in the Workletter shall be reduced to per
rentable square foot.
(e) Tenant acknowledges that, depending on the number
of floors Tenant adds to the Premises at any one time, elevator
service to the Premises may be below that normally offered in
first-class office buildings. Landlord agrees, at Tenant's
request to promptly ascertain and advise Tenant of the effect on
elevator service of any proposed exercise of any option pursuant
to the terms of this Section 30.
Page 58 of 74 Pages<PAGE>
(f) Landlord and Tenant acknowledge that a letter
agreement dated concurrently with this Lease ("Letter Agreement")
a copy of which has been attached as Exhibit M, has been entered
into by and among Tenant, ATT-IS and Landlord in which Tenant and
ATT-IS have agreed to designate certain representatives to deal
with Landlord with respect to, among other things, the exercise
of the options set forth in Sections 30, 33 and 34. Said letter
shall be binding on Landlord and Tenant and, in the event of a
conflict between said letter agreement and the provisions of this
Lease, said letter agreement shall control.
31. Option to Extend. Provided that this Lease is then
in full force and effect and that Tenant is not in default under
this Lease, both on the date of exercise of the option and the
date of commencement of an Option Term, Landlord hereby grants to
Tenant the option ("Extension Option") to extend the Term of this
Lease on the same terms, conditions and provisions as contained
in this Lease, except as otherwise provided herein, for four
consecutive periods of five years each after the expiration of
the Term (individually an "Option Term" and collectively the
"Option Terms"). For purposes of Section 30, this Section 31, and
Sections 33 and 34 "default" shall mean either (a) a material
default which at the time of exercise is not cured, in which
event Tenant's option rights shall be tolled during the cure
period but not terminated or (b) a Default. Each option to extend
shall be exercisable by written notice from Tenant to Landlord
given no later than twelve (12) months prior to the expiration of
the Term or the expiration of the prior Option Term ("Final
Exercise Date"), time being of the essence. If not so exercised,
Tenant's further options, under this Section 31 shall thereupon
expire. Within the eight (8) month period prior to the Final
Exercise Date ("Calculation Date"), Tenant shall give Landlord
written notice of Tenant's opinion of what the base rent for the
Opt on Term ("Option Term Base Rent") should be. Within twenty
(20) days of its receipt of Tenant's notice, Landlord shall
provide Tenant with written notice of whether Landlord agrees
with Tenant's opinion of the Option Term Base Rent or, if not,
Landlord's opinion of Option Term Base Rent. Both Landlord and
Tenant's opinions on Option Term Base Rent shall be based on a
calculation of ninety percent (90%) of the "net effective market
rent" prevailing at the time the renewal terms would commence for
tenants renting space of a comparable size to the Premises or, if
both Tenant and ATT-IS (pursuant to the ATT-IS Lease), exercise
rights to extend, of comparable size to the combined Tenant and
ATT-IS Premises. "Net effective market rent" shall take into
account various tenant concessions applicable at the time, such
as rent abatement and improvement allowances, in excess of
building standard allowances or workletter being offered to new
tenants but excluding equity participation. If Landlord and
Tenant cannot agree on the Option Term Base Rent, then Tenant may
inform Landlord that it elects to proceed with the appraisal
procedure set forth below. There shall be no limit on the number
of written notices Tenant or Landlord may deliver to the other in
their efforts to agree upon the Option Term Base Rent, except
that Tenant must inform Landlord by written notice on or before
Page 59 of 74 Pages<PAGE>
one hundred twenty (120) days after Tenant's first notice to
Landlord hereunder, whether Tenant elects to proceed with the
appraisal procedure. In the event that Tenant fails to respond or
so inform Landlord, Tenant shall be deemed to have abandoned the
request for determination of Option Term Base Rent.
In the event Tenant and Landlord cannot agree on Option
Period Base Rent, and Tenant has provided written notice to
Landlord of Tenant's desire to have such rent determined through
an appraisal procedure then, Landlord and Tenant shall each pick
a real estate broker within ten (10) days of Tenant's notice.
Such broker shall have at least ten (10) years of brokerage
experience, have a broad knowledge of the office leasing market
in downtown Chicago and have a good reputation in the Chicago
real estate community. In the event the two brokers cannot reach
agreement on Option Term Base Rent, taking into account the
parameters set forth in the preceding paragraph within thirty
(30) days after the matter has been submitted to them, then they
shall appoint a third broker who meets the aforesaid standards,
within ten (10) days after the expiration of the thirty (30) day
period. The decision of the brokers shall be rendered within
twenty (20) days after appointment of the third broker, and such
decisions shall be in writing and in duplicate and one
counterpart thereof shall be delivered by them to Landlord and
one to Tenant. The decision of a majority of the brokers shall be
binding, final and conclusive on all the parties in the event
Tenant exercises its option to extend the Term of this Lease
prior to the Final Exercise Date. Landlord and Tenant shall split
equally the fees of the third broker unless Tenant, after
determination of the Option Term Base Rent, elects not to
exercise the option to extend, in which event Tenant shall pay
the fees. Any failure of Landlord to comply with the appraisal
procedure shall delay by an equal number of days, the Final
Exercise Date.
In the event Tenant exercises its Extension Option for
the first Option Term, Landlord agrees, prior to the commencement
of such Option Term, to repaint and recarpet the Premises at
Landlord's expense. The paint and carpet shall be of a similar
quality to that specified on Attachment B to the Workletter.
Landlord shall offer Tenant a reasonable choice of color.
Upon the valid exercise by Tenant of each such option
to extend, at the request of either party hereto and within
thirty (30) days after such request, Landlord and Tenant shall
enter into a written supplement to this Lease incorporating the
terms, conditions and provisions applicable to the Option Term as
determined in accordance herewith.
32. Tenant Release Rights. Provided that this Lease is
then in full force and effect and that Tenant is not in default
hereunder, as defined in Section 31, Tenant may exercise the
following rights to terminate the Lease insofar as the Lease
relates to the space to be released to Landlord as described
herein:
Page 60 of 74 Pages<PAGE>
(i) By notice to Landlord given not later than one (1)
year prior to the tenth anniversary of the Commencement
Date, Tenant shall have the option to terminate the Lease
("Release Option A") as to one full floor designated by
Tenant ("Release Area A") effective as of the tenth
anniversary of the Commencement Date.
(ii) By notice to Landlord given not later than one (1)
year prior to the fifteenth anniversary of the Commencement
Date, Tenant shall have the option to (a) exercise Release
Option A, if not previously exercised, and/or (b) terminate
the Lease ("Release Option B") as to one full floor
designated by Tenant effective ("Release Area B") as of the
fifteenth anniversary of the Commencement Date.
Release Area A and Release Area B shall be contiguous
and shall commence at the highest floor in the combined Premises
occupied by Tenant hereunder and the tenant under the ATT-IS
Lease. Possession of Release Area A and/or B shall be delivered
to the Landlord on the effective date of such termination in the
manner provided in Section 7 hereof. Landlord and Tenant shall
execute an amendment to this Lease, setting forth the reduced
number of square feet of Rentable Area in the Premises and
setting forth the reduced Tenant's Proportionate Share. In the
event Tenant shall fail to notify Landlord of its election to
exercise the rights in (i) and (ii) above, Tenant shall be deemed
to have waived said rights.
Tenant acknowledges that, depending on the number of
floors Tenant releases to Landlord, Landlord shall have the right
to allocate elevators then currently serving the remaining
Premises to serve Release Area A and/or Release Area B and that
elevator service to the Premises after the release may be below
that normally offered in first-class office buildings. Landlord
agrees, at Tenant's request to promptly ascertain and notify
Tenant of the effect on elevator service of any proposed release
of space pursuant to the terms of this Section 32.
33. Relocation Rights. With respect to all space other
than the Premises ("Relocation Space") located on Tenant's
elevator bank (floors 3 through 28), Landlord hereby agrees that,
provided this Lease is then in full force and effect and that
Tenant is not in default, as defined in Section 31 hereof, on
twelve (12) months written notice from Tenant, Landlord will
relocate any tenant in the Relocation Space to comparable space
in the Building, provided such comparable space is available and
such vacated space shall be added to this Lease on the same terms
and conditions (including Base Rent) as such tenant had leased
the space until expiration of such lease and after expiration of
same, for the balance of the Term, on the same terms and
conditions contained herein except that Base Rent for such space
shall be ninety percent 90% of Landlord's quoted rate for
comparable space in the Building. Landlord agrees to use its best
efforts to cooperate with Tenant in connection with the terms of
this Section 33. Tenant agrees to pay the costs and expenses as
Page 61 of 74 Pages<PAGE>
set forth in the Relocation Clause (as hereinafter defined) in
connection with such relocation, including any rent differential
for the term of such lease and any renewal options. In the event
of any dispute regarding such costs and expenses, Tenant shall
resolve the dispute with the tenant .o be relocated. Landlord
shall include a provision in each lease of the Relocation Space
permitting such relocation ("Relocation Clause"). The Relocation
Clause shall be in the form attached hereto as Exhibit N. In the
event the tenant refuses to relocate, in violation of the terms
of the lease, Landlord, on Tenant's behalf, and at Tenant's ex-
pense, agrees to enforce the Relocation Clause of such lease. In
no event shall Landlord be liable for such tenant's failure to
perform in accordance with the provisions of such lease. Landlord
hereby agrees to include in each lease of the Relocation Space a
clause obligating the tenant under such lease to pay Landlord's
attorney's fees in the event of a dispute thereunder.
34. Right of First Offer. Provided this Lease is then
in full force and effect and that Tenant is not in default, as
defined in Section 31 hereof, during the Term of this Lease,
Landlord hereby grants to Tenant the rights herein contained with
respect to all office space in the Building (other than Tenant's
Premises) and all basement storage space (the "Option Space").
With respect to the Expansion Area, the terms of Section 30 shall
govern for the period of time prior to the fifth anniversary of
the Commencement Date of the Lease. Subsequent to such date the
terms of this Section 34 shall govern, and the Expansion Area, to
the extent not previously included in the Premises, shall be
deemed to be Option Space. If during the Option Period, Landlord
desires to lease any portion of the Option Space constituting a
full floor or more or as to basement storage space, or the
Expansion Area, a partial floor or full floor, ("Designated
Option Space") it shall notify Tenant in writing of the basic
"Business Terms and Conditions" (as hereinafter defined) upon
which it is prepared to lease the Designated Option Space and
Tenant shall have the right for a period of fifteen (15) days
from and after the giving of such notice within which to notify
Landlord that it will lease the Designated Option Space upon
substantially the same Business Terms and Conditions contained in
the Landlord's Notice, in which event Landlord and Tenant shall
proceed to negotiate in good faith to finalize such lease.
Business Terms and Conditions as to office space shall include
Base Rent, CPI Adjustment, if any, Operating Expense Adjustment,
tenant improvement work to be done to the Designated Option
Space, free rent, if any, extension options and any other
financial terms. Business Terms and Conditions as to basement
storage space shall include only a base rent charge. If Tenant
elects to rent the Designated Option Space, then the Designated
Option Space shall be added to the Lease for the term set forth
in Landlord's notice as aforesaid and shall otherwise be governed
by the terms and conditions of the Lease. If Tenant fails to
notify Landlord in writing that it will accept the Designated
Option Space within the prescribed fifteen (15) day period or
fails to promptly execute a lease or an amendment to this Lease
upon substantially such terms, Landlord may lease the Designated
Page 62 of 74 Pages<PAGE>
Option Space to another tenant and upon execution of such a
lease, Tenant's rights under this paragraph shall be terminated
as to such Option Space, but shall be reinstated on the
termination of such lease as it may be extended by Landlord and
such tenant. If Tenant shall notify the Landlord that it elects
to lease the Designated Option Space within said fifteen (15) day
period, Tenant shall execute a lease, or amendment to this Lease,
on substantially the same Business Terms and Conditions set forth
in Landlord's notice.
Landlord hereby agrees to advise Tenant in writing six
months in advance of the availability of space in the Building
and, in any event, prior to Landlord's marketing of such space.
Notwithstanding the Right of First Offer granted herein, in no
event shall the combined Premises of Tenant and the Tenant under
the ATT-IS Lease exceed 930,000 rentable square feet (excluding
basement storage area) in the Building.
35. Bankruptcy or Insolvency.
(a) Termination of Lease.
(i) Neither Tenant's interest in the Lease nor any
estate hereby created in Tenant shall pass to any trustee, except
as may specifically be provided pursuant to the provisions of the
Bankruptcy Code, 11 U.S.C. 101 et seq. (the "Bankruptcy Code"),
or receiver or assignee for the benefit of creditors or otherwise
by operation of law.
(ii) In the event Tenant's executors, administrators,
or assigns, if any, shall be adjudicated insolvent pursuant to
the provisions of any state law, or if Tenant is adjudicated
insolvent by a Court of competent jurisdiction other than the
United States Bankruptcy Court, or if a receiver or trustee of
the property of Tenant shall be appointed by reason of the
insolvency or inability to pay its debts, other than an
appointment pursuant to the provisions of the Bankruptcy Code, or
if any assignment shall be made of the property of Tenant for the
benefit of creditors, excepting an assignment by a trustee
pursuant to the provisions of the Bankruptcy Code, then and in
any such event, subject to the rights of the Leasehold Mortgagee
provided herein, .his Lease and all rights of Tenant hereunder
shall automatically cease and terminate with the same force and
effect as though the date of such event were the date originally
set forth herein and fixed for expiration of the Term of this
Lease, and Tenant shall vacate and surrender the Property.
Tenant shall not suffer or permit the appointment of a
trustee or receiver of the assets of Tenant by reason of the
insolvency or inability of Tenant to pay its debts and shall not
make any assignment for the benefit of creditors, or become or be
adjudicated insolvent. The allowance of any petition under any
insolvency law, except under the Bankruptcy Code, or the
appointment of a trustee or receiver of Tenant shall be
conclusive evidence that Tenant caused or gave cause therefor,
Page 63 of 74 Pages<PAGE>
unless such allowance of the petition, or the appointment of a
trustee or receiver, is vacated within ninety (90) days after
such allowance or appointment. Landlord does, in addition,
reserve any and all other remedies provided in this Lease or in
law.
(b) Protection by Tenant. Upon the filing of a
petition by or against Tenant under the Bankruptcy Code, Tenant,
as debtor and as debtor in possession, and any trustee who may be
appointed agree to adequately protect Landlord as follows:
(1) perform each and every obligation of Tenant under this Lease,
including the payment of Rent hereunder, arising from and after
the order for relief within sixty (60) days after the date of
such order, until such time as this Lease is either rejected or
assumed by order of the United States Bankruptcy Court; and
(2) to give Landlord prior written notice of any proceeding
relating to any assumption of this Lease; and (3) to give
Landlord written notice of the intention of Tenant and the
trustee to reject this Lease; and (4) to provide Landlord with
adequate assurance of future performance under the Lease as that
term is used in 11 U.S.C. 361.
(c) Waivers by Landlord. No default of this Lease by
Tenant, either prior to or subsequent to the filing of a petition
under the Bankruptcy Code, shall be deemed to have been waived
unless expressly done so in writing by Landlord.
(d) Assumption of Lease. If Tenant or a trustee elects
to assume this Lease subsequent to the filing of a petition under
the Bankruptcy Code, Tenant, as debtor and as debtor in
possession, and any trustee who may be appointed agree as
follows: (1) to cure each and every existing default within not
more than ninety (90) days after assumption of this Lease; and
(2) to compensate Landlord, or provide adequate assurance that
Tenant or the trustee will compensate Landlord, for any actual
pecuniary loss resulting from any existing default, including,
without limitation, Landlord's reasonable costs, expenses and
attorneys' fees incurred as a result of the default, as
determined by the Bankruptcy Court, within ninety (90) days of
assumption of this Lease; and (3) in the event of an existing
default, to provide Landlord with adequate assurance of Tenant's
future performance under the Lease as determined by the
Bankruptcy Court; and (4) the assumption will be subject to all
of the provisions of this Lease unless the prior written consent
of Landlord is obtained. If Tenant, as debtor-in-possession, or
such Trustee shall fail to elect this Lease within sixty (60)
days after the filing of the petition by or against Tenant,
unless such time period is extended by the Bankruptcy Court, this
Lease shall be deemed to have been rejected and unless Landlord
received adequate assurance for continued possession after
rejection of the Lease, Landlord shall be thereupon immediately
entitled to possession of the Premises without further obligation
to the Tenant or said Trustee, and this Lease shall be cancelled,
but Landlord's right to be compensated for damages in any such
bankruptcy proceeding shall survive.
Page 64 of 74 Pages<PAGE>
(e) Assignment of Lease and Adequate Assurances to
Landlord. If Tenant assumes this Lease and proposes to assign the
same pursuant to the provisions of the Bankruptcy Code to any
person or entity who shall have made a bona fide offer to accept
an assignment of this Lease on terms acceptable to the Tenant,
any person or entity to which this Lease is assigned pursuant to
the provisions of the Bankruptcy Code shall be deemed without
further act or deed to have assumed all of the obligations
arising under this Lease on and after the date of such
assignment. Any such assignee shall upon demand execute and
deliver to Landlord an instrument confirming such assumption.
The adequate assurance to be provided Landlord to
assure the assignee's future performance under the Lease shall be
determined by the Bankruptcy Court.
(f) Amounts Payable by Tenant Constitute Rent.
Notwithstanding anything in this Lease to the contrary, all
amounts payable by Tenant to or on behalf of Landlord under this
Lease, whether or not expressly denominated as rent, shall
constitute Rent for the purposes of Section 502(b)(6) of the
Bankruptcy Code.
(g) Application by Landlord of Payments from Tenant.
Any payment received from Tenant may be applied by Landlord
against any obligation due and owing by Tenant under this Lease,
notwithstanding any statement appearing on or referred to in any
remittance from Tenant or any prior application of such payment.
If a petition under the Bankruptcy Code is initiated within
ninety (90) days after receipt by Landlord of any such payment,
the payment shall be deemed applicable to any unpaid obligations
then due in the inverse order of their maturity.
36. Tenants. To the extent permitted by law, the
Landlord shall not engage in, nor shall Landlord lease or consent
to any sublease or assignment of a lease to any person, firm or
corporation which, as a primary part of its business as of the
date of the Lease engages in the activities set forth on Exhibit
O attached hereto and hereby made a part hereof. The Landlord
shall include the foregoing prohibition in all tenant leases
whether for office or commercial/retail space in the Building.
Landlord hereby agrees that enforcement of the foregoing
prohibition with respect to tenants or proposed tenants shall be
subject to the approval of Tenant.
The Landlord shall consult with the Tenant before
making any commitment which may in Tenant's reasonable
discretion, violate this Section or approving any assignment or
sublease which may in Tenant's reasonable discretion, violate
this Section. Tenant agrees to respond to a written submission by
Landlord as to a proposed activity within ten (10) days of such
submission. Tenant shall indicate in writing within the
aforementioned ten (10) day period whether or not Tenant believes
the proposed activity violates this Section of the Lease and
assuming a violation, whether Tenant is willing to waive the
Page 65 of 74 Pages<PAGE>
provisions of this Section as to such activity. Failure to
respond to such a submission shall be deemed to be approval of
such activity. In the event Tenant states that the proposed use
or activity violates this Section and Landlord disputes Tenant's
decision, the dispute shall be resolved by arbitration pursuant
to Section 48 hereof.
37. Abatement of Lease Payments. In consideration of
Tenant's execution of this Lease, Landlord hereby agrees that
Base Rent, commencing with the Commencement Date of the Lease as
it may be extended shall abate to the full extent of
("Lease Payment"), plus interest at
the rate set forth below, provided that during such abatement
period, Tenant shall remain obligated to make all payments of
Additional Rent or other sums which may be due to Landlord
hereunder. Base Rent shall abate to the extent of such interest.
Interest shall accrue from February 1, 1989 to the date each
portion of the Lease Payment is applied against Base Rent at the
rate for the construction loan on the Building, or, if the final
payment on the construction loan has been made, then at the rate
for the permanent first mortgage on the Building.
38. Building Name and Signage. The Landlord and Tenant
agree that the Building shall be named the AT&T Corporate Center
or such other name as may be agreed upon by Landlord and Tenant.
Tenant shall also have the right to cause appropriate
identification and/or logos to be placed on the exterior of the
Building. Such signage and the location thereof shall be tasteful
and consistent with a first class office building and shall be
sensitive to the architectural design of the Building. Tenant
shall review such signage with Landlord, but Landlord shall not
have a right of approval with respect to same. Such review by
Landlord shall be conducted at Landlord's expense. No other
signage, writing or pictures of any kind shall be placed on the
exterior of the Building by Landlord (except as set forth herein)
without the approval of Tenant nor by Tenant, without the
approval of Landlord. With respect to signage for commercial
tenants, Landlord will establish signage criteria ("Signage
Criteria") which reflects a) the first-class nature of the
Building and b) the quality appropriate for AT&T corporate
headquarters. Such Signage Criteria shall be subject to Tenant's
approval, which approval shall not be unreasonably withheld.
Provided signage for commercial tenants meets the approved
Signage Criteria, Landlord need not obtain Tenant's approval as
to each sign. Landlord may place signage on the Building
identifying the ownership and management of the Building. The
design and location of such sign shall be subject to the
reasonable approval of Tenant.
39. Roof Rights. Landlord hereby agrees that the
Premises shall include approximately four hundred square feet of
contiguous flat space on the roof described on Exhibit P ("Tenant
Roof Space"). No Rent shall be paid for the Tenant Roof Space,
nor shall Tenant's Proportionate Share be increased to reflect
Page 66 of 74 Pages<PAGE>
the Tenant Roof Space. Installation and maintenance of
telecommunications equipment on the Tenant's Roof Space shall be
at Tenant's expense. Landlord shall be responsible for
maintenance and repair of the entire roof of the Building with
the exception of repairs (i) necessitated by installation,
maintenance or repair of the telecommunications equipment, or
(ii) due to Tenant's negligence, intentional acts or omissions.
Tenant shall be responsible for repairs necessitated by (i) or
(ii) above. Tenant agrees that either (1) it will contract with
Landlord for the installation of the telecommunication equipment
at a cost to be negotiated at such time, or (2) will contract
with a third party for such installation work, in which event
Tenant will either (a) obtain a new warranty for the roof in the
event the existing warranty is abrogated due to the installation
work, or (b) take whatever steps are necessary to maintain the
existing warranty on the roof. Tenant further agrees to reimburse
Landlord for any reasonable insurance premiums incurred by
Landlord, which are directly due to Tenant's installation and/or
maintenance of the telecommunications equipment on the roof.
Landlord agrees, to the extent feasible, to allow Tenant at
Tenant's expense to connect the telecommunications equipment to
the Premises through the vertical risers in the Building pursuant
to plans approved by Landlord, which approval shall not be
unreasonably withheld. In no event shall Landlord's installations
on the roof block the line of sight to 10 South Canal Street.
Tenant hereby agrees that it shall not have the right to assign
or sublease the use of the Tenant Roof Space separately from a
sublease or assignment of a portion of the Premises, it being the
parties' intention to prohibit Tenant from using the Tenant Roof
Space as an independent profit-making operation separate and
apart from Tenant's use of the Premises or for other than
telecommunication purposes. Tenant shall not sublet or assign an
immaterial portion of the Premises with the intent or purpose of
primarily affording the sublessee or assignee the right to use
the Tenant Roof Space. Any consideration received by Tenant from
any assignee or sublessee from the use of the Tenant Roof Space
shall be included in the calculations of Landlord's Net Profits
pursuant to Section 12(f) hereof.
40. Attorneys' Fees. Landlord shall pay all of
Tenant's costs, charges and expenses, including court costs and
attorneys' fees, incurred in enforcing Landlord's obligations
under this Lease or incurred by Tenant in any litigation,
negotiation or transactions in which Landlord causes Tenant,
without Tenant's fault, to become involved or concerned.
41. Waiver. No waiver of any condition expressed in
this Lease shall be implied by any neglect of Tenant to enforce
any remedy or account of the violation of such condition whether
or not such violation be continued or repeated subsequently.
42. Short Form of Lease. The parties shall execute a
short form of this Lease for recording purposes substantially in
the form attached hereto as Exhibit. Such short form of lease
shall be in a form mutually acceptable to Landlord and Tenant.
Page 67 of 74 Pages<PAGE>
43. Partnership Default. No default under, or
termination of the ATT/Stein Partnership shall constitute a
default hereunder or be a cause for termination hereof except as
set forth in Section 44.
44. Termination Rights. Tenant shall have the right to
terminate this Lease in the event AT&T Resource Management
Corporation, a general partner of the AT&T/Stein Partnership,
terminates the AT&T/Stein Partnership pursuant to the provisions
of Article VI of the AT&T/Stein Partnership Agreement. Notice of
termination of this Lease shall be given concurrently with the
notice of termination under the AT&T/Stein Partnership Agreement.
In the event of such termination, 225 West Monroe
Street Associates, an Illinois limited partnership ("Stein
General Partner") shall pay to Tenant all of Tenant's reasonable
out-of-pocket costs and expenses incurred in connection with
legal, architectural, design and engineering services with
respect to this Lease and the Premises up to the date of such
termination ("Professional Expenses"). Stein General Partner
shall make such payment within thirty (30) days after receipt of
written statement from Tenant setting forth such costs and
expenses in reasonable detail. By separate guaranty dated
___________________, Stein & Company, a Nevada corporation has
guaranteed the payment of such Professional Expenses by Stein
General Partner.
45. Mutual Indemnity and Waiver.
(a) To the extent not expressly prohibited by law,
Landlord and Tenant each (in either case, the "Indemnitor")
agrees to hold harmless and indemnify the other, its bene-
ficiaries, partners, agents and employees (the "Indemnitee") from
any claim and liabilities imposed upon or incurred by or asserted
against the Indemnitee, including reasonable attorney's fees and
expenses, for death or injury to third parties or loss of or
damage to property of third parties that may arise from or be
caused directly or indirectly by any act or omission of the
Indemnitor, its agents, contractors or employees or from any
breach or default on the part of the Indemnitor in the
performance of any covenant or agreement on the part of the
Indemnitor to be performed pursuant to the terms of this Lease.
In case any action, suit or proceeding is brought against the
Indemnitee by reason of any such act of Indemnitor, Indemnitor
will, at Indemnitor's expense, by counsel approved by Indemnitee
(which approval shall not be unreasonably withheld), resist and
defend such action, sui. or proceeding. In case Landlord is
Indemnitee, Indemnitee shall also include Landlord's beneficiary
and its partners.
(b) To the extent not expressly prohibited by law and
except for claims arising from the negligent or intentional act
or omission of Landlord or its agents or employees, Tenant
releases Landlord and its beneficiaries, and their agents, and
employees, from and waives all claims for damages to person or
Page 68 of 74 Pages<PAGE>
property sustained by the Tenant, its guests and invitees or by
any occupant of the Premises and said occupant's guests and
invitees, or the Building, or by any other person, resulting
directly or indirectly from any act or neglect of any tenant or
other occupant of the Building or any part thereof.
To the extent not expressly prohibited by law and
accept for claims arising from the negligent or intentional act
or omission of Tenant, its agents or employees, Landlord releases
Tenant, its agents and employees, from and waives all claims for
damages to person or property sustained by the Landlord, or by
any other person, resulting directly or indirectly from any act
or neglect of any tenant or other occupant of the Building or any
part thereof.
46. "Force Majeure" is hereby defined to mean any
strike, lockout, labor trouble, civil disorder, inability to
procure materials, governmental laws and regulations, riots,
insurrections, war, fuel shortages, accidents, casualties, acts
of God, acts caused directly or indirectly by the other party lo
the Lease (or its agents, employees, contractors, licensees, or
invitees) or any other cause beyond the reasonable control of the
performing party. For purposes of calculating consequential
damages in the event of a holdover tenancy by Tenant, Tenant
shall not be subject to consequential damages in the event that
Tenant's failure to move from the Premises at the expiration of
the Term shall arise solely as a result of the failure of any
landlord under a new lease with Tenant to complete Tenant
improvements in any building to which Tenant intends to locate,
due to a Force Majeure event, provided that Tenant entered into a
new lease prior to eight (8) months before the termination of
this Lease, the scheduled delivery date under such new lease was
no later than ninety (90) days after the Term of this Lease and
the delay in completion of the tenant improvements under the new
lease was not attributable to changes and modifications requested
by Tenant.
47. Arbitration. Any dispute specifically required by
the terms of this Lease to be settled by arbitration shall be
submitted for arbitration to the Chicago, Illinois office of the
American Arbitration Association in accordance with its
Commercial Arbitration Rules then in effect, except where such
rules are contrary to the provisions set forth in this Lease. The
award rendered by the arbitrators shall be final, and judgment
may be entered upon it in accordance with applicable law in any
court having jurisdiction. The arbitrators may award any relief
which they shall deem proper in the circumstances, without regard
to the relief which would otherwise be available to any party
hereto in a court of law or equity including, without limitation,
specific performance and injunctive relief. It is understood that
the arbitration provisions of this Section 48 shall be the sole
remedy of the parties under this Agreement with respect to
disputes subject to arbitration under this Section 48.
Notwithstanding the foregoing, the parties agree that Landlord or
Tenant may apply lo a court of competent jurisdiction for
Page 69 of 74 Pages<PAGE>
equitable relief if such is appropriate during the pendency of
the arbitration proceeding.
Notice of the demand for arbitration shall be filed in
writing with the Landlord and Tenant. Unless otherwise agreed to
in writing by the Landlord and Tenant, upon receipt of a demand,
each party shall designate an arbitrator within ten (10) business
days. The two designated arbitrators shall then select a third
arbitrator to complete the full arbitration panel within ten (10)
business days, or as otherwise agreed. The arbitrators selected
pursuant to the terms of this Section 48 shall not be employees
of or hold any ownership interest in, the party selecting them.
Each such arbitrator shall have at least five years of experience
relevant to the general subject matter of the dispute.
If the arbitrators selected by each party fail to agree
upon a third arbitrator within the time limits set by this
Agreement, either party may request the American Arbitration
Association to select the neutral arbitrator. If either party
fails to appoint an arbitrator within the time period set forth,
the other party may apply to any court having jurisdiction over
this Agreement to compel arbitration and that court shall be
empowered to select the failing party's arbitrator.
The arbitration panel shall commence hearings within
thirty (30) days of the selection of the panel, unless Landlord
and Tenant or the arbitration panel agree upon a delayed schedule
of hearings. Any party may send out requests to compel document
production from the other party. Disputes concerning the scope of
document production and enforcement of the document requests
shall be subject to agreement by Landlord and Tenant, or may be
ordered by the arbitrators to the extent reasonable. The
arbitrators may obtain independent legal counsel to aid in their
resolution of legal questions presented in the course of
arbitration to the extent they consider that such counsel is
absolutely necessary to the fair resolution of the dispute, and
lo the extent that it is economical to do so considering
financial consequences of the dispute.
If any party subject to the terms of this arbitration
provision fails or refuses to appear at and participate in an
arbitration hearing after due notice, the arbitration panel may
hear and determine the controversy upon evidence produced by the
appearing party.
The arbitration costs (including filing fees, court
reporters' fees and transcript costs) shall be borne equally by
each party, except that each party shall be responsible for its
own expenses and the costs of the arbitrator selected by it.
48. Investment Tax Credit. It is hereby agreed between
the parties that Tenant will be entitled to the benefits of any
Investment Tax Credit with respect to all items of Section 38
Property, as defined in Section 48(a) of the Internal Revenue
Code of 1954 in effect on the date hereof (the "Code") and as
Page 70 of 74 Pages<PAGE>
determined by Tenant, purchased as part of the Landlord's
Contribution. Landlord agrees not to take any action to claim
such Investment Tax Credit itself and agrees to execute and
deliver such documents as Tenant may reasonably request to permit
Tenant to avail itself of such credit; Provided, however, that
Landlord makes no representation or warranty as to the
availability of any such Investment Tax Credit. Landlord
represents and warrants that (a) it, and each person having a
beneficial interest in it, currently is not, and during the term
of the Lease will not become, a person described in Section
46(e)(1) of the Code; (b) it will execute and deliver to Tenant
within 60 days of the date it transfers possession to Tenant of
any item of Section 38 Property purchased as part of the
Landlord's Contribution an Election to Treat Lessee as Purchaser,
in the form attached hereto as Exhibit Q, describing such
property, and (c) lt will comply with the provisions of Treasury
Regulations Section 1.48-4(j) as in effect on the date hereof
with respect to items of Section 38 property purchased as part of
the Landlord's Contribution. Landlord agrees to assume liability
for and to indemnify Tenant, on an after-tax basis, against any
and all losses or deferrals of any federal income tax credit with
respect to items of Section 38 Property purchased as part of the
Landlord's Contribution otherwise available to Tenant with
respect to any taxable year ending prior to the termination of
the Lease (and any interest, additions to tax or penalties
associated with such taxes payable by the Tenant), and other
expenses of any nature and kind, including reasonable counsel
fees, which Tenant may become liable to pay in connection with
any such loss or deferral or alleged loss or deferral which
occurs or is alleged to occur by reason of any (a) transfer by
Landlord of its interest in this Lease or any part of the
Landlord's Contribution prior to the occurrence of an Event of
Default hereunder to a person who may not, under Treasury
Regulation Section 1.48-4, make a valid election to treat the
Tenant as having purchased property for purposes of the credit
allowed under Section 38 of the Code, or (b) any breach by
Landlord of its representations or warranties set forth herein.
49. Use of Name. Landlord agrees that it will not
utilize the name of AT&T or of American Telephone and Telegraph
Company, a New York corporation ("AT&T Parent"), or of an
affiliate of AT&T or AT&T Parent in any advertising, publicity,
promotion, writing, radio or television broadcast, or in any
other way, concerning the Building or this Lease, except for use
in the name of the Building if called the AT&T Corporate Center
or other similar name, without the prior written consent of
Tenant.
50. Exculpatory Provisions. This instrument is
executed by American National Bank and Trust Company of Chicago,
not personally but solely as Trustee, as aforesaid. All the
covenants and conditions to be performed hereunder by American
National Bank and Trust Company of Chicago are undertaken by it
solely as Trustee, as aforesaid and not individually, and no
personal liability shall be asserted or be enforceable against
Page 71 of 74 Pages<PAGE>
American National Bank and Trust Company of Chicago by reason of
any of the covenants, statements, representations or warranties
contained in this Lease.
Page 72 of 74 Pages<PAGE>
IN WITNESS WHEREOF, the parties have caused this lease
to be executed on the date first above written.
LANDLORD:
AMERICAN NATIONAL BANK AND
TRUST COMPANY OF CHICAGO,
not personally but as
Trustee aforesaid,
By:
ATTEST:
By:
Its:
TENANT:
AT&T RESOURCE MANAGEMENT
CORPORATION, a New York
corporation
By:
Its:
ATTEST:
By:
Its:
Page 73 of 74 Pages<PAGE>
225 West Monroe Street Associates ("Stein General
Partner") executes this Lease solely for the purposes of agreeing
to make the payment set forth in Section 44 of the Lease. The
liability of Stein General Partner hereunder shall be limited to
the assets of Stein General Partner and in no event shall any
partner of Stein General Partner be personally or individually
liable hereunder except to the extent of, and limited to, such
partner's interest as a partner in the assets and property of
Stein General Partner. A deficit capital account of any partner
of Stein General Partner shall not be deemed to be an asset or
property of Stein General Partner.
225 WEST MONROE STREET
ASSOCIATES, an Illinois
limited partnership
By: Stein & Company 225 West
Monroe, Inc., an Illinois
corporation
By:
ATTEST:
By:
Page 74 of 74 Pages<PAGE>
EXHIBIT H
VIDEOS
That certain AT&T Floor Space Configuations
VHS T-120 Video dated June, 1993.
The video is a ten (10) minute VHS video filmed
June 15, 1993 on Floors 6 through 12 at AT&T Corporate Center,
227 West Monroe, Chicago, County of Cook, Illinois 60606. The
VHS video shows samples of the furniture (and their "as-is"
condition) described in Exhibit E.
-128-<PAGE>
EXHIBIT I
LOBBY WORK
A. Ground Floor
- Monument sign at the base of the east escalator will
read:
Floors 2-22 or Floors 2-23*
AT&T
Gallery Cafe
* Exact floor to be determined by Landlord
B. Mezzanine Level
- The two (2) AT&T security desks and incorporated logo)
will be removed
- Landlord may, at its option, display its or its
affiliates company name or logo only in the midrise
elevator bank (floors 16 and higher)
- Signage above the mid-rise elevator bank will read 17-
22 or 17-23*
* Exact floor to be determined by Landlord
-129-<PAGE>
EXHIBIT J
OPTION NOTICE
CHICAGO AND NORTH WESTERN TRANSPORTATION COMPANY ("TENANT")
227 WEST MONROE STREET
CHICAGO, ILLINOIS
AT&T Communications, Inc. ("Landlord")
c/o AT&T Resource Management Corporation
222 Mt. Airy Road
Basking Ridge, New Jersey 07920
Attention: District Manager, Real Estate Joint Ventures
and
Attention: Senior Attorney
and
Stein & Company Asset Services, Inc.
Suite 3400
227 West Monroe Street
Chicago, Illinois 60606
Attention: Vice President/Asset Management
and
American National Bank and
Trust Company of Chicago ("American National")
not personally but solely as Trustee under
Trust Agreement dated April 1, 1985, and
known as Trust 64020 ("Main Landlord")
33 North LaSalle Street
Chicago, Illinois 60603
Attention: Land Trust Department
Re: Notice of Extension Option and Direct Lease Option
Dear Ladies and Gentlemen:
In accordance with Section 42 of the Office Sublease
between Landlord and Tenant dated as of October 25, 1993
("Lease"), and subsection 2.3 of the Direct Lease Option,
Attornment, Recognition and Consent Agreement among Landlord,
Tenant, Main Landlord, The Travelers Insurance Company, American
National, not personally but as Trustee under Trust Agreement
dated April 1, 1985, and known as Trust No. 64020, dated as of
October 25, 1993 ("Option Agreement"), Tenant hereby notifies you
-130-<PAGE>
that Tenant desires to exercise its irrevocable Extension Option
with respect to the Lease and revocable Direct Lease Option under
the Option Agreement.
Sincerely,
CHICAGO AND NORTH WESTERN
TRANSPORTATION COMPANY, a Delaware
corporation
BY: /s/ Robert Schmiege
Its: President
-131-<PAGE>
CHICAGO AND NORTH WESTERN HOLDINGS CORP.
DIRECTORS' DEFERRED COMPENSATION PLAN
Section 1
Introduction
1.1 The Plan and Its Effective Date. The Chicago and North
Western Holdings Corp. Directors' Deferred Compensation Plan (the
"Plan") is hereby established by Chicago and North Western
Holdings Corp. (the "Company") effective January 1, 1994.
1.2 Purpose. The purpose of the Plan is to permit each
non-employee member of the Board of Directors ("Participating
Director") to elect deferral of any or all of his fees on a
deferred, unfunded basis for a set period of years.
Section 2
Benefits
2.1 Elected Deferred Benefits. Each Participating Director
may elect in accordance with Section 2.5 to defer all or any part
of his fees ("Elected Deferred Benefits") into the Plan. To the
extent fees are deferred under the Plan, such fees shall not be
eligible for deferral under any other Plan sponsored by the
Company.
2.2 Deferred Fee Account. Amounts deferred with respect to
each election made pursuant to Section 2.5 shall be credited to a
separate account ("Deferred Fee Account") for each Participating
Director on a quarterly basis at such a time and in such a manner
as is reasonably determined by the Company. Amounts credited to
each such separate Deferred Fee Account shall be credited with a
fixed rate of return equal to LIBOR plus one, as determined
quarterly as of the first day of each calendar quarter by the
Company.
2.3 Payment of Benefits. Each such separate Deferred Fee
Account for a Participating Director shall be paid to the
Participating Director promptly after the earlier of (i) the
expiration of the Deferral Period for such separate Deferred Fee
Account elected by the Participating Director in his properly
executed deferral election in accordance with Section 2.5, or
(ii) the date the Participating Director ceases to be a member of
the Board of Directors. In the event of the Participating
Director's death, his Deferred Fee Account shall be paid to the
beneficiaries designated by the Participating Director in writing
to the Secretary of the Board of Directors or, if the
Participating Director fails to designate beneficiaries, or if
all such beneficiaries predecease the Participating Director, to
the Participating Director's surviving spouse, and if there is no
surviving spouse then to the Participating Director's estate<PAGE>
promptly after the date of the Participating Director's death.
Payment shall be made in cash in an amount equal to the amount
credited to the Participating Director's Deferred Fee Account on
the date such amount is to be paid. If the Plan is terminated as
provided under Section 3.4, the Company reserves the right to pay
all benefits accrued hereunder at such time as the Company may
determine without regard to the Deferral Periods selected by the
Participating Directors under Section 2.5(b). In any case, such
payment shall release the Company of any future liability for
benefit accruals with respect to such amounts paid.
2.4 Funding. Benefits payable under the Plan to any person
shall be paid directly by the Company. The Company shall not be
required to fund, or otherwise segregate assets to be used for
payment of benefits under the Plan.
2.5 Deferral Elections.
(a) A Participating Director may elect by written
notice delivered to the Company within 60 days after the
effective date of the Plan to be credited with Elected Deferred
Benefits as provided in Section 2.1 with respect to fees earned
in the portion of the calendar year following the delivery of
such notice to the Company. For each calendar year thereafter,
the Participating Directors may elect by a written election filed
with the Company before the beginning of such calendar year to be
credited with Elected Deferred Benefits as provided in Section
2.1 for such calendar year. Notwithstanding the foregoing, a
person who becomes a Participating Director in a calendar year
may elect by a written notice delivered to the Company within 60
days after becoming a Participating Director to be credited with
Elected Deferred Benefits as provided in Section 2.1 with respect
to fees earned in the portion of such calendar year following the
delivery of such notice to the Company.
(b) Each such election made hereunder shall include
(i) the amount of Elected Deferred Benefits the Participating
Director elects and (ii) the period of time for which the
Participating Director elects to defer (the "Deferral Period")
such Elected Deferred Benefits. The Deferral Period for each
such election shall be no less than two (2) years and no longer
than the date the Participating Director ceases to be a member of
the Board of Directors of the Company. Payment of such amounts
shall be made in accordance with the provisions of Section 2.3.
-2-<PAGE>
Section 3
General Provisions
3.1 Plan Administration. The Plan shall be administered by
the Board of Directors. The Board shall have such powers, as may
be necessary to construe and interpret the Plan, determine the
eligibility of directors and to otherwise discharge its duties
hereunder, including, but not limited to the power to delegate
the responsibility for the administration of the Plan to
employees of the Company or to third parties.
3.2 Rights to Retention. Establishment of the Plan shall
not be construed to give a Participating Director the right to be
retained on the Board of Directors or to any benefits not
specifically provided by the Plan.
3.3 Interests Not Transferable. Except as to withholding
of any tax required under the laws of the United States or any
state or locality and except with respect to designation of a
beneficiary to receive benefits in the event of the death of a
Participating Director, no benefit payable at any time under the
Plan shall be subject in any manner to alienation, sale,
transfer, assignment, pledge, attachment, or other legal process,
or encumbrance of any kind until payable. Any attempt to
alienate, sell, transfer, assign, pledge or otherwise encumber
any such benefits, whether currently or thereafter payable, shall
be void. No benefit shall, in any manner, be liable for or
subject to the debts or liabilities of any person entitled to
such benefits. If any person shall attempt to, or shall
alienate, sell, transfer, assign, pledge or otherwise encumber
his benefits under the Plan, or if by any reason of his
bankruptcy or other event happening at any time, such benefits
would devolve upon any other person or would not be enjoyed by
the person entitled thereto under the Plan, then the Company, in
its discretion, may terminate the interest in any such benefits
of the person entitled thereto under the Plan and hold or apply
them to or for the benefit of such person entitled thereto under
the Plan or his spouse, children or other dependents, or any of
them, in such manner as the Company may deem proper.
3.4 Amendment and Termination. The Company intends the
Plan to be permanent, but reserves the right at any time to
modify, amend or terminate the Plan, provided, however, that
benefits earned as provided herein shall constitute an
irrevocable obligation of the Company.
3.5 Controlling Law. The law of Illinois, except its law
with respect to choice of law, shall be controlling in all
manners relating to the Plan.
-3-<PAGE>
3.6 Gender and Number. Words in the masculine gender shall
include the feminine, and the plural shall include the singular
and the singular shall include the plural.
Executed this 14th day of January, 1994.
CHICAGO AND NORTH WESTERN
HOLDINGS CORP.
By: /s/ Robert Schmiege
Its: Chairman, President and
Chief Executive Officer
ATTEST:
/s/ Robin Bourne-Caris
Assistant Vice President -
Assistant Corporate Secretary
-4-<PAGE>
CHICAGO AND NORTH WESTERN HOLDINGS CORP.
DIRECTORS' PENSION AND RETIREMENT SAVINGS PLAN
Section 1
Introduction
1.1 The Plan and Its Effective Date. The Chicago and North
Western Holdings Corp. Directors' Pension and Retirement Savings
Plan (the "Plan") is hereby established by Chicago and North
Western Holdings Corp. (the "Company") effective January 1, 1994.
1.2 Purpose. The purpose of the Plan is to permit each
non-employee member of the Board of Directors ("Participating
Director") to elect deferral of any or all of his fees on a
deferred, unfunded basis.
Section 2
Benefits
2.1 Elected Deferred Benefits. Each Participating Director
may elect in accordance with Section 2.7 to defer all or any part
of his fees ("Elected Deferred Benefits") into the Plan. To the
extent fees are deferred under the Plan, such fees shall not be
eligible for deferral under any other Plan sponsored by the
Company.
2.2 Matching Credits. The Company shall credit each
Participating Director's account with an amount equal to fifty
percent (50%) of the Participating Director's Elected Deferred
Benefits for the calendar year ("Matching Credits").
2.3 Deferred Fee Account. Elected Deferred Benefits and
Matching Credits shall be credited to an account ("Deferred Fee
Account") of each Participating Director on a quarterly basis on
the date such fees would have been paid in the absence of a
Deferral Election. Amounts credited to the Deferred Fee Account
of each Participating Director shall be expressed in terms of
shares (including fractional shares) of common stock of the
Company ("Stock"). Such number of shares of Stock shall be
determined by calculating the number of shares of Stock which
could have been purchased had such Elected Deferred Benefits and
the associated Matching Credits been used to purchase Stock on
the day such amounts were credited to the Participating
Director's Deferred Fee Account. The number of shares to be
credited to a Participating Director's Deferred Fee Account shall
be determined using the value of the Stock as provided in Section
2.4. Furthermore, for each dividend paid on Stock, each
Participating Director's Deferred Fee Account shall be credited
with an additional amount, equal to the number of shares of Stock
(including fractional shares) which could be purchased if the
dividend paid on Stock were paid with respect to the number of<PAGE>
shares of Stock (including fractional shares) credited to the
Participating Director's Deferred Fee Account and were invested
in additional Stock on the date of payment of the dividends paid
on Stock.
2.4 Value of the Stock. The market value of the Stock for
purposes hereof on any date shall be the closing price of the
Stock on the New York Stock Exchange Composite Tape on such date
(or if quotations for the Stock are not reported on the New York
Stock Exchange Composite Tape on that date, the closing price of
the Stock on the New York Stock Exchange Composite Tape on the
first day following such date on which such quotations are so
reported).
2.5 Payment of Benefits. A Participating Director's
Deferred Fee Account shall be paid to the Participating Director
promptly after he ceases to be a member of the Board of
Directors. In the event of the Participating Director's death,
his Deferred Fee Account shall be paid to the beneficiaries
designated by the Participating Director in writing to the
Secretary of the Board of Directors or, if the Participating
Director fails to designate beneficiaries, or if all such
beneficiaries predecease the Participating Director, to the
Participating Director's surviving spouse, and if there is no
surviving spouse then to the Participating Director's estate
promptly after the date of the Participating Director's death.
All payments shall be made in cash in an amount equal to the
product of (i) the total number of shares of Stock (including
fractional shares) credited to the Participating Director's
Deferred Fee Account on the date such amount is to be paid
multiplied by (ii) the market value of the Stock as determined
under Section 2.4.
2.6 Funding. Benefits payable under the Plan to any person
shall be paid directly by the Company. The Company shall not be
required to fund, or otherwise segregate assets to be used for
payment of benefits under the Plan. The Company may in its
discretion form a trust for the payment of benefits under the
Plan. The assets of such trust, if any, will be subject to the
claims of the Company's general creditors in the event of the
Company's inability to pay its debts as they become due or in the
event that the Company is subject to a pending proceeding as a
debtor under the United States Bankruptcy Code. To the extent
that benefits are paid by the trust, the Company shall have no
further obligation to pay such benefits.
2.7 Deferral Elections. A Participating Director may elect
by written notice delivered to the Company within 60 days after
the effective date of the Plan to be credited with Elected
Deferred Benefits as provided in Section 2.1 with respect to fees
earned in the portion of the calendar year following the delivery
of such notice to the Company. For each calendar year
-2-<PAGE>
thereafter, a Participating Director may elect by a written
election filed with the Company before the beginning of such
calendar year to be credited with Elected Deferred Benefits as
provided in Section 2.1 for such calendar year. Notwithstanding
the foregoing, a person who becomes a Participating Director in a
calendar year may elect by a written notice delivered to the
Company within 60 days after becoming a Participating Director to
be credited with Elected Deferred Benefits as provided in Section
2.1 with respect to fees earned in the portion of such calendar
year following the delivery of such notice to the Company.
Section 3
General Provisions
3.1 Plan Administration. The Plan shall be administered by
the Board of Directors. The Board shall have such powers as may
be necessary to construe and interpret the Plan, determine the
eligibility of directors and to otherwise discharge its duties
hereunder, including but not limited to the power to delegate the
responsibility for the administration of the Plan to employees of
the Company or to third parties.
3.2 Rights to Retention. Establishment of the Plan shall
not be construed to give a Participating Director the right to be
retained on the Board of Directors or to any benefits not
specifically provided by the Plan.
3.3 Interests Not Transferable. Except as to withholding of
any tax required under the laws of the United States or any state
or locality and except with respect to designation of a
beneficiary to receive benefits in the event of the death of a
Participating Director, no benefit payable at any time under the
Plan shall be subject in any manner to alienation, sale,
transfer, assignment, pledge, attachment, or other legal process,
or encumbrance of any kind until otherwise payable under the
Plan. Any attempt to alienate, sell, transfer, assign, pledge or
otherwise encumber any such benefits, whether currently or
thereafter payable, shall be void. No benefit shall, in any
manner, be liable for or subject to the debts or liabilities of
any person entitled to such benefits. If any person shall
attempt to, or shall alienate, sell, transfer, assign, pledge or
otherwise encumber his benefits under the Plan, or if by any
reason of his bankruptcy or other event happening at any time,
such benefits would devolve upon any other person or would not be
enjoyed by the person entitled thereto under the Plan, then the
Company, in its discretion, may terminate the interest in any
such benefits of the person entitled thereto under the Plan and
hold or apply them to or for the benefit of such person entitled
thereto under the Plan or his spouse, children or other
-3-<PAGE>
dependents, or any of them, in such manner as the Company may
deem proper.
3.4 Amendment and Termination. The Company intends the Plan
to be permanent, but reserves the right at any time to modify,
amend or terminate the Plan, provided, however, that benefits
earned as provided herein shall constitute an irrevocable
obligation of the Company.
3.5 Controlling Law. The law of Illinois, except its law
with respect to choice of law, shall be controlling in all
manners relating to the Plan.
3.6 Gender and Number. Words in the masculine gender shall
include the feminine, and the plural shall include the singular
and the singular shall include the plural.
Executed this 14th day of January, 1994.
CHICAGO AND NORTH WESTERN
HOLDINGS CORP.
By: /s/ Robert Schmiege
Its: Chairman, President and
Chief Executive Officer
ATTEST:
/s/ Robin Bourne-Caris
-4-<PAGE>
CHICAGO AND NORTH WESTERN HOLDINGS CORP.
DIRECTORS' PENSION AND RETIREMENT SAVINGS TRUST<PAGE>
TABLE OF CONTENTS
Page
ARTICLE I - ESTABLISHMENT AND PURPOSE 1
1.1 Establishment 1
1.2 Purposes 1
ARTICLE II - DEFINITIONS 1
2.1 Bank 1
2.2 Board of Directors 1
2.3 Committee 1
2.4 Company 2
2.5 Company Stock 2
2.6 Participating Director 2
2.7 Plan 2
2.8 Trust 2
2.9 Trust Agreement 2
2.10 Trust Fund 2
2.11 Trustee 2
ARTICLE III - CONTRIBUTIONS TO AND DISTRIBUTIONS
FROM THE TRUST 2
3.1 Contributions 2
3.2 Distributions 3
ARTICLE IV - TRUSTEE'S POWERS AND INVESTMENTS 3
4.1 Title to Assets 3
4.2 Investment of Trust Fund and
Responsibilities of Trustee 3
4.3 Shareholder Rights in Company Stock 6
ARTICLE V - VALUATION AND RECORDS OF TRUST FUND 8
5.1 Determination of Value 8
5.2 Records of Trust Fund 8
ARTICLE VI - EMPLOYMENT OF AGENTS OR SPECIAL TRUSTEE
BY AND COMPENSATION OF TRUSTEE 9
6.1 Employment of Agents 9
6.2 Appointment of Special Trustee 9
6.2 Compensation of Trustee 9
(i)<PAGE>
PAGE
ARTICLE VII - COMPANY DUTIES 9
7.1 Taxation of the Trust 9
7.2 Notice of Insolvency 10
7.3 Indemnification of the Trustee by the Company 10
7.4 Provide Information to Trustee 10
ARTICLE VIII - REMOVAL OF AND RESIGNATION
BY TRUSTEE 10
8.1 Removal and Resignation 10
ARTICLE IX - AMENDMENT, TERMINATION AND
SUBSTITUTION OF PROPERTY 11
9.1 Amendment, Revocation or Termination
of Trust Agreement 11
9.2 Termination of Plan 11
9.3 Substitution of Property 11
9.4 Transfer of Assets 11
ARTICLE X - MISCELLANEOUS 12
10.1 Necessary Parties 12
10.2 Non-Alienation 12
10.3 Company Creditors 12
10.4 Participating Director Rights 13
10.5 Invalid or Unenforceable Provisions 13
10.6 Successor Corporation 13
10.7 Gender and Number 13
10.8 Headings 13
10.9 Controlling Law 14
(ii)<PAGE>
CHICAGO AND NORTH WESTERN HOLDINGS CORP.
DIRECTORS' PENSION AND RETIREMENT SAVINGS TRUST
ARTICLE I.
Establishment and Purpose
1.1 Establishment. The Chicago and North Western Holdings
Corp. Directors' Pension and Retirement Savings Trust (the
"Trust") is hereby established, effective January 1, 1994,
between Chicago and North Western Holdings Corp. (the "Company")
and LaSalle National Trust, N.A. as trustee ("Trustee") to assist
in the administration of the Chicago and North Western Holdings
Corp. Directors' Pension and Retirement Savings Plan (the
"Plan"). All money and other property held by the Trustee
hereunder shall be held by the Trustee in trust and dealt with in
accordance with the provisions of this Trust Agreement.
1.2 Purposes. The Company has established the Plan to
permit each non-employee member of the Board of Directors
("Participating Director") to elect deferral of any or all of his
fees on a deferred, unfunded basis. The purpose of the Trust is
to increase the Participating Directors' confidence in the Plan
by holding the Company's common stock and other assets in trust,
subject to the claims of the Company's creditors, in the amount
credited to Participating Director's accounts under the Plan. In
addition, holding the shares and other assets credited to
Participating Director's accounts under the Plan in the Trust
facilitates efficiency of record keeping for the Plan.
ARTICLE II.
Definitions
The following words and phrases, when used herein, unless
their context clearly indicates otherwise, shall have the
following respective meanings:
2.1 "Bank" shall mean a bank having authority to act as a
fiduciary and, unless otherwise indicated, shall include a trust
company and any corporate fiduciary.
2.2 "Board of Directors" means the Board of Directors of the
Company.
2.3 "Committee" means the person or group to which the Board
delegates administrative responsibilities under the Plan. If no
Committee is appointed, the Board shall be the Committee.
2.4 "Company" means Chicago and North Western Holdings Corp.<PAGE>
2.5 "Company Stock" means common stock of Chicago and North
Western Holdings Corp.
2.6 "Participating Director" means a non-employee member of
the Board of Directors participating in the Plan.
2.7 "Plan" means the Chicago and North Western Holdings
Corp. Pension and Retirement Savings Plan as amended from time to
time.
2.8 "Trust" means the Chicago and North Western Holdings
Corp. Pension and Retirement Savings Trust, which is administered
by the Trustee in accordance with the provisions of the Trust
Agreement.
2.9 "Trust Agreement" means this agreement between the
Company and the Trustee, establishing the Chicago and North
Western Holdings Corp. Pension and Retirement Savings Trust, and
any amendments thereto.
2.10 "Trust Fund" means all property received by the
Trustee, together with all income, profits and increments
thereon, less all losses and distributions chargeable thereto.
2.11 "Trustee" means any corporation who shall accept the
appointment to execute the duties of the Trustee as set forth in
the Trust Agreement.
ARTICLE III.
Contributions to and Distributions from the Trust
3.1 Contributions. The Trustee shall receive and hold as
part of the Trust Fund any contributions under the Plan paid to
the Trustee from time to time by the Company and the Trustee
shall be accountable only for the funds and shares of stock
actually received by it. The Trustee shall not be required to
determine that such contributions are in compliance with the Plan
but shall be accountable only for the funds actually received by
it. Except as provided in Section 9.3, if any contributions to
the Trust are in money, the Trustee shall invest such
contributions in shares of Company Stock, as soon as the Trustee
deems it prudent to do so, unless in the opinion of counsel of
the Company such investment is (or there is a substantial
likelihood that it is) in violation of federal or state
securities laws or New York Stock Exchange rules.
3.2 Distributions. The Board or its delegate shall, in
accordance with the Plan, instruct the Trustee in writing to
distribute benefits to Participating Directors and their
beneficiaries. All distributions from the Trust shall be subject
-2-<PAGE>
to and deemed to be made under the Plan. Except as otherwise
provided in Section 10.3, the Trustee, upon the written direction
of the Board or its delegate, shall make distributions from the
Trust Fund to such persons, in such manner, in such amounts, and
for such purposes as may be specified in the written direction of
the Board or its delegate, and upon such distribution being made,
the amount thereof shall no longer constitute a part of the Trust
Fund.
The Trustee shall not be responsible in any way for the
application of such distributions or for the adequacy of the
Trust Fund to meet and discharge any and all liabilities under
the Plan.
ARTICLE IV.
Trustee's Powers and Investments
4.1 Title to Assets. The Trustee is vested with title to
all the assets of the Trust Fund and shall have full power and
authority to do all acts necessary to carry out its duties
hereunder.
4.2 Investment of Trust Fund and Responsibilities of
Trustee.
(a) Except as provided in Section 9.3, as necessary and
consistent with the Trust's liquidity needs, or while pending
investment, the Trustee shall invest and reinvest the
principal and income of the Trust Fund and keep the Trust
Fund assets invested, without distinction between principal
and income in Company Stock. Pursuant to this authority the
Trustee is specifically authorized to invest up to 100% of
the assets of the Trust Fund in shares of Company Stock. To
the extent not invested in Company Stock, the Trustee shall
invest and reinvest the principal and income of the Trust
Fund, and keep the Trust Fund assets invested, without
distinction between principal and income in such securities,
in such property, real or personal, wherever situated, as the
Trustee shall deem advisable, including, but not limited to,
common or preferred stocks, including stocks or other
securities of the Company, personal, corporate and
governmental obligations, shares of open ended investment
companies as defined in the Investment Company Act of 1940,
common trust funds, trust participating certificates,
leaseholds, mortgages and other interests in realty, notes
and other evidences of indebtedness or ownership, secured or
unsecured, as the Trustee deems proper. Pursuant to this
authority the Trustee is specifically authorized to invest up
to 100% of the assets of the Trust Fund in shares of Company
-3-<PAGE>
Stock. Without liability for interest, the Trustee may keep
a portion of the Trust Fund uninvested and may deposit any
uninvested funds in any Bank or Banks, or with the investment
department of a Trustee (if the Trustee is a Bank).
(b) In furtherance and not in limitation of its
investment authority, and subject to the provisions of
Section 4.2(a) and 4.2(d), the Trustee shall have full power
and authority to deal with all or any part of the Trust Fund,
including, without limitation, the power to sell, transfer,
invest, reinvest, and change investments; to alienate,
pledge, hypothecate or otherwise encumber; to acquire any
property by purchase, subscription, or other means; to sell
for cash or on credit, convey, or convert, redeem or
exchange, all or any part of the Trust Fund; to enforce, by
suit or otherwise, or to waive its rights on behalf of the
Trust, and to defend claims asserted against it or the Trust;
to compromise, adjust and settle any and all claims against
or in favor of it or the Trust; subject to Sections 4.2(d)
and 4.3, to vote, or give proxies to vote, any stock or other
security; to waive notice of meetings; to oppose, participate
in and consent to the reorganization, merger, consolidation
or readjustment of the finances of any enterprise, and to
deposit securities under deposit agreements; to hold
investments unregistered, or to register them in the name of
the Trustee, or in the name of a nominee; to hold investments
in an account in the name of the Trustee; to make, execute,
acknowledge and deliver any and all instruments that it shall
deem necessary or appropriate to carry out the powers herein
granted; and generally to exercise any of the powers of any
owner with respect to all or any part of the Trust assets.
No person dealing with the Trustee shall be bound to see to
the application of any money or property paid or delivered to
the Trustee or to inquire into the validity or propriety of
any transaction by it or on its behalf.
(c) All orders, requests and instructions of the Board
or the Committee to the Trustee shall be in writing signed by
a representative of the Board or the Committee, respectively,
or such other person or persons as the Board or the Committee
may from time to time designate, and the Trustee shall act in
accordance with such orders, requests and instructions. The
Board of Directors will, by resolution certified by the
Secretary of the Company, certify to the Trustee the
appointment and termination of the Committee or other
delegate, and the Trustee shall not be charged with knowledge
thereof until it receives such notice. The Trustee shall be
fully protected in relying upon a certification of the
Committee or other delegate authorized by the Board to
transmit any instruction or direction of the Board or the
Committee in the discharge of its administrative duties under
the Plan and also in relying on the certification of an
-4-<PAGE>
officer or agent of the Company as to the identity of a
delegate as it exists and in continuing to rely upon such
certification until a subsequent certification is filed with
the Trustee. The Trustee shall be fully protected in acting
upon any instrument, certificate or paper believed by it to
be genuine and to be signed or presented by the proper person
or persons, and the Trustee shall be under no duty to make
any investigation or inquiry as to any statement contained in
any such writing, but may accept the same as conclusive
evidence of the truth and accuracy of the statements therein
contained.
(d) In exercising the power to vote described in
Section 4.2(b) with respect to shares of Company Stock held
in the Trust Fund, the Trustee shall, in accordance with
Section 4.3, follow the Participating Directors' directions
in voting such shares (as to matters other than the sale or
retention of such shares in a public or private tender
offer).
(e) The Trustee is authorized to sell, exchange,
convey, transfer or otherwise dispose of any property held by
it by private or public sale or contract or at public
auction, and no person dealing with the Trustee shall be
bound to see to the application of the purchase money or to
inquire into the validity, expediency or propriety of any
such sale or other disposition.
(f) The Trustee is authorized to register any
investment held in the Trust Fund in its own name or in the
name of a nominee and to hold any investment in bearer form,
to cause any asset, real or personal, to be held in or
deposited with stock clearing corporations or depositories or
other corporate depositories or a Federal book entry account
system or in such other form as the Trustee determines, with
or without disclosing the Trust relationship, but the books
and records of the Trustee shall at all times show that all
such investments are part of the Trust.
(g) The Trustee may, in its discretion, invest funds
held by it in such short term liquid investments as it deems
appropriate, including, but not limited to, United States
Government Treasury Bills, commercial paper, savings accounts
and certificates of deposit (including those of the Trustee,
if the Trustee is a Bank), and common, pooled or commingled
trust funds (including, but not limited to, those of the
Trustee, if the Trustee is a Bank) which invest in such
securities. If the assets of the Trust Fund are invested in
a common, pooled or commingled trust fund or group trust, for
the period of time during which the Trust Fund is so invested
and with respect to the assets of the Trust Fund which are so
invested, the Declaration of Trust of each such common,
-5-<PAGE>
pooled or commingled trust fund or group trust shall
constitute a part of this Trust Agreement.
(h) If the Trustee is notified by the Company's Board
of Directors or chief executive officer that the Company is
insolvent, as defined in Section 7.2 or if the Trustee
receives other written allegations that the Company is
insolvent, the Trustee shall suspend payments to the
Participating Directors or their beneficiaries with respect
to benefits credited to their accounts. The Trustee shall
independently determine within 30 days of receipt of such
notice or written allegations whether the Company is
insolvent. If the Trustee determines that the Company is
solvent, it shall resume payments to the Participating
Directors and their beneficiaries including any suspended
benefits. If the Trustee has knowledge that or determines
that the Company is insolvent, it shall hold, for the benefit
of the general creditors of the Company, and deliver to
satisfy such claims, the assets of the Trust. The Trustee
shall resume payments of benefits under the Plan only after
the Trustee has determined that the Company is no longer
insolvent. Unless the Trustee has actual knowledge or has
received written allegations of the Company's insolvency,
Trustee shall have no duty to inquire whether the Company is
insolvent. Trustee may in all events rely on such evidence
concerning the Company's solvency as may be furnished to
Trustee which will give the Trustee a reasonable basis for
making a determination concerning the Company's solvency.
4.3 Shareholder Rights in Company Stock.
(a) Credited Shares. With respect to a number of
shares (and fractional shares) of Company Stock equal to
the number which have been credited to Participating
Directors' accounts under the plan, each Participating
Director or beneficiary shall have the right to direct
the Trustee as to the manner of voting such shares (and
fractional shares) (as to matters other than the sale or
retention of such shares in public or private tender
offer); provided that if more votes are cast pursuant to
the foregoing than there are shares held in the Trust,
the number of such shares (and fractional shares) voted
by each Participating Director or beneficiary shall
equal the number of shares of Company Stock held in the
Trust multiplied by a fraction the numerator of which is
the number of shares (and fractional shares) credited
under the Plan to the accounts of each such
Participating Director who votes and the denominator of
which is the number of shares credited to the accounts
of all Participating Directors who vote.
-6-<PAGE>
(b) Shares Not Directed. With respect to shares (and
fractional shares) of Company Stock in an amount equal
to the number of shares which are in excess of the
number of shares which are voted by the Participating
Directors in accordance with Section 4.3(a), each
Participating Director shall have the right to direct
the Trustee as to the manner of voting (as to matters
other than the sale or retention of such shares in a
public or private tender offer) the number of such
shares (and fractional shares) as is equal to the
product of (i) the sum of the number of any shares of
Company Stock held in the Trust which are not voted
pursuant to Section 4.3(a) multiplied by (ii) a
fraction, the numerator of which is the number of shares
(and fractional shares) of Company Stock which have been
credited to the accounts under the Plan of each such
Participating Director who gives directions to the
Trustee pursuant to this Section 4.3(b) and the
denominator of which is the total number of shares (and
fractional shares) of Company Stock which have been
credited to the accounts of all Participating Directors
who give directions to the Trustee pursuant to this
Section 4.3(b).
(c) Fiduciaries. The Trustee shall notify each
Participating Director and beneficiary who is authorized
pursuant to Section 4.3(a) or (b) to direct the Trustee
as to the manner of voting with respect to shares (and
fractional shares) of Company Stock that such
Participating Director or beneficiary is a fiduciary,
with respect to the voting of such shares (and
fractional shares).
(d) Confidentiality. The Trustee shall solicit the
directions of Participating Directors and beneficiaries
in accordance with Section 4.3(a) and (b) and shall
follow such directions by delivering aggregated votes to
the Company or otherwise implementing such directions in
any convenient manner which preserves the
confidentiality of the votes of individual Participating
Directors or beneficiaries. Any designee of the Trustee
who assists in the solicitation or tabulation of the
directions of Participating Directors or beneficiaries
shall certify that he will maintain the confidentiality
of all directions given.
-7-<PAGE>
ARTICLE V.
Valuation and Records of Trust Fund
5.1 Determination of Value. As of the last day of each
calendar month and as of such other times as may be specified in
writing by the Committee, the Trustee shall determine the fair
market value of the Trust Fund and shall notify the Committee in
writing of the determination. The fair market value of the Trust
Fund shall be the fair market value of all securities and other
assets then held in such fund, including all income received
during the month. In determining such fair market value, the
Trustee may rely upon any information that it believes to be
reliable including appraisals, reports of sales and of bid and
asked prices of issues listed on an exchange as disclosed in
newspapers of general circulation or in generally recognized
financial services, quotations with respect to unlisted issues as
supplied by any reputable broker or investment bank or from any
other source that the Trustee believes to be reliable, or the
Trustee may make such determination based upon its analysis of
such records or reports of any company issuing such stock or
other securities as are made available to it. The Trustee's
determination with respect to fair market value shall be final
and conclusive upon all persons.
5.2 Records of Trust Fund. The Trustee shall keep accurate
and detailed accounts of all investments, receipts, disbursements
and other transactions hereunder. All accounts, books and
records relating to such transactions shall be open to inspection
and audit at all reasonable times by any person designated by the
Committee. The Trustee shall have no record keeping
responsibilities with respect to the maintenance of account
records for individual participants in the Plan except as the
Company and the Trustee may agree in a separate agreement.
Within fifteen (15) days following the close of each calendar
year or the removal or resignation of the Trustee or as often as
the Committee shall direct as provided in Section 8.1 hereof, the
Trustee shall file with the Company a written account setting
forth all investments, receipts, disbursements, and other
transactions effected by it during such calendar year or during
the period from the close of the last calendar year to date of
such removal or resignation, and setting forth the current value
of the Trust Fund.
-8-<PAGE>
ARTICLE VI.
Employment of Agents or Special Trustee
by and Compensation of Trustee.
6.1 Employment of Agents. The Trustee shall have the power
to employ suitable agents, including but not limited to,
custodians, auditors, actuarial counsel, accountants, and legal
and other counsel, and to pay reasonable compensation for their
services. Such agents may but need not be employees of the
Company or other persons acting in a similar capacity for the
Company.
6.2 Appointment of Special Trustee. In the event of a
public or private tender offer for Company Stock, the Trustee may
appoint a Special Trustee to direct the Trustee as to whether or
not to tender the Company Stock held in the Trust. If such a
Special Trustee is appointed and accepts the responsibility to so
direct the Trustee, the Trustee shall follow the directions given
by the Special Trustee.
6.3 Compensation of Trustee. Any corporate Trustee shall be
paid such reasonable compensation as shall from time to time be
agreed upon between the Company and the Trustee. The Trustee
shall be reimbursed for all reasonable expenses incurred by it in
the administration of the Trust. Such compensation and expenses
and all other administrative expenses of the Trust shall be paid
by the Trust, except to the extent paid by the Company.
ARTICLE VII.
Company Duties
7.1 Taxation of the Trust. The Company acknowledges and
agrees that it is the owner of the Trust Fund for income tax
purposes and that, as such, all income, deductions and credits of
the Trust Fund belong to the Company and will be included in the
Company's income tax returns to the same extent and in the same
manner as if the Trust did not exist. However, except as
necessary to satisfy any obligation which the Company has or
might acquire, to withhold taxes and to pay over such withheld
amounts to the appropriate taxing authorities, neither the
Company nor the Trust Fund shall have any obligation or liability
for the payment of any income, estate, gift or employment taxes
payable by a Participating Director or beneficiary, with respect
to the benefits under the Plan for such Participating Director.
If the Company has or acquires an obligation to withhold taxes
and pay over the withheld amounts to the appropriate taxing
authorities, the Company shall be responsible for determining the
amount of and for making such payments; provided that the Trustee
shall remit to the Company the portion of any assets of the Trust
-9-<PAGE>
or distribution which the Company notifies the Trustee is
required to be withheld.
7.2 Notice of Insolvency. The Board of Directors and the
chief executive officer of the Company shall notify the Trustee
as soon as reasonably possible if the Company becomes insolvent.
The Company shall be deemed to be insolvent if the Company is
unable to pay its debts as they become due or is subject to a
pending proceeding as a debtor under the Federal Bankruptcy Code
or insolvency proceeding under state law.
7.3 Indemnification of the Trustee by the Company. The
Company hereby agrees to indemnify the Trustee for and to hold it
harmless against any and all liabilities, losses, costs or
expenses (including legal fees and expenses) of whatsoever kind
and nature which may be imposed on, incurred by or asserted
against the Trustee at any time by reason of Trustee's service
under this Trust Agreement if the Trustee did not act dishonestly
or in willful or negligent violation of the law or regulation
under which such liability, loss, cost or expense arises.
7.4 Provide Information to Trustee. The Company shall, upon
request, provide the Trustee with information concerning the
account balances of the Participating Directors under the Plan.
ARTICLE VIII.
Removal of and Resignation by Trustee
8.1 Removal and Resignation. The Trustee may be removed by
the Board of Directors, with or without cause, upon written
notice to the Trustee and the Board. A Trustee may resign at any
time upon thirty (30) days' (or such shorter period as the Board
of Directors shall permit by written consent) written notice to
the Company and the Board. Upon such removal or resignation of a
Trustee, the Company shall, unless the Trust shall have been
revoked or terminated, appoint a successor Trustee who shall have
all the rights, title, powers, duties, exemptions and limitations
as those conferred hereunder upon a Trustee and upon acceptance
of such appointment by the successor Trustee, the Trustee shall
assign, transfer, and pay over the Trust Fund to such successor
Trustee. No successor Trustee shall be personally liable for any
act or failure to act of any predecessor Trustee, or be required
to examine the accounts records or acts of any predecessor
Trustee.
-10-<PAGE>
ARTICLE IX.
Amendment, Termination and Substitution of Property
9.1 Amendment, Revocation or Termination of Trust Agreement.
The Company with the consent of (i) the Trustee and (ii) a
majority of the Participating Directors and the beneficiaries
(with the beneficiaries of a deceased Participating Director
casting one vote) reserves the right from time to time by action
of its Board of Directors to amend, retroactively, if desired, in
whole or in part, any or all of the provisions of this Trust
Agreement; provided that any assets of the Trust Fund which,
pursuant to Section 4.2(h), are being held on behalf of the
general creditors of the Company shall continue to be held on
their behalf and no amendment shall affect the rights of the
general creditors thereto. The Trustee shall have the right at
any time and from time to time to adopt with the consent of the
Company such amendments to the Trust, including retroactive
amendments, if desired, to any or all of the provisions of this
Trust Agreement or to terminate or revoke the Trust Agreement as
it shall determine to be in the best interests of or not
inconsistent with the best interests of the Participating
Directors or their beneficiaries. Notwithstanding anything to
the contrary in this Trust Agreement, if the Trustee determines
that there is a substantial risk that maintenance of the Trust
violates federal securities laws, the Trust shall liquidate and
all assets shall be transferred to the Company.
9.2 Termination of Plan. In the event of the termination of
the Plan as provided therein, and in the event of termination or
revocation of the Trust Agreement, the Trustee may, in its
discretion, (a) continue the Trust for a specific period of time
or for such period as the Trustee, in its discretion, may deem to
be in the best interest of the Participating Directors or their
beneficiaries or (b) terminate the Trust and distribute the Trust
Fund to the Participating Directors or their beneficiaries.
9.3 Substitution of Property. The Company reserves the
right to reacquire the property contained in the Trust Fund at
any time, without the consent of either the Trustee or the
Participating Directors, by substituting other property of
equivalent value. The exercise of such right shall nullify any
obligation of the Trustee under this Agreement to further invest
any portion of the Trust Fund in Company Stock.
9.4 Transfer of Assets. Upon written direction by the Board
of Directors and under such terms and conditions as the Board of
Directors shall provide, the Trustee shall (a) transfer and
deliver such part or all of the beneficial interest of a Plan as
may be specified in such direction to any trustee or insurance
carrier maintaining any other investment medium of such Plan or
to any trustee or insurance carrier maintaining any investment
-11-<PAGE>
medium of a plan, other than the Plan, into which plan the Plan
(or any portion thereof) shall be merged or consolidated, or
(b) accept the transfer to the Trust of assets acceptable to it
from any trustee or insurance carrier maintaining any other
investment medium of a plan or from any trustee or insurance
carrier maintaining any investment medium of a plan, other than
the Plan and which (or any portion of which) shall be merged or
consolidated with the Plan. Assets transferred to the Trustee in
accordance with this Section 9.4 may be commingled with other
Trust assets as the Committee shall direct.
ARTICLE X.
Miscellaneous
10.1 Necessary Parties. Necessary parties to any
accounting, litigation, or other proceedings shall include only
the Trustee and the Company, and the settlement or judgment in
any such cases in which the Company is duly served or cited shall
be binding upon all Participating Directors and their
beneficiaries and estates, and upon all persons claiming by,
through, or under them, to the extent permitted by applicable
law.
10.2 Non-Alienation. Distributions directed to be made
hereunder may not be subject to anticipation, alienation, sale,
transfer, assignment, pledge, encumbrance, charge, garnishment,
execution or levy of any kind, either voluntary or involuntary,
including, except to the extent otherwise required by law, any
such liability which is for alimony or other payments for the
support of a spouse or former spouse or for any other dependent
of the Participating Director, prior to actually being received
by the person entitled to the benefit under the terms of the
Plan; and any attempt to anticipate, alienate, sell, transfer,
assign, pledge, encumber, charge or otherwise dispose of any
right to benefits payable hereunder, shall be void. The Trust
Fund shall not in any manner be liable for, or subject to, the
debts, contracts, liabilities, engagements or torts of any person
entitled to benefits hereunder.
10.3 Company Creditors. The Trust Fund at all times shall
be subject to the claims of the creditors of the Company to the
extent specified in Section 4.2(h). No Participating Director or
beneficiary thereof shall have a secured interest, beneficial
ownership or preferred claim in the Trust Fund, and
notwithstanding the existence of the Trust Fund, the rights of
the Participating Director and his beneficiary with respect to
his Account under the Plan are and shall be those of unsecured
general creditors. The Company agrees, however, that during the
existence of the Trust and following its termination, the Company
shall not permit or cause or amend this Agreement to permit or
-12-<PAGE>
cause, the Trust Fund, or any part thereof, to be used for or
diverted to purposes other than the payment of benefits under the
Plan to Participating Directors and their beneficiaries, except
as may be required in accordance with Section 4.2(h) to satisfy
the claims of the Company's creditors.
10.4 Participating Director Rights. No Participating
Director shall have any right to an interest in the Trust Fund,
or in the Account maintained for him under the Plan and
notwithstanding the existence of this Trust or the maintenance of
an account under the Plan with respect to the Participating
Director's benefits, the rights of the Participating Director and
his beneficiary with respect to his Plan benefits are those of
unsecured general creditors of the Company. Nothing in this
Trust Agreement shall in any way diminish any rights of a
Participating Director or his beneficiary to pursue his rights as
a general creditor of the Company with respect to his benefits
under the Plan or otherwise.
10.5 Invalid or Unenforceable Provisions. If any provision
of this Trust shall be held invalid or unenforceable, such
invalidity or unenforceability shall not affect any other
provisions hereof and this Trust shall be construed and enforced
as if such provisions had not been included.
10.6 Successor Corporation. In the event that any successor
corporation to the Company, by merger, consolidation, purchase or
otherwise, shall elect to adopt the Plan, such successor
corporation shall be substituted hereunder for the Company, upon
the filing in writing of its election to do so with the Trustee.
10.7 Gender and Number. Except as otherwise indicated by
the context, all masculine terms shall be deemed to include the
feminine and neuter, and all singular terms shall be deemed to
include the plural.
10.8 Headings. The headings of sections and subsections are
included solely for convenience of reference and are neither part
of the Trust Agreement nor to be considered in the construction
thereof.
-13-<PAGE>
10.9 Controlling Law. This agreement shall be construed
according to the laws of the State of Illinois, other than its
laws respecting choice of law.
Executed this 14th day of January, 1994.
CHICAGO AND NORTH WESTERN
HOLDINGS CORP.
By: /s/ Robert Schmiege
Chairman, President and
Chief Executive Officer
ATTEST: /s/ Robin Bourne-Caris
Assistant Vice President -
Assistant Corporate Secretary
By: /s/ William R. Kursar
Its: Senior Vice President
Trustee
-14-<PAGE>
AGREEMENT
WHEREAS, each of the persons listed on the signature pages
hereof (other than UP Leasing Corporation and Chicago and North
Western Acquisition Corporation (collectively, the "WRPI
Parties")) is a party to, or bound by the provisions of, the
Second Amended and Restated Stockholders Agreement dated as of
March 30, 1992, as amended by the Letter Agreement dated
October 1, 1992 (as so amended, the "Stockholders Agreement") by
and among Blackstone Capital Partners L.P. ("Blackstone"),
Blackstone Family Investment Partnership II L.P. ("BFIP"),
Blackstone Advisory Directors Partnership L.P. ("BADP"), Chemical
Investments, Inc. ("Chemical"), The Prudential Insurance Company
of America ("Prudential"), DLJ Capital Corporation ("DLJCC"),
Donaldson, Lufkin & Jenrette Securities Corporation, as custodian
("DLJSC"), Union Pacific Corporation ("Union Pacific"), UP Rail,
Inc. ("UP"), Robert Schmiege, Jerome W. Conlon, James P. Daley,
Mary K. Daley, Robert A. Jahnke, Arthur W. Peters, and Thomas A.
Tingleff (such individuals being referred to herein,
collectively, as the "Management Purchasers"), CNW Corporation,
Chicago and North Western Transportation Company and Chicago and
North Western Holdings Corp. ("Holdings").
WHEREAS, DLJCC is the record and beneficial owner of
1,575,430 shares of common stock, par value $.01 per share
("Common Stock") of Holdings and DLJSC (collectively, the "DLJ
Group") is the record owner of 540,701 shares of Common Stock of
Holdings (collectively, the "DLJ Shares"), in each case
constituting Voting Stock for purposes of, and as defined in, the
Stockholders Agreement.
WHEREAS, Blackstone, BFIP, BADP, Chemical and
Prudential (collectively, the "Blackstone Group") are the record
owners of an aggregate of 12,031,690 shares of Common Stock of
Holdings (the "Blackstone Shares") constituting Voting Stock for
purposes of, and as defined in, the Stockholders Agreement.
WHEREAS, the Blackstone Group and the DLJ Group have
requested the Company to effect the registration (the
"Registration") under the Securities Act of 1933 of 11,558,673 of
the Blackstone Shares (the "Blackstone Secondary Shares") and
2,034,102 of the DLJ Shares (the "DLJ Secondary Shares" and,
collectively with the Blackstone Secondary Shares, the "Secondary
Shares") to permit a public offering of such shares (the
"Offering").
WHEREAS, the Blackstone Group and the DLJ Group are
selling to UP and UP is buying, on a pro rata basis, 500,000 of
the Blackstone Shares and the DLJ Shares (resulting in 425,200
shares allocated to the Blackstone Group and 74,800 shares
allocated to the DLJ Group) (the "UP Shares") on the closing date
of the Offering (the "Closing Date") at a price per share (the
"UP Purchase Price") equal to the public offering price per share
of the Secondary Shares (the "UP Purchase").<PAGE>
2
NOW, THEREFORE, the parties hereto agree as follows:
1. (a) Each of the undersigned (other than the WRPI
Parties) hereby consents to the Offering and the sale of the
Secondary Shares pursuant thereto and agrees that the
Registration shall be deemed to constitute a registration of
Registrable Securities requested by Blackstone and DLJ pursuant
to Section 2 of the Registration Rights Agreement dated as of
July 14, 1989 and amended as of July 24, 1989 and March 30, 1992
and as further amended by the Letter Agreement dated October 1,
1992 (as so amended, the "Registration Rights Agreement") by and
among Holdings, Blackstone, BFIP, BADP, Chemical, Prudential,
DLJCC, UP, Union Pacific and the Management Purchasers. Each of
the undersigned which is a Holder under the Registration Rights
Agreement, other than the Blackstone Group and the DLJ Group,
hereby waives any and all rights that it may have under the
Registration Rights Agreement with respect to the Registration
and the Offering.
(b) Each of the undersigned (other than the WRPI
Parties) hereby agrees and confirms that (i) the Management
Purchasers shall not be bound by the restriction on public sale
of Common Stock of Holdings by Holders set forth in Section 4(a)
of the Registration Rights Agreement to the extent such
restriction would apply in connection with the Offering,
(ii) upon completion of the Offering, each Management Purchaser
shall be permitted to transfer shares of Common Stock of Holdings
held by such Management Purchaser without any restriction under
the Stockholders Agreement or any subscription agreement between
such Management Purchaser and the Company relating to the Common
Stock, or otherwise, subject only to any applicable restrictions
under Rule 144 under the Securities Act and (iii) upon completion
of the Offering, each of the persons in the Blackstone Group and
the DLJ Group shall relinquish their respective rights and shall
be released from their respective obligations under the
Stockholders Agreement and the subscription agreements dated as
of July 14, 1989 between Blackstone and DLJCC, respectively, and
the Company relating to the Common Stock, subject only to any
applicable restrictions under Rule 144 under the Securities Act.
(c) Subject to the closing of the sale of the
Secondary Shares in the Offering, the Blackstone Group and the
DLJ Group agree to sell to UP and UP agrees to purchase, on a pro
rata basis, on the Closing Date, the UP Shares at a purchase
price per UP Share equal to the UP Purchase Price. On or prior to
the Closing Date, the Blackstone Group and the DLJ Group will
deliver the UP Shares to Holdings. At such closing, Holdings will
issue to UP, in lieu of the UP Shares, 500,000 newly issued
shares of Non-Voting Common Stock. Each of the undersigned hereby
consents to the sale of the UP Shares and issuance of NonVoting
Common Stock in the UP Purchase.
(d) Each of the undersigned (other than the WRPI
Parties) further waives any and all rights that it may have<PAGE>
3
under, and hereby releases each of Holdings, DLJCC, DLJSC,
Blackstone, BFIP, BADP, Chemical, Prudential, UP, Union Pacific
and the Management Purchasers from any and all of their
respective obligations under, the Stockholders Agreement with
respect to the Offering and the UP Purchase and the sales of
shares of Voting Stock and Non-Voting Common Stock transferred
pursuant thereto, including, without limitation, UP's waiver of
its right under Section 2(h) of the Stockholders Agreement to
request an amendment of the Corporation's Certificate of
Incorporation.
2. Each of the undersigned which is subject to
Section 3 of the Stockholders Agreement agrees that the UP
Purchase is deemed to comply with the terms, conditions and
restrictions on transfer contained in the Blackstone Subscription
Agreement and the DLJCC Subscription Agreement (as such terms are
defined in the Stockholders Agreement). Holdings and UP further
acknowledge that the UP Purchase constitutes an acquisition
pursuant to the exercise of UP's right of first refusal pursuant
to the Stockholders Agreement solely for purposes of Section 7.4
of the Exchange Agreement dated March 30, 1992 (the "Exchange
Agreement") between Holdings and UP. Holdings and UP hereby amend
Section 7.4 of the Exchange Agreement to change the percentage
"30%" contained therein to "33%".
3. Upon consummation of the UP Purchase, the parties
hereto acknowledge that (i) the Non-Voting Common Stock acquired
by UP upon conversion of the UP Shares and the shares of Common
Stock into which such Non-Voting Common Stock is convertible
shall continue to constitute Voting Stock for purposes of the
Stockholders Agreement and Registrable Securities as defined in
the Registration Rights Agreement and (ii) the certificates for
the shares of Non-Voting Common Stock issued to UP shall contain
the legends referred to in Section 6 of the Stockholders
Agreement, Section 7 of the Registration Rights Agreement and
Section 5.3 of the Exchange Agreement. Each of the undersigned
agrees that the obligations with respect to cooperation on
Interstate Commerce Commission (the "ICC") matters set forth in
Section 9 of the Stockholders Agreement shall apply to the
12,835,304 shares of Non-Voting Common Stock beneficially owned
by UP (assuming consummation of the UP Purchase) and the shares
of Common Stock into which such shares of Non-Voting Common Stock
are convertible.
4. UP represents that it is acquiring the UP Shares
with the same investment intention set forth in Section 5.2 of
the Exchange Agreement.
5. (a) From and after the Closing Date, Holdings
agrees to use its best efforts to cause Drew Lewis and L. White
Matthews, III (such individuals and their respective successors
as nominees of UP to the Board of Directors of the Company being
referred to herein, together, as the "Additional UP Nominees" and
collectively with the UP Nominee (as defined in the Stockholders<PAGE>
4
Agreement), as the "UP Nominees") to be appointed to Holdings'
Board of Directors as members of the class of Directors serving
for a term ending on the date of the Annual Meeting to be held in
1995, such appointment to become effective upon the later to
occur of (the "Effective Time") (i) the effectiveness of the
resignations of Messrs. Peterson and Schwarzman as Directors and
(ii) the obtaining of any approval, exemption or declaratory
order of the ICC necessary for the election of Drew Lewis and
L. White Matthews, III to become effective, as specified in a
resolution (the "Resolution") adopted by the Board of Directors
on June 16, 1993, a copy of which is attached hereto as Exhibit
A. To the extent necessary to ensure that there will at all times
be three nominees of UP on the Holdings' Board of Directors (and,
if Holdings shall continue to have a staggered Board of
Directors, one such nominee shall serve in Class I and two
nominees shall serve in Class III), after the Effective Time, or
if the Additional UP Nominees shall fail to take office prior to
the time that the Resolution shall cease to have effect by the
terms thereof, upon the request of UP (which in the case of an
annual meeting shall be given at least 30 days prior to the
Company's mailing of proxy materials for such meeting), Holdings
will use its best efforts to (i) if a vacancy or vacancies shall
then exist on the Board of Directors in any class, have each such
vacancy or vacancies filled by a UP Nominee, (ii) if no vacancies
or insufficient vacancies shall exist, to expand the Board of
Directors by one or two members, as the case may be, and have
each such duly created vacancy or vacancies filled by a UP
Nominee and (iii) nominate and solicit proxies for the election
as Directors at each annual meeting of stockholders of Holdings
(or, if applicable, at any special meeting of stockholders or in
any written consent executed in lieu of such a meeting of
stockholders, provided that Holdings shall not be required to
schedule a special meeting of stockholders or request such a
written consent at UP's request), recommend to the stockholders
of Holdings that they elect, and otherwise cause the election of,
such nominees of UP. The qualification for nomination of any of
the UP Nominees shall be subject to reasonable determination by
the Board of Directors. During the period in which UP has the
right to nominate three persons to the Board of Directors,
Holdings shall use its best efforts to ensure that the Board of
Directors consists of nine Directors; provided that if it is
necessary to increase the size of the Board of Directors in order
to elect the Additional UP Nominees, the Board of Directors may
be expanded to the extent necessary until the election of
Directors at Holdings' next annual meeting.
(b) From and after the Closing Date, in addition to
their obligations relating to the UP Nominee, the Management
Purchasers shall vote their shares of any voting stock of
Holdings (including any shares of voting stock hereafter
acquired), at any regular or special meeting of the stockholders
of Holdings called for the purpose of filling positions on the
Board of Directors of Holdings, or, to the extent permitted by
the Charter Documents (as defined in the Stockholders Agreement),<PAGE>
5
in any written consent executed in lieu of such a meeting of
stockholders, and the Management Purchasers shall vote and
otherwise use their best efforts to ensure that the Board of
Directors of Holdings includes three nominees of UP. During the
period set forth in Section 2(c) of the Stockholders Agreement,
the Management Purchasers shall use their best efforts to ensure
that the Board of Directors consists of no more than nine
Directors; provided that if it is necessary to increase the size
of the Board of Directors after December 31, 1994 in order to
elect the Additional UP Nominees, the Board of Directors may be
expanded to the extent necessary until the election of Directors
at Holdings' next annual meeting. The obligations of a Management
Purchaser under this Section 5(b) shall terminate if such
Management Purchaser ceases to be an employee of Holdings or, in
the case of Mary K. Daley, if James P. Daley ceases to be an
employee of Holdings. The provisions of this Section 5(b) shall
not impose any (i) restriction on the ability of any Management
Purchaser to sell such Management Purchaser's shares of Common
Stock or (ii) requirement that any Management Purchaser make any
expenditure of money in the exercise of such best efforts.
(c) If one of the nominees of UP serving as a Director
should resign or die while serving as a Director of Holdings, or,
in the case of any of the Additional UP Nominees, such person
shall die or decline to serve as a Director prior to the
Effective Time, UP shall be entitled to nominate a successor
nominee. Holdings shall use its best efforts to cause such
nominee to be nominated and elected as a Director of Holdings
within 10 days after UP gives written notice to the Board of
Directors of Holdings that UP has designated such successor
nominee, or, in the case of a successor to an Additional UP
Nominee, at the Effective Time.
(d) The parties hereto acknowledge and agree that in
the event of any breach of the obligations contained in this
Section 5, UP would be irreparably harmed and could not be made
whole by monetary damages. It is accordingly agreed that Holdings
and the Management Purchasers shall and do waive the defense in
any action for specific performance that a remedy at law would be
adequate and that UP, in addition to any other remedy to which it
may be entitled at law or in equity, shall be entitled to compel
specific performance in any action instituted in a Federal Court
of the United States of America sitting in New York City, or in
the event said court shall not have jurisdiction for such action,
in any court of the United States or any state thereof having
subject matter jurisdiction for such action.
(e) The provisions of this Section 5 shall terminate
(i) with respect to both Additional UP Nominees, if UP and its
affiliates cease to own at least 20% of the capital stock of
Holdings of any class or classes, the holders of which are
entitled to vote generally in the election of the members of the
Holdings' Board of Directors and any securities of Holdings
presently convertible into, or exercisable or exchangeable for,<PAGE>
6
any such capital stock of Holdings including, but not limited to
the Common Stock and Non-Voting Common Stock of Holdings (whether
or not such Non-Voting Common Stock is presently convertible)
(collectively, "Voting Stock"), and (ii) with respect to one of
the Additional UP Nominees, if UP and its affiliates cease to own
at least 25%, but continue to own at least 20% of Holdings'
Voting Stock.
6. The parties to the agreement dated December 20,
1990, among the WRPI Parties, Blackstone, UP, Union Pacific, CNW
Corporation, Chicago and North Western Transportation Company and
Holdings, hereby agree that such agreement shall be terminated
and shall have no further force or effect upon the closing of the
Offering and the UP Purchase.
7. Holdings represents and warrants that:
(a) Holdings is a corporation duly organized, validly
existing and in good standing under the laws of state of
Delaware. Holdings has all requisite power and authority to
own, operate and lease its properties and to carry on its
business as currently conducted, and is qualified or
licensed to do business and in good standing in each
jurisdiction in which its ownership or leasing of property
or the conduct of its business requires such licensing or
qualification, except to the extent that the failure to be
so qualified or licensed or in good standing would not have
a material adverse effect on Holdings or a material impact
on UP's investment in the UP Shares.
(b) Holdings has all requisite corporate power and
authority to execute and deliver this Agreement and to carry
out its obligations hereunder. The execution and delivery of
this Agreement and the performance by Holdings of its
obligations hereunder have been duly authorized, and no
other corporate proceeding on the part of Holdings or its
stockholders is required. This Agreement has been duly
executed and delivered by Holdings and assuming the due
authorization, execution and delivery hereof by the other
parties hereto, is a valid and binding obligation of
Holdings, enforceable against Holdings in accordance with
its terms.
(c) The execution and delivery of this Agreement by
Holdings, the performance by Holdings of its obligations
hereunder and the consummation of the transactions to be
performed by Holdings contemplated by this agreement will
not (i) conflict with or result in any breach of any
provision of the Certificate of Incorporation or By-Laws of
Holdings or any of its subsidiaries, (ii) conflict with, or
result in a violation or breach of, or constitute (with or
without due notice or lapse of time or both) a default or
give rise to any right of termination, cancellation or
acceleration under, any of the terms or conditions of any<PAGE>
7
note, bond, mortgage, indenture, license, agreement or other
instrument or obligation to which Holdings or any of its
subsidiaries is a party or by which any of them or any of
their properties or assets may be bound, or (iii) violate
any statute or law, or any rule, regulation, writ,
injunction, judgment, order or decree of any court,
administrative agency or governmental authority binding on
Holdings or any of its subsidiaries, or any of their
respective properties or assets (provided that no
representation or warranty is made as to any required ICC
action), excluding from the foregoing clauses (ii) and
(iii), conflicts, violations, breaches and defaults which,
individually and in the aggregate, would not have a material
adverse effect on Holdings or a material impact on UP's
investment in the UP Shares.
(d) The UP Shares (and the Non-Voting Common Stock
into which the UP Shares will be converted) have been duly
authorized by Holdings and (assuming, in the case of such
Non-Voting Common Stock, such conversion of the UP Shares)
have been duly and validly issued, and are fully paid and
nonassessable and UP will acquire valid and marketable title
thereto, free and clear of any lien, claim, charge, equity
or encumbrance of any kind (assuming, if applicable, that UP
has not created any lien, claim, charge, equity or
encumbrance of any kind on such shares). The shares of
Common stock issuable upon conversion of the 500,000 shares
of Non-Voting Common Stock have been duly authorized and,
when issued upon conversion of the 500,000 shares of
Non-Voting Common Stock, will be validly issued, fully paid
and nonassessable, and UP will acquire valid and marketable
title thereto, free and clear of any lien, claim, charge,
equity or encumbrance of any kind (assuming, if applicable,
that UP has not created any lien, claim, charge, equity or
encumbrance of any kind on such shares). The shares of
Common Stock issuable upon conversion of such 500,000 shares
of Non-Voting Common Stock have been, and at all times prior
to the conversion of the Shares will be, duly reserved for
issuance upon such conversion.
8. This Agreement shall terminate and shall have no
further force or effect and all consents and waivers hereunder
shall be void if the Closing Date shall not have occurred on or
before December 31, 1993.
9. For purposes of this Agreement, the consents,
waivers and agreements by each of the undersigned hereunder shall
constitute consents, waivers and agreements by each of the
Permitted Transferees (as defined in the Stockholders Agreement)
of such undersigned who represent that such consents, waivers and
agreements are binding on its Permitted Transferees.<PAGE>
8
10. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original but all
of which shall constitute one and the same agreement.<PAGE>
9
IN WITNESS WHEREOF, the parties hereto have executed
this Agreement as of June 21, 1993.
CHICAGO AND NORTH WESTERN
HOLDINGS CORP.
By: /s/ Robert Schmiege
Name: Robert Schmiege
Title: Chairman, President
and CEO
BLACKSTONE CAPITAL PARTNERS, L.P.
By: BLACKSTONE MANAGEMENT
ASSOCIATES L.P.
By: /s/ David A. Stockman
General Partner
BLACKSTONE FAMILY INVESTMENT
PARTNERSHIP II L.P.
By: BLACKSTONE MANAGEMENT
ASSOCIATES L.P.
By: /s/ David A. Stockman
General Partner
BLACKSTONE ADVISORY DIRECTORS
PARTNERSHIP L.P.
By: BLACKSTONE MANAGEMENT
ASSOCIATES L.P.
By: /s/ David A. Stockman
General Partner
CHEMICAL INVESTMENTS, INC.
By: /s/ Arnold L. Chavkin
Name: Arnold L. Chavkin
Title: President<PAGE>
10
THE PRUDENTIAL INSURANCE COMPANY
OF AMERICA
By: /s/ Richard A. Hubbard
Name: Richard A. Hubbard
Title: Vice President
DLJ CAPITAL CORPORATION
By: /s/ J. Brian Mullen
Name: J. Brian Mullen
Title: Vice President
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
By: /s/ J. Brian Mullen
Name: J. Brian Mullen
Title: Managing Director
UNION PACIFIC CORPORATION
By: /s/ John E. Dowling
Name: John E. Dowling
Title: Vice President -
Corporate Development
UP RAIL, INC.
By: /s/ John E. Dowling
Name: John E. Dowling
Title: Vice President
CNW CORPORATION
By: /s/ Robert Schmiege
Name: Robert Schmiege
Title: Chairman, President
and CEO<PAGE>
11
CHICAGO and NORTH WESTERN
TRANSPORTATION COMPANY
By: /s/ Robert Schmiege
Name: Robert Schmiege
Title: Chairman, President
and CEO
/s/ Robert Schmiege
Robert Schmiege
/s/ Jerome W. Conlon
Jerome W. Conlon
/s/ James P. Daley
James P. Daley
/s/ Mary K. Daley
Mary K. Daley
/s/ Robert A. Jahnke
Robert A. Jahnke
/s/ Arthur W. Peters
Arthur W. Peters
/s/ Thomas A. Tingleff
Thomas A. Tingleff
CHICAGO AND NORTH WESTERN
ACQUISITION CORP.
By: /s/ Robert Schmiege
Name: Robert Schmiege
Title: Chairman, President
and CEO
UP LEASING CORPORATION
By: /s/ Carl W. von Bernuth
Name: Carl W. von Bernuth
Title: Vice President - Law<PAGE>
EXHIBIT A
RESOLVED, that Drew Lewis and L. White Matthews, III
are hereby elected to serve as directors of the Corporation in
Class III, which Class shall serve for a term ending on the date
of the annual meeting in 1995; provided, however, that the
election of such persons shall be effective upon the later to
occur of (i) the effectiveness of the resignations of Messrs.
Peterson and Schwarzman as directors and (ii) the obtaining of
any approval, exemption or declaratory order of the Interstate
Commerce Commission (the "ICC") necessary for the election of
Drew Lewis and L. White Matthews, III to become effective ("ICC
Approval"); and further
RESOLVED, that the foregoing resolution shall be of no
further effect in the event that ICC Approval shall not have been
obtained by the earlier to occur of (i) December 31, 1994, or
(ii) the date of the Corporation's receipt of written notice
given pursuant to the Corporation's By-laws by any stockholder of
record entitled to vote generally in the election of Directors
(other than any stockholder that is a party to the Stockholders
Agreement) indicating such stockholder's intention to nominate
one or more persons for election as Directors at the annual
meeting of stockholders of the Corporation to be held in 1994;
and further
RESOLVED, that in the event that, prior to the date
that ICC Approval is obtained, (i) UP Rail, Inc. ("UP") and its
affiliates cease to own at least 20% of the capital stock of the
Corporation of any class or classes, the holders of which are
entitled to vote in the election of the members of the
Corporation's Board of Directors and any securities of the
Corporation presently convertible into, or exercisable or
exchangeable for, any such capital stock of the Corporation,
including, but not limited to the Common Stock and Non-Voting
Common Stock of the Corporation (whether or not such Non-Voting
Stock is presently convertible) (collectively, "Voting Stock"),
the Board of Directors may elect substitute directors to fill
such vacancies in lieu of Drew Lewis and L. White Matthews, III
or (ii) UP and its affiliates cease to own at least 25%, but
continue to own at least 20%, of the Voting Stock of the
Corporation, the Board of Directors may elect a substitute
director to fill the vacancy in lieu of either Drew Lewis or
L. White Matthews, III, as UP shall elect.<PAGE>
Market for the Registrant's Common Equity and Related Stockholders Matters
Stock Listing
The company's common stock is traded on the New York, Midwest,
Philadelphia and Boston Stock Exchanges under the symbol CNW.
High Low
Fourth quarter 1993 25-1/8 19-1/2
Third quarter 1993 23 19
Second quarter 1993 24-1/4 19-7/8
First quarter 1993 23-1/8 19-1/8
Dividends
No dividends have been paid on the common stock during 1993 (see Note
6(d) to Consolidated Financial Statements).
Stockholders
As of December 31, 1993, there were 963 holders of record.
<PAGE>
1
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
In 1993, operating revenues increased $58.2 million, primarily due to a
23.1% increase in coal traffic volume. Increased coal revenues were partially
offset by significant losses of corn traffic due to substantial flooding in
the upper Midwest during June through September of 1993. Operating expenses,
excluding special charges, increased $48.3 million, reflecting the effects of
midwestern flooding and increased traffic levels. The Company believes the
net effect of reduced revenues and increased expenses related to the flooding
was approximately $14 million pretax.
In 1993, the Company continued its efforts to become the rail industry's
low-cost leader in the markets it serves. Cost reductions -- employee cuts,
facility consolidations and the centralization of operations -- have been the
primary strategy used to reach this goal. Since December of 1988, the Company
has decreased the size of its workforce by 24.4%.
The Company continued to improve its capital structure in 1993 through a
negotiated interest rate reduction for a portion of its senior secured debt
facilities (the "Debt Facilities"); through prepayments of debt, including the
remaining outstanding 15.5% senior subordinated debentures (the "Debentures");
and through the issuance of 1,371,265 shares of common stock in connection
with a secondary stock offering. In 1992 the Company effected a
recapitalization plan (the "Recapitalization") that redeemed or exchanged all
preferred stock, prepaid all borrowings under the prior credit agreement and
retired the majority of the Debentures. See Note 12 to Consolidated Financial
Statements.
Results of Operations: 1991-1993
Summary of Operations
(millions of dollars)
1993 1992 1991
Operating revenues $1,043.2 $985.0 $979.0
Operating expenses excluding special charges 829.1 780.8 788.2
Special charges 5.0 30.0 115.8
Total operating expenses $ 834.1 $810.8 $904.0
Operating income $ 209.1 $174.2 $ 75.0
Other income, net 11.0 8.1 11.1
Interest expense 105.4 126.1 156.8
Income (loss) before income taxes $ 114.7 $ 56.2 $(70.7)
Income taxes 50.7 18.8 (27.2)
Income (loss)* $ 64.0 $ 37.4 $(43.5)
*Before extraordinary items and cumulative effect of a change in method of
accounting.<PAGE>
2
The Company's 1993 income increased $26.6 million compared with 1992.
This increase reflects a $58.2 million revenue increase, a $25.0 million
reduction in special charges and a $20.7 million decrease in interest expense,
partially offset by a $48.3 million increase in operating expenses and a $31.9
million increase in income taxes.
The Company's 1992 income increased $80.9 million compared with 1991.
This increase reflects an $85.8 million reduction in special charges, a $30.7
million reduction in interest expense due to the Recapitalization and lower
interest rates, and a $7.4 million reduction in operating expenses partially
offset by a $46.0 million increase in income taxes.
The Company's 1993 operating income increased $34.9 million compared with
1992, due to a $58.2 million revenue increase and a $25.0 million reduction in
special charges, partially offset by a $48.3 million increase in operating
expenses reflecting the effects of increased traffic volume and midwestern
flooding.
The Company's 1992 operating income increased $99.2 million, compared
with 1991, due to an $85.8 million reduction in special charges and decreased
labor and fuel costs, partially offset by increased equipment rental and other
expenses. The Company recorded a $30.0 million pretax special charge in 1992
for severance payments and costs associated with the consolidation of the
Company's customer service functions and the closing of its Council Bluffs,
Iowa, diesel shop. The 1991 loss reflects a $115.8 million pretax special
charge for employee-reduction programs primarily covering train crew personnel
and increased casualty and environmental reserves.
Excluding special charges, the Company's 1993 operating income was $214.1
million, an increase of $9.9 million compared with 1992. Excluding special
charges, the Company's 1992 operating income was $204.2 million, an increase
of $13.4 million compared with 1991.
Operating Revenues
Net freight revenues were $932.7 million in 1993, an increase of $59.9
million (or 6.9%) compared with 1992. Net freight revenues were $872.8
million in 1992, an increase of $4.3 million (or 0.5%) compared with 1991.
The balance of the operating revenues resulted from commuter service and other
operations.
The following tables provide three-year comparisons of freight revenues
and loads by the Company's business groups.<PAGE>
3
<TABLE>
<CAPTION>
Revenue Comparison by Business Group (dollars in millions)
1993 1992 1991
Percent Percent Percent Percent Percent
change of total change of total of total
Gross from gross Gross from gross Gross gross
revenues 1992 revenues revenues 1991 revenues revenues revenues
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Energy (Coal) $ 319.0 19.3 % 32.0% $267.3 (7.9)% 28.3% $290.2 31.0%
Agricultural
Commodities 211.3 (3.1) 21.2 218.1 4.5 23.1 208.7 22.3
Automotive,
Steel and
Chemicals 200.5 5.0 20.1 190.9 7.5 20.2 177.6 19.0
Intermodal 119.5 2.7 12.0 116.4 6.8 12.3 109.0 11.6
Consumer
Products 145.8 (4.1) 14.7 152.0 1.1 16.1 150.3 16.1
Gross freight
revenues $ 996.1 5.4 % 100.0% $944.7 1.0 % 100.0% $935.8 100.0%
Allowances,
absorptions,
& adjustments (63.4) (11.8) (71.9) 6.8 (67.3)
Net freight
revenues $ 932.7 6.9 % $872.8 0.5 % $868.5
Commuter 85.1 (4.8) 89.4 3.0 86.8
Other 25.4 11.4 22.8 (3.8) 23.7
Operating
revenues $1,043.2 5.9 % $985.0 0.6 % $979.0
<CAPTION>
Load Comparison by Business Group (loads in thousands)
1993 1992 1991
Percent Percent
change Percent change Percent Percent
Total from of total Total from of total Total of total
loads 1992 loads loads 1991 loads loads loads
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Energy (Coal) 785.5 23.1 % 33.4% 638.0 (3.7)% 29.1% 662.6 31.7%
Agricultural
Commodities 304.5 (5.0) 12.9 320.6 8.3 14.6 296.1 14.1
Automotive,
Steel and
Chemicals 332.3 4.5 14.1 318.0 8.9 14.5 291.9 14.0
Intermodal 714.0 3.6 30.4 689.2 11.5 31.5 618.0 29.5
Consumer
Products 215.3 (4.9) 9.2 226.4 0.7 10.3 224.8 10.7
Total loads 2,351.6 7.3 % 100.0% 2,192.2 4.7 % 100.0% 2,093.4 100.0%
</TABLE>
<PAGE>
4
1993 Operating Revenues Compared to 1992
As reflected in the previous tables, 1993 revenues and volumes compared
to 1992 were higher in the Energy; Automotive, Steel and Chemicals; and
Intermodal business groups. Total volume increased 7.3% and net freight
revenues increased 6.9% in 1993 compared with 1992. Freight rates in 1993
decreased for the Energy business group due to contracts that were entered
into or renewed at rates lower than those previously realized. Average
revenue per load for all commodity groups as a whole remained stable,
decreasing slightly from $398 in 1992 to $397 in 1993.
Energy (Coal) - Coal transportation, primarily to utility customers, is
the Company's largest, single revenue-producing activity. Volume and revenues
increased compared with 1992 due to new contracts and increased coal
originations for existing customers handled by the Company's subsidiary,
Western Railroad Properties, Incorporated ("WRPI"), from the southern Powder
River Basin in Wyoming (the "Powder River Basin"). The increases were also
partially due to shipments in 1992 being lower than normal due to mild
weather. Revenue increases were less than volume increases due to new and
renewed contracts at rates lower than those in place in 1992. WRPI's net
freight revenues were $204.9 million and $169.0 million in 1993 and 1992,
respectively. WRPI loadings were 708,872 and 554,895 in 1993 and 1992,
respectively. Of the total coal loads handled in 1993, 90.7% originated on
WRPI compared with 87.3% in 1992. Coal shipments and revenue for 1994 are
expected to be higher than 1993.
Agricultural Commodities - Volume and gross revenues decreased compared
with 1992 due to midwestern flooding that reduced the quantity and quality of
the corn harvest in the Company's service territory. This decrease was
partially offset by an increase in fertilizer shipments required to replace
soil nutrients lost due to the flooding. Grain shipments for 1994 are
expected to remain depressed due to the reduced 1993 corn harvest.
Automotive, Steel and Chemicals - Volume and gross revenues increased due
to increased automobile production; improved market share from General Motors'
Janesville, Wisconsin plant; increased demand and market share for steel
shipments from on-line mills; increased soda ash shipments to glass producers
and new plastics business. These increases were partially offset by reduced
traffic due to Chrysler's Belvidere, Illinois assembly plant being closed for
model changeover during the last half of 1993. Volume and gross revenues are
expected to increase in 1994 due in part to resumption of production at the
Belvidere assembly plant.
Intermodal - Volume and gross revenues increased due to growth from
existing customers. Volume increases are slightly higher than revenue
increases as a result of traffic moving at lower rates due to market
pressures. Volume and revenue increases are expected to continue in 1994.
Consumer Products - Volume and revenues decreased compared to 1992. The
decrease is primarily due to business that has diverted to the Wisconsin
Central route due to that railroad's acquisition of the Fox River Valley
Railroad. Volume and revenues in 1994 are expected to remain flat.<PAGE>
5
1992 Operating Revenues Compared to 1991
Revenues and volumes for 1992 compared to 1991 were higher in all
business groups except Energy. Total volume increased 4.7% and net freight
revenues increased 0.5% in 1992 compared with 1991. Freight rates in 1992
remained stable for the Agricultural Commodities; Automotive, Steel and
Chemicals; and Consumer Products business groups, but decreased for the Energy
and Intermodal business groups due to market pressures. Average revenue per
load for all commodity groups as a whole decreased from $415 in 1991 to $398
in 1992.
Energy (Coal) - Volume and revenues decreased compared with 1991 for two
major reasons. First, coal shipments in the first quarter of 1991 were high
in order to meet WRPI-contracted minimum shipping requirements deferred from
1990 due in part to capacity constraints (alleviated by 1991 track
construction) and bad weather. Second, 1992 shipments were also lower due to
mild weather that decreased the demand for electricity. Revenues declined
more than volume as a result of weather-related changes in traffic mix, market
pressures and a decrease in the Rail Cost Adjustment Factor (a cost-based
measurement used to adjust contract pricing). WRPI's net freight revenues
were $169.0 million and $176.4 million in 1992 and 1991, respectively. WRPI
loadings were 554,895 and 572,888 in 1992 and 1991, respectively. Of the
total coal loads handled in 1992, 87.3% originated on WRPI compared with 86.8%
in 1991.
Agricultural Commodities - Volume and gross revenues increased compared
with 1991 due to increased shipments of corn, soybeans, prepared animal feed,
soybean meal, corn syrup, phosphate, potash and sulphur. Gross revenues did
not increase as much as volume due to a change in traffic mix from export to
processors, resulting in shorter hauls.
Automotive, Steel and Chemicals - Volume and gross revenues increased due
to new contracts for finished autos and the resumption of shipments to and
from General Motors' Janesville, Wisconsin, plant, which was closed during
1991 for model changeover. In addition, steel shipments improved slightly due
to an upturn in the domestic steel market from 1991 levels.
Intermodal - Volume and gross revenues increased due to two new customers
and growth from existing customers. Volume increases were higher than revenue
increases as a result of rate decreases caused by market pressures.
Consumer Products - Volume and revenues increased compared to 1991. The
increase was primarily due to bentonite clay moving to export and taconite
markets, more shipments of food products, and higher lumber traffic due to
market share increases and improved housing starts.
Operating Expenses
Operating expenses in 1993 were $23.3 million (or 2.9%) higher than 1992.
1993 operating expenses, before special charges, were $48.3 million (or 6.2%)
higher than 1992 primarily due to increased traffic volumes and the effects of
midwestern flooding, causing increased compensation and benefits, fuel and
material and purchased services expenses; and increased environmental
expenses.<PAGE>
6
Operating expenses in 1992 were $93.2 million (or 10.3%) lower than 1991.
Operating expenses, before special charges, in 1992 were $7.4 million (or
0.9%) lower than 1991, primarily due to reductions in compensation and
benefits (train crew-consist reductions) and diesel fuel expense, partially
offset by an increase in material and purchased services.
The following table is a three-year comparison of operating expenses:
Operating Expenses (dollars in millions)
Percent Percent
change change
from from
1993 1992 1992 1991 1991
Compensation and benefits $389.5 3.3 % $376.9 (4.0)% $392.5
Diesel fuel 70.1 18.8 59.0 (13.4) 68.1
Material & purchased services 75.4 18.4 63.7 21.8 52.3
Hire of freight equipment 62.1 6.9 58.1 3.2 56.3
Other rents 71.9 (1.2) 72.8 4.6 69.6
Depreciation 68.8 6.0 64.9 (2.8) 66.8
Casualties 42.3 16.9 36.2 (9.0) 39.8
Other* 49.0 (0.4) 49.2 15.0 42.8
Operating expenses before
special charges $829.1 6.2 % $780.8 (0.9)% $788.2
Special charges 5.0 NM 30.0 NM 115.8
Total operating expenses $834.1 2.9 % $810.8 (10.3)% $904.0
*Other includes property taxes, utilities, vehicle operating costs, FRA and
railroad association fees and other general expenses.
1993 Operating Expenses Compared to 1992
Compensation and benefits expense, excluding special charges for employee
reductions and relocations, increased in 1993 as a result of higher wage
levels and increased train crew costs due to traffic increases and midwestern
flooding, partially offset by a 1.8% decline in the average number of
employees. Payroll taxes decreased compared with 1992 due primarily to the
elimination of the railroad unemployment insurance repayment tax and a
reduction in the number of employees. Other fringe benefits increased due to
increased health and welfare costs and increased accruals for profit sharing
and management incentive compensation. Compensation and benefits expense, as
a percentage of operating revenues, were 37.3% in 1993 compared with 38.3% in
1992.
Diesel fuel expense increased due to a 12.8% increase in revenue ton
miles, less efficient operations due to midwestern flooding, severe winter
weather early in the year and a 0.9% increase in the average price per gallon.
Material and purchased services increased compared with 1992 due to
reduced billings for repairing foreign line cars; increased joint facility
expenses; and increased maintenance and transportation expenses due to
increased traffic volumes and midwestern flooding.<PAGE>
7
Hire of freight equipment increased due to increased traffic levels.
Other rents decreased due to reduced computer and locomotive rentals due to
lease expirations, partially offset by a volume-related increase in WRPI
contingent rent.
Depreciation increased compared with 1992 primarily due to increased
traffic levels on WRPI where track structure components are depreciated on the
unit of production method.
Casualties increased primarily due to an increased charge for
environmental liability and a 1992 reduction in personal injury expense due to
the favorable settlement of a serious personal injury case.
During 1993, the Company accrued a special charge of $5.0 million for
severance and related costs, relocation costs related to the closing of the
Company's Oelwein, Iowa diesel shop and a management fee payable to one of the
Company's previous principal stockholders. During 1992, the Company accrued a
special charge of $30.0 million for employee reductions related to the
consolidation of its customer service functions and the closing of its Council
Bluffs diesel shop.
1992 Operating Expenses Compared to 1991
Compensation and benefits expense, excluding special charges for employee
reductions and relocations, decreased in 1992 as a result of an 8.4% decline
in the average number of employees (primarily, train crew-consist reductions),
but was partially offset by higher wage levels. Payroll taxes decreased
compared with 1991 due to the reduction in the number of employees. Other
fringe benefits decreased due to reductions in employee levels, reduced health
and welfare costs and decreased accruals for management incentive
compensation. Compensation and benefits expense, as a percentage of operating
revenues, were 38.3% in 1992 compared with 40.1% in 1991.
Diesel fuel expense decreased compared with 1991 due to an 8.6% reduction
in the average price per gallon combined with a 2.9% reduction in usage due to
the acquisition of more fuel-efficient locomotives and continuing fuel
conservation programs.
Material and purchased services increased compared to 1991 due to reduced
billings for repairing foreign line cars and increased rail grinding and
intermodal services provided by contractors.
Hire of freight equipment increased due to new leases of open-top hoppers
in 1991 and gondolas in 1992. Other rents increased due to the lease of 35
new locomotives in the third quarter of 1991 and 11 rebuilt locomotives in
1992.
Depreciation decreased compared with 1991 primarily due to implementation
of new rates resulting from a depreciation study, and reduced traffic levels
on WRPI where track structure components are depreciated on the unit of
production method.<PAGE>
8
Casualties decreased primarily due to a reduction of personal injury
expense due to a favorable settlement of a serious case.
Other expense increased compared with 1991 primarily due to increased
software costs, FRA and railroad association fees, property taxes and non-
recurring litigation costs, partially offset by a decrease in bad debt
expense.
During 1992, the Company accrued a special charge of $30.0 million for
employee reductions related to the consolidation of its customer service
functions and the closing of its Council Bluffs diesel shop. During 1991, the
Company accrued a special charge of $76.8 million for employee reduction
programs covering train crew personnel and non-operating employees.
Additionally, the Company accrued a special charge of $39.0 million for
increased environmental liability and personal injury reserves.
Other Income, Net
See Note 3 to Consolidated Financial Statements for a summary of other
income, net.
Interest Expense
1993 interest expense decreased $20.7 million compared with 1992 due to
the Recapitalization, average lower interest rates and reduced debt levels.
1992 interest expense decreased $30.7 million compared with 1991 due to the
Recapitalization and lower average interest rates. On a pro forma basis,
assuming the Recapitalization had occurred January 1, 1992, interest expense
for 1992 would have been reduced by an additional $9.2 million. Included in
interest expense is amortization of financing fees totaling $8.1 million in
1993, $8.7 million in 1992 and $7.9 million in 1991.
Income Taxes
The income tax provision for 1993 increased $31.9 million compared with
1992 primarily due to a $58.5 million increase in taxable income and an
increase in the corporate tax rate. Approximately $7.1 million of the
increase is related to the impact of the higher corporate rate on prior years'
deferred taxes. The Company recognized tax benefits of $6.6 million in 1993
in connection with the extraordinary loss on prepayment of long-term debt.
Due to the availability of approximately $209 million of net operating
losses and $49 million of investment tax credits, the Company does not
anticipate payment of significant amounts of income taxes until 1996. See
Note 2 to Consolidated Financial Statements.
The income tax provision for 1992 increased $46.0 million compared with
1991 due to a $126.9 million increase in book taxable income, which was
partially offset by a $2.8 million reduction in the valuation allowance for
deferred tax assets. In 1992 the Company recognized tax benefits of $57.0
million and $1.5 million in connection with the extraordinary loss on the
Recapitalization and the adoption of Statement of Financial Accounting
Standards ("SFAS") No. 106, "Accounting for Postretirement Benefits Other than
Pensions", respectively.<PAGE>
9
The income tax provision for 1991 reflects the adoption, effective
January 1, 1991, of SFAS No. 109, "Accounting for Income Taxes." The
cumulative effect of SFAS No. 109 for years prior to 1991 was $25.6 million.
See Note 1(f) to Consolidated Financial Statements.
Other Matters
The Company is a party to several proceedings before federal and state
regulatory agencies relating to environmental issues. The Company has been
named a potentially responsible party in several administrative proceedings
for the cleanup of various waste sites, including some Superfund sites. In
the opinion of management, based on the information currently available and
reserves provided for such costs, the ultimate liability resulting from these
environmental matters will not materially affect the results of operations or
financial position of the Company. See Note 8 to Consolidated Financial
Statements.
On July 28, 1993, the Company completed a secondary stock offering and
issued an additional 1,371,265 shares of common stock pursuant to the
underwriters exercise of over-allotment options. As part of the secondary
offering, the Company's previous principal stockholder, Blackstone Capital
Partners, sold substantially all their shares of common stock. See Note 6(b)
to Consolidated Financial Statements for discussion.
Asset Sales
The Company received net proceeds before income taxes from asset sales,
including excess rolling stock and non-operating real estate, of $9.9 million
in 1993, $12.8 million in 1992 and $21.4 million in 1991. The Company has
signed an agreement to sell its line from Norfolk to Chadron, Nebraska for
$6.3 million.
Liquidity
At December 31, 1993, the Company's working capital totaled a negative
$51.9 million, while cash and temporary cash investments totaled $70.9
million. The Company historically operates with negative working capital due
to a higher turnover rate for receivables than accounts payable. Consolidated
indebtedness is substantial in relation to its common stockholders' equity.
As of December 31, 1993, the Company had long-term indebtedness, including
current maturities, of $1.2 billion and common stockholders' equity of $226
million. The Company's ratio of long-term debt to total capitalization
decreased to 83.5% at December 31, 1993 from 89.5% at December 31, 1992.
The Company's cash requirements for financing and investing activities
are comprised of interest and principal payments under the Debt Facilties and
its other outstanding indebtedness and capital expenditures, primarily for
track improvements. The Company is required to make scheduled principal
repayments of approximately $59 million in 1994; $97 million in 1995; $109
million in 1996; $97 million in 1997; $175 million in 1998; and additional
amounts thereafter. The Debt Facilities and WRPI's debt require accelerated
debt payments if there is excess cash flow as defined in the respective
agreements.<PAGE>
10
The Company believes that its cash flow from operations, together with
approximately $47 million available on a revolving credit basis, will allow it
to meet its liquidity requirements, including debt service and capital
expenditures, during the foreseeable future. However, the Company's ability
to make principal and interest payments on its outstanding indebtedness and to
comply with the financial covenants under the Debt Facilities, including a
current ratio, an interest coverage ratio, a leverage ratio and a net worth
test, is dependent upon the Company's future performance and business growth,
which are subject to financial, economic, competitive and other factors
affecting the Company and its subsidiaries, many of which are beyond the
Company's control.
The Debt Facilities and certain other agreements materially restrict the
Company from paying dividends on or redeeming capital stock. See Note 6(d) to
the Consolidated Financial Statements.
Capital Expenditures
The Company allocates funds for capital expenditures based on its capital
needs indicated by its long-term planning and availability of internally
generated funds or suitable long-term financing.
Capital expenditures for 1993 were $115.8 million. The Company's 1994
capital expenditures are currently budgeted at approximately $152 million.
The majority of the capital expenditures program covers replacement of rail,
ties and other track material system-wide, expansion of train handling
capacity from the Powder River Basin by WRPI and construction of new
facilities to serve shippers.
The Company's 1993 capital expenditures included programs to consolidate
the Company's Minneapolis-St. Paul, Minnesota yard facilities and expand the
Company's Global II double-stack container terminal and approximately $4
million to replace property damaged by midwestern flooding. The Company
entered into operating lease agreements in 1993 covering 65 locomotives and
1,300 freight cars with a cost to the lessors of approximately $161 million,
with approximately $59 million of such equipment being received in 1993. The
Company expects to enter into additional operating lease agreements in 1994
for 65 locomotives and approximately 300 freight cars which have a cost to the
lessors of approximately $107 million.
<PAGE>
1
CHICAGO AND NORTH WESTERN HOLDINGS CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF INCOME
Millions of dollars except for per share amounts
Years Ended December 31,
1993 1992 1991
Operating revenues $1,043.2 $ 985.0 $ 979.0
Operating expenses excluding
special charges $ 829.1 $ 780.8 $ 788.2
Special charges 5.0 30.0 115.8
Total operating expenses $ 834.1 $ 810.8 $ 904.0
Operating income $ 209.1 $ 174.2 $ 75.0
Other income, net 11.0 8.1 11.1
Interest expense 105.4 126.1 156.8
Income (loss) before income taxes $ 114.7 $ 56.2 $ (70.7)
Income taxes:
Currently payable $ 1.3 $ - $ (2.0)
Deferred 49.4 18.8 (25.2)
$ 50.7 $ 18.8 $ (27.2)
Income (loss) before extraordinary item
and cumulative effect of a
change in method of accounting $ 64.0 $ 37.4 $ (43.5)
Extraordinary loss on prepayment of
long-term debt, net of income taxes (10.8) (91.0) (3.4)
Cumulative effect of change in method
of accounting for income taxes - - (25.6)
Cumulative effect of change in method of
accounting for other postretirement
benefits, net of income taxes - (2.6) -
Net income (loss) $ 53.2 $ (56.2) $ (72.5)
Preferred stock dividends - 11.9 30.3
Excess of liquidation value over
carrying value of preferred
stock called for redemption - 46.8 -
Income (loss) available for
common stockholders $ 53.2 $ (114.9) $ (102.8)
Earnings (loss) per common share:
Before extraordinary item and
cumulative effect of a change
in method of accounting $ 1.44 $ (.58) $(3.39)
Extraordinary item (.24) (2.50) (.15)
Cumulative effect of a change in
method of accounting - (.07) (1.18)
Total $ 1.20 $(3.15) $(4.72)
Shares used in earnings per share
computation (thousands) 44,261 36,457 21,763
See accompanying Notes to Consolidated Financial Statements.<PAGE>
2
CHICAGO AND NORTH WESTERN HOLDINGS CORP. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
Millions of dollars
December 31,
1993 1992
ASSETS
Current assets:
Cash and temporary cash investments $ 70.9 $ 44.2
Accounts receivable, net of allowance
for doubtful accounts of $.2 and $.2 140.9 129.7
Materials and supplies 27.7 29.4
Prepaid expenses and other 9.3 11.4
$ 248.8 $ 214.7
Property:
Road $1,938.6 $1,844.4
Equipment 155.3 142.8
Accumulated depreciation (273.1) (205.8)
$1,820.8 $1,781.4
Other assets $ 66.3 $ 75.9
Total assets $2,135.9 $2,072.0
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued expenses $ 179.4 $ 171.7
Payroll and vacation pay 35.3 34.3
Interest 10.9 16.9
Taxes 16.2 13.3
Total, excluding long-term debt
due within one year $ 241.8 $ 236.2
Long-term debt due within one year 58.9 50.7
$ 300.7 $ 286.9
Casualties and environmental reserve 78.3 60.3
Other liabilities 84.3 89.6
Deferred income taxes 303.6 263.3
Long-term debt, excluding amounts
due within one year:
C&NW railroad 730.4 798.9
WRPI 412.4 429.0
Total long-term debt,
excluding amounts due within one year $1,142.8 $1,227.9
Total liabilities $1,909.7 $1,928.0
Stockholders' equity:
Common stock, par value $.01 per share,
authorized 250,000,000 shares of which
125,000,000 are non-voting; issued and
outstanding 43,650,561 and 41,902,131 shares,
respectively (of which 12,835,304 and
12,335,304, respectively, are non-voting) $ 0.4 $ 0.4
Capital surplus 537.5 508.5
Retained income (311.7) (364.9)
$ 226.2 $ 144.0
Total liabilities and stockholders' equity $2,135.9 $2,072.0
See accompanying Notes to Consolidated Financial Statements.<PAGE>
3
CHICAGO AND NORTH WESTERN HOLDINGS CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
Millions of dollars
Years Ended December 31,
1993 1992 1991
Cash flow from operating activities:
Net income (loss) $ 53.2 $ (56.2) $ (72.5)
Items not affecting cash flow from
operating activities:
Depreciation 68.8 64.9 66.8
Amortization of debt cost 8.1 8.7 7.9
Gain from sales of property, net (4.4) (1.9) (3.4)
Deferred income taxes 49.4 18.8 (25.2)
Extraordinary items, net 10.8 91.0 3.4
Cumulative effect of change
in method of accounting - 2.6 25.6
Changes in assets and liabilities:
(Increase) decrease in accounts receivable (11.2) 25.2 (8.6)
(Increase) decrease in other current
assets except cash 3.8 7.1 (1.0)
Increase (decrease) in accounts payable
and accruals 5.6 (39.3) 9.3
Increase in noncurrent reserves for
special charges 3.0 12.7 54.3
Other, net (6.5) (5.5) (12.2)
Net cash flow from operating activities $ 180.6 $ 128.1 $ 44.4
Cash flow from financing activities:
Proceeds from debt financing $ 6.7 $ 758.5 $ 57.6
Proceeds from sale of common stock 26.4 216.0 -
Payments on debt (50.9) (54.1) (33.7)
Prepayment on long-term debt (32.9) (842.9) (112.2)
Repurchase of interest rate swap agreements - (7.2) (15.9)
Redeem preferred stock - (124.7) -
Net cash flow used for
financing activities $ (50.7) $ (54.4) $(104.2)
Cash flow from investing activities:
Additions to property $(115.4) $ (83.3) $ (84.4)
Proceeds from property dispositions 9.9 12.8 21.4
Other, net 2.3 (2.5) (0.2)
Net cash flow used for
investing activities $(103.2) $ (73.0) $ (63.2)
Increase (decrease) in cash and
temporary cash investments $ 26.7 $ 0.7 $(123.0)
Cash and temporary cash investments -
Beginning of period 44.2 43.5 166.5
End of period $ 70.9 $ 44.2 $ 43.5
See accompanying Notes to Consolidated Financial Statements.<PAGE>
4
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. SUMMARY OF ACCOUNTING POLICIES
a) Principles of Consolidation.
The consolidated financial statements reflect the operations of the
Company and its subsidiaries. All significant intercompany transactions
have been eliminated.
b) Revenue Recognition.
The Company allocates transportation revenue between reporting
periods based upon relative transit times.
c) Cash and Cash Equivalents.
The Company considers all short-term investments which have an
original maturity of less than ninety days as cash equivalents.
d) Materials and Supplies.
Materials and supplies consist mainly of fuel oil and items to be
used for maintenance of and additions to road and equipment properties
and are stated at average cost.
e) Property and Depreciation.
Property balances include assets under capital leases with costs
(before accumulated depreciation) of $256.6 million and $259.0 million at
December 31, 1993 and 1992, respectively.
Depreciation is provided at composite straight-line rates except that
the track structure components of the Company's subsidiary, Western
Railroad Properties, Incorporated ("WRPI"), are depreciated on the unit
of production method. For 1993, 1992 and 1991, the provision
approximated an annual rate of 4.4%, 4.2% and 4.5%, respectively.
Capital leases are depreciated over the terms of the respective leases
from 3 to 28 years. The average life was approximately 13 years for 1993
and 15 years for 1992 and 1991.
Additions and renewals constituting a unit of property are
capitalized. Other renewals, repairs and maintenance are charged to
expense. Track removal costs and costs of units of property retired or
replaced, less salvage, are charged to accumulated depreciation. All
overhead costs related to track construction and payroll additives
related to other construction are capitalized.
f) Changes in Method of Accounting.
Effective January 1, 1991, the Company adopted SFAS No. 109,
"Accounting for Income Taxes." Under the liability method specified by
SFAS No. 109, the deferred tax liability is determined based on the
temporary differences between the financial statement and tax bases of
<PAGE>
5
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Cont'd.)
assets and liabilities as measured by the enacted tax rates which are
expected to be in effect when these differences reverse. Deferred tax
expense is the result of changes in the liability for deferred taxes.
The cumulative effect of the change in the method of accounting for
income taxes, attributable to years prior to 1991, was a decrease in net
earnings of $25.6 million.
Effective January 1, 1992, the Company adopted SFAS No. 106,
"Employers' Accounting for Postretirement Benefits Other than Pensions."
The cumulative effect of the change in the method of accounting for other
postretirement benefits, attributable to the accumulated postretirement
benefit obligation ("APBO") for years prior to 1992, net of income taxes,
was a decrease in net earnings of $2.6 million.
Effective January 1, 1992, the Company adopted SFAS No. 112,
"Employers' Accounting for Postemployment Benefits." The adoption had a
minimal impact upon the Company's results of operations and financial
position.
2. INCOME TAXES
The provision (benefit) for income taxes consisted of the following:
Years ended December 31,
1993 1992 1991
(Millions of dollars)
Provision (benefit) from:
Continuing operations $ 50.7 $ 18.8 $(27.2)
Extraordinary loss (6.6) (57.0) (2.1)
Change in method of accounting - (1.5) -
Total income tax provision (benefit) $ 44.1 $(39.7) $(29.3)
Current - Federal $ 1.3 $ - $ (1.8)
- State - - (0.2)
Deferred 26.7 3.9 (5.4)
Loss carryover benefit used (generated) 16.1 (40.8) (21.9)
Reduction of deferred tax asset
valuation allowance - (2.8) -
Total income tax provision (benefit) $ 44.1 $(39.7) $(29.3)
The 1993 provision includes a $7.1 million charge to reflect the effect
of the increase in the federal corporate tax rate on the deferred tax balance
as of December 31, 1992.
Total income taxes reflected in the consolidated statement of income
differ from the amounts computed by applying the federal statutory corporate
tax rate as follows:<PAGE>
6
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Cont'd.)
Years ended December 31,
1993 1992 1991
(Millions of dollars)
Tax provision (benefit):
At the federal statutory rate $ 32.5 $(30.4) $(24.1)
Change in federal corporate tax rate 7.1 - -
Reduction of deferred tax asset
valuation allowance - (2.8) -
Federal income tax provision $ 39.6 $(33.2) $(24.1)
State income tax provision 4.5 (6.5) (5.2)
Total income tax provision (benefit) $ 44.1 $(39.7) $(29.3)
As of December 31, 1993, the Company has net operating losses (NOLs) of
approximately $209 million and $134 million for regular and alternative
minimum taxes (AMTs), respectively. The Company's NOLs are recognized for
financial statement purposes as a reduction of the deferred tax liability and
expire as follows:
2000 $ 28 million 2007 $ 64 million
2002 8 million 2008 101 million
2005 8 million
In addition, the Company has approximately $49 million of investment tax
credits for tax return purposes which expire as follows:
1994 $ 6 million 1998 $ 4 million
1995 10 million 1999 9 million
1996 8 million 2000 5 million
1997 5 million 2001 2 million
These investment tax credits are subject to certain limitations as to
their future use. For financial statement purposes, the Company has
established a $38 million valuation reserve for credits which are unlikely to
be used. The estimate of NOLs and ITCs likely to be used was determined
using internal Company projections of future taxable income. The Company
generated a book gain before income taxes of $97 million in 1993 and book
losses before income taxes of $96 million in 1992 and $76 million in 1991.
Taxable gain for 1993 was somewhat lower, while taxable losses for 1992 and
1991 are somewhat higher, primarily due to temporary differences related to
property additions. The Company's projections to support the recognition of
these deferred tax assets do not require continued operating income
improvements but assume the elimination of the special charges for employee
reductions and extraordinary losses for refinancing. The employee reductions
and refinancings have increased pretax income by decreasing operating expenses
and interest expense.
<PAGE>
7
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Cont'd.)
The components of the deferred tax liability include:
Amounts as of
December 31,
1993 1992
(millions of dollars)
Deferred tax liabilities:
Depreciation and basis differences $ 512.9 $ 520.6
All other 15.4 2.7
Total deferred tax liabilities $ 528.3 $ 523.3
Deferred tax assets:
Property treated as leased for tax purposes (59.6) (64.1)
Tax loss carryforwards (79.5) (98.2)
Accruals (59.2) (59.1)
Investment tax credit carryforwards, net of
valuation reserves of $37.6 and $43.1 (11.5) (11.5)
All other (14.9) (27.1)
Total deferred tax assets $(224.7) $(260.0)
Net deferred income tax liability $ 303.6 $ 263.3
3. OTHER INCOME, NET:
Years ended December 31,
(millions of dollars) 1993 1992 1991
Interest income $ 2.5 $ 2.8 $ 5.5
Gain from sales of property, net 4.4 1.9 3.4
Gain from sale of investment 1.6 - -
Rents from property not used for operations 3.9 3.7 3.8
Financing commitment fees (0.6) (0.8) (1.2)
Other, net (0.8) 0.5 (0.4)
Total $11.0 $ 8.1 $11.1
<PAGE>
8
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Cont'd.)
4. LONG-TERM DEBT
a) Non-Current Portion of Long-Term Debt:
Amounts as of
December 31,
1993 1992
(Millions of dollars)
C&NW railroad:
Senior Secured Notes due from 1998 to 2001 $ 465.0 $ 465.0
Term Loan due from 1995 to 1997 72.5 129.5
Standby Loan due from 1995 to 1998 132.7 126.7
Equipment and other obligations
due from 1995 to 2006 41.5 54.7
Capital lease obligations due from
1995 to 2005 (Note 5) 18.7 23.0
Total C&NW railroad $ 730.4 $ 798.9
WRPI:
Loan due from 1995 to 2002 $ 275.8 $ 291.8
Capital lease due from 1995 to 2011 (Note 5) 136.6 137.2
Total WRPI $ 412.4 $ 429.0
Total $1,142.8 $1,227.9
b) C&NW Railroad Debt.
Interest on the Company's senior secured debt facilities (the "Debt
Facilities") is based on floating rates plus various margins. Excluding the
WRPI debt, the composite interest rates net of the effect of interest rate
swap agreements at December 31, 1993, 1992 and 1991, were 7.1%, 8.3% and
10.2%, respectively. As of December 31, 1993 and 1992, interest rates on
$678.7 million and $731.2 million, respectively, of debt varied with the prime
rate, LIBOR or other short-term interest rates. The 1993 and 1992 amounts
included $425 million of fixed rate debt, reverse swapped to floating rate
through various dates in 1996. The Company has effectively fixed the interest
rate on $450 million of loans at 5.6% plus applicable margins through various
dates in 1994 and on $450 million of loans at 6.3% plus applicable margins
through April of 1995 by means of interest rate swap agreements. The Company
has limited the exposure of floating interest rates on $250 million of loans
to a maximum of 5% plus applicable margins from April, 1994 through April,
1995 and on $100 million of loans from April, 1995 through December, 1995 to a
maximum of 7% plus applicable margins by means of interest rate cap
agreements.
See Note 12 for a discussion of the Company's 1992 recapitalization.
c) WRPI Debt.
WRPI's property consists of a one-half interest in a 103-mile rail
line serving the southern Powder River Basin coal fields in Wyoming that
is jointly owned with the Burlington Northern Railroad, and approximately
107 miles of railroad that connects the jointly owned line to the lines
<PAGE>
9
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Cont'd.)
of the Union Pacific Railroad near Joyce, Nebraska. The Chicago and
North Western Transportation Company operates the project as agent for
its subsidiary WRPI. A trust for the benefit of a subsidiary of UP
("WRPI Trust") owns approximately 101 miles of the connector track and
certain of the support facilities and leases them to WRPI under a long-
term capital lease. WRPI owns the half interest in the jointly owned
line and the remainder of the assets.
WRPI's debt consists of a direct loan to WRPI (the "WRPI Loan") and a
loan to WRPI Trust, which is treated as a capital lease obligation by
WRPI; collectively, the "WRPI Loans." In addition to the WRPI Trust
capital lease, WRPI's capital lease obligations include approximately $32
million related to the initial equity investment in the lease.
The WRPI Loans bear interest at per annum rates calculated at the
option of WRPI or the WRPI Trust, as applicable, at a margin over the
Adjusted LIBOR Rate, the Alternate Base Rate or the Adjusted CD Rate (in
each case as defined in WRPI's debt agreement) as follows:
Adjusted Alternate Adjusted
LIBOR base rate CD rate
Through December 19, 1994 1.25% 0.25% 1.375%
December 20, 1994-December 19, 1998 1.50% 0.50% 1.625%
Thereafter 2.00% 1.00% 2.125%
The composite interest rates, net of the effect of interest rate swap
agreements as of December 31, 1993, 1992 and 1991 were 7.1%, 7.2% and
8.4%, respectively. The interest rates on $165 million of the WRPI Loans
are effectively fixed at 8.2% until February of 1996, plus applicable
margins by means of interest rate swap agreements.
The Company paid approximately $7.2 million in 1992 to terminate $135
million of WRPI swap agreements. This amount is amortized to interest
expense over the remaining life of the WRPI Loans.
d) Annual Debt Payments.
Scheduled principal payments (including capital lease obligations)
due in 1994 through 1998 are as follows:
<PAGE>
10
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Cont'd.)
Other
WRPI debt Total
(millions of dollars)
1994 $ 16.6 $ 42.3 $ 58.9
1995 22.7 74.5 97.2
1996 25.0 83.5 108.5
1997 32.1 64.5 96.6
1998 37.2 137.3 174.5
The Debt Facilities and WRPI Loans require accelerated debt payments
if there is excess cash flow as defined in the respective agreements.
e) Principal Encumbrances.
All of the Company's subsidiaries other than WRPI guarantee
borrowings under the Debt Facilities. All of the WRPI assets, except for
certain intercompany loans, secure the WRPI Loans.
f) Extraordinary Items.
The 1993 extraordinary loss resulted from the refinancing of a
portion of the Company's Debt Facilities. The total pretax loss was
$17.4 million and the related income tax benefit was $6.6 million.
The 1992 extraordinary loss resulted primarily from the retirement of
Debentures in connection with the Recapitalization (see Note 12). The
total pretax loss was $148.0 million and the related income tax benefit
was $57.0 million.
The 1991 extraordinary loss resulted from the writeoff of financing
fees and debt discount related to the Debentures repurchased in
connection with the refinancing of the WRPI Loans and a sale leaseback of
railroad equipment. The total pretax loss was $5.5 million and the
related income tax benefit was $2.1 million.
5. LONG-TERM LEASES
The Company has substantial lease commitments for railroad, highway and
data processing equipment, and WRPI has a lease for portions of the track
structure and related facilities for WRPI. Those leases which meet the
criteria established by SFAS No. 13 are capitalized. The remainder are
reported as operating leases.
Minimum annual rental commitments for noncancelable leases at December
31, 1993 were as follows:<PAGE>
11
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Cont'd.)
Capital leases
Operating
C&NW Railroad WRPI leases
(Millions of dollars)
1994 $ 6.5 $ 11.7 $ 99.1
1995 5.1 11.7 102.8
1996 4.4 11.7 96.7
1997 2.7 11.7 89.7
1998 2.7 11.7 85.9
After 1998 12.5 187.1 540.6
Total $ 33.9 $ 245.6 $1,014.8
Less amount representing
interest on capital leases 10.5 108.4
Present value of net minimum
lease payments $ 23.4 $ 137.2
Lease rental expense for operating leases, including cancelable leases,
was as follows (millions of dollars):
1993 $111.3
1992 111.3
1991 109.4
The above amounts include insignificant amounts of rental income from
subleases. Excluded from such amounts are contingent rentals on freight cars
based on off-line car hire earnings of $0.3 million, $0.9 million and $1.4
million in 1993, 1992 and 1991, respectively. Also excluded from the above
amounts are contingent rentals payable by WRPI out of its cash flow of $18.2
million for 1993, $15.6 million for 1992 and $11.6 million for 1991.<PAGE>
12
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Cont'd.)
6. STOCKHOLDERS' EQUITY
a) Changes in Stockholders' Equity.
(millions of dollars)
Common Capital Retained
stock surplus income
December 31, 1990 $ 0.2 $ 112.5 $(108.4)
Net loss for the period - - (72.5)
Dividends on and accretion of
preferred stock* - - (30.3)
December 31, 1991 $ 0.2 $ 112.5 $(211.2)
Issuance of common stock 0.2 395.7 (38.8)
Net loss for the period - - (56.2)
Exercise of stock options - 0.3 -
Dividends on and accretion of
preferred stock* - - (11.9)
Excess of liquidation value over
carrying value of preferred stock
called for redemption* - - (46.8)
December 31, 1992 $ 0.4 $ 508.5 $(364.9)
Net income for the period - - 53.2
Issuance of common stock - 24.4 -
Exercise of stock options - 4.6 -
December 31, 1993 $ 0.4 $ 537.5 $(311.7)
*Preferred dividends of the Company, all paid in additional shares, were
13% per annum for each share of UP Convertible Preferred Stock, and 17%
per annum for each share of Merger Preferred Stock. See Note 12 for
discussion of preferred stock redemption.
b) Secondary Stock Offering.
During June of 1993 the Company filed a registration statement with
the Securities and Exchange Commission for the secondary offering of
13,712,645 shares of common stock. The secondary offering closed July
28, 1993 at a price of $19.25 per share. Blackstone Capital Partners,
L.P. ("Blackstone") and related investors sold 11,983,873 shares and DLJ
Capital Corporation ("DLJ") and related investors sold 2,228,772 shares,
substantially all of their respective shares. UP Rail, Inc. ("UP Rail"),
a subsidiary of Union Pacific Corporation, purchased 500,000 shares
from the selling stockholders, thereby increasing its ownership to
12,835,304 shares, all of which are non-voting. On January 29, 1993,
Union Pacific Corporation filed an application with the ICC requesting
approval to convert the non-voting common stock to common stock. A
decision is expected in late 1994.<PAGE>
13
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Cont'd.)
In connection with the secondary offering, the underwriters exercised
overallotment options under which the Company issued an additional
1,371,265 shares of common stock for which it received net proceeds after
underwriting discount and issuance expenses of approximately $24.4
million. Such net proceeds were used for the payment of a portion of the
amounts owing under the Company's Debt Facilities. Under the Debt
Facilities, the Company is allowed to pay cash dividends or increase its
capital expenditures by the $24.4 million amount of net proceeds.
c) Stock Option Agreements.
1,820,012 options on common stock, with an exercise price of $5.88,
were granted in 1989 and an additional 247,582 options were granted in
1990. Options became exercisable for 12.5% of the shares subject thereto
on each of the first, second and third anniversaries of the grant date.
In addition to the shares with respect to which options have become
exercisable as described in the previous sentence, 45% of the options
have become exercisable based on achievement of performance levels in
fiscal 1990-1993 and 17.5% may become exercisable for the remaining
options based on achievement of performance levels, subject to adjustment
by the Board of Directors, over the next fiscal year. As of December 31,
1993, 1,268,634 options were exercisable, 374,965 had been exercised and
77,323 had been canceled. In addition, 323,542 options, all of which are
exercisable, with exercise prices between $1.09 and $2.07 were granted in
1989 to certain executives. 50,000 of the 323,542 options have been
exercised as of December 31, 1993. All options expire on the tenth
anniversary of the grant date or earlier under certain circumstances.
996,000 options, with an exercise price of $21.375 were granted on
December 8, 1992. These options become exercisable for 20% of the shares
subject thereto, annually, beginning on the first anniversary of the
grant date and expire on the tenth anniversary of the grant date. 1,000
of these options have been exercised as of December 31, 1993. An
additional 1,104,000 options are available to be granted under the 1992
stock option plan.
d) Dividend Restrictions.
The Debt Facilities limit the Company's payment of dividends or
making other distributions with respect to the common stock to 10% of
income, as defined by the Debt Facilities, and the amount of proceeds
from equity issuances subsequent to the Recapitalization. Proceeds from
equity issuances may alternately be used for increased capital
expenditures, thereby decreasing the amount available for dividends. As
of December 31, 1993, the Company's potential dividend payments were
limited to $28.4 million.
<PAGE>
14
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Cont'd.)
7. EMPLOYEE BENEFIT PLANS
a) Pensions.
The Company has a noncontributory defined benefit pension plan for
employees who are not covered by a collective bargaining agreement. The
benefits are based on years of service and the employee's average
compensation over the last five years of employment. These benefits are
reduced by eligible retirement benefits under the Company's Profit
Sharing and Retirement Savings Plan and the Railroad Retirement Act. The
Company makes annual contributions to the plan based on actuarial
determinations and cash requirements. The plan's assets are invested in
an immediate participation guaranty policy with an insurance company.
Net pension expense was $0.3 million in 1993 and 1992, and $0.5
million in 1991, which consisted primarily of interest on the projected
benefit obligation. The projected benefit obligation was $7.0 million
and $6.4 million as of December 31, 1993 and 1992, respectively.
The Company has accrued pension liabilities of $4.3 million and $4.5
million as of December 31, 1993 and 1992, respectively, consisting of the
projected benefit obligation and unrecognized net gains (losses) less the
fair value of plan assets. The fair value of plan assets was $2.9
million and $2.3 million as of December 31, 1993 and 1992, respectively.
Pension expense was determined using a weighted average discount rate
of 8.25%. The projected benefit obligation was determined using a
weighted average discount rate of 7.0% at December 31, 1993 and 8.25 % at
December 31, 1992. The expected long-term rate of return on plan assets
was 8.75%. The assumed rate of compensation increase was 6.0% at
December 31, 1993 and 7.5% at December 31, 1992.
b) Postemployment Benefits
SFAS No. 106 primarily affects the Company's plan under which life
insurance is provided for retired employees not covered under collective
bargaining agreements. The Company's plan is unfunded. Total operating
expense recognized for 1993 and 1992 was $0.4 million and $0.3 million,
respectively, consisting primarily of interest on the APBO.
Certain employees not covered by collective bargaining agreements
also have received postretirement health care benefits to age 65 under
special employee severance programs. The amount paid for these benefits,
which was accrued by the Company prior to the employees' retirement was
$1.2 million in 1993, $1.1 million in 1992 and $0.5 million in 1991.
The Company provides health care benefits through a multi-employer
insurance plan for retired employees between the ages of 62 and 65 who
are covered by collective bargaining agreements. The cost of these
benefits for retired employees was $1.7 million in 1993 and 1992 and $1.9
million in 1991.<PAGE>
15
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Cont'd.)
8. CONTINGENT LIABILITIES AND COMMITMENTS
The Company has approved a capital budget of $152 million for 1994 and plans
to acquire equipment under operating leases with a cost to the lessors of $107
million. Additionally, the Company will acquire $102 million of equipment for
which operating lease agreements were signed in 1993.
The Company's operations are subject to a variety of federal, state and
local environmental and pollution control statutes and regulations. The
Company has been named as a potentially responsible party ("PRP") in three
proceedings under the federal Comprehensive Environmental Response,
Compensation and Liability Act of 1980 ("CERCLA"), and in one state Superfund
matter, all in the Midwest. The Company is also a defendant in one private
CERCLA cost recovery action. The current estimate of the total cost of
remediation for these five proceedings to all PRPs aggregates approximately
$78 million. The Company has assumed that other PRPs will pay appropriate
shares of remediation obligations, except when the Company is aware they are
incapable of doing so. In such instances, the Company has reapportioned the
potential liability and provided a reserve.
The Company is the lessor of real property under approximately 1,700
leases for commercial, agricultural and industrial uses and owns or leases
numerous other sites. The Company has additionally provided reserves for
environmental exposure from current and former railroad operating properties,
fueling facilities, leased properties and pending litigation and enforcement
actions. The Company's environmental exposure is reevaluated periodically.
At December 31, 1993, the Company's reserve for environmental liabilities
was $28 million. No offsets were credited for possible insurance recoveries,
as the Company believes, to a large extent, it would not be able to obtain
such recoveries. The reserve was determined based on the Company's
anticipated cost of remediation at all known sites, including those where no
claim or enforcement action has been issued, taking into consideration the
extent of damage and the Company's remediation cost history. The Company has
not discounted its environmental liabilities as the timing of remediation
payments is uncertain. Environmental regulations and remediation processes
are subject to future change, and determining the actual cost of remediation
will require further investigation and remediation experience. Therefore, the
ultimate cost cannot be determined at this time. However, while such cost may
vary from the Company's current estimate, the Company believes the difference
between its reserve and the ultimate liability will not be material.
The Company is a party to a number of other legal actions arising in the
ordinary course of business, including actions involving personal injury
claims. The Company believes that the legal actions will not have a material
adverse impact upon the financial position or results of operations of the
Company.<PAGE>
16
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Cont'd.)
9. SELECTED QUARTERLY FINANCIAL DATA (UNAUDITED)
(millions of dollars except per share amounts)
1993 Quarters Ended March 31 June 30 September 30 December 31
Operating revenues $254.7 $257.0 $262.9 $268.6
Operating income 45.6 52.7 49.2 a/ 61.6
Income before
extraordinary item 14.6 18.7 6.2 24.5
Net income (loss) 14.6 18.7 (4.6) b/ 24.5
Income before extraordinary
item per share .33 .43 .14 .54
Net income (loss) per share .33 .43 (.10) .54
(millions of dollars except per share amounts)
1992 Quarters Ended March 31 June 30 September 30 December 31
Operating revenues $242.6 $240.0 $253.3 $249.1
Operating income 44.0 47.4 59.7 23.1 c/
Income before extraordinary
item and cumulative
effect of a change in
method of accounting 5.0 11.6 19.5 1.3
Net income (loss) (88.6) d/ 11.6 19.5 1.3
Income (loss) before
extraordinary item and
cumulative effect of a
change in method of
accounting per share (2.36) .22 .45 .03
Net income (loss) per share (6.66) .22 .45 .03
a/ Includes $5 million charge for employee buyouts, relocation costs and a
management fee payable to one of the Company's previous principal
stockholders.
b/ Includes a $10.8 million extraordinary charge from a debt refinancing.
c/ Includes $30 million employee reduction program costs.
d/ Includes a $91 million extraordinary charge in connection with the
Recapitalization (see Note 12).<PAGE>
17
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Cont'd.)
10. RELATED PARTY TRANSACTIONS
Union Pacific Corporation and its subsidiaries ("UP") are related parties
as a result of their ownership of common stock of the Company. Blackstone
and DLJ were formerly related parties as a result of their or their
affiliates' ownership of common stock of the Company
The Company paid Blackstone $1.0 million in 1993 and 1992 and $0.8
million in 1991 for management and advisory fees, and $1.2 million in 1992
with respect to the Recapitalization. The Company paid DLJ $1.2 million in
fees in 1992 related to the Recapitalization, and $0.2 million in 1991 for
management and advisory services. In addition, DLJ, acting as a lead
underwriter, realized aggregate selling concessions of $2.3 million in
connection with the Company's 1993 secondary offering and $4.1 million in
connection with the Company's 1992 stock offering.
Repurchases of Debentures by the Company in 1991 included repurchases of
approximately $62.7 million face amount of such debentures from DLJ for an
aggregate purchase price of approximately $62.4 million.
In connection with the Recapitalization, the Company exchanged 10,153,304
shares of non-voting common stock for the outstanding UP Convertible Preferred
Stock and an additional cash investment of $28 million. In connection with
the secondary offering, UP Rail purchased an additional 500,000 shares of non-
voting common stock. See Note 6(b).
Approximately 65% of the Company's total loads in 1993, 62% in 1992 and
64% in 1991 were interchanged with the UP with revenue shared in accordance
with standard industry procedures. Pursuant to a trackage rights agreement,
approved by the Interstate Commerce Commission, among the Company and
subsidiaries of UP, the Company hauls certain traffic for subsidiaries of UP
under terms that preserve the Company's revenue on that traffic. Note 5
details WRPI capital lease payments (including contingent rent payable out of
cash flow) made to a trust for the benefit of a subsidiary of UP.
<PAGE>
18
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Cont'd.)
11. OTHER DISCLOSURES
a) Additional Disclosures for Consolidated Statement of Cash Flows.
The following cash payments occurred in the periods shown:
1993 1992 1991
(millions of dollars)
Interest $103.0 $118.6 $151.3
Income taxes .9 - .2
The following noncash financing activities of the Company occurred in
the periods shown:
1993 1992 1991
(millions of dollars)
UP convertible preferred
stock dividend $ - $ 4.8 $ 16.4
Merger preferred stock
dividend and accretion - - 13.9
Exchange of UP convertible preferred
stock for non-voting common stock - 141.4 -
b) Cash Resources.
The Company has a credit line available through a $50 million
revolving credit facility. Approximately $47 million was available under
this credit line as of December 31, 1993.
c) Concentration of Credit Risk.
The Company is not dependent upon a single customer or on a
few customers. However, approximately 33% of the Company's 1993 traffic
was coal, primarily destined to electric utilities in the United States.
Approximately 65% of the Company's 1993 traffic was interchanged with
subsidiaries of the Union Pacific Corporation.
d) Fair Value of Financial Instruments.
The estimated fair value of the Company's financial instruments as of
December 31, 1993 was as follows:
Carrying Fair
value value
(millions of dollars)
Assets:
Cash and temporary cash investments $ 70.9 $ 70.9
Other current assets 177.9 177.9
Investments 5.6 5.6
Interest rate swap agreements - 3.3
Liabilities:
Current liabilities 300.7 300.7
Long-term debt 1,142.8 1,213.3
<PAGE>
19
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Cont'd.)
The following methods and assumptions were used to estimate the fair
value of each class of financial instruments:
Current Assets and Current Liabilities: The carrying value
approximates fair value due to the short maturity of these items.
Investments: The Company has a minor amount of assets accounted for
on the cost basis for which the Company believes the carrying value
approximates fair value.
Long-Term Debt: The fair value of long-term debt and related swaps
is estimated based on quoted market prices for similar issues.
12. RECAPITALIZATION
On April 7, 1992, the Company issued 20,069,463 shares of common stock,
of which 9,916,159 shares were issued to the public and 10,153,304 non-voting
shares were issued to UP Rail as part of a recapitalization plan (the
"Recapitalization") to: (i) eliminate dividends on its 17% Cumulative
Exchangeable Preferred Stock, par value $.01 per share (the "Merger Preferred
Stock") and 13% Cumulative Convertible Exchangeable Senior Pay-in-Kind
Preferred Stock, par value $.01 per share (the "UP Convertible Preferred
Stock") issued in connection with the acquisition of CNW Corporation in 1989
(the "Acquisition"); (ii) increase common stockholders' equity; and (iii)
reduce the interest costs of the Company's consolidated indebtedness. The
principal sources of funds in the Recapitalization were: (i) the public
common stock issuance; (ii) new senior secured debt facilities for borrowings
of up to $850 million ; and (iii) an investment by UP Rail of $28 million,
along with the surrender of the UP Convertible Preferred Stock in exchange for
the issuance of non-voting Common Stock to UP Rail.
The proceeds of the Recapitalization (approximately $1.2 billion) were
used to: (i) redeem all of the issued and outstanding shares of Merger
Preferred Stock at an aggregate redemption price equal to its liquidation
value plus accrued and unpaid dividends to the redemption date of May 8, 1992;
(ii) prepay all borrowings outstanding under the credit agreement (the "Merger
Credit Agreement") entered into in connection with the Acquisition; (iii)
retire $362 million of the 15-1/2% senior subordinated debentures due 2001
(the "Debentures") issued by a subsidiary of the Company in connection with
the Acquisition; (iv) exchange all of the issued and outstanding shares of UP
Convertible Preferred Stock (plus an additional cash investment by UP Rail of
$28 million) for 10,153,304 shares of non-voting common stock; (v) fund a
portion of employee severance costs; (vi) terminate certain interest rate swap
agreements; and (vii) pay financing and transaction costs. In connection with
the Recapitalization, the Company recorded a first quarter after-tax
extraordinary charge to earnings of approximately $91 million (net of $57
million of income taxes) related to the retirement of the Debentures and the
termination of the Merger Credit Agreement and a charge of approximately $47
million to accrete the Merger Preferred Stock to its liquidation value.
Concurrent with the common stock issuance, the Company effected an
approximate 32.25-for-one stock split. Share and per share data included in
the Consolidated Financial Statements have been restated for the stock split.
<PAGE>
20
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Cont'd.)
On a pro forma basis, as of January 1, 1992, the Recapitalization would
have reduced 1992 interest expense by $9.2 million and eliminated all
preferred stock dividends.
13. SPECIAL CHARGES
The Company recorded a special charge of $5 million in 1993 for employee
severance and related costs, relocation costs related to the closing of the
Oelwein, Iowa diesel shop and a management fee payable to one of the Company's
previous principal stockholders.
The Company recorded a special charge of $30 million in 1992 for
severance and related costs to consolidate the Company's customer service
functions and close a diesel shop in Council Bluffs, Iowa.
In 1991 the Company recorded special charges totaling $115.8 million,
consisting of: (a) $76 million for severance and related costs pursuant to an
agreement with the United Transportation Union; (b) a $20 million increase to
the Company's environmental liability reserve; (c) a $19 million increase to
the Company's personal injury reserve; and (d) $0.8 million for an employee
reduction program covering non-operating contract personnel.<PAGE>
21
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Board of Directors of
Chicago and North Western Holdings Corp.:
We have audited the accompanying consolidated balance sheets of Chicago
and North Western Holdings Corp. (a Delaware corporation) and subsidiaries as
of December 31, 1993 and 1992, and the related consolidated statements of
income and cash flows for the three years in the period ended December 31,
1993. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the 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 Chicago and North
Western Holdings Corp. and subsidiaries as of December 31, 1993 and 1992, and
the results of their operations and their cash flows for the three years in
the period ended December 31, 1993, in conformity with generally accepted
accounting principles.
As explained in Note 1(f) to the financial statements, effective January
1, 1992, the Company changed its method of accounting for other postretirement
benefits and effective January 1, 1991, the Company changed its method of
accounting for income taxes.
ARTHUR ANDERSEN & CO.
Chicago, Illinois
February 4, 1994<PAGE>
Exhibit 21
SUBSIDIARIES OF CHICAGO AND NORTH WESTERN HOLDINGS CORP.
State of
Incorporation
Chicago and North Western Acquisition Corp. Delaware
CNW Corporation Delaware
Chicago and North Western Transportation Company Delaware
CNW Consulting, Inc. Delaware
CNW Realco, Inc. Delaware
Midwestern Railroad Properties, Incorporated Delaware
North Western Leasing Company Delaware
Western Railroad Properties, Inc. Delaware
Wisconsin Town Lot Company Wisconsin <PAGE>
