<PAGE>
===============================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
---------
FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1996 Commission file number 0-18694
CATELLUS DEVELOPMENT
CORPORATION
(Exact name of Registrant as specified in its charter)
Delaware 94-2953477
(State or other jurisdiction of (I.R.S. Employer
Incorporation or organization) Identification No.)
201 Mission Street
San Francisco, California 94105
(Address of principal executive offices and zip code)
Registrant's telephone number, including area code:
(415) 974-4500
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 per share New York, Pacific, Chicago Stock
Exchanges
$3.75 Series A Cumulative Convertible New York Stock Exchange
Preferred Stock
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 _
The aggregate market value of the voting stock held by non-affiliates of
the Registrant was approximately $846 million on March 24, 1997.
As of March 24, 1997, there were 89,500,428 issued and outstanding shares
of the Registrant's Common Stock.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Registrant's Proxy Statement for the 1997 Annual Meeting of
Stockholders are incorporated by reference in Part III.
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<PAGE>
PART I
ITEM 1. BUSINESS
Catellus Development Corporation (the "Company") is a diversified real
estate operating company that owns, manages and develops real estate for its
account and others. As of December 31, 1996 its portfolio included approximately
837,000 acres of land, 16.4 million square feet of income-producing property,
5,300 acres of land leases and interests in twelve joint ventures. Approximately
76% (by square feet) of the Company's industrial property, 85% of its retail
property and 65% of its office property are located in California, with the
balance mainly concentrated in metropolitan Texas, Illinois and Arizona. In
addition, 30% of the Company's industrial land holdings, and all of its resource
group portfolio and major mixed-use projects are located in California.
The Company was originally organized in the state of Delaware in 1984 as an
indirect, wholly-owned subsidiary of Santa Fe Pacific Corporation to conduct the
non-railroad real estate activities of Santa Fe Industries and Southern Pacific
Company. The largest single shareholder of the Company is the California Public
Employees' Retirement System ("CALPERS"), which, as of December 31, 1996, owned
approximately 41.7% of the common stock.
The Company's principal office is located at 201 Mission Street, San
Francisco, California 94105; its telephone number is (415) 974-4500.
COMPANY STRATEGIES -- OVERVIEW
Prior to 1996, the aggregate cash requirements associated with fixed
charges and leasing costs exceeded the Company's operating income from recurring
sources. The Company relied primarily on proceeds from asset sales and the
issuances of debt and preferred stock to meet its operating deficits. During
1995 and 1996, the Company focused on improving operating income, and, as a
result, the deficits were eliminated in 1996 (see detailed financial results
under Liquidity and Capital Resources section in "Management's Discussion and
Analysis of Financial Condition and Results of Operations" of this Form 10-K).
The more significant steps taken were as follows:
o In October 1995, the Company established a goal to sell $100 million of
non-strategic land assets over the 15-month period ended December 31, 1996.
Total program sales for the 15 months equaled $123.7 million, exceeding the goal
by $23.7 million. In addition, $9.1 million in other non-strategic property
sales occurred in 1996. Proceeds from these sales were used primarily for debt
reduction and to fund the Company's development activities.
o The Company continued to place a greater emphasis on increasing its
development activity:
- During 1996, the Company commenced construction on 3.3 million
square feet of new development, compared to 900,000 square feet
in 1995, and completed 1.6 million square feet
compared to 600,000 for 1995.
- In March 1996, the Company acquired The Akins Companies (now the
Catellus Residential Group), a residential developer based in
Southern California, to place the Company in a better position to
pursue residential opportunities on certain existing land
holdings. In addition, the Company intends to grow this business
to opportunities on land not currently owned.
- In addition to non-strategic land sales, the Company closed $62.5
million in property sales related to industrial, residential and
mixed-use land development. These sales contributed $15.6 million
to 1996 earnings compared to $1.0 million in 1995.
o The Company continued to grow its fee businesses. Development and
management fee income (net) increased to $3.4 million during 1996 from $1.9
million in 1995. This increase was primarily from "design build" fee income
for the 500,000-square-foot Metropolitan Water District's headquarters at
Los Angeles Union Station, residential development fee income and
management fees from the Burlington Northern Santa Fe management contract.
2
<PAGE>
o During 1996, the Company applied $83.3 million of the proceeds from
non-strategic land sales to debt reduction in order to reduce interest
expense. In addition, debt increased by $83.9 million which financed the
construction of primarily pre-leased industrial buildings, residential
development and the redemption of preferred stock. It is expected that
future cash flow will be improved by the interest savings on the $83.3
million of debt reduction, reduced dividend requirements, cash flow from
completed buildings and residential development, less the interest related
to the $83.9 million of debt incurred to fund these activities.
o In order to reduce its preferred dividends, the Company issued two calls
in 1996 and two calls in early 1997 for the redemption of preferred stock:
- In July 1996, the Company called for redemption of 950,000 shares
or approximately $50 million of its $3.75 Series A Cumulative
Convertible Preferred Stock (Series A Preferred Stock). The
redemption date was September 13, 1996. The results were the
conversion of 441,887 shares into 2,438,641 shares of common stock
and the redemption of 508,113 shares at a cost of approximately
$26.7 million.
- In December 1996, the Company called for redemption an additional
475,000 shares or approximately $25 million of its Series A
Preferred Stock. The redemption date was January 31, 1997. The
results were the conversion of 471,730 shares into 2,603,168
shares of common stock and the redemption of the remaining shares
at a cost of $175,000.
- On February 5, 1997, the Company called for redemption an
additional 1,720,000 shares or approximately $90 million of its
Series A Preferred Stock. The redemption date was March 24, 1997.
The results were the conversion of 99.8% of the shares into
9,469,015 shares of common stock and the redemption of the
remaining 4,163 shares at a cost of $220,000.
- On March 24, 1997, the Company called for redemption of the
remaining outstanding 250,000 shares, or approximately $13
million, of its Series A Preferred Stock and 1,470,000 shares, or
approximately $75 million, of its $3.625 Series B Cumulative
Convertible Exchangeable Preferred Stock. The redemption date on
this call is May 1, 1997.
As a result of these four calls, the Company's annual preferred dividend
requirement will be decreased by approximately $18.1 million. Assuming the
market conditions remain favorable, the Company expects to make additional
redemption calls in 1997.
o The Company has an ongoing strategy to review its major land development
projects with the goal of increasing profitability, minimizing up-front
capital requirements and shortening the time required to develop the
properties. As a result of these reviews, decisions have been and continue
to be made to modify certain of the entitlements or abandon or sell
properties that management believes cannot be developed in a reasonable
time frame. For a discussion of specific projects, see Portfolio Summary.
The combination of the above actions and other operating results resulted
in the Company reporting $19.9 million in "Income from property operations,
development and management activities after adjustment for general and
administrative expense, fixed charges and leasing costs" compared to a deficit
of $8.3 million in 1995 and a deficit of $24.5 million in 1994 (see Liquidity
and Capital Resources section in "Management's Discussion and Analysis of
Financial Condition and Results of Operations" of this Form 10-K).
With the elimination of its historic operating deficits, the Company
expects to aggressively pursue development activities beyond those associated
with its current land holdings, as well as other opportunities to increase cash
flow.
PORTFOLIO SUMMARY
The following tables provide information on the Company's income-producing
assets, land assets, and joint venture investments:
3
<PAGE>
PORTFOLIO BY ASSET CATEGORY
INCOME-PRODUCING PROPERTIES
<TABLE>
<CAPTION>
AS OF DECEMBER 31,
------------------------------------------- PROPERTY
NUMBER OF PROPERTIES SQUARE FEET OWNED OPERATING INCOME(1)
------------------- -------------------- -----------------------
1996 1996 1995 1996 1995
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
(IN THOUSANDS) (IN THOUSANDS)
Industrial....... 53 12,606 11,424 $ 41,851 $ 39,523
Retail........... 12 928 957 8,839 8,423
Office........... 14 1,683 1,687 15,746 16,483
Land leases...... 54 N/A N/A 6,705 6,171
--- ------ ------ -------- --------
Total....... 133 15,217* 14,068 $ 73,141 $ 70,600
=== ====== ====== ======== ========
</TABLE>
* Does not include approximately 1,200,000 square feet of buildings located
on major mixed-use projects.
LAND DEVELOPMENT AND LAND HOLDINGS
<TABLE>
<CAPTION>
AS OF DECEMBER 31,
----------------------------------------------------- Property
Acres Catellus Net Book Value Operating Income (1)
------------------------ --------------------------- -------------------------
1996 1995 1996 1995 1996 1995
----------- ----------- ------------ ------------- ------------ ------------
(IN THOUSANDS) (IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
Major mixed use projects........ 1,171 1,156 $323,134 $317,727 $3,337 $1,578
Industrial development.......... 1,838 1,671 93,783 76,170 (964) (1,111)
Retail and office development
and other land................ 1,209 6,086 61,902 59,647 (459) 391
Residential properties.......... 1,955 550 44,939 14,522 (86) (197)
Resource group portfolio........ 789,899 833,844 2,299 1,788 (615) (936)
Properties held for sale........ 41,323 11,863 37,223 84,232 (1,600) (2,018)
------- ------- -------- -------- ------- --------
Total................. 837,395 855,170 $563,280 $554,086 $(387) $ (2,293)
======= ======= ======== ======== ======= ========
</TABLE>
JOINT VENTURES
<TABLE>
<CAPTION>
COMPANY
SHARE OF INCOME
---------------
1996 1995
---- ----
(IN THOUSANDS)
<S> <C> <C>
Hotels................ $6,571 $6,355
Land.................. 130 1,373
Residential........... 797 --
Office and apartments. (747) (693)
------ ------
Total....... $6,751 $7,035
====== ======
</TABLE>
Notes:
(1) Property operating income represents rental revenue less property
operating costs.
4
<PAGE>
The following summarizes leasing statistics for the Company's operating
properties (square feet in thousands):
<TABLE>
<CAPTION>
DECEMBER 31,
---------------------
1996 1995 1994
---- ---- ----
<S> <C> <C> <C>
Industrial buildings
Square feet owned.......... 12,606 11,424 10,985
Square feet leased......... 12,345 10,945 10,432
Percent leased............. 97.9% 95.8% 95.0%
Office buildings
Square feet owned.......... 1,683 1,687 1,687
Square feet leased......... 1,460 1,553 1,618
Percent leased............. 86.7% 92.1% 95.9%
Retail buildings
Square feet owned.......... 928 957 837
Square feet leased......... 874 883 777
Percent leased............. 94.2% 92.3% 92.8%
Land development*
Square feet owned.......... 1,231 100 100
Square feet leased......... 1,129 100 100
Percent leased............. 91.7% 100.0% 100.0%
Total
Square feet owned.......... 16,448 14,168 13,609
Square feet leased......... 15,808 13,481 12,927
Percent leased............. 96.1% 95.1% 95.0%
</TABLE>
- ----------
* 1996 increase reflects the inclusion of income from Mission Bay which was
previously excluded because of capitalization of revenues and expenses.
Lease Expiration -- The following table summarizes the lease expirations in
the total portfolio as of December 31, 1996:
<TABLE>
<CAPTION>
1997 1998 1999 2000 2001 2002 2003 2004 2005 THEREAFTER
---- ---- ---- ---- ---- ---- ---- ---- ---- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Percent..................... 19.1% 8.3% 10.0% 10.1% 17.4% 5.9% 4.2% 5.6% 6.3% 13.1%
Square feet (in thousands).. 3,026 1,312 1,584 1,602 2,746 930 665 889 991 2,063
</TABLE>
Of the 3.0 million of leased square feet that is scheduled to expire in
1997, approximately 385,000 square feet represent month-to-month leases.
INDUSTRIAL INCOME-PRODUCING PROPERTIES
At the end of 1996, the Company's industrial income-producing portfolio
included 12.6 million square feet in 53 properties. At the year-end, these
buildings were 97.9% leased.
At the end of 1996, the Company also had 2.3 million square feet under
construction and leases signed for an additional 43,000 square feet to be
constructed in 1997.
Property Operating Income -- Property operating income for the industrial
portfolio increased from $39.5 million in 1995 to $41.9 million in 1996. This
increase resulted primarily from the addition of new industrial buildings
totaling 1.7 million square feet that were completed in late 1995 and 1996. The
increase in 1995 compared to 1994 was due to the completion of six new buildings
totaling 532,000 square feet in 1995 and the
5
<PAGE>
fourth quarter of 1994, and was partially offset by reduced rentals from
existing properties. The following table summarizes property operating income
for the industrial portfolio (in thousands):
<TABLE>
<CAPTION>
1996 1995 1994
---- ---- ----
<S> <C> <C> <C>
Industrial buildings....... $ 41,851 $ 39,523 $ 38,813
======== ======== ========
</TABLE>
Location -- The following table summarizes the Company's industrial
buildings by region as of December 31, 1996:
<TABLE>
<CAPTION>
NUMBER OF NUMBER OF
BUILDINGS PROPERTIES SQUARE FEET
------------ ---------- --------------
(IN THOUSANDS)
<S> <C> <C> <C>
Arizona.................. 12 5 1,194
Northern California...... 20 4 1,727
Southern California...... 125 34 7,868
Illinois................. 4 1 791
Oklahoma & Kansas........ 4 4 406
Texas.................... 7 5 620
--- --- ------
Total.......... 172 53 12,606
=== === ======
</TABLE>
Lease Expiration -- The following table summarizes the lease expirations in
the industrial portfolio as of December 31, 1996:
<TABLE>
<CAPTION>
1997 1998 1999 2000 2001 2002 2003 2004 2005 THEREAFTER
---- ---- ---- ---- ---- ---- ---- ---- ---- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Percent....................... 17.8% 6.8% 10.6% 11.0% 18.6% 4.8% 4.3% 6.3% 7.3% 12.5%
Square feet (in thousands).... 2,194 836 1,313 1,358 2,301 598 527 776 899 1,543
</TABLE>
Leases totaling 2.2 million square feet of the Company's total industrial
square footage expire in 1997. Of this, 52% are located in Southern California,
where economic conditions have improved, 16% are located in Arizona, and the
balance is spread throughout the portfolio. Of the 2.2 million of leased square
feet that is scheduled to expire in 1997, approximately 133,000 square feet
represent month-to-month leases.
INDUSTRIAL DEVELOPMENT
The Company's plans call for continuing to expand industrial development
activity. Approximately 1,866 acres of the Company's industrial land in 15
separate locations would support the development of approximately 26 million
square feet of industrial development.
In 1996, the Company commenced construction on 3.3 million square feet of
new industrial development and completed approximately 1.6 million square feet
of industrial construction. As of December 31, 1996, the Company had 2.3 million
square feet under construction and had signed leases for 43,000 square feet of
new industrial development. In 1997, the Company intends to seek additional
build-to-suit opportunities and will engage in speculative development, in order
to take advantage of local market conditions.
6
<PAGE>
Property -- The following table summarizes selected industrial development
properties:
<TABLE>
<CAPTION>
POTENTIAL
Square Feet of
ENTITLEMENTS
LOCATION ACRES (IN MILLIONS)
----- -------------
<S> <C> <C>
Phoenix, Arizona................... 214.3 3.6
Dallas, Texas
Coppell.......................... 171.6 3.0
Garland.......................... 72.8 1.4
Chicago, Illinois
International Centre, Woodridge.. 436.1 5.5
Romeoville....................... 140.5 2.0
Northern California
Richmond......................... 50.9 0.6
Fremont*......................... 134.1 2.3
Southern California
Anaheim.......................... 11.5 0.2
City of Industry................. 36.2 0.7
La Mirada (held in joint venture) 30.4 0.6
Ontario.......................... 248.6 4.0
Rancho Cucamonga................. 32.6 0.6
Santa Fe Springs................. 12.5 0.2
Oklahoma City, Oklahoma............ 274.5 1.2
------- ----
Total.................... 1,866.6 25.9
======= ====
</TABLE>
* Includes estimated industrial development on 127.5 acres of the Company's
840-acre mixed-use project, Pacific Commons in Fremont. The remainder of the
developable acreage at Pacific Commons will be R&D, flex-tech, office and
retail.
Development -- The following table summarizes the Company's industrial
development activities, in square feet, during the past three years:
<TABLE>
<CAPTION>
1996 1995 1994
---- ---- ----
<S> <C> <C> <C>
Under construction, beginning of period...... 641,128 337,136 307,000
Construction starts.......................... 3,259,308 791,846 381,136
Completion................................... (1,613,475) (487,854) (351,000)
--------- ------- -------
Under construction, end of period............ 2,286,961 641,128 337,136
========= ======= =======
</TABLE>
Sales -- The following table summarizes the Company's sales of industrial
development property:
<TABLE>
<CAPTION>
1996 1995 1994
---- ---- ----
Industrial Development Property: (in thousands)
<S> <C> <C> <C>
Sales............ $ 27,375 $ 3,224 $ --
Cost of sales.... 18,596 2,271 --
-------- ------- ----
Gain........ $ 8,779 $ 953 $ --
======== ======= ====
</TABLE>
7
<PAGE>
RETAIL INCOME-PRODUCING PROPERTIES
As of the end of 1996, the Company's retail income-producing portfolio
totalled 928,000 square feet consisting of 24 buildings at 12 locations,
which were 94.2% leased as of December 31, 1996.
The Company's retail properties are located primarily in Northern and
Southern California, with one complex in each of Colorado and Oregon. The
largest retail project, East Baybridge Center, is located on 40 acres near San
Francisco in the cities of Emeryville and Oakland. The 269,000-square-foot Phase
I of this project opened in mid-1994 and was pre-leased to such national
retailers as Home Depot, Sportmart, OfficeMax, Safeway's Pak 'n Save, and
CompUSA. A 117,000-square-foot building for Kmart was added to the center in
late 1995.
Property Operating Income -- Property operating income for the Company's
retail building portfolio rose from $8.4 million in 1995 to $8.8 million in
1996, because of the addition of the Kmart building to East Baybridge Center.
Operating income increased by $3.4 million from 1994 to 1995 primarily because
of the completion of the East Baybridge Center in late 1994. The
following table summarizes property operating income for the retail portfolio
(in thousands):
<TABLE>
<CAPTION>
1996 1995 1994
---- ---- ----
<S> <C> <C> <C>
Retail buildings.... $8,839 $8,423 $5,024
====== ====== ======
</TABLE>
Location -- The following table summarizes the Company's retail buildings
by region as of December 31, 1996:
<TABLE>
<CAPTION>
NUMBER OF NUMBER OF
BUILDINGS PROPERTIES SQUARE FEET
--------- ---------- -----------
(IN THOUSANDS)
<S> <C> <C> <C>
Northern California..... 9 3 460
Southern California..... 12 7 330
Colorado................ 1 1 100
Oregon.................. 2 1 38
-- -- ---
Total 24 12 928
== == ===
</TABLE>
Lease expirations -- The following table summarizes the lease expirations
in the retail portfolio as of December 31, 1996:
<TABLE>
<CAPTION>
1997 1998 1999 2000 2001 2002 2003 2004 2005 THEREAFTER
---- ---- ---- ---- ---- ---- ---- ---- ---- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Percent................... 11.9% 6.8% 4.0% 10.8% 6.8% 0.1% 4.0% 10.3% 0.6% 44.7%
Square feet (in thousands) 104 59 35 95 59 1 35 90 5 391
</TABLE>
Development -- The following table summarizes the Company's retail
development completed during the past three years:
<TABLE>
<CAPTION>
1996 1995 1994
---- ---- ----
<S> <C> <C> <C>
Completed projects (square feet). -- 117,000 269,310
==== ======= =======
</TABLE>
OFFICE INCOME-PRODUCING PROPERTIES
At the end of 1996, the Company's office income-producing portfolio
consisted of approximately 1.7 million square feet of office buildings. At
year-end 1996, this portfolio of 34 office buildings was 86.7% leased. The most
significant office projects owned by the Company are the South Bay Center in San
Jose, California (424,192 square feet) and the Railway Exchange Building in
Chicago, Illinois (374,929 square feet).
Property Operating Income -- The Company experienced a decrease in property
operating income from office buildings in 1996. This decrease is related to an
increase in vacancy primarily in one building. The decrease from 1994 to 1995 is
related primarily to the Railway Exchange Building in Chicago, Illinois. An
increase in property taxes in Chicago and the replacement of a major tenant with
tenants paying lower rates caused
8
<PAGE>
the building to contribute less to office property operating income than in
1994. The following table summarizes property operating income for the office
portfolio (in thousands):
<TABLE>
<CAPTION>
<S> <C> <C> <C>
1996 1995 1994
---- ---- ----
Office buildings... $15,746 $16,483 $18,399
======= ======= =======
</TABLE>
Location -- The following table summarizes the Company's office property by
region as of December 31, 1996:
<TABLE>
<CAPTION>
Number of Number of
BUILDINGS PROPERTIES SQUARE FEET
--------- ---------- -----------
(IN THOUSANDS)
<S> <C> <C> <C>
Northern California..... 11 3 521
Southern California..... 14 7 573
Illinois................ 2 2 473
Oregon.................. 1 1 56
Texas................... 6 1 60
-- -- -----
Totals........ 34 14 1,683
=== == =====
</TABLE>
Lease Expirations -- The following table summarizes the lease expirations
in the office portfolio as of December 31, 1996:
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1997 1998 1999 2000 2001 2002 2003 2004 2005 THEREAFTER
---- ---- ---- ---- ---- ---- ---- ---- ---- ----------
Percent................... 14.6% 8.5% 12.1% 6.0% 20.3% 21.2% 7.0% 1.5% 0.0% 8.8%
Square feet (in thousands) 213 124 177 87 296 309 102 23 0 129
</TABLE>
Of the 213,000 square feet of leased space that is scheduled to expire in
1997, approximately 2,400 square feet represent month-to-month leases.
LAND LEASES
As of the end of 1996, the Company's land lease income-producing portfolio
included 54 leases on 5,339 acres.
Property Operating Income -- Property operating income for the land lease
portfolio has remained stable since 1994. The following table summarizes
operating income for the land lease portfolio (in thousands):
<TABLE>
<CAPTION>
1996 1995 1994
---- ---- ----
<S> <C> <C> <C>
Land leases........... 6,705 6,171 6,377
===== ===== =====
</TABLE>
Location -- The following table summarizes the Company's land leases by
region as of December 31, 1996:
<TABLE>
<CAPTION>
NUMBER OF
LEASES ACRES
------ -----
<S> <C> <C>
Arizona......................... 4 16
Northern California............. 5 24
Southern California............. 44 5,294
Texas........................... 1 5
-- -----
Total................. 54 5,339
== =====
</TABLE>
9
<PAGE>
LAND DEVELOPMENT -- MIXED USE PROJECTS
The Company's land portfolio includes four major mixed-use development
sites.
Mission Bay, San Francisco, CA. The Company owns 166.9 acres of
property in San Francisco which is part of a 313-acre mixed-use development
known as Mission Bay. The balance of the property is primarily owned by various
public entities. The property is subject to easements or other encumbrances in
favor of public utilities or public entities, leases, exchange agreements
between the Company and the various public entities and specific plan and zoning
requirements regarding further development. The Company's property was the
subject of a 1991 Development Agreement between the Company and the City and
County of San Francisco that was terminated by the Company in February 1996. As
a result of this decision, the Company took an $84.8 million charge against
fourth quarter earnings in 1995. (See "Management's Discussion and Analysis of
Financial Condition and Results of Operations," and Note 6 to the Consolidated
Financial Statements).
During 1996, the Company reached an agreement in principle with the
City of San Francisco for a 65-acre portion of the 313-acre project. The
entitlement process to implement that agreement in principle is underway and
will continue into 1998. The revised plan for this project will include 2,400
market-rate units, up to 350,000 square feet of entertainment retail and up to
250,000 square feet of neighborhood and community-serving retail. Under this
agreement in principle, incremental tax revenue generated by the project will be
available to finance infrastructure. It is not feasible to estimate the cost of
this development until entitlements have been obtained.
In March 1997, the University of California at San Francisco ("UCSF")
entered into an exclusive negotiation period with the Company to pursue an
agreement, subject to the receipt of the necessary entitlements and other
conditions, to locate a planned expansion of UCSF's campus on the Mission Bay
project. There can be no assurances, however, that the necessary entitlements
will be obtained, that the timing of entitlements, if obtained, will meet
marketing needs, or that the other conditions will be met. Negotiations are
expected to continue throughout much, if not all, of 1997.
As of December 31, 1996, approximately one million square feet of
buildings and approximately 20 land leases were held for lease at Mission Bay
and the buildings were approximately 92% occupied. These operating assets
represent interim uses of the property and are not expected to be part of any
final project. Rental revenue from the buildings was $4.5 million during 1996,
resulting in property operating income of $3.2 million. Rental revenue from
these land leases was approximately $1.6 million during 1996, resulting in
property operating income of $600,000. This project is not currently security
for borrowings of the Company.
Pacific Commons, Fremont, CA. Pacific Commons Business Park is located
on an 840-acre site bordering Interstate 880 in Fremont, California, a part of
the San Jose/Silicon Valley area.
In September 1996, the Company received entitlements from the City of
Fremont for 8.5 million square feet of development, upon compliance with the
certified environmental impact report and applicable laws. The development would
include 7.8 million square feet of research and development, light industrial,
warehouse-distribution and corporate campus space and 700,000 square feet of
retail. In accordance with the environmental impact report and applicable law,
the Company is working with the City, state and federal government agencies to
address the impact of the park on wetlands and special status species. There can
be no assurances that the necessary government approvals will be obtained, or
that the timing of approvals, if obtained, will meet marketing needs.
In the fourth quarter of 1996, the Company began construction on its
first build-to-suit development at Pacific Commons. The 375,000-square-foot
warehouse/distribution facility is expected to be completed by the end of 1997.
Union Station, Los Angeles, CA. The Company owns approximately 47 acres
which surround and include the historic Los Angeles Union Station. The Company
completed acquisition of the site in 1990. In 1996, the City awarded the Company
a flexible entitlement package permitting seven million square feet of
development which could include office, hotel, housing, sports and entertainment
facilities.
10
<PAGE>
In 1996, the Company sold a 4.2-acre portion of the Union Station
property to Metropolitan Water District ("MWD") as the site of MWD's new
headquarters facility. This sale generated proceeds of $13.2 million and a gain
of $5.0 million. The Company has commenced construction of the
500,000-square-foot, 12-story headquarters facility on behalf of MWD. Completion
is scheduled for late 1998, with occupancy to occur in 1999.
Santa Fe Depot, San Diego, CA. The Company owns approximately 17 acres
near the waterfront in downtown San Diego, California. The Depot is served daily
by intercity rail lines (Amtrak), a commuter rail line (Coaster), and the City's
growing trolley system. The site is currently entitled for a mixture of office,
hotel, retail and housing development. Management is reevaluating the approved
specific plan in light of current and projected market conditions, and is
working with the U.S. Navy, Port Commission, and City and County agencies on a
master plan for the entire North Embarcadero portion of the waterfront, which
would require additional entitlements. The site is also one of three in the
greater San Diego area under consideration for a new San Diego Padres baseball
stadium, which would require reevaluation of the specific plan, which in turn
would require additional entitlements. There can be no assurances that any
necessary entitlements will be obtained, or that the timing of entitlements, if
obtained, will meet marketing needs.
RESIDENTIAL DEVELOPMENT
In March 1996, the Company concluded the acquisition of The Akins
Companies, a residential real estate company, consisting of a diversified group
of entities involved in home-building, community development and project
management services. Since 1950, the Akins Companies have developed more than
10,000 homes throughout Southern California.
The acquired business, now called the Catellus Residential Group
("CRG"), develops the Company's residential land, as well as projects previously
started by Akins, and will undertake new development activities. In addition,
Catellus Residential Group includes an urban housing division formed by the
Company in 1995 to develop rental housing with an affordable component on urban
in-fill locations in California.
Property -- The following table summarizes the Company's residential
properties, including those acquired as part of the Akins acquisition:
<TABLE>
<CAPTION>
POTENTIAL LOTS OR UNITS
-------------------------------
COMMUNITY MERCHANT URBAN
DEVELOPMENT HOUSING HOUSING ESTIMATED
DIVISION DIVISION DIVISION START
LOCATION ACRES (LOTS) (UNITS) (UNITS) DATE
- -------- ----- ------ ------- --------- --------
<S> <C> <C> <C> <C> <C>
Owned Projects
Texas
Oak Cliff/Dallas, TX...................... 113 400 After 1998
Clodine, TX............................... 877 2,100 After 1998
Northern California
Bear Creek/Stockton, CA................... 392 800 After 1998
Tracy, CA................................. 445 2,400 After 1998
Mission Bay/San Francisco, CA*............ 22 2,400 Mid 1998-Early 1999
Union City, CA............................ 58 86 100 Under development
Southern California
Lakeside/Buena Park, CA................... 70 258 92 Late 1997
Joint Venture Projects
Bridgecourt Apts/Emeryville, CA........... 4 220 Under development
Kentwood Collection/Los Angeles, CA....... 11 23 Under development
Signature Collection/Newport Coast, CA.... 25 30 Under development
Stevenson Ranch/Santa Clarita, CA......... 11 55 Under development
Management Projects
University Hills/Irvine, CA............... 22 150 Under development
Canyon Hills/Orange, CA................... 4 74 Under development
Ridgemoor/Rowland Heights, CA............. 123 228 Under development
Marabella Golf Villas/San Juan
Capistrano, CA............................ 2 24 Under development
----- ----- --- ----
TOTALS . . . . . . . . . . . . . . . . . . . . . 2,179 6,044 626 2,770
===== ===== === =====
</TABLE>
* Represents 21.9 acres in the 65-acre portion of Mission Bay located north of
the channel, which the CRG's Urban Housing Division will develop in conjunction
with the Bay Area Development Group.
11
<PAGE>
Sales - The following table summarizes the Company's sales of
residential development property:
<TABLE>
<CAPTION>
1996 1995 1994
---- ---- ----
(IN THOUSANDS)
<S> <C> <C> <C>
Residential Development Property:
Sales.............................. $ 21,945 $ -- $ --
Cost of sales...................... 20,138 -- --
-------- ----- -----
Gain............................ $ 1,807 $ -- $ --
======== ===== =====
</TABLE>
JOINT VENTURES
The Company's joint venture interests provided net distributions to the
Company of $10.2 million in 1996. The Company owns an interest in the following
properties:
<TABLE>
<CAPTION>
<S> <C> <C>
OPERATING PROPERTIES LOCATION TYPE
- -------------------- -------- ----
New Orleans Hilton New Orleans, LA Hotel
San Diego Embassy Suites San Diego, CA Hotel
Park del Amo Torrance, CA Office
Seabridge Apartments San Diego, CA Residential
Pacific Design Center West Hollywood, CA Furniture mart
LAND TYPE
- ---- ----
Dallas, Texas Industrial development
New Orleans, Louisiana Hotel development
La Mirada, California Industrial development
West Hollywood, California Entertainment/retail development
RESIDENTIAL PROPERTIES LOCATION TYPE
- ---------------------- -------- ----
Kentwood Collection Los Angeles, CA Residential
Signature Collection Newport Coast, CA Residential
Stevenson Ranch Santa Clarita, CA Residential
Bridgecourt Apts. Emeryville, CA Residential
</TABLE>
The Company is engaged in discussions concerning the possible sale of
certain interests. The Company expects to participate in additional joint
ventures in connection with future development opportunities.
CATELLUS RESOURCES GROUP PORTFOLIO
The Company owns more than 790,000 acres of land in the Southern
California desert regions of Los Angeles, Kern, San Bernardino, Riverside and
Imperial Counties and the state's Central Valley. Because of its location, lack
of contiguity among parcels and other factors, this land is not currently
suitable for traditional development activities. As a result, a new division of
the Company, the Catellus Resources Group, was created in 1995 to explore the
potential for agricultural, minerals, water, telecommunications, energy, and
waste management uses for this property. In addition, Catellus Resources
Group will explore possible exchanges with various governmental agencies. There
can be no assurances that any of these prospects or opportunities will be
realized by the Company.
DEBT SECURED BY PROPERTIES
Of the Company's $496.7 million in outstanding debt at December 31,
1996, $496.2 million represents loans secured by a majority of the Company's
income-producing properties and certain of its land under development.
Approximately $347 million of the Company's debt secured by income-producing
properties has penalties if paid before maturity. Information regarding interest
rates and principal maturities is provided in Note 3 to the consolidated
financial statements.
12
<PAGE>
DEVELOPMENT AND MANAGEMENT SERVICES
Development Services
The Company is currently the developer on a "design build" basis, in
partnership with Charles Pankow Builders, for the Metropolitan Water District
headquarters facility. The Company intends to pursue additional design build
opportunities in order to increase recurring earnings.
Management Services
The Company's wholly-owned subsidiary Catellus Management Corporation
("CMC") has entered into a contract with the Burlington Northern Santa Fe
Corporation ("BNSF"), which owns one of the nation's largest railroads, to
provide management and disposition services for BNSF's real property assets. The
assets include approximately 17,000 leases and are located in 27 states and two
Canadian provinces. In November 1996, CMC executed a new contract with BNSF to
provide management services for BNSF's existing portfolio of approximately
115,000 permits and to handle BNSF's issuance of new permits. The Catellus
Residential Group also generates management fees in regard to its joint venture
developments and third party arrangements.
The Company intends to pursue additional management service agreements
aggressively to increase recurring earnings.
PROPERTY SALES
Before 1996, the Company sold land to provide cash for costs associated
with pre-development, operating and holding the Company's substantial real
estate assets and paying interest on debt and dividends on preferred stock.
Sales included mountain, desert, agricultural and other non-strategic lands, as
well as lands that the Company might develop in the future. The Company also
sold income-producing properties to cover such costs. In October 1995, the
Company announced a goal of selling $200 million of non-strategic land assets by
March 1998, including $100 million by December 31, 1996. After announcing this
goal, the Company sold $47.1 million in the fourth quarter of 1995 and $76.6
million in 1996, bringing the total sales to $123.7 million through December 31,
1996. In addition, during 1996 the Company determined that approximately $30
million of assets had residential and other development potential and,
therefore, reduced the goal of $200 million to $170 million. The Company expects
the remaining $46.3 million of non-strategic land assets to be sold during 1997
and 1998. Over the past three years, the Company's sales (in thousands)
consisted of the following:
<TABLE>
<CAPTION>
1996 1995 1994
---- ---- ----
<S> <C> <C> <C>
NON-STRATEGIC LAND AND OTHER ASSETS:
Non-strategic land:
Sales.................................... $76,553 $62,199 $32,298
Cost of sales............................ 56,894 29,410 22,024
------- ------- -------
Gain................................... 19,659 32,789 10,274
------- ------- -------
Other:
Sales.................................... 9,125 -- 21,472
Cost of sales............................ 4,379 -- 18,439
------- ------- -------
Gain................................... 4,746 -- 3,033
------- ------- -------
Total non-strategic land and other assets
Sales.................................... 85,678 62,199 53,770
Cost of sales............................ 61,273 29,410 40,463
------- ------- -------
Gain................................... $24,405 $32,789 $13,307
======= ======= =======
</TABLE>
ENVIRONMENTAL MATTERS
Various federal, state, and local laws and regulations covering the
discharge of materials into the environment, or otherwise relating to the
protection of the environment, may affect the Company's operations and costs.
See "Management's Discussion and Analysis of Financial Condition and Results of
Operations -- Environmental Matters." Such regulations can increase the cost of
planning, designing, developing, managing and
13
<PAGE>
maintaining the Company's properties. The Company has expended and will continue
to expend significant financial and managerial resources to comply with
environmental regulations and local permitting requirements. While the Company
or outside consultants have evaluated the environmental liabilities associated
with most of the Company's properties, any evaluation necessarily is based upon
then-prevailing law and identified site conditions. In addition, many of the
Company's properties are in the early stages of development, and the
environmental studies and investigations which have been performed are
preliminary. It is possible that significant unknown costs and liabilities may
arise in the future relating to these properties and that certain development
projects may be significantly delayed, modified, or canceled as a result of
associated remediation costs. In addition, other properties presently or
formerly owned by the Company or its corporate predecessors have required or may
require remediation. Although there can be no assurance, the Company does not
believe that such costs will have a material adverse effect on its business,
financial condition or results of operations.
The Company has been or may be named a defendant or a potentially
responsible party ("PRP") under the Comprehensive Environmental Response,
Compensation, and Liability Act of 1980, as amended ("CERCLA"), or analogous
state statutes. With respect to a site in Livermore, California, the Regional
Water Quality Control Board has issued a Tentative Site Cleanup Order naming the
Company as one of eleven responsible parties. In February 1994, the Company
reached a settlement with plaintiffs and all of the other potentially
responsible parties pursuant to which the Company paid $67,650 into a fund
covering certain past and future remediation costs in exchange for a qualified
release of liability. The Company has been named a PRP with respect to several
additional sites. Remediation of those sites has been completed by the Company
or is being completed by third parties at their expense. The Company does not
expect to incur material additional costs with respect to those sites.
COMPETITION
Real estate markets are regional, and levels of competition vary by
market. The Company encounters significant competition for leasing and sales of
real estate in each of its market areas, but no one competitor is dominant. The
Company is not dependent on any one customer for a significant portion of its
revenues.
EMPLOYEES
At December 31, 1996, the Company had 304 employees, including 56
employees of the management subsidiary which now manages certain BNSF
properties, and 106 employees of the residential subsidiary.
The Company engages third parties to manage multi-tenant properties and
properties in locations which are not in close proximity to the Company's
regional or field offices. In addition, the Company engages outside consultants
such as architects and design firms in connection with its pre-development
activities. The Company also employs third party contractors on development
projects for infrastructure and building construction.
RISK FACTORS
It is the Company's belief that this Annual Report on Form 10-K may
contain statements which, to the extent that they are not recitations of
historical fact, may constitute "forward looking statements" within the meaning
of Section 27A of the Securities Act of 1933 and Section 21E of the Securities
and Exchange Act of 1934. All forward looking statements involve risks and
uncertainties. The forward looking statements in this document are intended to
be subject to the safe harbor protection provided by Sections 27A and 21E.
Factors that most typically affect the Company's operating results and financial
condition include (i) changes in general economic conditions in regions in which
the Company's projects are located, (ii) supply and demand for office,
industrial, and residential space, (iii) the delay in receipt of or the denial
of government approvals and entitlements for development projects, (iv) other
public and private development activity in the areas in which the Company owns
property, (v) land and building material costs, (vi) the availability and cost
of project financing, (vii) competition from other property owners, (viii)
liability for environmental remediation at the Company's properties, (ix) the
Company's ability to increase development fees, (x) the Company's ability to
sell non-strategic assets, (xi) changes in the capital markets affecting the
ability of the Company to minimize its interest and preferred dividends, (xii)
the Company's ability to control the timing of the recognition of deferred tax
liability, (xiii) the impact of discretionary government actions, (xiv) the
exposure of the Company's assets to natural occurrences, such as earthquakes,
tornadoes, and similar events, and (xv) changes in the legal and regulatory
environment, including the tax treatment of the Company's activities and assets.
For discussions identifying other important factors that
14
<PAGE>
could cause actual results to differ materially from those anticipated in the
forward looking statements, see the Company's Securities and Exchange Commission
filings, "Management's Discussion and Analysis of Financial Condition and
Results of Operations" of this Form 10-K and Note 14 to the Consolidated
Financial Statements included in this Form 10-K.
ITEM 2. PROPERTIES
The Company's real estate projects are generally described in Item 1
above, which descriptions are incorporated in this Item by reference. The
Company's principal executive office is located in San Francisco, California,
and it has regional or field offices in seven other locations in the United
States. The Company believes that its property and equipment are generally well
maintained, in good condition, and adequate for its present needs.
ITEM 3. LEGAL PROCEEDINGS
The Company, its subsidiaries and other related companies are named
defendants in several lawsuits arising from normal business activities, are
named parties in certain governmental proceedings (including environmental
actions) and are the subject of various environmental remediation orders of
local governmental agencies arising in the ordinary course of its business. The
matters described below may involve substantial claims for damages for which the
Company could be liable. While the outcome of these lawsuits or other
proceedings against the Company and the cost of compliance with any governmental
order cannot be predicted with certainty, management does not expect any of
these matters to have a material adverse effect on the business, financial
condition or liquidity of the Company.
The Atchison, Topeka, & Santa Fe Railway Co. v. The Testate and
Intestate Successors of Grace Richards, et al. (Superior Court of California,
County of San Diego; filed May 1983) and Herbert Lincoln Hubbard et al. v. The
Atchison, Topeka & Santa Fe Railway Co., Santa Fe Land Improvement Company, et
al. (Superior Court of California, County of San Diego; filed January 1988) are
consolidated cases in which both the Company and the opposing litigants claim
title to a 550 foot by 75 foot strip of property located on the Santa Fe Depot
site in San Diego, CA. The opposing litigants also seek damages for alleged
fraud, interference with prospective economic advantage, and inverse
condemnation.
After trial and several appellate proceedings, the courts have rejected
the damages claims of the opposing litigants and held that the Company on the
one hand and the opposing litigants on the other each own an undivided one-half
fee interest in the disputed strip of property. The opposing litigants have
filed a petition for review with the California Superior Court, and the outcome
of this petition and any further appeals cannot be predicted.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
There were no matters submitted to a vote of security holders during
the quarter ended December 31, 1996.
EXECUTIVE OFFICERS OF THE COMPANY
The executive officers of the Company are listed below. There were no
family relationships among any executive officers and directors of the Company.
All officers serve at the pleasure of the Board of Directors of the Company,
subject to compliance with various employment agreements to which the Company
and the officers are parties.
15
<PAGE>
<TABLE>
<CAPTION>
Name Age Position
- ---- --- --------
<S> <C> <C>
CORPORATE OFFICERS
Nelson C. Rising 55 President and Chief Executive Officer
Stephen P. Wallace 42 Senior Vice President and Chief Financial Officer
Timothy J. Beaudin 38 Senior Vice President Property Operations
Kathleen Smalley 39 Senior Vice President, General Counsel and Secretary
Paul A. Lockie 38 Vice President and Controller
OPERATING OFFICERS WHO ARE CONSIDERED EXECUTIVE OFFICERS
Ted R. Antenucci 32 Vice President
David B. Friedman 40 President Catellus Resources Group
Don M. Parker 52 Vice President Bay Area Development
Ira E. Yellin 56 Senior Vice President Southern California Development
</TABLE>
Additional information concerning the business background of each
executive officer of the Company is set forth below:
MR. RISING has served as President and Chief Executive Officer and a
Director of the Company since September 1994. For more than five years prior to
joining the Company, Mr. Rising was a Senior Partner with Maguire Thomas
Partners, a Los Angeles-based commercial developer with projects in Southern
California, Dallas and Philadelphia.
MR. WALLACE was elected as Senior Vice President and Chief Financial
Officer in July 1995. Mr. Wallace was previously the Senior Vice President and
Chief Financial Officer at Castle & Cooke Homes, Inc. from May 1993. Before that
Mr. Wallace served as the Chief Financial Officer at A.M. Homes in Newport
Beach, California.
MR. BEAUDIN was elected Senior Vice President Property Operations in
January 1996. Before this appointment, Mr. Beaudin served as Vice President
Property Operations since February 1995. For more than five years before that,
Mr. Beaudin served as Senior Vice President -- Managing Officer of the Financial
Services Group at CB Commercial Real Estate Group, a national real estate
brokerage firm.
MS. SMALLEY joined the Company as Senior Vice President, General
Counsel, and Secretary on January 1, 1997. For more than five years before
joining the Company, Ms. Smalley was General Counsel and Investment Manager of
Crow Family Holdings ("CFH"), an investment management company that manages
assets, including real estate and related businesses, throughout the United
States and abroad. Ms. Smalley also currently holds an appointment to Harvard
Law School, where she lectures in the real estate field.
CFH, during Ms. Smalley's employment, managed investments in thousands
of entities holding real estate. In connection with her duties as General
Counsel and Investment Manager for CFH, Ms. Smalley managed both legal functions
and a number of special assignments. Among those special assignments was the
management of the bankruptcy of approximately 55 affiliated entities in two
jointly administered proceedings. Ms. Smalley was not involved in the ownership
or management (other than as described below) of the properties owned by the
affected debtors before the debt restructuring negotiations and related filing
of bankruptcy petitions. In addition, there were approximately 35 other entities
affiliated with CFH that filed for protection under federal bankruptcy laws. In
connection with her employment by CFH, Ms. Smalley served as an officer of the
direct or indirect general partner of some of these entities.
MR. LOCKIE joined the Company as Vice President and Controller in February
1996. Before joining the Company, Mr. Lockie served as the Chief Financial
Officer for Kimball Small Properties, Inc. ("KSP"), a San Jose, California real
estate development and management company.
Mr. Lockie, in connection with his duties as Chief Financial Officer
for KSP, also served as Cheif Financial Officer of several companies affiliated
with KSP, including Techmart Properties, Inc., the indirect
16
<PAGE>
general partner of a real estate partnership that filed for protection under
federal bankruptcy laws in September , 1992. In September, 1995, a final decree
was entered closing the case.
MR. ANTENUCCI was elected Vice President of the Company in October 1995.
Before joining the Company, Mr. Antenucci served as Vice President at Omnitrax,
a shortline rail carrier, for two years and as Vice President -- Industrial
Sales for CB Commercial Real Estate Group, Inc. for more than seven years.
DR. FRIEDMAN has served as President of Catellus Resources Group since
February 1996. For more than five years before joining the Company, Dr. Friedman
was an Associate Attorney and Partner in the Los Angeles law firm of Tuttle &
Taylor representing, among other clients, major agriculture and resource
interests and was a consultant specializing in California economic development
research.
MR. PARKER was elected Vice President Bay Area Development in March 1995.
From January 1994 to March 1995, Mr. Parker was the Executive Director of the
Alameda Reuse and Redevelopment Authority for the conversion of the naval air
station. For more than five years before that, Mr. Parker was a partner and
project director of the Marina Village Mixed-Use Community in Alameda,
California.
MR. YELLIN joined the Company in February 1996, as the Senior Vice
President, Southern California Development. For more than five years before
joining the Company, Mr. Yellin served as President of the Yellin Company, a Los
Angeles real estate investment, development and management company involved
primarily in the acquisition, restoration and redevelopment of historic
buildings in the Historic Core of Downtown Los Angeles.
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
The common stock commenced trading on December 5, 1990 and is traded on
the New York Stock Exchange, the Chicago Stock Exchange, and the Pacific Stock
Exchange under the symbol "CDX." The following table sets forth the high and low
sale prices of the common stock, as reported on the New York Stock Exchange
Composite Tape, during the periods indicated:
<TABLE>
<CAPTION>
<S> <C> <C>
High Low
1995
First Quarter................ $ 6 1/8 $ 5 1/8
Second Quarter............... 6 7/8 5 1/2
Third Quarter................ 6 7/8 6 1/8
Fourth Quarter............... 6 5/8 5 3/8
1996
First Quarter................ $ 8 1/4 $ 6 1/8
Second Quarter............... 9 3/4 7 7/8
Third Quarter................ 9 7/8 8 1/4
Fourth Quarter............... 11 3/8 9 3/4
</TABLE>
No cash dividends have been paid on the Company's common stock and the
Company does not anticipate paying any cash dividends on its common stock in the
foreseeable future.
On March 14, 1996, there were approximately 35,080 holders of record of
the Company's common stock.
17
<PAGE>
ITEM 6. SELECTED FINANCIAL DATA (IN THOUSANDS, EXCEPT PER SHARE DATA)
The following income statement and selected balance sheet data with
respect to each of the years in the five-year period ended December 31, 1996
have been derived from the annual Consolidated Financial Statements. The
operating data have been derived from the Company's underlying financial and
management records and are unaudited. This information should be read in
conjunction with the Consolidated Financial Statements and related Notes
thereto. See "Management's Discussion and Analysis of Financial Condition and
Results of Operations" for a discussion of results of operations for 1996, 1995
and 1994.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
------------------------------------------------------------
1996 1995 1994 1993 1992
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
INCOME PRODUCING PROPERTIES
Rental revenue................................. $ 115,886 $ 102,828 $ 99,183 $ 107,625 $ 96,496
Property operating costs....................... (39,408) (30,650) (29,609) (38,708) (37,670)
Equity in earnings of joint ventures........... 5,993 5,826 4,240 1,878 (1,991)
--------- --------- --------- --------- ---------
82,471 78,004 73,814 70,795 56,835
--------- --------- --------- --------- ---------
DEVELOPMENT ACTIVITIES AND FEE SERVICES
Gain on development property sales............. 15,623 953 -- -- --
Development and management fee income, net..... 3,432 1,924 2,151 2,260 1,733
Equity in earnings of joint ventures........... 758 1,209 3,742 (60) (25)
Land holding costs, net........................ (3,724) (3,871) (4,891) (872) (2,161)
--------- --------- --------- --------- ---------
16,089 215 1,002 1,328 (453)
--------- --------- --------- --------- ---------
Interest expense.................................. (42,521) (25,757) (24,671) (43,959) (53,221)
Depreciation and amortization..................... (30,561) (27,990) (28,577) (31,117) (29,437)
General and administrative expense................ (8,019) (10,924) (14,818) (13,143) (12,876)
Gain on non-strategic land and other asset sales.. 24,405 32,789 13,307 33,165 40,204
Adjustment to carrying value of property.......... -- (102,400) (24,100) (32,500) --
Litigation, environmental and restructuring costs. 1,093 (961) (2,854) (12,637) (1,888)
Other, net........................................ (19) 2,504 3,091 (25,292) 3,221
--------- --------- --------- --------- ---------
EARNINGS (LOSS) BEFORE INCOME TAXES
AND EXTRAORDINARY EXPENSE......... 42,938 (54,520) (3,806) (53,360) 2,385
Income tax (expense) benefit (17,537) 21,518 1,359 8,008 (1,208)
--------- --------- --------- --------- ---------
NET EARNINGS (LOSS) BEFORE
EXTRAORDINARY EXPENSE............... 25,401 (33,002) (2,447) (45,352) 1,177
Extraordinary expense related to early
retirement of debt, net of income tax
benefit (1)................................ -- -- -- (7,401) --
--------- --------- --------- --------- ---------
NET EARNINGS (LOSS)............................ 25,401 (33,002) (2,447) (52,753) 1,177
Preferred stock dividends.................... (22,173) (23,813) (23,813) (16,132) --
Premium on redemption of preferred stock..... (1,334) -- -- -- --
--------- --------- --------- --------- ---------
NET EARNINGS (LOSS) APPLICABLE TO
COMMON STOCKHOLDERS................ $ 1,894 $ (56,815) $ (26,260) $ (68,885) $ 1,177
========= ========= ========= ========= =========
Net earnings (loss) per share of common stock:
Before extraordinary expense................ $ 0.03 $ (0.78) $(0.36) $ (0.87) $ 0.02
Extraordinary expense (1)................... -- -- -- (0.10) --
--------- --------- --------- --------- ---------
Net earnings (loss) after extraordinary expense $ 0.03 $ (0.78) $(0.36) $ (0.97) $ 0.02
========== ========= ========== ======== =========
Average number of common shares outstanding 74,947 72,967 72,967 70,834 53,976
========== ======== ========= ======== ========
</TABLE>
18
<PAGE>
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------
1996 1995 1994 1993 1992
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Earnings before depreciation and
deferred taxes (EBDDT)............ $ 25,852 $ 18,254 $ 19,665 $ <16,931> $ <9,466>
NOTE: The Company uses a supplemental performance measure called Earnings Before Depreciation and Deferred Taxes (EBDDT) in order to
better understand its operating results. EBDDT is calculated by taking net earnings (loss) and making various adjustments.
Depreciation, amortization and provision for deferred income taxes are excluded as they represent non-cash charges. In addition,
gains on sale of non-strategic and other assets, adjustments to carrying value of property, and premiums on the redemption of
preferred stock more closely reflect investment activities, not operating activities, and are also excluded from the EBDDT
calculation.
</TABLE>
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------
1996 1995 1994 1993 1992
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Balance sheet data:
Total properties.................. $1,024,102 $1,007,451 $1,087,119 $1,091,832 $1,129,634
Total assets...................... 1,123,118 1,097,604 1,207,363 1,373,827 1,208,887
Mortgage and other debt........... 496,742 496,180 530,641 663,764 887,185
Stockholders' equity.............. 422,453 442,874 499,689 525,949 145,923
</TABLE>
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------
1996 1995 1994 1993 1992
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Operating Data:
Buildings owned (square feet)(2).. 16,449 14,168 13,609 13,367 14,183
Leased percentage................. 96.1% 95.1% 95.0% 94.9% 90.4%
</TABLE>
- ----------
(1) Net income in 1993 reflects extraordinary expense relating to a redemption
premium paid to a lender and write-off of deferred financing costs on the
Company's $388.2 million first mortgage loan.
(2) Prior to 1996, square feet owned excludes approximately 1.2 million square
feet of existing buildings, primarily at Mission Bay.
19
<PAGE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
OVERVIEW
Prior to 1996, the aggregate cash requirements associated with fixed
charges and leasing costs exceeded the Company's operating income from recurring
sources. The Company relied primarily on proceeds from asset sales and the
issuances of debt and preferred stock to meet its operating deficits. During
1995 and 1996, the Company focused on improving operating income, and, as a
result, the deficits were eliminated in 1996 (see detailed financial results
under Liquidity and Capital Resources). The more significant steps taken were as
follows:
. In October 1995, the Company established a goal to sell $100 million of
non-strategic land assets over the 15-month period ended December 31, 1996.
Total program sales for the 15 months equaled $123.7 million, exceeding the
goal by $23.7 million. In addition, $9.1 million in other non-strategic
property sales occurred in 1996. Proceeds from these sales were used
primarily for debt reduction and to fund the Company's development
activities.
. The Company continued to place a greater emphasis on increasing its
development activity:
- During 1996, the Company commenced construction on 3.3 million
square feet of new development, compared to 900,000 square feet
in 1995, and completed 1.6 million square feet compared to
600,000 for 1995.
- In March 1996, the Company acquired The Akins Companies (now the
Catellus Residential Group), a residential developer based in
Southern California, to place the Company in a better position to
pursue residential opportunities on certain existing land
holdings. In addition, the Company intends to grow this business
to opportunities on land not currently owned.
- In addition to non-strategic land sales, the Company closed $62.5
million in property sales related to industrial, residential and
mixed-use land development. These sales contributed $15.6 million
to 1996 earnings compared to $1.0 million in 1995.
. The Company continued to grow its fee businesses. Development and
management fee income (net) increased to $3.4 million during 1996 from $1.9
million in 1995. This increase was primarily from "design build" fee income
for the 500,000-square-foot Metropolitan Water District's headquarters at
Los Angeles Union Station, residential development fee income and
management fees from the Burlington Northern Santa Fe management contract.
. During 1996, the Company applied $83.3 million of the proceeds from
non-strategic land sales to debt reduction in order to reduce interest
expense. In addition, debt increased by $83.9 million which financed the
construction of primarily pre-leased industrial buildings, residential
development and the redemption of preferred stock. It is expected that
future cash flow will be improved by the interest savings on the $83.3
million of debt reduction, reduced dividend requirements, cash flow from
completed buildings and residential development, less the interest related
to the $83.9 million of debt incurred to fund these activities.
. In order to reduce its preferred dividends, the Company issued two calls
in 1996 and two calls in early 1997 for the redemption of preferred stock:
- In July 1996, the Company called for redemption of 950,000 shares
or approximately $50 million of its $3.75 Series A Cumulative
Convertible Preferred Stock (Series A Preferred Stock). The
redemption date was September 13, 1996. The results were the
conversion of 441,887 shares into 2,438,641 shares of common stock
and the redemption of 508,113 shares at a cost of approximately
$26.7 million.
- In December 1996, the Company called for redemption an additional
475,000 shares or approximately $25 million of its Series A
Preferred Stock. The redemption date was
20
<PAGE>
January 31, 1997. The results were the conversion of 471,730
shares into 2,603,168 shares of common stock and the redemption of
the remaining shares at a cost of $175,000.
- On February 5, 1997, the Company called for redemption an
additional 1,720,000 shares or approximately $90 million of its
Series A Preferred Stock. The redemption date was March 24, 1997.
The results were the conversion of 99.8% of the shares into
9,469,015 shares of common stock and the redemption of the
remaining 4,163 shares at a cost of $220,000.
- On March 24, 1997, the Company called for redemption of the
remaining outstanding 250,000 shares, or approximately $13
million, of its Series A Preferred Stock and 1,470,000 shares, or
approximately $75 million, of its $3.625 Series B Cumulative
Convertible Exchangeable Preferred Stock. The redemption date on
this call is May 1, 1997.
As a result of these four calls, the Company's annual preferred dividend
requirement will be decreased by approximately $18.1 million. Assuming the
market conditions remain favorable, the Company expects to make additional
redemption calls in 1997.
. The Company has an ongoing strategy to review its major land development
projects with the goal of increasing profitability, minimizing up-front
capital requirements and shortening the time required to develop the
properties. As a result of these reviews, decisions have been and continue
to be made to modify certain of the entitlements or abandon or sell
properties that management believes cannot be developed in a reasonable
time frame. Significant entitlement accomplishments in 1996 included:
- In the second quarter of 1996, the Company received final approval
from the City of Los Angeles for its seven million square foot
mixed-use development at Los Angeles Union Station.
- In September 1996, the Company reached an agreement in principle
with the City of San Francisco on a development proposal for a
65-acre portion of the Company's Mission Bay project. The
development proposal contains up to 3,000 housing units, a
350,000-square-foot retail/entertainment complex adjacent to the
future San Francisco Giants ball park and neighborhood and
community-serving retail of up to 250,000 square feet. In March
1997, the University of California Board of Regents entered into
an agreement with the Company for a two-month period to negotiate
exclusively with the Company to locate the proposed expansion
campus of the University of California at San Francisco on a
43-acre portion of the project located south of the Mission Creek
channel. The Company is working with the City and other government
agencies to obtain final plan approvals, however, there can be no
assurances that the necessary government approvals will be
obtained, or that the timing of approvals, if obtained, will meet
marketing needs.
- In September 1996, the Company received approvals from the City of
Fremont for its 840-acre Pacific Commons Business Park, including
a general plan amendment, development agreement, tentative tract
map and a certified environmental impact report. These approvals
are for 8.5 million square feet of development upon compliance
with the certified environmental impact report and applicable
laws. The development would include 7.8 million square feet of
research and development, light industrial, warehouse,
distribution and corporate campus space and 700,000 square feet of
retail. In accordance with the environmental impact report and
applicable law, the Company is working with the City and federal
government agencies to address the impact of Pacific Commons on
wetlands and special status species. There can be no assurances
that the necessary government approvals will be obtained, or that
the timing of approvals, if obtained, will meet marketing needs .
The combination of the above actions and other operating results
resulted in the Company reporting $19.9 million in "Income from property
operations, development and management activities after adjustment for general
and administrative expense, fixed charges and leasing costs" compared to a
deficit of $8.3 million in 1995 and a deficit of $24.5 million in 1994 (see
Liquidity and Capital Resources section).
With the elimination of its historic operating deficits, the Company
expects to aggressively pursue development activities beyond those associated
with its current land holdings, as well as other opportunities to increase cash
flow.
21
<PAGE>
RESULTS OF OPERATIONS
Comparison of 1996 to 1995
Income Producing Properties
- ---------------------------
The changes in rental revenue and property operating costs from 1995 to
1996 are summarized below:
<TABLE>
<CAPTION>
Increase (Decrease)
-------------------------
Property
Rental operating
Revenue costs
--------- ---------
(in millions)
<S> <C> <C>
Industrial buildings................................ $ 5.1 $ 2.8
Office buildings.................................... (0.2) 0.5
Retail buildings.................................... 1.9 1.5
Land development.................................... 5.7 3.9
Land leases......................................... 0.6 0.1
------ ------
Total change...................................... $ 13.1 $ 8.8
====== ======
</TABLE>
Of the increase in revenue from industrial buildings, $3.3 million was
attributable to eleven new buildings totaling 1.7 million square feet that were
completed in late 1995 and 1996. Revenues also increased $1.2 million as a
result of higher tenant pass-through charges associated with the new
construction and higher operating costs. Operating costs for the industrial
portfolio increased, in part, because of new buildings completed and higher
overhead, maintenance and repairs.
Rental revenue for the Company's office portfolio decreased $0.2
million because of a decrease in occupancy, primarily in one building, compared
to the same period in 1995. As of the end of 1996, a majority of this office
space has been leased. Revenue and costs for retail buildings increased
primarily because a 117,000-square-foot building leased to Kmart was acquired in
December 1995 at the East Baybridge shopping center.
The increase in revenue and costs from land development properties
resulted, in large part, from determination by the Company at the end of 1995,
that Mission Bay and certain other properties no longer qualify for the
capitalization of interest expense. As a result, incremental revenue and
operating costs from interim uses, which had previously also been capitalized to
the project, were included in the consolidated statement of operations effective
January 1, 1996. Rental revenue and property operating cost increases
attributable to Mission Bay and other such properties were $6.1 million and $3.3
million, respectively, in 1996.
Development Activities and Fee Services
- ---------------------------------------
The increase in the Company's gain on development property sales from
1995 to 1996 is summarized as follows:
<TABLE>
<CAPTION>
1996 1995 Difference
------------ ----------- --------------
(in thousands)
<S> <C> <C> <C>
Development property:
Sales............................................ $ 62,470 $ 3,224 $ 59,246
Cost of sales.................................... 46,847 2,271 44,576
--------- --------- --------
Gain. . .................................... $ 15,623 $ 953 $ 14,670
========= ======= =========
</TABLE>
The significant increase in development property sales is attributable
to improved industrial development activity ($24.1 million), residential sales
activity resulting from the acquisition of Akins ($21.9 million) and the sale of
the Metropolitan Water District site at the Company's Los Angeles Union Station
project ($13.2 million).
22
<PAGE>
Development and management fee income (net) increased to $3.4 million
during 1996 from $1.9 million in 1995. This increase was primarily from "design
build" fee income for the 500,000 square foot Metropolitan Water District's
corporate headquarters at Los Angeles Union Station, residential development fee
income and management fees from the Burlington Northern Santa Fe management
contract.
Other Items on the Statement of Operations
- ------------------------------------------
During 1996, the Company capitalized $2.9 million of interest compared
to $23.6 million in 1995 because Mission Bay and certain other properties no
longer qualified for interest capitalization. However, total interest incurred
was $3.9 million lower in 1996 compared to the same period in 1995 because of
debt reduction in 1996 and late 1995. As a result, interest expense increased
$16.8 million.
In late 1994, the Company experienced significant staff reductions and
realignment of responsibilities. In connection with these changes, the Company
refined its general and administrative expense allocation to align certain
common costs more closely with the underlying activities. This change in
allocations had the result of increasing property operating costs and decreasing
general and administrative expense in 1996 when compared to 1995.
In October 1995, the Company announced a goal to sell $200 million of
non-strategic land assets by March 1998, including $100 million by December 31,
1996. Since announcing this goal, the Company sold $47.1 million in the fourth
quarter of 1995 and $76.6 million in 1996, bringing the total sales to $123.7
million through December 31, 1996. In addition, during 1996 the Company
determined that approximately $30 million of assets had residential and other
development potential and, therefore, reduced the $200 million goal to $170
million. The Company expects the remaining $46.3 million of non-strategic land
assets to be sold during 1997 and 1998.
In 1995, the Company took a $102.4 million charge to adjust the
carrying value of certain properties, where the carrying costs exceeded what
management expected to recover through future operations and ultimate sale of
such properties. This charge included $84.8 million resulting from the Company's
decision to terminate the 1991 Development Agreement for its Mission Bay project
in San Francisco.
Litigation, environmental and restructuring costs decreased $2.1
million. The $1.1 million income in 1996 represents monies received from
settlement proceeds in environmental matters, with no offsetting costs being
incurred. The $1.0 million expense in 1995 represents actual environmental costs
incurred in regard to operating properties, partly offset by income resulting
from the settlement of litigation in favor of the Company.
Other, net decreased by $2.5 million in 1996 as a result of lower
interest income.
As discussed above, the Company completed a preferred stock call in
September 1996. As a result, a charge of $1.3 million for the premium on that
redemption, was recognized in 1996. No preferred stock calls occurred in 1995.
23
<PAGE>
Comparison of 1995 to 1994
Income Producing Properties
- ---------------------------
The more significant changes in rental revenue and property operating costs
are summarized below:
<TABLE>
<CAPTION>
INCREASE (DECREASE)
---------------------------
PROPERTY
RENTAL OPERATING
REVENUE COSTS
------------ ------------
(in millions)
<S> <C> <C>
Industrial buildings..................... $ $0.1 $ (0.7)
Office buildings......................... (1.0) 1.0
Retail buildings......................... 4.0 0.6
Land development......................... 0.7 0.1
Land leases.............................. (0.2) --
----- -----
Total change.......................... $ 3.6 $ 1.0
===== =====
</TABLE>
The increase in revenue for industrial buildings was due to six new
buildings totaling 532,000 square feet which were completed in 1995 and in the
fourth quarter of 1994; this increase was partially offset by reduced rentals
from existing properties. Operating costs for the industrial portfolio decreased
because of the overhead reductions described below. Rental revenue for the
Company's office portfolio decreased primarily because of the expiration of an
above-market lease in one building and a reduction in occupancy from 96% at the
end of 1994 to 92% at the end of 1995. In addition, the Company's operating
costs for its office portfolio increased $1 million because of increased
property taxes resulting from the reassessment of a building. The increase in
revenue and costs for retail buildings was primarily due to the completion of
the East Baybridge shopping center in late 1994.
Income-producing joint venture earnings increased $1.6 million. The
increase consists principally of significantly improved operating results from a
hotel joint venture.
Development Activities and Fee Services
- ---------------------------------------
The Company sold $3.2 million of development property in 1995, compared
to none in 1994, which resulted in a gain of $1.0 million in 1995. Activity was
zero in 1994 as the Company had a major reorganization.
Equity in earnings of development joint ventures decreased $2.5 million
in 1995, primarily because of decreased land sales from one joint venture.
Property operating costs associated with land holdings (primarily
property taxes and overhead) decreased because of the sale of $62.2 million of
non-strategic land assets and lower overhead.
24
<PAGE>
Other Items on the Statement of Operations
- ------------------------------------------
Interest expense increased $1.1 million, representing the net effect of
additional borrowings to fund the Company's development activity, offset by a
reduction in interest rates in 1995 as compared to 1994.
General and administrative costs decreased $3.9 million in 1995 because
of staff reductions. Gross salaries, wages and benefits expense decreased $5.1
million and computer expenses decreased $1.0 million. These decreases were
offset by a lower level of capitalization of overhead costs to development
projects.
The Company completed sales of non-strategic land and other assets
totaling $62.2 million in 1995 compared to $53.8 million in 1994. Related gains
increased to $32.8 million in 1995 versus $13.3 million in 1994. This increase
was attributable to the Company's 1995 announcement of its goal of selling $100
million of non-strategic land over a fifteen-month period ending December 31,
1996. Non-strategic land sales in the amount of $47.1 million closed in the
fourth quarter of 1995.
Adjustment to carrying value of property in 1995 was $102.4 million
compared to $24.1 million in 1994. In 1995, the Company took a $102.4 million
charge to adjust the carrying value of certain properties for which the carrying
costs exceeded what management expected to recover through the future operations
and ultimate sale of such properties. This included $84.8 million resulting from
the Company's decision to terminate the 1991 Development Agreement for its
Mission Bay project in San Francisco.
Litigation, environmental and restructuring costs decreased $1.9
million from 1994 to 1995. This was primarily attributable to the recognition of
$3.1 million in restructuring charges in 1994 with no comparable amount in 1995,
offset by higher charges for environmental costs in 1995.
Variability in Results
The timing of development sales and non-strategic asset sales have
resulted in significant variability in the Company's historic operating results,
particularly on a quarterly basis. Many of the Company's projects require a
lengthy process to complete the development cycle before they are sold.
Non-strategic asset sales are generally subject to lengthy negotiations and
contingencies that need to be resolved prior to closing. These factors tend to
"bunch" income in particular periods rather than a more even pattern throughout
a year. In addition, gross margins vary significantly as the mix of properties
varies. The cost basis of the properties sold varies because a) a number of
properties have been owned for many decades; b) some properties were acquired
within the last ten to fifteen years; and c) properties are owned in various
geographical locations.
Earnings Before Depreciation and Deferred Taxes
The Company uses a supplemental performance measure along with net
earnings (loss) to report its operating results. This measure, Earnings Before
Depreciation and Deferred Taxes (EBDDT), is not a measure of operating results
or cash flows from operating activities as defined by generally accepted
accounting principles. Additionally, EBDDT is not necessarily indicative of cash
available to fund cash needs and should not be considered as an alternative to
cash flows as a measure of liquidity. However, the Company believes that EBDDT
provides relevant information about its operations and is necessary, along with
net earnings (loss), for an understanding of its operating results.
Depreciation, amortization and deferred income taxes are excluded from
EBDDT as they represent non-cash charges. Gains on the sale of non-strategic
land and other assets, adjustments to the carrying value of property, premiums
on the redemption of preferred stock and restructuring costs represent
non-operating, unusual and/or nonrecurring items and are therefore excluded from
EBDDT. EBDDT is reconciled to net earnings (loss) in the Three Year Summary of
Earnings Before Depreciation and Deferred Taxes from Operations and Net Earnings
(Loss) as follows:
25
<PAGE>
<TABLE>
<CAPTION>
Year ended December 31,
------------------------------
1996 1995 1994
-------- ---------- ----------
(In thousands)
<S> <C> <C> <C>
NET EARNINGS (LOSS) APPLICABLE TO COMMON STOCKHOLDERS.......... $ 1,894 $ (56,815) $ (26,260)
Depreciation and amortization.......................... 30,561 27,990 28,577
Deferred income taxes.................................. 16,468 (22,532) (1,545)
Gain on non-strategic land and other asset sales....... (24,405) (32,789) (13,307)
Adjustment to carrying value of property............... -- 102,400 24,100
Premium on redemption of preferred stock............... 1,334 -- --
Restructuring costs.................................... -- -- 3,100
-------- ---------- ----------
EARNINGS BEFORE DEPRECIATION AND DEFERRED TAXES................ $ 25,852 $ 18,254 $ 14,665
======== ========== ==========
EARNINGS BEFORE DEPRECIATION AND DEFERRED TAXES
PER SHARE OF COMMON STOCK.............................. $ 0.34 $ 0.25 $ 0.20
======== ========== ==========
AVERAGE NUMBER OF COMMON SHARES OUTSTANDING.................... 74,947 72,967 72,967
======== ========== ==========
</TABLE>
The increase in EBDDT in 1996 was primarily due to improved results
from the Company's income-producing properties and gains on sales of development
property.
LIQUIDITY AND CAPITAL RESOURCES
Before 1996, the aggregate amount of the Company's general and
administrative expense, interest paid, preferred stock dividend payments and
leasing costs exceeded revenue from property operations, development and
management activities. In addition, the Company's cash requirements were
increased by the funds necessary to support the predevelopment and entitlement
efforts for its major land development projects. The resulting cash flow
deficits were funded by borrowings, the issuance of preferred stock and the sale
of assets in sufficient amount to meet the Company's overall cash requirements.
Through the development and operation of new buildings, reduction of property
and administrative costs, expansion of management and development activities,
preferred stock calls and lower interest cost through debt reduction, as noted
above, the deficits were eliminated in 1996.
The following table summarizes the Company's "Income (deficit) from
property operations, development and management activities after adjustment for
general and administrative expense, fixed charges and leasing costs". The
Company believes this presentation is meaningful in understanding the
improvement the Company has made in reducing its historical deficits.
26
<PAGE>
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
--------------------------------
1996 1995 1994
-------- -------- --------
(in thousands)
<S> <C> <C> <C>
PROPERTY OPERATIONS, DEVELOPMENT AND MANAGEMENT ACTIVITIES
Income-producing properties........................... $ 82,471 $ 78,004 $ 73,814
Development activities and fee services............... 16,089 215 1,002
Less: equity in earnings of joint ventures............ (6,751) (7,035) (7,982)
Add: distributions from joint ventures................ 8,488 8,332 386
-------- -------- --------
100,297 79,516 67,220
-------- -------- --------
GENERAL AND ADMINISTRATIVE EXPENSE............................ (8,019) (10,924) (14,818)
-------- -------- --------
FIXED CHARGES - INTEREST AND DIVIDENDS
Total interest costs, net of interest income.......... (44,165) (45,547) (44,981)
Preferred dividends................................... (22,173) (23,813) (23,813)
Add: non-cash components of interest expense.......... 3,935 2,861 3,559
-------- -------- --------
(62,403) (66,499) (65,235)
-------- -------- --------
LEASING COSTS
Depreciation on tenant improvements................... (7,048) (7,878) (8,930)
Amortization of lease commissions..................... (2,962) (2,504) (2,758)
-------- -------- --------
(10,010) (10,382) (11,688)
-------- -------- --------
INCOME (DEFICIT) FROM PROPERTY OPERATIONS, DEVELOPMENT AND
MANAGEMENT ACTIVITIES AFTER ADJUSTMENT FOR GENERAL
AND ADMINISTRATIVE EXPENSE, FIXED CHARGES AND
LEASING COSTS......................................... $ 19,865 $ (8,289) $(24,521)
======== ======== ========
</TABLE>
Other factors which may affect liquidity are discussed below. See `Risk
Factors'.
Cash flow from operating activities
Cash provided by operating activities reflected in the statement of
cash flows in 1996, 1995 and 1994 was $111.1 million, $102.2 million and $60.4
million, respectively. The increase in 1996 is primarily the result of a
significant increase in development property and non-strategic land sales,
offset by an increase in interest expense and increased capital expenditures for
development properties. The increase in 1995 from 1994 is primarily because of a
higher level of non-strategic land sales and lower general and administrative
costs.
Cash generated from sales of non-strategic land and development
property was $113.1 million, $58.4 million and $28.0 million in 1996, 1995 and
1994, respectively. Cash generated from rental operations increased principally
because of new buildings.
Cash flow from investing activities
Net cash flow used in investing activities reflected in the statement
of cash flows increased $33.7 million from 1995 to 1996 and decreased $59.0
million from 1994 to 1995. The increase in 1996 resulted primarily from the
decrease in short-term investments and restricted cash. The decrease in 1995
resulted primarily from the conversion of short-term commercial paper and
government securities into cash, offset by lower cash generated by the sale of
other assets. Net cash used in investing activities included the following
capital expenditures:
27
<PAGE>
<TABLE>
<CAPTION>
1996 1995 1994
-------- -------- --------
(in millions)
<S> <C> <C> <C>
Construction and building improvements................ $ 32.8 $ 14.8 $ 31.2
Acquisitions.......................................... 12.3 9.3 1.2
Predevelopment........................................ 11.1 3.7 (0.9)
Infrastructure and other.............................. 11.4 9.6 12.0
Capitalized interest and property taxes............... 2.2 26.1 26.5
-------- -------- --------
$ 69.8 $ 63.5 $ 70.0
======== ======== ========
</TABLE>
Cash flow from financing activities
Net cash used in financing activities reflected in the statement of
cash flows in 1996, 1995 and 1994 was $50.8 million, $60.7 million and $100.4
million, respectively. The amount for 1996 is primarily preferred stock
dividends paid and the redemption of preferred stock. The 1995 amount reflects
borrowing and repayment activity relating to operating properties (including
principal amortization) and capital expenditures and preferred stock dividends
paid. The 1994 amount reflects principally the net proceeds from the Series A
and B Preferred Stock offerings and the use of a part of those proceeds to repay
debt.
At December 31, 1996, the Company had total outstanding debt of $496.7
million, of which 73.2% was non-recourse to the Company and secured by certain
property of the Company, 26.7% was recourse to the Company and also secured by
certain property, and 0.1% was unsecured. During the next twelve months, $24.2
million of debt matures, consisting of construction financing, term loans or
first mortgage loans. All maturing debt is expected to be repaid upon sale of
the property securing it, extended, refinanced, converted into permanent loans
or repaid.
Debt covenants
Certain loan agreements contain restrictive financial covenants, the
most restrictive of which allow for a maximum funded debt to net worth not
exceed 75%, require stockholders' equity to be no less than $400 million, and
require that the Company maintain certain specified financial ratios. In
addition, certain agreements restrict the level of total leverage for the
Company. The Company was in compliance with all such covenants at December 31,
1996.
Capital Commitments
At December 31, 1996, the Company had approximately $24.6 million in
capital expenditure commitments. These commitments are primarily to fund the
construction of industrial development projects, predevelopment costs and
re-leasing costs. See comments below regarding the sources of funding for
capital requirements.
Lease Expirations
For the five years from 1997 through 2001, leases for 19%, 8%, 10%, 10%
and 17% of total square footage are scheduled to expire. The 1997 lease
expirations of 19% includes 2% attributable to month-to-month leases.
Cash balances, available borrowings and capital resources
At December 31, 1996, cash and cash equivalents totaled $23.6 million.
In addition, the Company had available $121.4 million under its secured
revolving credit facilities, $4.5 million under its development construction
facilities and $25.1 million under its residential construction facilities.
28
<PAGE>
On October 28, 1996, the Company entered into an agreement for a $240
million secured credit line which replaced six existing credit lines or term
facilities. This credit line is used to fund the Company's development projects,
interim capital requirements and to provide working capital for general
corporate purposes. At December 31, 1996, $121.4 million was available for
future borrowings. The maturity date of this credit line is November 1, 1998.
In July 1995, the Company entered into a $25 million revolving
construction line of credit which was available to fund new development in
twelve states in the Southwest. In July 1996, the Company elected not to renew
the revolving function of this facility in anticipation of closing the $240
million credit facility (described above). As of December 31,1996, one
construction project was financed under the line and $4.5 million was available
for future borrowings under this facility.
At December 31, 1996, Catellus Residential Group had six residential
construction loans and mortgage loans outstanding totaling $16.3 million. The
borrowing capacity of these loans totaled $41.4 million, leaving a balance
available for future borrowing of $25.1 million. The maturity dates of these
loans vary between 1997 and 1998.
The Company's short-and long-term liquidity and capital resources
requirements will essentially be provided from three sources: ongoing operating
income from rental properties, proceeds from asset sales, and fee services
income. As noted above, a $240 million secured revolving line of credit, a
construction line of credit and residential construction loan facilities are
available to the Company for meeting liquidity requirements. Additionally, the
Company will use third-party borrowing for development projects to the extent
practical.
Income Taxes
At December 31, 1996, the Company's deferred tax liability consisted of
deferred tax assets totaling $121.4 million and deferred tax liabilities of
$228.1 million. Deferred tax assets included $14.3 million relating to net
operating loss carryforwards (NOLs) of $40.2 million. The Company has NOLs of
$16.3 million, $16.9 million, $6.5 million, $.3 million and $.2 million which
expire in 2006, 2007, 2008, 2009 and 2011. The Company's other deferred tax
assets of $107.1 million relate primarily to differences between book and tax
basis of properties. These deferred tax assets are not subject to expiration and
will likely be realized at the time of taxable dispositions of the properties.
Deferred tax liabilities in excess of deferred tax assets are often associated
with the same property, with the result that the deferred tax asset will likely
be realized in a taxable disposition, without regard to other taxable income.
The Company believes it is more likely than not that it will realize the benefit
of its deferred tax assets, and that no valuation allowance is required. In
making this determination, the Company considered: the nature of its deferred
tax assets (and liabilities); the amounts and expiration dates of its NOLs; the
historical levels of taxable income; the significant unrealized appreciation of
its properties, including properties likely to be sold during the NOL
carryforward periods; and its ability in many cases to control the timing of
property sales in order to assure that deferred tax assets will be offset by
deferred tax liabilities or realized appreciation.
ENVIRONMENTAL MATTERS
Many of the Company's properties are in urban and industrial areas and
may have been leased to or previously owned by commercial and industrial tenants
that may have discharged hazardous materials. The Company incurs on-going
environmental remediation costs, including clean-up costs, consulting fees for
environmental studies and investigations, monitoring costs, and legal costs
relating to clean-up, litigation defense and the pursuit of responsible third
parties. Costs incurred in connection with operating properties and properties
previously sold are expensed. As of December 31, 1996, management has provided a
reserve of $13.6 million for such costs. These costs are expected to be incurred
over an estimated ten-year period, with a substantial portion incurred over the
next five years.
29
<PAGE>
Costs incurred for properties to be sold are deferred and will be
charged to cost of sales when the properties are sold. Costs relating to
undeveloped properties are capitalized as part of development costs. At December
31, 1996, the Company's estimate of its potential liability for identified
environmental costs relating to properties to be developed or sold ranged from
$14 million to $40 million. These costs generally will be capitalized as they
are incurred over the course of the estimated development period of
approximately 20 years. Environmental costs capitalized for 1996 and 1995
totaled $2.8 million and $1.7 million, respectively.
While the Company or outside consultants have evaluated the
environmental liabilities associated with most of the Company's properties, any
evaluation necessarily is based upon then prevailing law and identified site
conditions. The Company monitors its exposure to environmental costs on a
regular basis. Although an unexpected event could have a material impact on the
results of operations for any period, the Company does not believe that such
costs for identified liabilities will have a material adverse effect on its
financial condition.
SUPPLEMENTAL CURRENT VALUE
In 1996, because of the significant cost and limitations involved in
estimating the current value of its real estate assets, the Company decided to
discontinue the voluntary practice of preparing a supplemental current value
balance sheet.
RISK FACTORS
It is the Company's belief that this annual report on Form 10-K may
contain statements which, to the extent that they are not recitations of
historical fact, may constitute "forward-looking statements" within the meaning
of Section 27A of the Securities Act of 1933 and Section 21E of the Securities
and Exchange Act of 1934. All forward-looking statements involve risks and
uncertainties. Any forward-looking statements in this document are intended to
be subject to the safe harbor protection provided by Section 27A and 21E.
Factors that most typically affect the Company's operating results and financial
condition include (i) changes in general economic conditions in regions in which
the Company's projects are located, (ii) supply and demand for office,
industrial, and residential space, (iii) the delay in receipt of or the denial
of government approvals and entitlements for development projects, (iv) other
public and private development activity in the areas in which the Company owns
property, (v) land and building material costs, (vi) the availability and cost
of project financing, (vii) competition from other property owners, (viii)
liability for environmental remediation at the Company's properties, (ix) the
Company's ability to increase development fees, (x) the Company's ability to
sell non-strategic assets, (xi) changes in the capital markets affecting the
ability of the Company to minimize its interest and preferred dividends, (xii)
the Company's ability to control the timing of the recognition of deferred tax
liability, (xiii) the impact of discretionary government actions, (xiv) the
exposure of the Company's assets to natural occurrences, such as earthquakes,
tornadoes, and similar events, and (xv) changes in the legal and regulatory
environment, including the tax treatment of the Company's activities and assets.
For discussions identifying other important factors that could cause
actual results to differ materially from those anticipated in the forward-
looking statements, see the Company's Securities and Exchange Commission
filings, "Management's Discussion and Analysis of Financial Condition and
Results of Operations" of this Form 10-K, and Note 14 to the Consolidated
Financial Statements included in this Form 10-K. The Company cautions that the
foregoing list of risk factors is not exclusive. Further, the Company does not
undertake to update any forward-looking statements that may be made from time to
time by or on behalf of the Company.
30
<PAGE>
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The financial statements and schedules required under Regulation S-X
promulgated under the Securities Act of 1933 are identified in Item 14 and are
incorporated herein by reference.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
PART III
Except for the information relating to the executive officers of the
Company set forth in Part I of this Annual Report on Form 10-K, the information
required by the following items in this Part III is hereby incorporated by
reference to the relevant sections contained in the Company's definitive Proxy
Statement ("1997 Proxy Statement") which will be filed with the Securities and
Exchange Commission in connection with the 1997 Annual Meeting of Stockholders.
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The information in the section caption "Election of Directors" in the
1997 Proxy Statement is incorporated herein by reference. Information concerning
executive officers required by this Item 10 is located under Part I, Item 4 and
pages 15 through page 17 of this Form 10-K.
The information in the section captioned "Compliance with Section 16(a)
of the Securities Exchange Act of 1934" in the 1997 Proxy Statement is
incorporated herein by reference.
ITEM 11. EXECUTIVE COMPENSATION
The information in the sections captioned "Election of Directors --
Directors' Compensation," "Employment Agreements" and "Compensation Agreements"
and "Compensation of Executive Officers" included in the 1997 Proxy Statement is
incorporated herein by reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The information in the sections captioned "Security Ownership of
Directors, Nominees and Executive Officers" and "Security Ownership of Certain
Beneficial Owners" in the 1997 Proxy Statement is incorporated herein by
reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information in the section captioned "Certain Transactions" in the
1997 Proxy Statement is incorporated herein by reference.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
(a)(1) AND (a)(2) FINANCIAL STATEMENTS AND FINANCIAL STATEMENT
SCHEDULES
See Index to Financial Statements and Financial Statement Schedules at
F-1 herein.
31
<PAGE>
All other Schedules are omitted because they are not applicable or the
required information is shown in the financial statements or notes thereto.
(a)(3) EXHIBITS
<TABLE>
<CAPTION>
Exhibit
No.
-------
<S> <C>
3.1 Form of Restated Certificate of Incorporation of the Registrant(1)
3.1A Amendment to Restated Certificate of Incorporation of the Registrant(7)
3.3 Form of Certificate of Designations, Preferences and Rights of $3.25 Series A Cumulative
Convertible Preferred Stock(2)
3.4 By-Laws, as amended(10)
3.5 Form of Certificate of Designations, Preferences and Rights of $3.625 Series B Cumulative
Convertible Exchangeable Preferred Stock(7)
4.1 Form of stock certificate representing Common Stock(1)
4.9 Form of stock certificate representing $3.75 Series A Cumulative Convertible Preferred Stock(2)
4.10 Form of stock certificate representing $3.625 Series B Cumulative Convertible Exchangeable
Preferred Stock(7)
4.11 Loan Agreement dated as of February 16, 1994 between the Registrant and The Prudential
Insurance Company of America(8)
4.12 Loan Agreement dated as of October 28, 1996 between the Registrant and Bank of America National
Trust and Savings Association*
10.1 Exploration Agreement and Option to Lease dated December 28, 1989 between the Registrant and
Santa Fe Pacific Minerals Corporation(1)
10.4 Registration Rights Agreement dated as of December 29, 1989 among the Registrant, BAREIA, O&Y
and Itel(1)
10.4A Letter Agreement dated November 14, 1995 between the Registrant and California Public
Employees' Retirement System(10)
10.6 Restated Tax Allocation and Indemnity Agreement dated December 29, 1989 among the Registrant and
certain of its subsidiaries and Santa Fe Pacific Corporation ("SFP")(1)
10.7 State Tax Allocation and Indemnity Agreement dated December 29, 1989 among the Registrant and
certain of its subsidiaries and SFP(1)
10.13 Registrant's Incentive Stock Compensation Plan(3)
10.15 Termination, Substitution and Guarantee Agreement between ATSF and the Registrant dated
December 21, 1990(4)
</TABLE>
32
<PAGE>
<TABLE>
<S> <C>
10.16 Registrant's Stock Option Plan(4)
10.21 Amended and Restated Executive Stock Option Plan(7)
10.21A First Amendment to Amended and Restated Executive
Stock Option Plan*
10.26 Form of First Amendment to Registration Rights Agreement among
the Registrant, BAREIA, O&Y and Itel(5)
10.29 Amended and Restated Executive Employment Agreement dated as
of November 29, 1995 between the Registrant and Nelson C.
Rising(10)
10.30 Executive Employment Agreement dated February
10, 1995 between the Registrant and Timothy J. Beaudin(9)
10.31 Amended and Restated Stock Option Agreement dated March
22, 1996 between the Registrant and Joseph R. Seiger(10)
10.37 Employment Agreement dated July 24, 1996 between the
Registrant and Stephen P. Wallace(10)
10.38 Letter Agreement dated March 24, 1995 between the
Registrant and Donald M. Parker(10)
10.39 Stock Option Award Agreement dated as of
January 1, 1996 between the Registrant and Joseph R.
Seiger(10)
10.40 Revised Memorandum of Understanding dated
November 15, 1995 between the Registrant and Theodore L.
Tanner(10)
10.41 Memorandum of Understanding dated February
16, 1996 between the Registrant and Jeffrey K. Gwin(10)
10.42 Consulting Agreement dated February 25, 1996, between the
Registrant and Jeffrey K. Gwin(10)
10.43 1995 Stock Option Plan (11)
10.44 1996 Performance Award Plan (12)
10.44A First Amendment to 1996 Performance Award Plan*
10.45 Employment Agreement dated February 1, 1996 between the
Registrant and David Friedman*
10.46 Employment Agreement dated February 1, 1996 between the
Registrant and Ira Yellin*
10.47 Letter Agreement dated February 1, 1996 between the Registrant
and Ira Yellin*
10.48 Employment Agreement dated December 3, 1996 between the
Registrant and Kathleen Smalley*
10.49 Letter Agreement dated November 16, 1996 between the
Registrant and Steve Wallace*
10.50 Letter Agreement dated November 16, 1996 between the
Registrant and Timothy Beaudin*
10.51 Office lease dated November 22, 1996 between Bradbury
Associated, L.P. and the Registrant*
21.1 Subsidiaries of the Registrant*
23.1 Consent of Independent Accountants*
</TABLE>
- -----------------------------------
*Filed with this report on Form 10-K.
33
<PAGE>
<TABLE>
<S> <C>
24.1 Powers of Attorney from directors with respect to the filing
of the Form 10-K*
27 Financial Data Schedule*
99.1 Report of the Independent Real Estate Appraisers dated March
12, 1996(10)
</TABLE>
The Registrant has omitted instruments with respect to long-term debt
where the total amount of the securities authorized thereunder does not exceed
10 percent of the assets of the Registrant and its subsidiaries on a
consolidated basis. The Registrant agrees to furnish a copy of such instrument
to the Commission upon request.
<TABLE>
(b) REPORTS ON FORM 8-K
<S> <C>
(2) Incorporated by reference to Exhibit of the same number on the
Form 8 constituting a Post-Effective Amendment No. 1 to the
Form 8-A as filed with the Commission on February 19, 1993.
(3) Incorporated by reference to Exhibit of the same number of the
Form 8 constituting Post-Effective Amendment No. 1 to the Form
10 as filed with the Commission on November 20, 1990.
(4) Incorporated by reference to Exhibit of the same number on the
Form 10-K for the year ended December 31, 1990.
(5) Incorporated by reference to Exhibit of the same number of
Amendment No. 2 to Form S-3 as filed with the Commission on
February 4, 1993.
(6) Incorporated by reference to Exhibit of the same number on the
Form 10-Q for the quarter ended September 30, 1993.
(7) Incorporated by reference to Exhibit of the same number on the
Form 10-K for the year ended December 31, 1993.
(8) Incorporated by reference to Exhibit of the same number of
Amendment No. 1 to the Form 10-K for the year ended December
31, 1993.
(9) Incorporated by reference to Exhibit of the same number on the
Form 10-K for the year ended December 31, 1994.
(10) Incorporated by reference to Exhibit of the same number on the
Form 10-K for the year ended December 31, 1995.
(11) Incorporated by reference to Exhibit 4.1 of Form S-8 as
filed with the Commission on February 26, 1996.
(12) Incorporated by reference to Exhibit 4.1 of Form S-8 as
filed with the Commission on May 22, 1996.
- --------------------------------------------------------------------------------
</TABLE>
(1) Incorporated by reference to Exhibit of the same number of the
Registration Statement on Form 10 (Commissiom File No.0-18694) as filed with the
Commission on July 18, 1990 ("Form 10")
34
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, Catellus Development Corporation has duly caused this
report to be signed on its behalf by the undersigned, thereunto duly authorized.
CATELLUS DEVELOPMENT CORPORATION
By *
---------------------------
Nelson C. Rising
President and Chief Executive
Officer
Dated: March 31, 1997
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of Catellus
Development Corporation and in the capacities and on the date indicated.
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
/s/ * President, Chief Executive March 31, 1997
- ---------------------------
Nelson C. Rising Officer and Director
Principal Executive Officer
/s/STEPHEN P. WALLACE Senior Vice President and March 31, 1997
- ------------------------
Stephen P. Wallace Chief Financial Officer
Principal Financial Officer
/s/PAUL A. LOCKIE Vice President and Controller March 31, 1997
- ------------------------------
Paul A. Lockie Principal Accounting Officer
</TABLE>
35
<PAGE>
<TABLE>
<S> <C> <C>
* Director
----------------------------
Joseph F. Alibrandi
* Director
----------------------------
Daryl J. Carter
* Director
----------------------------
Christine Garvey
* Chairman of the
---------------------------- Board, Director
Joseph R. Seiger
* Director
----------------------------
Jacqueline R. Slater
* Director
----------------------------
Thomas M. Steinberg
* Director
----------------------------
Beverly Benedict Thomas
By /s/ PAUL A. LOCKIE
-----------------------------
Paul A. Lockie
Attorney-in-fact
March 31, 1997
</TABLE>
36
<PAGE>
CATELLUS DEVELOPMENT CORPORATION
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
FINANCIAL STATEMENTS
Report of Independent Accountants dated February 12, 1997,
except for Note 15, as to which the date is March 24, 1997................................. F-2
Consolidated Balance Sheet at December 31, 1996 and 1995......................................... F-3
Consolidated Statement of Operations for the years ended December 31, 1996, 1995 and 1994........ F-4
Consolidated Statement of Stockholders' Equity for the years ended December 31, 1996, 1995
and 1994.................................................................................... F-5
Consolidated Statement of Cash Flows for the years ended December 31, 1996, 1995 and 1994........ F-6
Notes to Consolidated Financial Statements....................................................... F-7
Summarized Quarterly Results (Unaudited)......................................................... F-21
(a)(2) FINANCIAL STATEMENT SCHEDULES
Report of Independent Accountants dated February 12, 1997........................................ S-1
Schedule II -- Valuation and Qualifying Accounts................................................. S-2
Schedule III -- Real Estate and Accumulated Depreciation......................................... S-3
Attachment A to Schedule III..................................................................... S-4
</TABLE>
F-1
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors
and Stockholders of
Catellus Development Corporation
In our opinion, the accompanying consolidated balance sheet and the
related consolidated statements of operations, of stockholders' equity and of
cash flows present fairly, in all material respects, the financial position of
Catellus Development Corporation and its subsidiaries at December 31, 1996 and
1995 and the results of their operations and their cash flows for each of the
three years in the period ended December 31, 1996, in conformity with generally
accepted accounting principles. The 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 of these
statements in accordance with generally accepted auditing standards which
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, assessing the accounting principles
used and significant estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for the opinion expressed above.
Price Waterhouse LLP
San Francisco, California
February 12, 1997, except for Note 15,
as to which the date is March 24, 1997
F-2
<PAGE>
CATELLUS DEVELOPMENT CORPORATION
CONSOLIDATED BALANCE SHEET
(In thousands, except share data)
<TABLE>
<CAPTION>
December 31,
--------------------------
1996 1995
--------- -----------
<S> <C> <C>
Assets
Properties..................................................... $ 1,235,440 $ 1,191,679
Less accumulated depreciation.................................. (211,338) (184,228)
----------- -----------
1,024,102 1,007,451
Other assets and deferred charges.............................. 50,547 44,530
Notes receivable............................................... 11,924 7,550
Accounts receivable, less allowance............................ 12,965 10,330
Cash and cash equivalents...................................... 23,580 27,743
----------- -----------
Total.................................................. $ 1,123,118 $ 1,097,604
=========== ===========
Liabilities and stockholders' equity
Mortgage and other debt........................................ $ 496,742 $ 496,180
Accounts payable and accrued expenses.......................... 54,178 33,913
Deferred credits and other liabilities......................... 43,007 34,367
Deferred income taxes.......................................... 106,738 90,270
----------- -----------
Total liabilities...................................... 700,665 654,730
----------- -----------
Commitments and contingencies (Note 14)
Stockholders' equity
Preferred stock............................................... 274,428 322,500
Common stock - 77,028,099 and 72,967,236 shares issued at
December 31, 1996 and 1995.................................. 770 730
Paid-in capital............................................... 197,709 196,525
Accumulated deficit........................................... (50,454) (76,881)
----------- -----------
Total stockholders' equity............................. 422,453 442,874
----------- -----------
Total............................................... $ 1,123,118 $ 1,097,604
=========== ===========
</TABLE>
See notes to consolidated financial statements.
F-3
<PAGE>
CATELLUS DEVELOPMENT CORPORATION
CONSOLIDATED STATEMENT OF OPERATIONS
(In thousands, except per share data)
<TABLE>
<CAPTION>
Year ended December 31,
-----------------------------------
l996 l995 l994
--------- --------- ---------
<S> <C> <C> <C>
Income producing properties
Rental revenue.............................................. $ 115,886 $ 102,828 $ 99,183
Property operating costs.................................... (39,408) (30,650) (29,609)
Equity in earnings of joint ventures........................ 5,993 5,826 4,240
--------- --------- ---------
82,471 78,004 73,814
--------- --------- ---------
Development activities and fee services
Gain on development property sales.......................... 15,623 953 --
Development and management fee income, net.................. 3,432 1,924 2,151
Equity in earnings of joint ventures........................ 758 1,209 3,742
Land holding costs, net..................................... (3,724) (3,871) (4,891)
--------- --------- ---------
16,089 215 1,002
--------- --------- ---------
Interest expense................................................ (42,521) (25,757) (24,671)
Depreciation and amortization................................... (30,561) (27,990) (28,577)
General and administrative expense.............................. (8,019) (10,924) (14,818)
Gain on non-strategic land and other asset sales................ 24,405 32,789 13,307
Adjustment to carrying value of property........................ -- (102,400) (24,100)
Litigation, environmental and restructuring costs............... 1,093 (961) (2,854)
Other, net...................................................... (19) 2,504 3,091
--------- --------- ---------
Earnings (loss) before income taxes............................. 42,938 (54,520) (3,806)
--------- --------- ---------
Income tax (expense) benefit
Current..................................................... (1,069) (1,014) (186)
Deferred.................................................... (16,468) 22,532 1,545
--------- --------- ---------
(17,537) 21,518 1,359
--------- --------- ---------
Net earnings (loss)......................................... 25,401 (33,002) (2,447)
Preferred stock dividends................................. (22,173) (23,813) (23,813)
Premium on redemption of preferred stock.................. (1,334) -- --
--------- --------- ---------
Net earnings (loss) applicable to common stockholders....... $ 1,894 $ (56,815) $ (26,260)
========= ========= =========
Net earnings (loss) per share of common stock............... $ 0.03 $ (0.78) $ (0.36)
========= ========= =========
Average number of common shares outstanding................. 74,947 72,967 72,967
========= ========= =========
</TABLE>
See notes to consolidated financial statements.
F-4
<PAGE>
CATELLUS DEVELOPMENT CORPORATION
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
(In thousands)
<TABLE>
<CAPTION>
Preferred Stock Common Stock
------------------------- ------------------------- Paid-In Accumulated
Shares Amount Shares Amount Capital Deficit
------------ ------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Balance at December 31, 1993................ 6,450 $ 322,500 72,967 $730 $244,151 $(41,432)
Series A preferred stock dividends........ -- -- -- -- (12,938) --
Series B preferred stock dividends........ -- -- -- -- (10,875) --
Net loss.................................... -- -- -- -- -- (2,447)
------------ ------------ ------------ ------------ ------------ ------------
Balance at December 31, 1994................ 6,450 322,500 72,967 730 220,338 (43,879)
Series A preferred stock dividends........ -- -- -- -- (12,938) --
Series B preferred stock dividends........ -- -- -- -- (10,875) --
Net loss.................................. -- -- -- -- -- (33,002)
------------ ------------ ------------ ------------ ------------ ------------
Balance at December 31, 1995................ 6,450 322,500 72,967 730 196,525 (76,881)
Redemption of Series A preferred stock.... (508) (25,406) -- -- (1,334) --
Conversion of Series A preferred stock.... (453) (22,666) 2,502 25 22,641 --
Series A preferred stock dividends........ -- -- -- -- (11,298) --
Series B preferred stock dividends........ -- -- -- -- (10,875) --
Exercise of stock options and other....... -- -- 1,559 15 2,050 1,026
Net earnings.............................. -- -- -- -- -- 25,401
============ ============ ============ ============ ============ ============
Balance at December 31, 1996................ 5,489 $ 274,428 77,028 $770 $197,709 $(50,454)
============ ============ ============ ============ ============ ============
</TABLE>
See notes to consolidated financial statements.
F-5
<PAGE>
CATELLUS DEVELOPMENT CORPORATION
CONSOLIDATED STATEMENT OF CASH FLOWS
(In thousands)
<TABLE>
<CAPTION>
Year Ended December 31,
-------------------------------------------
1996 1995 1994
------------- ------------- -------------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net earnings (loss)..................................................... $ 25,401 $(33,002) $ (2,447)
Adjustments to reconcile net earnings (loss) to net
cash provided by operating activities:
Depreciation and amortization........................................ 30,561 27,990 28,577
Deferred income taxes................................................ 16,468 (22,392) (1,667)
Amortization of deferred loan fees and other costs................... 4,799 2,743 2,940
Equity in earnings of joint ventures................................. (6,751) (7,035) (7,982)
Operating contributions/distributions of joint ventures, net......... 10,235 8,332 2,193
Cost of non-strategic land and development properties sold........... 84,276 23,716 17,683
Gain on sales of other assets........................................ (4,746) -- (3,033)
Expenditures for development properties.............................. (41,978) (2,761) --
Litigation recovery.................................................. -- (6,450) --
Adjustment to carrying value of property............................. -- 102,400 24,100
Other, net........................................................... 2,842 8,674 3,963
Change in assets and liabilities:
Accounts and notes receivable........................................ (9,681) 1,306 (2,248)
Other assets and deferred charges.................................... (13,444) (5,652) (8,014)
Accounts payable and accrued expenses................................ 12,341 850 3,145
Other................................................................ 754 3,483 3,155
------------- ------------- -------------
Net cash provided by operating activities................................. 111,077 102,202 60,365
------------- ------------- -------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures.................................................... (69,747) (63,516) (69,998)
Tenant improvements..................................................... (3,613) (2,246) (3,902)
Net proceeds from sale of other assets.................................. 8,969 -- 21,109
Contributions to joint ventures......................................... -- -- (1,807)
Reduction (investment) in short-term investments and
restricted cash........................................................ -- 35,067 (35,067)
------------- ------------- -------------
Net cash used in investing activities..................................... (64,391) (30,695) (89,665)
------------- ------------- -------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Borrowings.............................................................. 222,052 99,013 328,408
Repayment of borrowings................................................. (224,470) (135,884) (462,002)
Dividends paid.......................................................... (23,067) (23,813) (24,145)
Redemption of preferred stock........................................... (26,739) -- --
Contributions/distributions of minority partners........................ 1,201 -- --
Proceeds from issuance of common stock.................................. 174 -- --
Stock issuance costs.................................................... -- -- (55)
Investment in restricted cash used for reduction of debt................ -- -- 67,410
Redemption premium on early retirement of debt.......................... -- -- (10,000)
------------- ------------- -------------
Net cash used in financing activities..................................... (50,849) (60,684) (100,384)
------------- ------------- -------------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS...................... (4,163) 10,823 (129,684)
Cash and cash equivalents at beginning of year............................ 27,743 16,920 146,604
============= ============= =============
Cash and cash equivalents at end of year.................................. $ 23,580 $ 27,743 $ 16,920
============= ============= =============
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid during the year for:
Interest (net of amount capitalized)................................. $ 39,144 $ 23,208 $ 22,895
Income taxes......................................................... $ 1,009 $ 444 $ 324
</TABLE>
See notes to consolidated financial statements.
F-6
<PAGE>
CATELLUS DEVELOPMENT CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1. DESCRIPTION OF BUSINESS
Catellus Development Corporation (the Company) is a diversified real
estate operating company that manages and develops real estate for its own
account and others. The Company's portfolio of industrial, residential, retail
and office projects, undeveloped land and joint venture interests are located in
major markets in California and 10 other states. The Company's operating
properties consist primarily of industrial facilities, along with a number of
office and retail buildings located in California, Arizona, Illinois, Texas,
Colorado and Oregon. The Company also has substantial undeveloped land holdings
primarily in these same states.
In March 1996, the Company acquired The Akins Companies (Akins), a
residential real estate company involved in home building, community development
and project management services, primarily in Southern California. Akins was
acquired in exchange for 1,528,421 shares of the Company's common stock in a
transaction that qualifies for the pooling of interest method of accounting.
However, prior year financial statements have not been restated because Akins
was not material to the financial position, results of operations or cash flows
of the Company. Concurrent with this acquisition, Akins changed its legal name
to Catellus Residential Group (Residential Group) and commenced development of
certain of the Company's residential land holdings, projects previously started
by Akins and new development activities on properties owned by others.
NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Principles of consolidation -- The accompanying consolidated financial
statements include the accounts of the Company, its wholly-owned subsidiaries
and investees over 50% owned which are controlled by the Company.
All other investees are accounted for using the equity method.
Revenue recognition -- Rental revenue, in general, is recognized when
due from tenants; however, revenue from leases with rent concessions is
recognized on a straight-line basis over the initial term of the lease. Direct
costs of negotiating and consummating a lease are deferred and amortized over
the initial term of the related lease.
The Company recognizes revenue from the sale of properties using the
accrual method. Sales not qualifying for full recognition at the time of sale
are accounted for under the installment method. In general, specific
identification is used to determine the cost of sales. Estimated future costs to
be incurred by the Company after completion of each sale are included in cost of
sales.
Cash and cash equivalents -- The Company considers all highly liquid
investments with a maturity of three months or less at time of purchase to be
cash equivalents.
Financial instruments -- The cost bases of the Company's notes
receivable and debt approximate fair value, based upon current market rates for
commercial real estate loans of similar risks and maturities.
Property and deferred costs -- Real estate is stated at the lower of
cost or estimated fair value. For operating properties and properties held for
long-term investment, a write-down to estimated fair value is recognized when a
property's estimated undiscounted future cash flow, before interest charges, is
less than its book value. For properties held for sale, a write-down to
estimated fair value is recorded when the Company determines that the carrying
cost exceeds the estimated selling price, less cost to sell. This evaluation is
made by management on a property by property basis. The evaluation of fair value
and future cash flows from individual properties requires significant judgment;
it is reasonably possible that a change in estimate could occur.
The Company capitalizes construction and development costs. Costs
associated with financing or leasing projects are also capitalized and amortized
over the period benefited by those expenditures.
F-7
<PAGE>
Depreciation is computed using the straight-line method. Buildings and
improvements are depreciated using lives of between 20 and 40 years. Tenant
improvements are depreciated over the primary terms of the leases (generally
3-15 years), while furniture and equipment are depreciated using lives ranging
between 3 and 10 years.
Maintenance and repair costs are charged to expense as incurred, while
significant improvements, replacements and major renovations are capitalized.
Allowance for uncollectible accounts -- Accounts receivable are net of
an allowance for uncollectible accounts totaling $2.4 million and $1.8 million
at December 31, 1996 and 1995.
Environmental costs -- The Company incurs on-going environmental
remediation costs, including clean-up costs, consulting fees for environmental
studies and investigations, monitoring costs, and legal costs relating to
clean-up, litigation defense, and the pursuit of responsible third parties.
Costs incurred in connection with operating properties and properties previously
sold are expensed. Costs relating to undeveloped land are capitalized as part of
development costs. Costs incurred for properties to be sold are deferred and
will be charged to cost of sales when the properties are sold.
The Company maintains a reserve, included in the caption "deferred
credits and other liabilities", for known, probable costs of environmental
remediation to be incurred in connection with operating properties and
properties previously sold. This reserve was $13.6 million and $13.8 million at
December 31, 1996 and 1995, respectively. When there is a legal requirement for
environmental remediation of developable land, the Company will accrue for the
estimated cost of remediation and capitalize that amount. Where there is no
legal requirement for remediation, costs will be capitalized, as incurred, as
part of the project costs.
Restructuring Costs -- The Company implemented a major restructuring in
November 1994 to refocus the Company and to improve the Company's long-term cash
position. This restructuring, which was implemented in 1995, resulted in a $3.1
million nonrecurring operating expense in 1994.
Income taxes -- Income taxes are recorded based on the future tax
effects of the difference between the tax and financial reporting bases of the
Company's assets and liabilities. In estimating future tax consequences,
expected future events are considered except for potential income tax law or
rate changes.
Net earnings (loss) per share -- Net earnings (loss) per share of
common stock is computed by dividing net earnings (loss), after reduction for
preferred stock dividends and premium on redemption of preferred stock, by the
weighted average number of shares of common stock outstanding during the year.
Fully diluted earnings per share amounts have not been presented because assumed
conversion of the Series A and Series B preferred stock would be anti-dilutive
for all relevant periods.
Use of estimates -- The preparation of financial statements in
conformity with generally accepted accounting principles requires management to
make estimates and assumptions that affect the reported amounts of assets and
liabilities, the disclosure of contingent assets and liabilities, and the
reported amounts of revenue and expenses. Actual results could differ from those
estimates.
Reclassifications - Rental revenue and certain other prior year amounts
have been reclassified to conform with the current year financial statement
presentation.
F-8
<PAGE>
NOTE 3. MORTGAGE AND OTHER DEBT
Mortgage and other debt at December 31, 1996 and 1995 consisted of the
following (in thousands):
<TABLE>
<CAPTION>
1996 1995
---------- ----------
<S> <C> <C>
First mortgage loan, interest at an average rate of 8.71%, due at
various dates through March 1, 2004 (a)............................................... $ 259,063 $ 267,260
Secured revolving credit line, interest variable (7.313% at December 31, 1996),
due November 1, 1998 (b)............................................................. 118,600 --
First mortgage loans, interest at 7.625% to 10.05%, due at various
dates through March 1, 2009 (c)....................................................... 67,249 70,770
Assessment district bonds, interest at 5.0% to 10.43%, due at various
dates through April 10, 2021 (d)...................................................... 21,012 23,283
Residential construction loans, interest variable (9.25% to 9.5%
at December 31, 1996), due at various dates through May 22, 1998 (e).................. 10,105 --
Term loan, secured, interest variable (7.75% at December 31, 1996),
due May 1, 1997 (f).................................................................. 9,000 14,400
Secured promissory note, interest at prime plus 1.0% (9.0% at December 31, 1996),
due December 1, 1998 (g)............................................................. 6,160 --
Construction loans, interest variable (7.465% at December 31,
1996), due May 20, 1998 (h)........................................................... 5,028 52,851
Intermediate secured term loans (i)..................................................... -- 57,400
Term loan, unsecured, interest variable................................................. -- 7,000
Other loan, interest at 8.0%, due July 15, 1997......................................... 525 3,216
========== ==========
$ 496,742 $ 496,180
========== ==========
</TABLE>
- -----------
(a) This loan with The Prudential Insurance Company of America is
collateralized by certain of the Company's operating properties and by an
assignment of rents generated by the underlying properties. This loan has a
penalty if paid prior to maturity.
(b) On October 28, 1996, the Company entered into an agreement for a $240
million credit line which replaced six existing credit lines or term
facilities. This credit line is used to fund the Company's development
projects, interim capital requirements and to provide working capital for
general corporate purposes. At December 31, 1996, $121.4 million was
available for future borrowings. The credit line is collateralized by
certain of the Company's operating properties, an assignment of rents
generated by the underlying properties and certain land holdings.
(c) These first mortgage loans are collateralized by certain of the Company's
operating properties and by an assignment of rents generated by the
underlying properties. A majority of these loans have penalties if paid
prior to maturity.
(d) The assessment district bonds are issued through local municipalities to
fund the construction of public infrastructure and improvements which
benefit the Company's properties. These bonds are secured by certain of the
Company's properties.
(e) The Company's residential construction loans are used to finance
development projects and are secured by the related land and improvements.
The Residential Group and certain joint venture partners have guaranteed
$6.1 million of these borrowings. At December 31, 1996, $25.1 million was
available for future borrowings under these residential construction loans.
(f) This secured term loan is collateralized by an operating property and by an
assignment of rents generated by the underlying property.
(g) This promissory note was used to finance a land purchase for a residential
development project and is secured by a deed of trust.
F-9
<PAGE>
(h) In July 1995, the Company entered into a $25 million revolving construction
line of credit which was available to fund new development in twelve states
in the Southwest. In July 1996, the Company opted not to renew the
revolving function of this facility in anticipation of closing the credit
facility discussed in (b) above. As of December 31, 1996, one construction
project was financed under the line which is secured by the related land
and improvements and by an assignment of rents generated by the underlying
property. At December 31, 1996 $4.5 million was available for future
borrowings under this facility.
(i) These secured term loans were repaid in full in October 1996 with proceeds
from a secured revolving credit line (see (b) above).
Certain loan agreements contain restrictive financial covenants. The
most restrictive of which allows for a maximum funded debt to net worth not to
exceed 75%, require stockholders' equity to be no less than $400 million, and
that the Company maintain certain specified financial ratios. In addition,
certain agreements restrict the level of total leverage for the Company. The
Company was in compliance with all such covenants at December 31, 1996.
The maturities of mortgage and other debt outstanding as of December
31, 1996 are summarized as follows (in thousands):
<TABLE>
<S> <C>
1997........................... $ 24,221
1998........................... 154,876
1999........................... 8,773
2000........................... 9,540
2001........................... 10,414
Thereafter..................... 288,918
--------
$496,742
========
</TABLE>
Interest costs incurred during 1996, 1995 and 1994 relating to mortgage
and other debt totaled $41.8 million, $46.5 million and $45.8 million. Total
interest costs, which also includes loan fee amortization and other interest
costs, amounted to $45.4 million, $49.3 million and $48.7 million in 1996, 1995
and 1994. Of these amounts, $2.9 million, $23.6 million and $24 million were
capitalized during 1996, 1995 and 1994.
F-10
<PAGE>
NOTE 4. INCOME TAXES
Total income taxes (benefit) reflected in the consolidated statement of
operations differs from the amounts computed by applying the federal statutory
rate of 35% to earnings (loss) before income taxes as follows (in thousands):
<TABLE>
<CAPTION>
1996 1995 1994
------- -------- -------
<S> <C> <C> <C>
Federal income tax at statutory rate............................ $15,028 $(19,082) $(1,332)
Increase (decrease) in taxes resulting from:
State income taxes, net of federal impact.................... 2,441 (2,460) 72
Other........................................................ 68 24 (99)
------- -------- -------
$17,537 $(21,518) $(1,359)
======= ======== =======
</TABLE>
Deferred income taxes are provided for the temporary differences
between the financial reporting basis and the tax basis of the Company's assets
and liabilities and for operating loss and tax credit carryforwards. Significant
components of the Company's net deferred tax liability as of December 31, 1996
and 1995 are as follows (in thousands):
<TABLE>
<CAPTION>
December 31,
-----------------------
1996 1995
-------- --------
<S> <C> <C>
Deferred tax liability:
Involuntary conversions (condemnations) of property.................. $ 90,074 $ 91,226
Capitalized interest and taxes....................................... 89,119 93,135
Like-kind property exchanges......................................... 22,392 20,169
Investments in partnerships.......................................... 20,544 16,599
Other................................................................ 5,999 5,219
-------- --------
228,128 226,348
-------- --------
Deferred tax assets:
Operating loss carryforwards......................................... 14,345 13,257
Intercompany transaction (prior to spin-off)......................... 16,332 16,522
Capitalized rent..................................................... 23,469 23,194
Adjustment to carrying value of property............................. 46,026 63,376
Depreciation and amortization........................................ 8,897 7,028
Environmental reserve................................................ 4,633 4,687
Other................................................................ 7,688 8,014
-------- --------
121,390 136,078
Deferred tax assets valuation allowance.............................. -- --
-------- --------
121,390 136,078
-------- --------
Net deferred tax liability........................................... $106,738 $ 90,270
======== ========
</TABLE>
During 1996 and 1994, the Company generated net operating loss
carryforwards of $.2 million and $.3 million for tax purposes which expire in
2011 and 2009. Deferred income tax expense was reduced to reflect the benefit of
these amounts.
NOTE 5. JOINT VENTURE INVESTMENTS
The Company has investments in a variety of unconsolidated real
estate-oriented joint ventures that are involved in both operation of income
producing properties and development of various other projects. At December 31,
1996, these joint venture investments included two hotels, one office building,
a 900,000 square foot trade mart center for the contract and home furnishing
industries, an apartment complex and other projects in the early stages of
development.
The Company guarantees a portion of the debt and interest of certain of
its joint ventures. At December 31, 1996, these guarantees totaled $11.9
million.
F-11
<PAGE>
The condensed combined balance sheets and statements of operations of
these unconsolidated joint ventures, along with the Company's proportionate
share, are summarized as follows (in thousands):
<TABLE>
<CAPTION>
Combined Proportionate Share
---------------------------- --------------------------
1996 1995 1996 1995
------------- ------------- ------------ ------------
<S> <C> <C> <C> <C>
Assets:
Income producing properties:
Property......................................... $ 233,150 $ 240,797 $ 107,656 $ 110,610
Other............................................ 26,506 23,828 13,134 10,700
Development projects:
Property......................................... 62,720 18,679 4,461 1,860
Other............................................ 15,647 20,714 1,627 4,011
------------ ------------- ------------ ------------
Total......................................... $ 338,023 $ 304,018 $ 126,878 $ 127,181
============ ============= ============ ============
Liabilities and venturers' deficit:
Income producing properties:
Notes Payable.................................... $ 401,266 $ 396,090 $ 161,748 $ 161,940
Other............................................ 18,984 18,952 5,957 6,116
Development projects:
Notes Payable.................................... 8,525 -- 144 --
Other............................................ 376 733 87 191
------------ ------------- ------------ ------------
Total liabilities............................. 429,151 415,775 167,936 168,247
------------ ------------- ------------ ------------
Venturers' deficit
Income producing properties....................... (160,594) (150,417) (46,915) (46,746)
Development projects.............................. 69,466 38,660 5,857 5,680
------------ ------------- ------------ ------------
(91,128) (111,757) (41,058) (41,066)
------------ ------------- ------------ ------------
Total liabilities and venturers' deficit..... $ 338,023 $ 304,018 $ 126,878 $127,181
============ ============= ============ ============
</TABLE>
The Company's proportionate share of venturers' deficit is an aggregate
amount for all ventures. Because the Company's ownership percentage differs from
venture to venture, and certain ventures have accumulated deficits while others
have accumulated equity, the Company's percentage of venturers' deficit is not
reflective of the Company's ownership percentage of the ventures.
<TABLE>
<CAPTION>
Combined Proportionate Share
------------------------------------ -----------------------------------
1996 1995 1994 1996 1995 1994
-------- -------- -------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
Revenue
Income producing properites..... $134,144 $127,678 $123,509 $35,527 $33,356 $31,275
Development projects............ 49,235 5,735 15,301 9,516 2,054 5,666
-------- -------- -------- ------- ------- -------
183,379 133,413 138,810 45,043 35,410 36,941
-------- -------- -------- ------- ------- -------
Expenses
Income producing properties...... 122,964 118,670 115,708 29,534 27,530 27,035
Development projects............. 45,256 5,018 13,362 8,758 845 1,924
-------- -------- -------- ------- ------- -------
168,220 123,688 129,070 38,292 28,375 28,959
-------- -------- -------- ------- ------- -------
Net earnings before income tax..... $ 15,159 $ 9,725 $ 9,740 $ 6,751 $ 7,035 $ 7,982
======== ======== ======== ======= ======= =======
</TABLE>
The Company had a loan outstanding to one of its joint ventures in the
amount of $1.7 million at December 31, 1995. During 1996, the Company converted
this note to equity in the joint venture.
F-12
<PAGE>
NOTE 6. PROPERTY
Net book value by property type at December 31, 1996 and 1995 consisted
of the following (in thousands):
<TABLE>
<CAPTION>
1996 1995
------------ ------------
<S> <C> <C>
Income producing properties:
Industrial buildings.................................... $ 291,608 $ 279,838
Office buildings........................................ 108,184 113,095
Retail buildings........................................ 86,070 84,595
Land development........................................ 323,134 317,727
Land leases............................................. 6,627 10,069
----------- -----------
815,623 805,324
----------- -----------
Land holdings:
Developable properties.................................. 200,624 150,339
Natural resources....................................... 2,299 1,788
Properties held for sale................................ 37,223 84,232
----------- -----------
240,146 236,359
----------- -----------
Other (including proportionate share of joint ventures'
net deficits of $41,058 and $41,066).................... (31,667) (34,232)
----------- -----------
$ 1,024,102 $ 1,007,451
=========== ===========
</TABLE>
During 1995 and 1994, the Company took charges of $102.4 million and
$24.1 million to adjust the carrying value of certain properties. The 1995
charge included $84.8 million resulting from the Company's decision to terminate
the 1991 Development Agreement for its Mission Bay project in San Francisco. The
revised carrying value of the Mission Bay project represents management's best
estimate of its fair value, assuming the Company is successful in re-entitling
the property. During 1996, the Company took a charge of $9.9 million to cost of
sales relating to non-strategic land assets identified for sale.
NOTE 7. LEASES
The Company, as lessor, has entered into noncancelable operating leases
expiring at various dates through 2052. Rental revenue under these leases
totaled $118.7 million in 1996, $106.8 million in 1995 and $102.3 million in
1994. Included in this revenue are rentals contingent on lease operations of
$2.7 million in 1996, $2.1 million in 1995 and $2.8 million in 1994. Future
minimum rental revenue under existing noncancelable operating leases as of
December 31, 1996 are summarized as follows (in thousands):
<TABLE>
<S> <C>
1997......................................................... $ 76,461
1998......................................................... 67,903
1999......................................................... 59,401
2000......................................................... 51,965
2001......................................................... 41,462
Thereafter .................................................. 294,172
--------
$591,364
========
</TABLE>
The book value of the Company's properties under operating leases or held
for rent are summarized as follows (in thousands):
<TABLE>
<CAPTION>
December 31,
------------------------
1996 1995
-------- ---------
<S> <C> <C>
Buildings............................................. $ 527,190 $ 501,030
Land and improvements................................. 173,828 164,492
--------- ---------
701,018 665,522
Less accumulated depreciation......................... (197,586) (172,934)
--------- ---------
$ 503,432 $ 492,588
========= =========
</TABLE>
F-13
<PAGE>
The Company, as lessee, has entered into noncancelable operating leases
expiring at various dates through 2023. Rental expense under these leases
totaled $1.6 million in 1996, $1.7 million in 1995, and $2.8 million in 1994.
Future minimum lease payments as of December 31, 1996 are summarized as follows
(in thousands):
<TABLE>
<S> <C>
1997........................................... $ 2,056
1998........................................... 2,029
1999........................................... 1,787
2000........................................... 1,361
2001........................................... 1,046
Thereafter..................................... 2,911
-------
$11,190
=======
</TABLE>
F-14
<PAGE>
NOTE 8. REVENUES AND DIRECT COSTS BY ACTIVITY
Revenues and related costs exclusive of depreciation and amortization,
are summarized by activity as follows (in thousands):
<TABLE>
<CAPTION>
Property Excess
Operating (deficit) of
Costs or Revenues
Revenues Cost of Sales over Costs
-------- ------------- --------------
<S> <C> <C> <C>
1996
Income producing properties:
Industrial buildings......................... $ 55,865 $ 14,014 $ 41,851
Office buildings............................. 28,407 12,661 15,746
Retail buildings............................. 13,215 4,376 8,839
Land development............................. 10,589 7,252 3,337
Land leases.................................. 7,810 1,105 6,705
Equity in earnings of joint ventures......... 5,993 -- 5,993
-------- -------- --------
121,879 39,408 82,471
-------- -------- --------
Development activites and fee services:
Commercial property sales.................... 40,525 26,708 13,817
Residential property sales................... 21,945 20,139 1,806
Development and management fees.............. 11,945 8,513 3,432
Equity in earnings of joint ventures......... 758 -- 758
Land holdings................................ 4,874 8,598 (3,724)
-------- -------- --------
80,047 63,958 16,089
-------- -------- --------
$201,926 $103,366 $ 98,560
======== ======== ========
1995
Income producing properties:
Industrial buildings......................... $ 50,716 $ 11,193 $ 39,523
Office buildings............................. 28,662 12,179 16,483
Retail buildings............................. 11,364 2,941 8,423
Land development............................. 4,886 3,308 1,578
Land leases.................................. 7,200 1,029 6,171
Equity in earnings of joint ventures......... 5,826 -- 5,826
-------- -------- --------
108,654 30,650 78,004
-------- -------- --------
Development activites and fee services:
Commercial property sales.................... 3,224 2,271 953
Development and management fees.............. 4,674 2,750 1,924
Equity in earnings of joint ventures......... 1,209 -- 1,209
Land holdings................................ 5,240 9,111 (3,871)
-------- -------- --------
14,347 14,132 215
-------- -------- --------
$123,001 $ 44,782 $ 78,219
======== ======== ========
1994
Income producing properties:
Industrial buildings......................... $ 50,650 $ 11,837 $ 38,813
Office buildings............................. 29,619 11,220 18,399
Retail buildings............................. 7,339 2,315 5,024
Land development............................. 4,161 3,200 961
Land leases.................................. 7,414 1,037 6,377
Equity in earnings of joint ventures......... 4,240 -- 4,240
-------- -------- --------
103,423 29,609 73,814
-------- -------- --------
Development activities and fee services:
Development and management fees.............. 5,705 3,554 2,151
Equity in earnings of joint ventures......... 3,742 -- 3,742
Land holdings................................ 5,249 10,140 (4,891)
-------- -------- --------
14,696 13,694 1,002
-------- -------- --------
$118,119 $ 43,303 $ 74,816
======== ======== ========
</TABLE>
F-15
<PAGE>
NOTE 9. SALES
As part of its development actitivies, the Company constructs and sells
commercial and residential properties. In addition, based on management's
assessment of the maximum value to be derived from its various real estate
holdings, the Company sells certain operating properties, land parcels and other
assets.
The Company's asset sales consist of the following (in thousands):
<TABLE>
<CAPTION>
1996 1995 1994
-------- -------- --------
<S> <C> <C> <C>
DEVELOPMENT PROPERTIES:
Sales................................................ $ 62,470 $ 3,224 $ --
Cost of sales........................................ 46,847 2,271 --
-------- ------- -------
Gain............................................... 15,623 953 --
-------- ------- -------
NON-STRATEGIC LAND AND OTHER ASSETS:
Non-strategic land:
Sales................................................ 76,553 62,199 32,298
Cost of sales........................................ 56,894 29,410 22,024
-------- ------- -------
Gain............................................... 19,659 32,789 10,274
-------- ------- -------
Other:
Sales................................................ 9,125 -- 21,472
Cost of sales........................................ 4,379 -- 18,439
-------- ------- -------
Gain............................................... 4,746 -- 3,033
-------- ------- -------
Total non-strategic land and other assets
Sales................................................ 85,678 62,199 53,770
Cost of sales........................................ 61,273 29,410 40,463
-------- ------- -------
Gain............................................... 24,405 32,789 13,307
-------- ------- -------
Total
Sales................................................ 148,148 65,423 53,770
Cost of sales........................................ 108,120 31,681 40,463
-------- ------- -------
Gain............................................... $ 40,028 $33,742 $13,307
======== ======= =======
</TABLE>
NOTE 10. LITIGATION, ENVIRONMENTAL AND RESTRUCTURING COSTS
Litigation, environmental and restructuring costs are summarized as
follows (in thousands):
<TABLE>
<CAPTION>
1996 1995 1994
-------- -------- --------
<S> <C> <C> <C>
Litigation recovery............................ $ -- $ 6,450 $ --
Environmental (expense) recovery, net.......... 1,093 (7,411) 246
Restructuring costs............................ -- -- (3, l00)
------- ------- -------
$ 1,093 $ (961) $(2,854)
======= ======= =======
</TABLE>
Environmental costs charged to operations, including amounts charged to
cost of sales, for 1996, 1995 and 1994 totaled $1.1 million, $8.1 million and
$4.6 million. Environmental costs capitalized in 1996, 1995 and 1994 were $2.8
million, $1.7 million and $1.2 million.
See further discussion regarding litigation and environmental matters
at Note 14.
F-16
<PAGE>
NOTE 11. OTHER, NET
Other income (expense) is summarized as follows (in thousands):
<TABLE>
<CAPTION>
1996 1995 1994
-------- -------- --------
<S> <C> <C> <C>
Interest income................... $ 1,212 $ 3,769 $ 3,739
All other, net.................... (1,231) (1,265) (648)
------- ------- -------
$ (19) $ 2,504 $ 3,091
======= ======= =======
</TABLE>
NOTE 12. EMPLOYEE BENEFIT AND STOCK OPTION PLANS
The Company has a profit sharing and savings plan for all employees.
Funding consists of employee contributions along with matching and discretionary
contributions by the Company. Total expense for the Company under this plan was
$0.4 million, $0.2 million and $0.6 million in 1996, 1995 and 1994.
The Company has various plans through which employees may purchase
common stock of the Company.
The Incentive Stock Compensation Plan (Substitute Plan) was adopted to
provide substitute awards to employees whose awards under certain plans of the
former parent company, Santa Fe Pacific Corporation (SFP), were forfeited as a
result of the Company's spin-off from SFP in 1990. The number of shares,
exercise price and expiration dates of these awards were set so the participant
retained the full unrealized potential value of the original SFP grant. Options
became exercisable after March 5, 1992 and expire from 1996 through 1999.
The Company also has four stock option plans under which the Board of
Directors may grant options to purchase up to 8,750,000 shares of common stock
(Stock Option Plan, 1995 Stock Option Plan, Amended and Restated Executive Stock
Option Plan and 1996 Performance Award Plan). The exercise price of options
granted under these plans is generally the fair market value of the common stock
on the date of grant. Options generally are exercisable no earlier than six
months from the date of grant and expire ten years after the date of grant. All
options granted to date are exercisable (a) in installments on a cumulative
basis at a rate of 25% each year commencing on the first anniversary of the date
of grant, (b) in increments based on stock price performance benchmarks, or (c)
in increments based on a combination of stock price performance benchmarks and
time vesting requirements.
The Company also has various plans through which non-employee directors
may purchase common stock of the Company.
Under the Amended and Restated Executive Stock Option Plan, each
non-employee director was automatically granted an option, upon initial election
to the Board of Directors, to purchase 5,000 shares of common stock at a price
of 127.63% of the fair market value on the date of grant, increasing 5% on each
anniversary of the grant date commencing on the sixth anniversary. These options
are exercisable in installments on a cumulative basis at a rate of 20% each
year. No further options may be granted to non-employee directors under this
plan.
Under the 1996 Performance Award Plan, each non-employee director is
automatically granted an option to purchase 5,000 shares of common stock upon
initial election to the Board of Directors and annually thereafter during his or
her term of service. The exercise price of these options is the fair market
value of the common stock on the date of grant and the options are exercisable
based upon stock price performance benchmarks.
In addition, under the 1996 Performance Award Plan, each non-employee
director may elect to defer receipt of his or her annual retainer fee until
termination of board service and to acquire stock rather than receive the cash
retainer at a purchase price equal to 90% of the fair market value of the common
stock on the date of deferral.
F-17
<PAGE>
The Company has elected to follow Accounting Principles Board Opinion
No. 25, "Accounting for Stock Issued to Employees" (APB 25), and related
Interpretations in accounting for its employee stock options because, as
discussed below, the alternative fair value accounting provided for under
Statement of Financial Accounting Standards No. 123, "Accounting for Stock-Based
Compensation" (Statement 123) requires use of option valuation models that were
developed for use in valuing publicly traded stock options. Under APB 25,
because the exercise price of the Company's employee stock options equals the
market price of the underlying stock on the date of grant, no compensation
expense is recognized.
Pro forma information regarding net earnings(loss) and earnings(loss)
per share is required by Statement 123 and has been determined as if the Company
had accounted for its employee stock options under the fair value method. The
weighted-average fair value of options granted during 1996 and 1995 were $3.30
and $2.34. The fair value of options granted was estimated at the date of grant
using a Black-Scholes option pricing model with the following weighted-average
assumptions for 1995 and 1996, respectively: risk-free interest rates of 6.11%
and 5.82%; zero percent dividend yields; volatility factors of the expected
market price of the Company's common stock of 30.77% and 29.56%, and a weighted-
average expected life of the options of five years.
The Black-Scholes option valuation model was developed for use in
estimating the fair value of traded options which have no vesting restrictions
and are fully transferable. In addition, option valuation models require the
input of highly subjective assumptions, including the expected stock price
volatility. Because the Company's employee stock options have characteristics
significantly different from those of traded options, and because changes in the
subjective input assumptions can materially affect the fair value estimate, in
management's opinion, the existing models do not necessarily provide a reliable
measure of the fair value of its employee stock options.
For purposes of pro forma disclosures, the estimated fair value of the
options is amortized to expense over the options' vesting period. The Company's
pro forma information is as follows (in thousands, except earnings (loss) per
share information):
<TABLE>
<CAPTION>
1996 1995
--------- ---------
<S> <C> <C>
Pro forma net earnings (loss) applicable to
common stockholders....................................... $ 671 $(57,074)
========= =========
Pro forma earnings (loss) per share......................... $ 0.01 $ (0.78)
========= =========
</TABLE>
A summary of the Company's stock option activity, and related
information for the years ended December 31 is as follows (in thousands, except
exercise price information):
<TABLE>
<CAPTION>
1996 1995 1994
--------------------------- ------------------------ -------------------------
Weighted-Average Weighted-Average Weighted-Average
Options Exercise Price Options Exercise Price Options Exercise Price
------- ------------------ -------- --------------- -------- --------------
<S> <C> <C> <C> <C> <C> <C>
Outstanding-beginning of year... 2,877 $ 9.84 1,779 $ 10.69 1,495 $ 11.69
Granted......................... 4,189 $ 8.85 1,305 $ 6.04 2,106 $ 7.25
Exercised....................... (68) $ 7.15 -- -- -- --
Expired......................... -- -- (207) $ 14.51 (1,822) $ 12.25
Forfeited....................... (637) $10.81 -- -- -- --
-------- ------- -------
Outstanding-end of year......... 6,361 $ 8.13 2,877 $ 9.84 1,779 $ 10.69
======== ======= =======
Exercisable at end of year...... 404 $ 7.32 277 $ 9.08 169 $ 10.15
</TABLE>
Exercise prices for options outstanding as of December 31, 1996 ranged
from $5.58 to $16.53. The weighted-average remaining contractual life of those
options is 8.78 years.
F-18
<PAGE>
NOTE 13. CAPITAL STOCK
The Company has authorized the issuance of 150 million shares of $.01
par value common stock. As of December 31, 1996 and 1995, the Company has
77,028,099 and 72,967,236 shares outstanding. The Company has reserved
12,697,000 and 16,556,000 shares of common stock for conversion of the Series A
and Series B preferred stock and 8,875,000 shares pursuant to various
compensation programs.
The Company has authorized the issuance of 50 million shares of $.01
par value preferred stock. As of December 31, 1996 and 1995, the Company has
outstanding 2,488,560 and 3,449,999 shares of $3.75 Series A Cumulative
Convertible Preferred Stock (Series A preferred stock). The Series A preferred
stock has an annual dividend of $3.75 per share, a stated value of $50 per share
and a liquidation preference of $50 per share plus accrued and unpaid dividends.
It is convertible into common stock at a price of $9.06 per common share,
subject to adjustment in certain events. It is also redeemable, at the option of
the Company, at any time after February 16, 1996, at $52.625 per share and
thereafter at prices declining to $50 per share on or after February 16, 2003.
In July 1996, the Company called for redemption of approximately $50
million of its Series A preferred stock. In September 1996, of the 950,000
preferred shares called, 441,887 shares were converted into 2,438,641 common
shares and 508,113 shares were redeemed at $52.625 per share plus accrued and
unpaid dividends at a cost of approximately $26.7 million. In October 1996, an
additional 11,439 shares were converted into 63,142 common shares. These
preferred stock conversions and redemptions led to a $1.2 million decrease in
preferred dividends in 1996.
In December 1996, the Company called for redemption of approximately
$25 million of its Series A preferred stock. In January 1997, of the 475,000
preferred shares called, 471,730 shares were converted into 2,603,168 common
shares and 3,270 shares were redeemed at $52.625 per share plus accrued and
unpaid dividends at a cost of approximately $175,000.
The Company also has outstanding 3,000,000 shares of $3.625 Series B
Cumulative Convertible Exchangeable Preferred Stock (Series B preferred stock).
The Series B preferred stock has an annual dividend of $3.625 per share, a
stated value of $50 per share and a liquidation preference of $50 per share plus
accrued and unpaid dividends. It is convertible into the Company's common stock
at a price of $9.80 per common share, subject to adjustment in certain events.
The Series B preferred stock is exchangeable, at the Company's option, at any
time after November 15, 1995, into 7.25% Convertible Subordinated Debentures due
November 15, 2018, at a rate of $50 of debentures for each share of Series B
preferred stock. It is also redeemable, at the option of the Company, at any
time after November 15, 1996, at $52.5375 per share and thereafter at prices
declining to $50 per share on or after November 15, 2003.
NOTE 14. COMMITMENTS AND CONTINGENCIES
As of December 31, 1996, the Company has outstanding standby letters of
credit and surety bonds in the amount of $10.5 million in favor of local
municipalities or financial institutions to guarantee performance on real
property improvements or financial obligations.
The Company, as a partner in certain joint ventures, has made certain
financing guarantees (Note 5).
The Company is a party to a number of legal actions arising in the
ordinary course of business. While the Company cannot predict with certainty the
final outcome of these proceedings, considering the substantial legal defenses
available, management believes that none of these actions, when finally
resolved, will have a material adverse effect on the consolidated financial
position, results of operations or cash flows of the Company.
F-19
<PAGE>
Inherent in the operations of the real estate business is the
possibility that environmental liability may arise from the ownership, or
previous ownership, of real properties owned. The Company may be required in the
future to take action to correct or reduce the environmental effects of prior
disposal or release substances by third parties, the Company, or its corporate
predecessors. Future environmental costs are difficult to estimate because of
such factors as the unknown magnitude of possible contamination, the unknown
timing and extent of the corrective actions which may be required, the
determination of the Company's liability in proportion to that of responsible
parties, and the extent to which such costs are recoverable from insurance.
At December 31, 1996, management estimates that future costs for
remediation of identified or suspected environmental contamination on operating
properties and properties previously sold approximate $13.6 million, and has
provided a reserve for that amount. It is anticipated that such costs will be
incurred over the next ten years with a substantial portion incurred over the
next five years. Management also estimates that similar costs relating to the
Company's properties to be developed or sold may range from $14 million to $40
million. These amounts will be capitalized as components of development costs
when incurred, which is anticipated to be over a period of twenty years, or will
be deferred and charged to cost of sales when the properties are sold. The
Company's estimates were developed based on extensive reviews which took place
over several years based upon then prevailing law and identified site
conditions. Because of the breadth of its portfolio, the Company is unable to
review extensively each property on a regular basis. Such estimates are not
precise and are always subject to the availability of further information about
the prevailing conditions at the site, the future requirements of regulatory
agencies and the availability of other parties to pay some or all of such costs.
In April 1991, a lawsuit was brought against the Company alleging
breach of contract for a finder's fee in connection with an August 1990 sale of
land in Fremont, California. On November 1, 1993, the jury returned a verdict in
favor of the plaintiff and made an award of approximately $440,000 which,
together with pre-judgment interest, totaled approximately $600,000.
Additionally, the jury awarded approximately $7.7 million in punitive damages
for what it found was the Company's bad faith denial of an alleged contract.
While the Company was vigorously pursuing an appeal, it recognized an expense of
$8.3 million in the 1993 consolidated statement of operations. In December 1995,
the Company reached a settlement with the plaintiff and $7.5 million of the
expense was reversed in the 1995 consolidated statement of operations.
NOTE 15. SUBSEQUENT EVENTS
On February 5, 1997, the Company called for redemption of approximately
$90 million of its Series A preferred stock. On March 24, 1997, of the 1,720,000
preferred shares called, 1,715,837 shares were converted into 9,469,015 common
shares and the remaining shares were redeemed at $52.25 per share plus accrued
and unpaid dividends at a cost of approximately $220,000.
On March 24, 1997, the Company called for redemption of the remaining
outstanding 250,000 shares, or approximately $13.0 million, of it Series A
preferred stock and 1,470,000 shares, or approximately $75 million, of its
Series B preferred stock. The redemption date on this call is May 1, 1997.
F-20
<PAGE>
SUMMARIZED QUARTERLY RESULTS (UNAUDITED)
The Company's earnings(loss) and cash flow are determined to a large
extent by property sales. Sales and net earnings have fluctuated significantly
from quarter to quarter, as evidenced by the following summary of unaudited
quarterly consolidated results of operations. Property sales fluctuate from
quarter to quarter, reflecting general market conditions and the Company's
intent to sell property when it can obtain attractive prices. Cost of sales may
also vary widely because it is determined by the Company's historical cost basis
in the underlying land.
<TABLE>
<CAPTION>
1996 1995
----------------------------------------- -----------------------------------------
FIRST SECOND THIRD FOURTH FIRST SECOND THIRD FOURTH
-------- -------- -------- -------- -------- -------- -------- --------
(In thousands, except per share data)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Income producing properties:
Rental revenue........................ $ 28,034 $ 29,380 $ 28,606 $ 29,866 $ 25,408 $ 25,360 $ 26,139 $ 25,921
Property operating costs.............. (8,987) (9,928) (9,953) (10,540) (6,458) (7,810) (7,478) (8,904)
Development activities and fee services:
Gain on development property sales.... -- 6,569 2,746 6,308 -- -- -- 953
Development and management fee
income, net............................ 403 410 1,182 1,437 407 576 589 352
Gain on non-strategic land and other
asset sales............................ 3,087 7,358 1,330 12,630 5,574 1,626 1,702 23,887
Interest expense........................ (10,939) (10,841) (10,536) (10,205) (6,453) (6,687) (6,413) (6,204)
General and administrative expense...... (2,060) (1,997) (l,66l) (2,301) (3,869) (2,570) (2,783) (1,702)
Depreciation and amortiztion............ (7,672) (7,432) (7,550) (7,907) (7,053) (6,810) (6,766) (7,361)
Net earnings (loss)..................... $ 1,714 $ 8,817 $ 2,752 $ 12,118 $ 5,358 $ 3,143 $ 2,756 $(44,259)
======== ======== ======== ========= ========= ========= ======== ========
Net earnings (1oss) per common share.... $ (0.06) $ 0.04 $ (0.05) $ 0.09 $ (0.01) $ (0.04) $ (0.04) $ (0.69)
======== ======== ======== ========= ========= ========= ======== ========
</TABLE>
F-21
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS ON
FINANCIAL STATEMENT SCHEDULES
The Board of Directors
and Stockholders of Catellus
Development Corporation
Our audits of the consolidated financial statements referred to in our
report dated February 12, 1997, appearing on page F-2 of this Form 10-K of
Catellus Development Corporation, also included an audit of the Financial
Statement Schedules listed in Item 14(a)(2) of this Form 10-K. In our opinion,
these Financial Statement Schedules present fairly, in all material respects,
the information set forth therein when read in conjunction with the related
consolidated financial statements.
Price Waterhouse LLP
San Francisco, California
February 12, 1997
S-1
<PAGE>
CATELLUS DEVELOPMENT CORPORATION
SCHEDULE II -- VALUATION AND QUALIFYING ACCOUNTS
THREE YEARS ENDED DECEMBER 31, 1996
(IN THOUSANDS)
<TABLE>
<CAPTION>
ADDITIONS
------------------------
BALANCE AT CHARGED TO CHARGED TO DEDUCTIONS BALANCE AT
BEGINNING COSTS AND OTHER END OF YEAR
OF YEAR EXPENSES ACCOUNTS
----------- ----------- ----------- ---------- -----------
<S> <C> <C> <C> <C> <C>
Year ended December 31, 1994
Allowance for doubtful receivables..... $ 1,888 $ 1,001 $ -- $ 1,026 (1) $ 1,863
Reserve for abandoned projects......... 284 732 -- 39 (2) 977
Reserve for environmental costs........ 5,619 890 1,886 -- 8,395
Year ended December 31, 1995
Allowance for doubtful receivables..... 1,863 504 -- 616 (1) 1,751
Reserve for abandoned projects......... 977 407 -- 38 (2) 1,346
Reserve for environmental costs........ 8,395 5,389 -- 5 (3) 13,779
Year ended December 31, 1996
Allowance for doubtful receivables..... 1,751 1,053 81 533 (1) 2,352
Reserve for abandoned projects......... 1,346 -- -- 30 (2) 1,316
Reserve for environmental costs........ 13,779 -- 200 386 (3) 13,593
</TABLE>
- ------------
Notes:
(1) Balances written off as uncollectible.
(2) Costs of unsuccessful projects written off.
(3) Environmental costs incurred.
S-2
<PAGE>
CATELLUS DEVELOPMENT CORPORATION
SCHEDULE III - REAL ESTATE AND ACCUMULATED DEPRECIATION
December 31, 1996
(Dollars in thousands)
<TABLE>
<CAPTION>
Cost Capitalized Gross Amount at Which Carried
Initial Cost to Subsequent at Close of Period
Catellus to Acquisition (1)(2)(3)(4)
------------------- ---------------------- ---------------------------------
Build- Build-
ings & Car- ings &
Encumb- Improve- Improve- rying Improve-
Description rances Land ments ments Costs Land ments Total
- ----------- -------- -------- ------- ------- -------- -------- -------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Income producing
properties:
Mission Bay,
San Francisco, CA... $ -- $ 80,587 $ 3,952 $ (2,050)(6)$ 59,764 $ 80,587 $ 61,666 $ 142,253
Other properties
less than 5% of total. 453,940 160,137 35,492 544,723 131,225 160,137 711,440 871,577
-------- -------- ------- -------- -------- -------- -------- ----------
453,940 240,724 39,444 542,673 190,989 240,724 773,106 1,013,830
-------- -------- ------- -------- -------- -------- -------- ----------
Land holdings........... 42,277 113,396 11,697 88,893 30,305 113,396 130,895 244,291
-------- -------- ------- -------- -------- -------- -------- ----------
Total................... $496,217 $354,120 $51,141 $631,566 $221,294 $354,120 $904,001 $1,258,121
======== ======== ======= ======== ======== ======== ======== ==========
</TABLE>
<TABLE>
<CAPTION>
Life on Which
Depreciation
in Latest
Date of Income
Accumulated Completion of Date Statement is
Depreciation Depreciation Construction Acquired Computed
- ----------- ------------ ------------- -------- -------------
<S> <C> <C> <C> <C>
Income producing
properties:
Mission Bay,
San Francisco, CA... $ 2,916 N/A various (5)
Other properties
less than 5% of total. 195,291 N/A various (5)
--------
198,207
--------
Land holdings........... 4,145 N/A various (5)
--------
Total................... $202,352
========
</TABLE>
- --------------------------
Notes:
(1) A reserve of $1,316,000 against predevelopment costs has been established
for projects to be abandoned.
(2) The aggregate cost for Federal income tax purpose is approximately
$957,000,000.
(3) See Attachment A to Schedule III for reconciliation of beginning of period
total to total at close of period.
(4) Excludes investments in joint ventures and furniture and equipment.
(5) Reference is made to Note 2 to the Consolidated Financial Statements for
information related to depreciation.
(6) Net incremental revenue.
S-3
<PAGE>
CATELLUS DEVELOPMENT CORPORATION
ATTACHMENT A TO SCHEDULE III
RECONCILIATION OF COST OF REAL ESTATE AT BEGINNING OF PERIOD
WITH TOTAL AT END OF PERIOD
(In thousands)
<TABLE>
<CAPTION>
1996 1995 1994
---------- ---------- ----------
<S> <C> <C> <C>
Balance at January 1............................................... $1,218,995 $1,276,955 $1,259,803
---------- ---------- ----------
Additions during period:
Acquisitions.................................................. 10,987 9,326 --
Improvements.................................................. 104,646 58,967 71,096
Reclassification from other accounts.......................... 30 270 591
---------- ---------- ----------
Total additions.......................................... 115,663 68,563 71,687
---------- ---------- ----------
Deductions during period:
Cost of real estate sold...................................... 75,364 23,716 39,883
Other
Write-down of properties to estimated net realizable value.. -- 102,400 11,800
Contribution to joint venture............................... -- -- 2,120
Reclassification to personal property
and other accounts..................................... 1,173 -- --
Increase reserve for abandoned projects..................... -- 407 732
---------- ---------- ----------
Total deductions......................................... 76,537 126,523 54,535
---------- ---------- ----------
Balance at December 31............................................. $1,258,121 $1,218,995 $1,276,955
========== ========== ==========
</TABLE>
RECONCILIATION OF REAL ESTATE ACCUMULATED DEPRECIATION
AT BEGINNING OF PERIOD WITH TOTAL AT END OF PERIOD
(In thousands)
<TABLE>
<CAPTION>
1996 1995 1994
---------- ---------- ----------
<S> <C> <C> <C>
Balance at January 1............................................... $ 177,312 $ 154,002 $ 133,923
---------- ---------- ----------
Additions during period:
Charged to expense............................................ 25,994 24,342 24,706
---------- ---------- ----------
Deductions during period:
Cost of real estate sold...................................... 1,190 795 4,549
Other......................................................... (236) 237 78
---------- ---------- ----------
Total deductions........................................ 954 1,032 4,627
---------- ---------- ----------
Balance at December 31............................................. $ 202,352 $ 177,312 $ 154,002
========== ========== ==========
</TABLE>
S-4
<PAGE>
EXHIBIT 4.12
LINE OF CREDIT LOAN AGREEMENT
among
CATELLUS DEVELOPMENT CORPORATION,
BANK OF AMERICA NATIONAL TRUST
AND SAVINGS ASSOCIATION,
as Administrative Agent,
THE FIRST NATIONAL BANK OF CHICAGO
as Documentation Agent,
and
THE OTHER FINANCIAL INSTITUTIONS PARTY HERETO
Dated as of October 28, 1996
<PAGE>
<TABLE>
<CAPTION>
TABLE OF CONTENTS
<S> <C>
ARTICLE 1. DEFINITIONS................................................................. 1
1.1 Certain Defined Terms....................................................... 1
1.2 Other Interpretive Provisions............................................... 17
1.2.1 Use of Defined Terms................................................ 17
1.2.2 Certain Common Terms................................................ 17
(a) The Agreement.................................................. 17
(b) Documents...................................................... 17
(c) Including...................................................... 17
(d) Performance.................................................... 18
(e) Contracts...................................................... 18
(f) Laws........................................................... 18
(g) Captions....................................................... 18
(h) Independence of Provisions..................................... 18
(i) Exhibits....................................................... 18
1.2.3 Accounting Principles............................................... 18
(a) Accounting Terms............................................... 18
(b) Fiscal Periods................................................. 19
ARTICLE 2. THE CREDITS................................................................. 19
2.1 Amounts and Terms of Commitments............................................... 19
2.2 Loan Accounts.................................................................. 19
2.3 Procedure for Borrowing........................................................ 20
2.4 Conversion and Continuation Elections.......................................... 21
2.5 Optional Prepayments........................................................... 23
2.6 Mandatory Prepayments of Loans................................................. 23
2.6.1 Property Dispositions............................................... 23
2.6.2 Events of Loss...................................................... 23
2.6.3 Remargining......................................................... 23
2.6.4 General............................................................. 24
2.7 Repayment at Maturity.......................................................... 25
2.8 Interest....................................................................... 25
</TABLE>
i
<PAGE>
<TABLE>
<S> <C>
2.8.1 Accrual Rate...................................................... 25
2.8.2 Payment........................................................... 25
2.8.3 Default Interest.................................................. 25
2.8.4 Maximum Legal Rate................................................ 25
2.9 Fees......................................................................... 25
2.9.1 Administrative Agent Fees......................................... 25
2.9.2 Commitment Fee.................................................... 26
2.9.3 Unused Fee........................................................ 26
2.9.4 Letter of Credit Fees............................................. 26
2.10 Computation of Interest and Fees............................................ 26
2.11 Payments by the Borrower.................................................... 27
2.12 Payments by the Banks to the Administrative Agent........................... 27
2.13 Sharing of Payments......................................................... 28
2.14 Security.................................................................... 29
2.15 Reconveyance................................................................ 29
2.16 Encumbrance of Additional Properties........................................ 30
2.17 Development of Entitled Land................................................ 32
ARTICLE 3. TAXES, YIELD PROTECTION AND ILLEGALITY................................ 32
3.1 Taxes........................................................................ 32
3.2 Illegality................................................................... 33
3.3 Increased Costs and Reduction of Return...................................... 33
3.4 Funding Losses............................................................... 35
3.5 Inability to Determine Rates................................................. 36
3.6 Certificates of Banks........................................................ 36
3.7 Survival..................................................................... 36
ARTICLE 4. CONDITIONS PRECEDENT.................................................. 36
4.1 Conditions of Initial Loans.................................................. 36
4.1.1 Credit Agreement, Notes and Environmental Indemnity............... 37
4.1.2 Resolutions; Incumbency........................................... 37
4.1.3 Organization Documents; Good Standing.............................. 37
4.1.4 Legal Opinions..................................................... 37
4.1.5 Payment of Fees.................................................... 37
4.1.6 Collateral Documents............................................... 38
4.1.7 Environmental Review............................................... 39
4.1.8 Lease Review....................................................... 39
4.1.9 Certificate........................................................ 39
4.1.10 Other Documents................................................ 40
</TABLE>
ii
<PAGE>
<TABLE>
<S> <C>
4.2 Conditions to All Borrowings................................................ 40
4.2.1 Notice of Borrowing.............................................. 40
4.2.2 Continuation of Representations and Warranties................... 40
4.2.3 No Existing Default.............................................. 40
4.2.4 No Future Advance Notice......................................... 40
4.2.5 Further Assurances............................................... 40
4.2.6 Title Indorscments............................................... 40
4.3 Letters of Credit.......................................................... 41
4.3.1 Letter of Credit Application......................................... 41
ARTICLE 5. REPRESENTATIONS AND WARRANTIES....................................... 41
5.1 Corporate Existence and Power.............................................. 41
5.2 Corporate Authorization; No Contravention.................................. 41
5.3 Governmental Authorization................................................. 42
5.4 Binding Effect............................................................. 42
5.5 Litigation................................................................. 42
5.6 No Default................................................................. 43
5.7 ERISA Compliance........................................................... 43
5.8 Use of Proceeds; Margin Regulations........................................ 44
5.9 Title to Properties........................................................ 44
5.10 Taxes...................................................................... 44
5.11 Financial Condition........................................................ 44
5.12 Environmental Matters...................................................... 45
5.13 Collateral Documents....................................................... 46
5.14 Regulated Entities......................................................... 46
5.15 No Burdensome Restriction.s................................................ 47
5.16 Subsidiaries............................................................... 47
5.17 Insurance.................................................................. 47
5.18 Solvency................................................................... 47
5.19 Full Disclosure............................................................ 47
5.20 Name and Principal Place of Business....................................... 47
ARTICLE 6. AFFIRMATIVE COVENANTS................................................ 47
6.1 Financial Statements....................................................... 48
6.1.1 Annual Borrower Financial Statements............................. 48
6.1.2 Annual Borrower Cash Flow Projections............................ 48
6.1.3 Quarterly Borrower Financial Statements.......................... 48
6.1.4 Quarterly Property Operating Statements and Rent Rolls........... 48
</TABLE>
iii
<PAGE>
<TABLE>
<S> <C>
6.2 Certificates; Other Information............................................ 48
6.3 Notices.................................................................... 49
6.4 Preservation of Corporate Existence, Etc................................... 50
6.5 Maintenance of Property.................................................... 51
6.6 Insurance.................................................................. 51
6.7 Payment of Obligations..................................................... 52
6.8 Compliance with Laws....................................................... 53
6.9 Inspection of Property and Books and Records............................... 53
6.10 Environmental Laws......................................................... 53
6.11 Use of Proceeds............................................................ 54
6.12 Further Assurances......................................................... 54
6.13 Copies of Leases........................................................... 54
6.14 Debt Coverage.............................................................. 55
6.15 Fixed Charge Coverage...................................................... 55
6.16 Leverage................................................................... 55
6.17 Tangible Net Worth......................................................... 55
ARTICLE 7. NEGATIVE COVENANTS................................................... 55
7.1 Limitation on Liens........................................................ 55
7.2 Lease of a Property........................................................ 56
7.3 Consolidations and Mergers................................................. 57
7.4 Limitation on Subordinated Indebtedness.................................... 57
7.5 Limitation on Preferred Shares............................................. 57
7.6 Transactions with Affiliates............................................... 57
7.7 Use of Proceeds............................................................ 57
7.8 Change in Business......................................................... 58
7.9 Accounting Changes......................................................... 58
7.10 Lease Amendments........................................................... 58
7.11 Leasing or Management Office............................................... 58
7.12 Management Agreements...................................................... 58
ARTICLE 8. EVENTS OF DEFAULT.................................................... 58
8.1 Event of Default........................................................... 58
(a) Non-Payment................................................... 58
(b) Representation or Warranty.................................... 58
(c) Certain Specific Defaults..................................... 59
(d) Other Specific Defaults....................................... 59
(e) Other Defaults................................................ 59
(f) Insolvency; Voluntary Proceedings............................. 59
(g) Involuntary Proceedings....................................... 59
(h) Monetary Judgments............................................ 60
(i) Non-Monetary Judgments........................................ 60
</TABLE>
<PAGE>
iv
<TABLE>
<S> <C>
(j) Adverse Change................................................ 60
8.2 Remedies................................................................... 60
8.3 Rights Not Exclusive....................................................... 61
ARTICLE 9. THE ADMINISTRATIVE AGENT............................................. 61
9.1 Appointment and Authorization.............................................. 61
9.2 The Administrative Agent's Powers.......................................... 61
9.3 Limitation on the Administrative Agent's Duties............................ 62
9.4 Acknowledgment of the Co-Lender Agreement.................................. 62
9.5 Documentation Agent and Co-Agents.......................................... 62
9.6 Successor Administrative Agent, Documentation Agent and Co-Agents.......... 62
ARTICLE 10. MISCELLANEOUS........................................................ 63
10.1 Amendments and Waivers.................................................... 63
10.2 Notices................................................................... 64
10.3 No Waiver; Cumulative Remedies............................................ 65
10.4 Costs and Expenses........................................................ 65
10.5 Indemnity................................................................. 66
10.6 Assignments, Participations, etc.......................................... 67
10.7 Successors and Assigns.................................................... 69
10.8 Confidentiality........................................................... 69
10.9 Set-off................................................................... 70
10.10 Notification of Addresses, Lending Offices, Etc........................... 70
10.11 Counterparts.............................................................. 70
10.12 Severability.............................................................. 70
10.13 No Third Parties Benefited................................................ 70
10.14 Governing Law and Jurisdiction............................................ 70
10.15 Reference and Arbitration................................................. 71
10.15.1 Judicial Reference............................................. 71
10.15.2 Mandatory Arbitration.......................................... 71
10.15.3 Real Property Collateral....................................... 71
10.15.4 Provisional Remedies, Self-Help and Foreclosure................ 72
10.16 Entire Agreement......................................................... 72
</TABLE>
v
<PAGE>
<TABLE>
<CAPTION>
SCHEDULES
<S> <C>
Schedule 1.1 List of Appraised Values
Schedule 2.1 Commitments and Pro Rata Shares
Schedule 5.5 Litigation
Schedule 5.7 ERISA Disclosures
Schedule 5.11 Financial Condition Disclosures
Schedule 5.12 Environmental Disclosures
Schedule 5.16 (a) Subsidiaries
(b) Equity Investments
Schedule 5.17 Insurance Disclosures
Schedule 10.2 Offshore and Domestic Lending Offices, Addresses for Notices
EXHIBITS
Exhibit A Notice of Borrowing
Exhibit B Notice of Conversion/Continuation
Exhibit C Compliance Certificate
Exhibit D Legal Opinion Forms
Exhibit E Assignment and Acceptance Agreement
Exhibit F Note Form
Exhibit G List of Operating Properties
Exhibit H Estoppel Certificate Form
Exhibit I Description of the Woodridge Property
Exhibit J Configuration of the Woodridge Property Taking Area
Exhibit K Letter of Credit Application Form
</TABLE>
vi
<PAGE>
LINE OF CREDIT LOAN AGREEMENT
(Secured)
This LINE OF CREDIT LOAN AGREEMENT (the "Agreement") is entered into as of
---------
October 28, 1996, among CATELLUS DEVELOPMENT CORPORATION, a Delaware corporation
(the "Borrower"), the several financial institutions from time to time party to
--------
this Agreement (collectively, the "Banks"; individually, a "Bank"), Bank of
----- ----
America National Trust and Savings Association, as administrative agent for the
Banks, and The First National Bank of Chicago, as documentation agent.
WHEREAS, the Banks have agreed to make available to the Borrower a secured
revolving credit facility upon the terms and subject to the conditions set forth
in this Agreement;
NOW, THEREFORE, in consideration of the mutual agreements, provisions and
covenants contained herein, the parties agree as follows:
ARTICLE 1.
DEFINITIONS
-----------
1.1 Certain Defined Terms. The following terms have the following
---------------------
meanings:
"Administrative Agent" means BofA in its capacity as administrative
--------------------
agent for the Banks hereunder, and any successor administrative agent designated
under Section 9.6.
-----------
"Affiliate" means, as to any Person, (a) any other Person which,
---------
directly or indirectly, is in control of, is controlled by, or is under common
control with, (i) such Person or (ii) any general partner of such Person; (b)
any other Person five percent (5.O) or more of the equity interest of which is
held beneficially or of record by (i) such Person or (ii) any general partner of
such Person; or (c) any general or limited partner of (i) such Person or (ii)
any general partner of such Person. A Person shall be deemed to "control"
another Person if the controlling Person possesses, directly or indirectly, the
power to direct or cause the direction of the management and policies of the
other Person, whether through the ownership of voting securities, by contract,
or otherwise; provided, however, that no Person shall be deemed to "control"
another Person solely because such Persons have a common director or an employee
or agent of one such Person is a director of the other.
"Agent-Related Persons" means BofA and any successor administrative
---------------------
agent designated under Section 9.6, together with their respective Affiliates,
-----------
and the officers, directors, employees, agents and attorneys-in-fact of such
Persons and Affiliates.
"Agent's Payment Office" means the address for payments set forth on
----------------------
the signature page hereto in relation to the Administrative Agent, or such other
address as the
1
<PAGE>
Administrative Agent may from time to time specify by written notice to Borrower
in accordance with the terms of this Agreement.
"Agreement" means this Line of Credit Loan Agreement, as amended,
---------
supplemented or modified from time to time.
"Applicable Margin" means (i) with respect to Reference Rate Loans,
-----------------
0%, and (ii) with respect to LIBOR Loans, 1.75%; provided, however, that if as
--------
of the end of any fiscal quarter the Borrower has maintained (a) Debt Coverage
of not less than 1.60:1.0, (b) Fixed Charge Coverage of not less than 1.60:1.0,
and (c) Leverage not greater than 0.60:1.0 (regardless of the exchange of any of
the Borrower's Series B preferred stock for subordinated debt), the "Applicable
Margin" with respect to LIBOR Loans shall mean 1.625% during the next fiscal
quarter following delivery of the financial statements evidencing compliance
with the foregoing conditions.
"Appraisal" means an appraisal of the market value of a Property in
---------
the condition existing as of the date of such appraisal taking into account any
and all Estimated Remediation Costs applicable to such Property. Such appraisal
shall be conducted in accordance with all Requirements of Law applicable to the
Banks, and all applicable internal policies of the Administrative Agent, by (i)
an independent appraisal firm selected by the Administrative Agent or (ii) the
BofA in-house appraisal department. No appraisal of any Property shall include
any part of such Property (or any improvements located on such part of such
Property) previously released or reconveyed from the Lien of the Deed of Trust
encumbering such Property and no longer owned by the Borrower.
"Appraised Value" means, for any Property at any time, the value
---------------
established by the Appraisal conducted prior to the recording of the Deed of
Trust encumbering such Property to secure the Obligations. The Appraised Values
for the Properties as of the Closing Date are set forth on Schedule 1.1.
------------
However, nothing contained in this Agreement is intended to be, nor should it be
construed as, an admission by the Borrower as to the fair cash market value of
any Property, or any portion thereof.
"Assignee" has the meaning specified in Section 10.6.1.
-------- --------------
"Attorney Costs" means and includes all reasonable fees and
--------------
disbursements of any law firm or other external counsel, and the reasonable
allocated cost of internal legal services and all disbursements of internal
counsel, to the extent described in Sections 4.1.5, 10.4 and 10.5.1.
"Availability" means, at any time, the least of (i) the Operating
------------
Portfolio Cash Flow Value at such time, (ii) the Portfolio Appraisal Value at
such time, or (iii) the Maximum Commitment Amount at such time.
"Bank" means one of the institutions described as a Bank" in the
----
introductory clause hereto.
2
<PAGE>
"Bankruptcy Code" means the Bankruptcy Reform Act of 1978, as amended
---------------
or recodified from time to time (11 U.S.C. (S)101, et seq.).
-- ---
"BofA" means Bank of America National Trust and Savings Association,
----
a national banking association.
"Borrower" means the Person specified as the "Borrower" in the
--------
introductory clause hereto.
"Borrowing" means a disbursement hereunder consisting of Loans of the
---------
same Type made to the Borrower on the same day by the Banks under Article 2 and,
---------
other than in the case of Reference Rate Loans, having the same Interest Period.
"Borrowing Date" means any date on which a Borrowing occurs under
--------------
Section 2.3.
- -----------
"Business Day" means any day other than a Saturday, Sunday or other
------------
day on which commercial banks in New York City or San Francisco are authorized
or required by law to close and, if the applicable Business Day relates to any
LIBOR Loan, means such a day on which dealings are carried on in the applicable
offshore dollar interbank market.
"Capital Adequacy Regulation" means any guideline, request or
---------------------------
directive of any central bank or other Governmental Authority, or any other law,
rule or regulation, whether or not having the force of law, in each case,
regarding capital adequacy of any bank or of any corporation controlling a bank.
"CERCLA" means the Comprehensive Environmental Response, Compensation
------
and Liability Act of 1980, as amended or recodified from time to time.
"Closing Date" means the date on which the initial Deeds of Trust are
------------
recorded.
"Co-Agent" means any Bank designated as a "Co-Agent" in this
--------
Agreement, each in its capacity as a co-agent for the Banks hereunder, and any
successor co-agent designated under Section 9.6.
-----------
"Code" means the Internal Revenue Code of 1986, as amended or
----
recodified from time to time, and regulations promulgated thereunder.
"Collateral" means all property and interests in property and proceeds
----------
thereof now owned or hereafter acquired by the Borrower in or upon which a Lien
now or hereafter exists in favor of the Administrative Agent, on behalf of the
Banks, whether under this Agreement or under any other documents executed by the
Borrower and delivered to the Administrative Agent, on behalf of the Banks.
3
<PAGE>
"Collateral Documents" means, collectively, (i) the Deeds of Trust,
--------------------
the Lease Assignments and all other security agreements, mortgages, deeds of
trust, lease assignments and other similar agreements between the Borrower and
the Administrative Agent, for the benefit of the Banks, now or hereafter
delivered to the Administrative Agent pursuant to or in connection with the
transactions contemplated hereby, and all financing statements (or comparable
documents now or hereafter filed in accordance with the Uniform Commercial Code
or comparable law) against the Borrower as debtor in favor of the Administrative
Agent, for the benefit of the Banks, as secured party, pursuant to or in
connection with the transactions contemplated hereby, and (ii) any amendments,
supplements, modifications, renewals, replacements, consolidations,
substitutions and extensions of any of the foregoing.
"Commitment" means the amount of the credit and the outstanding Loans
----------
for which each Bank is obligated under this Agreement.
"Compliance Certificate" means a certificate substantially in the
----------------------
form of Exhibit C.
---------
"Contingent Obligation" means, as to any Person, any liability of that
---------------------
Person, whether or not contingent, with or without recourse, (a) with respect to
any Guaranty Obligation; or (b) with respect to any Surety Instrument issued for
the account of that Person or as to which that Person is otherwise liable for
reimbursement of drawings or payments.
"Contractual Obligation" means, as to any Person, any provision of any
----------------------
security issued by such Person or of any agreement, undertaking, contract,
indenture, mortgage, deed of trust or other instrument, document or agreement to
which such Person is a party or by which it or any of its property is bound.
"Conversion/Continuation Date" means any date on which, under Section
---------------------------- -------
2.4, the Borrower (a) converts Loans of one Type to another Type, or (b)
- ---
continues as Loans of the same Type, but with a new Interest Period, Loans
having Interest Periods expiring on such date.
"Debt Coverage" means, at any time, the ratio of (a) EBITDA to (b)
-------------
Debt Service, each measured over the four (4) most recent consecutive fiscal
quarters for which financial statements are available at such time.
"Debt Service" means, for any period, (i) all interest expense
------------
(including capitalized interest expense) for such period, plus (ii) the
----
aggregate amount of regularly scheduled principal payments due and payable
during such period, (iii) the interest expense accruing on subordinated
Indebtedness during such period.
"Deed of Trust" means any deed of trust, mortgage, leasehold mortgage,
-------------
assignment of rents or other document creating a Lien on real property or any
interest in real property.
4
<PAGE>
"Default" means any event or circumstance which, with the giving of
-------
notice, the lapse of time, or both, would (if not cured or otherwise remedied
during such time) constitute an Event of Default.
"Disposition" means the sale, conveyance or other disposition of a
-----------
Property, but excluding any Event of Loss.
"Documentation Agent" means The First National Bank of Chicago in its
-------------------
capacity as documentation agent for the Banks hereunder, and any successor
documentation agent designated under Section 9.6.
-----------
"Dollars," "dollars" and "$" each mean lawful money of the United
------- ------- -
States.
"EBITDA" means, for any fiscal period, (a) the sum of the aggregate
------
amounts of the following items for the Borrower and its subsidiaries for such
period: (i) net income, (ii) provisions for taxes based on income, (iii)
interest expense (including capitalized interest expense), (iv) depreciation
expense, (v) amortization expense and (vi) the aggregate amount of other
expenses, losses on sales of nonstrategic assets, net realizable value write-
downs and other non-recurring charges and extraordinary losses, less (b) the
----
aggregate amount of gain on sales of non-strategic assets and other
extraordinary gains, all as determined on a consolidated basis for the Borrower
and its subsidiaries in accordance with GAAP, consistently applied.
"Eligible Assignee" means (i) a commercial bank, savings and loan or
-----------------
savings bank organized under the laws of the United States, or any state
thereof, and having a combined capital and surplus of at least $100,000,000;
(ii) a commercial bank organized under the laws of any other country which is a
member of the Organization for Economic Cooperation and Development (the
"OECD"), or a political subdivision of any such country, and having a combined
capital and surplus of at least $100,000,000, provided that such bank is acting
--------
through a branch or agency located in the United States; (iii) a Person that is
primarily engaged in the business of commercial banking and that is (A) a
Subsidiary of a Bank, (B) a Subsidiary of a Person of which a Bank is a
Subsidiary, or (C) a Person of which a Bank is a Subsidiary; or (iv) any other
Person engaged in the business of commercial real estate lending and acceptable
to the Administrative Agent, the Majority Banks and the Borrower in their sole
discretion.
"Entitled Land" means an unimproved Property that satisfies all of the
-------------
following conditions: (i) the Borrower's intended use of such Property (which
must include one or more of the uses permissible under clause (i) of the first
sentence of Section 2.16.1) is permissible under the applicable general plan or
--------------
its equivalent, and (ii) such intended use is permissible under any applicable
specific plan, zoning classification and development agreement; provided,
--------
however, that the Property located in Romeoville, Illinois shall be deemed to be
"Entitled Land" notwithstanding the zoning of a portion of such Property for
agricultural uses.
5
<PAGE>
"Environmental Claims" means all claims, however asserted, by any
--------------------
Governmental Authority or other Person alleging potential liability or
responsibility for violation of any Environmental Law, or for release or injury
to the environment or threat to public health, personal injury (including
sickness, disease or death), property damage, natural resources damage, or
otherwise alleging liability or responsibility for damages (punitive or
otherwise), cleanup, removal, remedial or response costs, restitution, civil or
criminal penalties, injunctive relief, or other type of relief, resulting from
or based upon the presence, placement, discharge, emission or release (including
intentional and unintentional, negligent and non-negligent, sudden or non-
sudden, accidental or non-accidental, placement, spills, leaks, discharges,
emissions or releases) of any Hazardous Material at, in, or from property,
whether or not owned by the Borrower.
"Environmental Indemnity" means the unsecured environmental indemnity
-----------------------
executed by the Borrower and delivered to the Administrative Agent, for the
benefit of the Banks, pursuant to Section 4.1.1.
-------------
"Environmental Laws" means all federal, state or local laws, statutes,
------------------
common law duties, rules, regulations, ordinances and codes, together with all
administrative orders, directed duties, requests, licenses, authorizations and
permits of, and agreements with, any Governmental Authorities, in each case
relating to environmental, health and safety matters, including CERCLA, the
Clean Air Act, the Federal Water Pollution Control Act of 1972, the Solid Waste
Disposal Act, the Federal Resource Conservation and Recovery Act, the Toxic
Substances Control Act, the Emergency Planning and Community Right-to-Know Act,
the California Hazardous Waste Control Law, the California Solid Waste
Management, Resource, Recovery and Recycling Act, the California Water Code and
the California Health and Safety Code.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
-----
amended or recodified from time to time, and regulations promulgated thereunder.
"ERISA Affiliate" means any trade or business (whether or not
---------------
incorporated) under common control with the Borrower within the meaning of
Sections 414(b) or (c) of the Code (and Sections 414(m) and (o) of the Code for
purposes of provisions relating to Section 412 of the Code).
"ERISA Event" means (a) a Reportable Event with respect to a Pension
-----------
Plan or a Multiemployer Plan; (b) a withdrawal by the Borrower or any ERISA
Affiliate from a Pension Plan subject to Section 4063 of ERISA during a plan
year in which it was a substantial employer (as defined in Section 4001(a)(2) of
ERISA) or a cessation of operations which is treated as such a withdrawal under
Section 4062(e) of ERISA; (c) a complete or partial withdrawal by the Borrower
or any ERISA Affiliate from a Multiemployer Plan; (d) the filing of a notice of
intent to terminate, the treatment of a plan amendment as a termination under
Section 4041 or 4041A of ERISA, or the commencement of proceedings by the PBGC
to terminate a Pension Plan or Multiemployer Plan subject to Title IV of ERISA;
(e) failure by the Borrower or any member of the Controlled Group to make
6
<PAGE>
required contributions to a Pension Plan or Multiemployer Plan; (f) an event or
condition which might reasonably be expected to constitute grounds under Section
4042 of ERISA for the termination of, or the appointment of a trustee to
administer, any Pension Plan or Multiemployer Plan; (g) the imposition of any
liability under Title IV of ERISA, other than PBGC premiums due but not
delinquent under Section 4007 of ERISA, upon the Borrower or any ERISA
Affiliate; or (g) an application for a funding waiver or an extension of any
amortization period pursuant to Section 412 of the Tax Code with respect to any
Pension Plan.
"Estimated Remediation Cost" means for any Property all costs
--------------------------
associated with performing work to remediate contamination of real property or
groundwater, as determined by a qualified engineer or consultant reasonably
acceptable to the Administrative Agent, to the extent that any such work is
required to be performed or any such cost must be incurred in order to bring
such Property into compliance with any Requirement of Law, including engineering
and other professional fees and expenses, costs to remove, transport and dispose
of contaminated soil, costs to "cap" or otherwise contain contaminated soil, and
costs to pump and treat water and monitor water quality.
"Event of Default" means any of the events or circumstances specified
----------------
in Section 8.1.
-----------
"Event of Loss" means, with respect to any Property, any of the
-------------
following: (a) any loss or destruction of, or damage to, such Property; or (b)
any actual condemnation, seizure or taking, by exercise of the power of eminent
domain or otherwise, of such Property, or confiscation of such Property or the
requisition of the use of such Property by a Governmental Authority or any
Person having the power of eminent domain, or any voluntary transfer of such
Property or any portion thereof in lieu of any such condemnation, seizure or
taking.
"Federal Funds Rate" means, for any day, the rate set forth in the
------------------
weekly statistical release designated as H.15(519), or any successor
publication, published by the Federal Reserve Bank of New York (including any
such successor, "H.15(519)") on the preceding Business Day opposite the caption
"Federal Funds (Effective)"; or, if for any relevant day such rate is not so
published on any such preceding Business Day, the rate for such day will be the
arithmetic mean, as determined by the Administrative Agent, of the rates for the
last transaction in overnight Federal funds arranged prior to 9:00 a.m. (New
York City time) on that day by each of three leading brokers of Federal funds
transactions in New York City selected by the Administrative Agent.
"Fee Letter" has the meaning specified in Section 2.9.1.
---------- -------------
"Fixed Charge Coverage" means, as of any date of determination, the
---------------------
ratio of (a) an amount equal to EBITDA plus the aggregate amount of gain on
----
sales of non-strategic assets less the aggregate amount of losses on sales of
----
non-strategic assets to (b) Fixed
7
<PAGE>
Charges, each measured over the four (4) most recent consecutive fiscal quarters
for which financial statements are available at such time.
"Fixed Charges" means, for any period, the sum of (i) the consolidated
-------------
interest expense (including capitalized interest expense and the interest
expense accruing on subordinated Indebtedness) of the Borrower and its
subsidiaries for such period, plus (ii) the aggregate amount of regularly
----
scheduled principal payments due and payable by the Borrower and its
subsidiaries during such period, plus (iii) the aggregate amount of dividends
----
declared and payable to both preferred and common shareholders of the Borrower
during such period, all as determined on a consolidated basis in accordance with
GAAP, consistently applied.
"FRB" means the Board of Governors of the Federal Reserve System, and
---
any Governmental Authority succeeding to any of its principal functions.
"GAAP" means generally accepted accounting principles set forth from
----
time to time in the opinions and pronouncements of the Accounting Principles
Board and the American Institute of Certified Public Accountants and statements
and pronouncements of the Financial Accounting Standards Board (or agencies with
similar functions of comparable stature and authority within the U.S. accounting
profession), which are applicable to the circumstances as of the date of
determination.
"Governmental Authority" means any nation or government, any state or
----------------------
other political subdivision thereof, any central bank (or similar monetary or
regulatory authority) thereof, any entity exercising executive, legislative,
judicial, regulatory or administrative functions of or pertaining to government,
and any corporation or other entity owned or controlled, through stock or
capital ownership or otherwise, by any of the foregoing.
"Guaranty Obligation" means, as to any Person, any direct or indirect
-------------------
contractual liability of that Person, whether or not contingent, with or without
recourse, with respect to any Indebtedness, lease, dividend, letter of credit or
other monetary obligation (the "primary obligations") of another Person (the
"primary obligor").
"Hazardous Materials" means all those substances that are regulated
-------------------
by, or which may form the basis of liability under, any Environmental Law,
including all substances identified under any Environmental Law as a pollutant,
contaminant, hazardous waste, hazardous constituent, special waste, hazardous
substance, hazardous material or toxic substance, or petroleum or petroleum-
derived substance or waste.
"Indebtedness" of any Person means, without duplication, (a) all
------------
indebtedness for borrowed money; (b) all obligations issued, undertaken or
assumed as the deferred purchase price of property or services (other than trade
payables entered into in the ordinary course of business on ordinary terms); (c)
all non-contingent reimbursement or payment obligations with respect to Surety
Instruments; (d) all obligations evidenced by notes, bonds,
8
<PAGE>
debentures or similar instruments, including obligations so evidenced incurred
in connection with the acquisition of property, assets or businesses; (e) all
indebtedness created or arising under any conditional sale or other title
retention agreement, or incurred as financing, in either case with respect to
property acquired by the Person (even though the rights and remedies of the
seller or bank under such agreement in the event of default are limited to
repossession or sale of such property); (f) all obligations with respect to
capital leases; (g) all liquidated net obligations with respect to Swap
Contracts; (h) all indebtedness referred to in clauses (a) through (g) above
secured by (or for which the holder of such Indebtedness has an existing right,
contingent or otherwise, to be secured by) any Lien upon or in property
(including accounts and contracts rights) owned by such Person, even though such
Person has not assumed or become liable for the payment of such Indebtedness;
and (i) all Guaranty Obligations in respect of indebtedness or obligations of
others of the kinds referred to in clauses (a) through (g) above.
"Indemnified Liabilities" has the meaning specified in Section 10.5.
----------------------- ------------
"Indemnified Person" has the meaning specified in Section 10.5.
------------------ ------------
"Independent Auditor" has the meaning specified in Section 6.1.1.
------------------- -------------
"Industrial Property" means any Property improved with an industrial,
-------------------
manufacturing or warehouse distribution facility, including any R&D Property.
"Insolvency Proceeding" means (a) any case, action or proceeding
---------------------
before any court or other Governmental Authority relating to bankruptcy,
reorganization, insolvency, liquidation, receivership, dissolution, winding-up
or relief of debtors, or (b) any general assignment for the benefit of
creditors, composition, marshaling of assets for creditors, or other similar
arrangement in respect of its creditors generally or any substantial portion of
its creditors, undertaken under U.S. federal, state or foreign law, including
the Bankruptcy Code.
"Interest Payment Date" means, as to any Loan, the tenth (10th) day
---------------------
of each calendar month.
"Interest Period" means, as to any LIBOR Loan, the period commencing
---------------
on the Borrowing Date of such Loan or on the Conversion/Continuation Date on
which the Loan is converted into or continued as a LIBOR Loan, and ending on the
date one (1), two (2), three (3), four (4), six (6), nine (9) or twelve (12)
months thereafter (and any other period that is twelve (12) months or less and
is consented to by the Majority Banks in the given instance), as selected by the
Borrower in its Notice of Borrowing or Notice of Conversion/Continuation;
provided that:
- --------
(i) if any Interest Period would otherwise end on a day that is not a
Business Day, that Interest Period shall be extended to the following
Business Day unless the result of such extension would be to carry such
Interest Period into another
9
<PAGE>
calendar month, in which event such Interest Period shall end on the
preceding Business Day;
(ii) any Interest Period that begins on the last Business Day of a
calendar month (or on a day for which there is no numerically corresponding
day in the calendar month at the end of such Interest Period) shall end on
the last Business Day of the calendar month at the end of such Interest
Period; and
(iii) no Interest Period for any Loan shall extend beyond the
Maturity Date.
"IRS" means the Internal Revenue Service, and any Governmental
---
Authority succeeding to any of its principal functions.
"Lease Assignment" means any assignment of leases or rents executed
----------------
by the Borrower to secure the Obligations.
"Lending Office" means, as to any Bank, the office or offices of such
--------------
Bank specified as its "Lending Office" or "Domestic Lending Office" or "Offshore
Lending Office", as the case may be, on Schedule 10.2, or such other office or
-------------
offices as the Bank may from time to time notify the Borrower and the
Administrative Agent.
"Letter of Credit" means a letter of credit issued by BofA for the
----------------
Borrower's account pursuant to Article 2.
---------
"Leverage" means, as of any date of determination, the ratio of (a)
--------
Total Liabilities as of such date to (b) Total Capital as of such date.
"LIBOR" means the rate of interest per annum (rounded upward to the
-----
next 1/16th of 1%) determined by the Administrative Agent as the rate at which
dollar deposits in the approximate amount of the Loan to be made or continued
as, or converted into, a LIBOR Loan and having a maturity comparable to such
Interest Period would be offered by BofA's London Branch, London, England, to
major banks in the London dollar interbank market at their request at
approximately 11:00 a.m. (London time) two (2) Business Days prior to the
commencement of such Interest Period.
"LIBOR Loan" means a Loan that bears interest based on LIBOR.
----------
"Lien" means any security interest, mortgage, deed of trust, pledge,
----
hypothecation, assignment, charge or deposit arrangement, encumbrance or lien
(statutory or other) in respect of any property (including those created by,
arising under or evidenced by any conditional sale or other title retention
agreement, the interest of a lessor under a capital lease, any financing lease
having substantially the same economic effect as any of the foregoing, or the
filing of any financing statement naming the owner of the asset to which such
lien relates as debtor, under the UCC or any comparable law), but not including
the interest of a lessor under an operating lease.
10
<PAGE>
"Loan" means an extension of credit by a Bank to the Borrower under
----
Article 2, and may be a Reference Rate Loan or a LIBOR Loan.
- ---------
"Loan Documents" means this Agreement, any Notes, the Collateral
--------------
Documents, the Fee Letters and all other documents (except for the Environmental
Indemnity) delivered to the Administrative Agent, on behalf of the Banks, to
evidence or secure any of the Loans or reimbursement obligations relating to any
Letter of Credit.
"Majority Banks" means at any time at least two Banks then holding at
--------------
least 66-2/3% of the then aggregate unpaid principal amount of the Loans, or, if
no such principal amount is then outstanding, at least two Banks then having at
least 66-2/3% of the aggregate amount of the Commitments; provided, however,
--------
that solely for purposes of removing the Administrative Agent, the Documentation
Agent or any Co-Agent pursuant to Section 9.6, if any Bank holds more than 33-
-----------
1/3% of the then aggregate unpaid principal amount of the Loans (or, if
applicable, the Commitments), "Majority Banks" means at least two Banks holding
a percentage of the amount of the aggregate unpaid principal amount of the Loans
(or, if applicable, the Commitments) equal to 66-2/3% the aggregate percentage
in excess of 33-1/3% held by any Bank.
"Margin Stock" means "margin stock" as such term is defined in
------------
Regulation G, T, U or X of the FRB.
"Material Adverse Effect" means (a) a material impairment of the
-----------------------
Borrower's ability to perform under any Loan Document and to avoid any Event of
Default; or (b) a material adverse effect upon (i) the legality, validity,
binding effect or enforceability against the Borrower of any Loan Document, or
(ii) the perfection or priority of any Lien granted under any of the Collateral
Documents.
"Material Lease" means any lease covering more than the greater of (i)
--------------
twenty-five percent (25%), or (ii) fifty thousand (50,000) square feet, of the
net rentable area of the improvements located on any Property.
"Maturity Date" means November 1, 1998.
-------------
"Maximum Commitment Amount" means, at any time, Two Hundred Forty
-------------------------
Million Dollars ($240,000,000.00).
"Monetary Default" means any Default with respect to the payment of
----------------
any amount owed by Borrower to a Bank under any Loan Document.
"Multiemployer Plan" means a "multiemployer plan" within the meaning
------------------
of Section 4001(a)(3) of ERISA, to which the Borrower or any ERISA Affiliate
makes, is making, or is obligated to make contributions or, during the preceding
three calendar years, has made, or been obligated to make, contributions.
11
<PAGE>
"Net Cash Flow" means, for any Operating Property at any time, the
-------------
actual net operating income for such Operating Property for the last twelve (12)
consecutive calendar months for which operating reports are available at such
time; provided, however, that for any Operating Property for which operating
--------
reports are not required to have been delivered to the Administrative Agent for
twelve (12) consecutive calendar months as of the determination date, "Net Cash
Flow" means an amount equal to the actual net operating income for such
Operating Property for the number of the most recent consecutive calendar months
for which operating reports are available at such time multiplied by a fraction
the numerator of which is twelve (12) and the denominator of which is the number
of consecutive calendar months for which operating reports are available for
such Operating Property at such time.
"Net Proceeds" means, as to any Disposition by a Person, proceeds in
------------
cash, checks or other cash equivalent financial instruments as and when received
by such Person, net of: (a) the out-of-pocket costs relating to such
Disposition, excluding amounts ultimately payable to such Person or any
Affiliate of such Person, and (b) sale, use or other transaction taxes paid or
payable by such Person as a direct result thereof. "Net Proceeds" shall also
------------
include proceeds paid on account of any Event of Loss, net of (i) all money
actually applied or to be applied to repair or reconstruct the damaged property
or property affected by the condemnation or taking, (ii) all of the costs and
expenses reasonably incurred in connection with the collection of such proceeds,
award or other payments, and (iii) any amounts retained by or paid to parties
having superior rights to such proceeds, awards or other payments.
"Note" means a promissory note executed by the Borrower in favor of a
----
Bank pursuant to subsection 2.2(b), in substantially the form of Exhibit F;
----------------- ---------
"Notes" means, at any time, all of the Notes executed by the Borrower in favor
of a Bank outstanding at such time.
"Notice of Borrowing" means a notice in substantially the form of
-------------------
Exhibit A.
- ---------
"Notice of Conversion/Continuation" means a notice in substantially
---------------------------------
the form of Exhibit B.
---------
"Obligations" means all advances, debts, liabilities, obligations,
-----------
covenants and duties arising under any Loan Document owing by the Borrower to
any Bank, the Administrative Agent, or any Indemnified Person, whether direct or
indirect (including those acquired by assignment), absolute or contingent, due
or to become due, now existing or hereafter arising.
"Office Property" means any Property improved with an office
---------------
building.
"Operating Portfolio Cash Flow Value" means, at any time, the
-----------------------------------
principal amount of indebtedness that is determined by the following formula as
of the most recent date of determination pursuant to Section 2.6.3.
-----
Operating Portfolio Operating Portfolio Net Cash Flow
---------------------------------
12
<PAGE>
Cash Flow Value = Operating Portfolio Debt Service / 1.25
Interest Rate (expressed as a decimal)
Operating Portfolio Cash Flow Value shall be adjusted (a) upon the reconveyance
of any Property pursuant to Section 2.15 or the encumbrance of an additional
------------
Property pursuant to Section 2.16 to reflect the effect of the Property released
------------
or encumbered, and (b) upon remargining pursuant to Section 2.6.3.
-------------
"Operating Portfolio Debt Service Interest Rate" means, at any time, a
----------------------------------------------
rate per annum (calculated on the basis of a 360-day year, actual days elapsed)
equal to the sum of (i) the rate payable on United States Treasury Notes having
a maturity of seven (7) years, determined on the first day of the month in which
the calculation is made (or the date closest to the first day of such month for
which rate data are available), plus (ii) 1.75%.
"Operating Portfolio Net Cash Flow" means, at any time, the aggregate
---------------------------------
amount of Net Cash Flow for all of the Properties that on the date of
determination are considered to be Operating Properties pursuant to this
Agreement.
"Operating Property" means an Industrial Property, a Retail Property
------------------
or an Office Property; the Operating Properties as of the date of this Agreement
are described on Exhibit G.
---------
"Opinions of Counsel" has the meaning specified in Section 5.3.
------------------- -----------
"Organization Documents" means, for any corporation, the certificate
----------------------
or articles of incorporation, any certificate of determination or instrument
relating to the rights of preferred shareholders of such corporation, any
shareholder rights agreement, and all applicable resolutions of the board of
directors (or any committee thereof) of such corporation.
"Other Taxes" means any present or future stamp or documentary taxes
-----------
or any other excise or property taxes, charges or similar levies which arise
from any payment made hereunder or from the execution, delivery or registration
of, or otherwise with respect to, this Agreement or any of the other Loan
Documents, excluding, in the case of each Bank and the Administrative Agent,
such taxes (including income taxes or franchise taxes) as are imposed on or
measured by such Person's net income, gross income or net worth.
"Participant" has the meaning specified in Section 10.6.4.
----------- --------------
"PBGC" means the Pension Benefit Guaranty Corporation, or any
----
Governmental Authority succeeding to any of its principal functions under ERISA.
"Pension Plan" means a pension plan (as defined in Section 3(2) of
------------
ERISA) subject to Title IV of ERISA which the Borrower sponsors, maintains, or
to which it makes, is making, or is obligated to make contributions, or in the
case of a multiple employer plan
13
<PAGE>
(as described in Section 4064(a) of ERISA) has made contributions at any time
during the immediately preceding five (5) plan years.
"Permitted Encumbrances" has the meaning specified in Section 5.13.
---------------------- ------------
"Permitted Liens" has the meaning specified in Section 7.1.
--------------- -----------
"Person" means an individual, partnership, corporation, business
------
trust, limited liability company, joint stock company, trust, unincorporated
association, joint venture or Governmental Authority.
"Plan" means an employee benefit plan (as defined in Section 3(3) of
----
ERISA) which the Borrower sponsors or maintains or to which the Borrower makes,
is making, or is obligated to make contributions, and includes any Pension Plan.
"Portfolio Appraisal Value" means, at any time, the sum of (i) 75% of
-------------------------
the aggregate amount of the Appraised Values for each of the Industrial
Properties at such time, and (ii) 65% of the aggregate amount of the Appraised
Values for each of the Retail Properties at such time, and (iii) 65% of the
aggregate amount of the Appraised Values for each of the Office Properties at
such time, and (iv) 50% of the aggregate amount of the Appraised Values for each
of the parcels of Entitled Land at such time; provided, however, that the amount
--------
determined under clause (iv), above, shall not at any time exceed 25% of the sum
of the amounts determined under clauses (i), (ii), (iii) and (iv), above, and
any portion of the aggregate amount of the Appraised Values for e Entitled Land
that exceeds such limit at any time (i.e., any amount in excess of 66-2/3% of
----
the sum of the amounts determined under clauses (i), (ii) and (iii), above)
shall not be considered in computing the "Portfolio Appraisal Value" at such
time.
"Property" means, collectively, all of Borrower's right, title and
--------
interest, whether now existing or hereafter acquired, in and to any real
property which is encumbered by a Deed of Trust, together with all easements and
other rights now or hereafter made appurtenant thereto, all improvements and
fixtures now or hereafter located thereon, and all additions and accretions
thereto.
"Pro Rata Share" means, as to any Bank at any time, the percentage
--------------
equivalent (expressed as a decimal, rounded to the ninth decimal place) at such
time of such Bank's Commitment divided by the combined Commitments of all Banks.
"R&D Property" means any parcel of real property owned by the Borrower
------------
more than fifty percent (50%) of whose net rentable area is improved as research
and development space.
"Reference Rate" means, at any time, the rate of interest publicly
--------------
announced from time to time by BofA in San Francisco, California, as its
"reference rate." (The "reference rate" is a rate set by BofA based upon various
factors, including BofA's costs and
14
<PAGE>
desired return, general economic conditions and other factors, and is used as a
reference point for pricing some loans, which may be priced at, above, or below
such announced rate.) Any change in the reference rate announced by BofA shall
take effect at the opening of business on the day specified in the public
announcement of such change.
"Reference Rate Loan" means a Loan that bears interest based on the
-------------------
Reference Rate.
"Release Price" means, with respect to a Property, the amount, if any,
-------------
necessary to reduce the aggregate outstanding principal amount of the Loans to
the Availability (computed without regard to the Property for which the Borrower
is seeking release), determined on the date of the Borrower's request that the
Administrative Agent, on behalf of the Banks, release the Deed of Trust
encumbering such Property.
"Reportable Event" means, as to any Plan, any of the events set forth
----------------
in Section 4043(c) of ERISA, or the regulations thereunder, other than any such
event for which the 30-day notice requirement under ERISA has been waived in
regulations issued by the PBGC.
"Requirement of Law" means, as to any Person, any law (statutory or
------------------
common), treaty, rule or regulation or determination of an arbitrator or of a
Governmental Authority, in each case applicable to or binding upon the Person or
any of its property or as to which the Person or any of its property is subject.
"Responsible Officer" means the chief financial officer, treasurer,
-------------------
controller, director of finance or Vice President of Asset Management of the
Borrower, or any other officer having substantially the same authority and
responsibility.
"Retail Property" means any Property improved with a shopping center,
---------------
theater, restaurant facility or other similar retail project or use (or any
combination thereof).
"SEC" means the Securities and Exchange Commission, or any
---
Governmental Authority succeeding to any of its principal functions.
"Senior Officer" means the chief executive officer, chief financial
--------------
officer or general counsel of Borrower.
"SFPP" means SF Pacific Properties Inc., a Delaware corporation.
----
"Solvent" means, as to any Person at any time, that (a) the fair value
-------
of the property of such Person is greater than the amount of such Person's
liabilities (including disputed, contingent and unliquidated liabilities) as
such value is established and liabilities evaluated for purposes of Section
101(31) of the Bankruptcy Code and, in the alternative, for purposes of the
California Uniform Fraudulent Transfer Act; (b) the present fair saleable value
of the property of such Person is not less than the amount that will be required
to pay
15
<PAGE>
the probable liability of such Person on its debts as they become absolute and
matured; (c) such Person is able to realize upon its property and pay its debts
and other liabilities (including disputed, contingent and unliquidated
liabilities) as they mature in the normal course of business; (d) such Person
does not intend to, and does not believe that it will, incur debts or
liabilities beyond such Person's ability to pay as such debts and liabilities
mature; and (e) such Person is not engaged in business or a transaction, and is
not about to engage in business or a transaction, for which such Person's
property would constitute unreasonably small capital.
"Subsidiary" of a Person means, as of any date of determination, any
----------
corporation, partnership, joint venture or other business entity, whether now
existing or hereafter organized or acquired: (a) (i) in the case of a
corporation, of which a majority of the securities having ordinary voting power
for the election of directors or other governing body (other than securities
having such power only by reason of the happening of a contingency) are at the
time owned by such Person or by one or more Subsidiaries of such Person, or (ii)
in the case of a partnership, joint venture or other business entity, of which
such Person or a Subsidiary of such Person is a general partner or joint
venturer or of which a majority of the partnership or other ownership interests
are at the time owned by such Person or by one or more of its Subsidiaries, and
(b) the financial condition and results of which would be consolidated with the
financial condition and results of such Person under GAAP, consistently applied.
"Supermajority Banks" means at any time at least two Banks then
-------------------
holding at least 76% of the then aggregate unpaid principal amount of the Loans,
or, if no such principal amount is then outstanding, at least two Banks then
having at least 76% of the aggregate amount of the Commitments.
"Surety Instrument" means any letter of credit (including standby and
-----------------
commercial), banker's acceptance, bank guaranty, surety bond or similar
instrument.
"Swap Contract" means any agreement, whether or not in writing,
-------------
relating to any transaction that is a rate swap, basis swap, forward rate
transaction, commodity swap, commodity option, equity or equity index swap or
option, bond, note or bill option, interest rate option, forward foreign
exchange transaction, cap, collar or floor transaction, currency swap, cross-
currency rate swap, swaption, currency option or any other, similar transaction
(including any option to enter into any of the foregoing) or any combination of
the foregoing and, unless the context otherwise clearly requires, any master
agreement relating to or governing any or all of the foregoing.
"Tangible Net Worth" means, as of any date of determination, the
------------------
consolidated total stockholders' equity of the Borrower and its subsidiaries
(net of intangible assets) using the historical cost method in accordance with
GAAP, consistently applied, based on the Borrower's consolidated balance sheet
for the most recent fiscal period.
16
<PAGE>
"Taxes" means any and all present or future taxes, levies, imposts,
-----
deductions, charges or withholdings, and all liabilities with respect thereto,
excluding, in the case of each Bank and the Administrative Agent, such taxes
(including income taxes or franchise taxes) as are imposed on or measured by
such Person's net income, gross income or net worth.
"Total Capital" means, as of any date of determination, an amount
-------------
equal to the sum of (a) Total Liabilities as of such date plus (b) Tangible Net
----
Worth as of such date.
"Total Liabilities" means, as of any date of determination, the
-----------------
aggregate amount of all liabilities of the Borrower and its subsidiaries, as
shown on the Borrower's consolidated balance sheet for the most recent fiscal
period, plus Contingent Obligations.
"Type" means, in connection with a Loan, the characterization of such
----
Loan as a Reference Rate Loan or a LIBOR Loan.
"UCC" means the Uniform Commercial Code as in effect in the State of
---
California.
"United States" and "U.S." each means the United States of America.
------------- ----
1.2 Other Interpretive Provisions.
-----------------------------
1.2.1 Use of Defined Terms. Unless otherwise specified herein or
--------------------
therein, all terms defined in this Agreement shall have the defined meanings
when used in any certificate or other document made or delivered pursuant to
this Agreement. The meaning of defined terms shall be equally applicable to the
singular and plural forms of the defined terms. Terms (including uncapitalized
terms) not otherwise defined herein and that are defined in the UCC shall have
the meanings therein described.
1.2.2 Certain Common Terms.
--------------------
(a) The Agreement. The words "hereof," "herein," "hereunder" and
-------------
words of similar import when used in this Agreement shall refer to this
Agreement as a whole and not to any particular provision of this Agreement,
and section, schedule and exhibit references are to this Agreement unless
otherwise specified.
(b) Documents. The term "documents" includes any and all
---------
instruments, documents, agreements, certificates, indentures, notices and
other writings, however evidenced.
(c) Including. The term "including" is not limiting and means
---------
"including without limitation."
17
<PAGE>
(d) Performance. Whenever any performance obligation hereunder
-----------
(including a payment obligation) shall be stated to be due or required . to
be satisfied on a day other than a Business Day, such performance shall be
made or satisfied on the next succeeding Business Day. In the computation
of periods of time from a specified date to a later specified date (other
than with respect to computation of interest owed or accrued under this
Agreement), the word "from" means "from and including" and the words "to"
and until" each mean "to and including". If any provision of this Agreement
refers to any action taken or to be taken by any Person, or which such
Person is prohibited from taking, such provision shall be interpreted to
encompass any and all reasonable means, direct or indirect, of taking or
not taking such action.
(e) Contracts. Unless otherwise expressly provided in this
---------
Agreement, references to agreements and other contractual instruments shall
be deemed to include all subsequent amendments and other modifications
thereto, but only to the extent such amendments and other modifications are
not prohibited by the terms of any Loan Document.
(f) Laws. References to any statute or regulation are to be
----
construed as including all statutory and regulatory provisions
consolidating, amending or replacing the statute or regulation.
(g) Captions. The captions and headings of this Agreement are for
--------
convenience of reference only, and shall not affect the construction of
this Agreement.
(h) Independence of Provisions. If a conflict exists between the
--------------------------
terms of this Agreement and those of any other Loan Document, this
Agreement shall prevail; provided, however, that the parties acknowledge
--------
that this Agreement and the other Loan Documents may use several different
limitations, tests or measurements to regulate the same or similar matters,
and that such limitations, tests and measurements are cumulative and must
each be performed, except as expressly stated to the contrary in this
Agreement, or unless the applicable provisions are inconsistent or cannot
be simultaneously enforced or performed.
(i) Exhibits. All of the exhibits attached to this Agreement are
--------
incorporated herein by this reference.
1.2.3 Accounting Principles.
---------------------
(a) Accounting Terms. Unless the context otherwise clearly
----------------
requires, all accounting terms not expressly defined herein shall be
construed, and all financial computations required under this Agreement
shall be made, in accordance with GAAP, consistently applied.
18
<PAGE>
(b) Fiscal Periods. References herein to "fiscal year" and
--------------
"fiscal quarter" refer to such fiscal periods of the Borrower.
ARTICLE 2.
THE CREDITS
-----------
2.1 Amounts and Terms of Commitments. Each Bank severally agrees, on the
--------------------------------
terms and subject to the conditions set forth in this Agreement,
(a) to make Loans to the Borrower (each, a "Loan") from time to time
on any Business Day during the period from the Closing Date to the Maturity
Date, in an aggregate amount not to exceed at any time outstanding such
Bank's Pro Rata Share of the Availability, as the same may be reduced as a
result of one or more assignments permitted under Section 10.6, and
------------
(b) to fund drawings on any Letters of Credit that BofA issues for
the Borrower's account from time to time, in an aggregate amount not to
exceed at any time outstanding such Bank's Pro Rata Share of the amount of
such drawing.
BofA agrees to issue Letters of Credit for the Borrower's account on any
Business Day during the period from the Closing Date to the Maturity Date, for
any purpose, in an aggregate amount not to exceed Fifteen Million Dollars
($15,000,000.00) at any time outstanding; provided, however, that no Letter of
--------
Credit shall have an expiry date later than the Maturity Date. Notwithstanding
any contrary provision of this Agreement, the aggregate principal amount of all
outstanding Loans shall not at any time exceed the Availability, and the
aggregate amount of outstanding but undrawn Letters of Credit shall be
considered a portion of the principal amount outstanding on the Loans for
purposes of determining (x) the amount of Availability remaining available for
disbursement, (y) mandatory repayments under Section 2.6.3 and (z) computation
-------------
of the unused fee pursuant to Section 2.9.3. Within the limits of each Bank's
-------------
Commitment, and subject to the other terms and conditions hereof, the Borrower
may borrow under this Section 2.1, repay under Section 2.5 and reborrow under
----------- -----------
this Section 2.1.
-----------
2.2 Loan Accounts.
-------------
(a) The Loans made by each Bank shall be evidenced by one or more
loan accounts or records maintained by such Bank in the ordinary course of
business. The loan accounts or records maintained by the Administrative
Agent and each Bank shall be conclusive, absent manifest error, of the
amount of the Loans made by the Banks to the Borrower and the interest and
payments thereon. Any failure to record any such amounts or any error in
doing so shall not, however, limit or otherwise affect the obligation of
the Borrower hereunder to pay any amount owing with respect to the Loans.
19
<PAGE>
(b) Upon the request of any Bank made through the Administrative
Agent, the Loans made by such Bank may be evidenced by one or more Notes,
instead of loan accounts. Each such Bank may endorse on schedules annexed
to its Note(s) the date, amount (which shall not include undrawn amounts on
outstanding Letters of Credit, but shall include the amounts of any
drawings on outstanding Letters of Credit) and maturity of each Loan made
by it and the amount of each payment of principal made by the Borrower with
respect thereto. Each such Bank is irrevocably authorized by the Borrower
to endorse its Note(s), and each Bank's record shall be conclusive absent
manifest error; provided, however, that the failure of a Bank to make, or
-------- -------
an error in making, a notation thereon with respect to any Loan shall not
limit or otherwise affect the obligations of the Borrower hereunder or
under any such Note to such Bank.
2.3 Procedure for Borrowing.
-----------------------
2.3.1 Each Borrowing shall be made and each Letter of Credit shall be
issued upon the Borrower's irrevocable written notice (including notice by
facsimile, confirmed immediately by telephone) delivered to the Administrative
Agent in the form of a Notice of Borrowing (which notice must be received by the
Administrative Agent prior to 11:00 a.m. San Francisco time (i) four (4)
Business Days prior to the requested Borrowing Date, in the case of LIBOR Loans,
(ii) one (1) Business Day prior to the requested Borrowing Date, in the case of
Reference Rate Loans, or (iii) five (5) Business Days prior to the requested
issuance date of a Letter of Credit) specifying:
(a) the amount of the Borrowing or the Letter of Credit, which for
any Borrowing shall be in an aggregate minimum amount of $2,500,000 or any
multiple of $100,000 in excess thereof, and for any Letter of Credit may be
any amount; provided, however, that the aggregate minimum amount of LIBOR
--------
Loans in respect of any Borrowing shall be $5,000,000.00 or any multiple of
$100,000.00 in excess thereof;
(b) the requested Borrowing Date or Letter of Credit issuance date,
which shall be a Business Day;
(c) the Type of Loans comprising the Borrowing; and
(d) the duration of the Interest Period applicable to such Loans
included in such notice. If the Notice of Borrowing fails to specify the
duration of the Interest Period for any Borrowing comprised of LIBOR Loans,
such Interest Period shall be one (1) month; provided, however, that with
-------- -------
respect to the Borrowing to be made on the Closing Date, the Notice of
Borrowing shall be delivered to the Administrative Agent not later than
11:00 a.m. San Francisco time one (1) Business Day before the Closing Date,
and such Borrowing will consist of Reference Rate Loans only.
20
<PAGE>
Notwithstanding the foregoing provisions of this Section 2.3.1, any amount drawn
-------------
under a Letter of Credit shall, from and after the date on which such drawing is
made, constitute a Borrowing for all purposes under this Agreement (including
accrual and payment of interest and repayment of principal) other than
disbursement of Loan proceeds under this Section 2.3.1.
-------------
2.3.2 The Administrative Agent will notify each Bank (a) on the day
of its receipt of any Notice of Borrowing, in the case of a request for a
Borrowing consisting of Reference Rate Loans, and (b) within one (1) Business
Day after its receipt of any Notice of Borrowing, in the case of a request for a
Borrowing consisting of LIBOR Loans, of the amount of such Bank's Pro Rata Share
of that Borrowing.
2.3.3 Each Bank will make the amount of its Pro Rata Share of each
Borrowing available to the Administrative Agent for the account of the Borrower
at the Administrative Agent's Payment Office by 11:00 a.m. San Francisco time on
the Borrowing Date requested by the Borrower in funds immediately available to
the Administrative Agent. The Administrative Agent will then make the proceeds
of all such Loans available to the Borrower by wire transfer to a deposit
account designated by the Borrower of like funds as received by the
Administrative Agent.
2.3.4 After giving effect to any Borrowing, there may not be more
than eight (8) different Interest Periods in effect.
2.3.5 Borrowings and/or the issuance of Letters of Credit shall be
made on not more than three (3) Business Days during any calendar month without
payment of a fee. The Borrower shall pay to the Administrative Agent, on the
date of each additional Borrowing and/or issuance of a Letter of Credit, an
administration fee of $1,500.00 for each additional Business Day during any
calendar month on which one or more Borrowings occurs and/or a Letter of Credit
is issued.
2.4 Conversion and Continuation Elections.
-------------------------------------
2.4.1 The Borrower may, upon irrevocable written notice to the
Administrative Agent in accordance with Section 2.4.2:
-------------
(a) elect, as of any Business Day, in the case of Reference Rate
Loans, or as of the last day of the applicable Interest Period, in the case
of LIBOR Loans, to convert any such Loans (or any part thereof in an amount
not less than $5,000,000.00, or that is in an integral multiple of $100,000
in excess thereof) into Loans of any other Type; or
(a) elect, as of the last day of the applicable Interest Period, to
continue any Loans having Interest Periods expiring on such day (or any
part thereof in an amount not less than $5,000,000.00, or that is in an
integral multiple of $100,000 in excess thereof);
21
<PAGE>
provided, that if at any time the aggregate amount of LIBOR Loans in respect of
- --------
any Borrowing is reduced, by payment, prepayment, or conversion of part thereof
to be less than $5,000,000, such LIBOR Loans shall automatically convert into
Reference Rate Loans, and on and after such date the right of the Borrower to
continue such Loans as, and convert such Loans into, LIBOR Loans shall
terminate.
2.4.2 The Borrower shall deliver a Notice of Conversion/Continuation
by facsimile, immediately confirmed in writing, to be received by the
Administrative Agent not later than 11:00 a.m. San Francisco time at least (i)
four (4) Business Days in advance of the Conversion/Continuation Date, if the
Loans are to be converted into or continued as LIBOR Loans; and (ii) one (1)
Business Day in advance of the Conversion/ Continuation Date, if the Loans are
to be converted into Reference Rate Loans (provided, however, that the
Administrative Agent may, in its discretion, permit the Borrower's chief
financial officer, treasurer or controller to give such notice by telephone, to
be followed by a written Notice of Conversion/Continuation within forty-eight
(48) hours), specifying:
(a) the proposed Conversion/Continuation Date;
(b) the aggregate amount of Loans to be converted or renewed;
(c) the Type of Loans resulting from the proposed conversion or
continuation; and
(d) other than in the case of conversions into Reference Rate Loans,
the duration of the requested Interest Period.
2.4.3 If upon the expiration of any Interest Period applicable to
LIBOR Loans the Borrower has failed to select timely a new Interest Period to be
applicable to such LIBOR Loans, or if any Event of Default then exists, the
Borrower shall be deemed to have elected to convert such LIBOR Loans into
Reference Rate Loans effective as of the expiration date of such Interest
Period.
2.4.4 The Administrative Agent will notify each Bank within one (1)
Business Day after its receipt of a Notice of Conversion/Continuation, or, if no
timely notice is provided by the Borrower, the Administrative Agent will
promptly notify each Bank of the details of any automatic conversion. All
conversions and continuations shall be made ratably according to the respective
outstanding principal amounts of the Loans with respect to which the notice was
given.
2.4.5 Unless the Majority Banks otherwise agree, (a) during the
existence of a Monetary Default, the Borrower may not elect to have a Loan
converted into or continued as a LIBOR Loan having an Interest Period longer
than one (1) month, and (b) during the existence of an Event of Default, the
Borrower may not elect to have a Loan converted into or continued as a LIBOR
Loan.
22
<PAGE>
2.4.6 After giving effect to any conversion or continuation of Loans,
there may not be more than eight (8) different Interest Periods in effect.
2.5 Optional Prepayments. Subject to the provisions of Section 3.4, the
-------------------- -----------
Borrower may, at any time or from time to time (but in no event more often than
three times during any calendar month, unless the Borrower pays to the
Administrative Agent an administrative fee of $1,500.00 for each additional
prepayment), upon not less than one (1) Business Days' irrevocable written
notice to the Administrative Agent, ratably prepay Loans in whole or in part, in
minimum amounts of $2,500,000.00 or any multiple of $100,000.00 in excess
thereof. Such notice of prepayment shall specify the date and amount of such
prepayment and the Type(s) of Loans to be prepaid. The Administrative Agent will
promptly notify each Bank of its receipt of any such notice, and of such Bank's
Pro Rata Share of such prepayment. If such notice is given by the Borrower, the
payment amount specified in such notice shall be due and payable on the date
specified therein, together with accrued interest to each such date on the
amount prepaid and any amounts required pursuant to Section 3.4; provided,
----------- --------
however, that the Borrower's failure to prepay the amount specified in such
notice on such date shall not constitute a Default or an Event of Default so
long as the Borrower pays the amount required pursuant to Section 3.4.
2.6 Mandatory Prepayments of Loans.
------------------------------
2.6.1 Property Dispositions. If at any time or from time to time the
---------------------
Borrower shall make a Disposition with respect to a Property, then (a) the
Borrower shall notify the Administrative Agent of such proposed Disposition at
least ten (10) days prior to the requested reconveyance date and (b) promptly
upon the Borrower's receipt of the Net Proceeds of such Disposition, the
Borrower shall prepay Loans in an aggregate amount equal to the Release Price of
the Property subject to the Disposition.
2.6.2 Events of Loss. If at any time or from time to time the
--------------
Borrower shall suffer an Event of Loss with respect to a Property, then (a) the
Borrower shall promptly notify the Administrative Agent of such Event of Loss
(including the amount of the estimated Net Proceeds to be received by the
Borrower in respect thereof) and (b) except to the extent that the Net Proceeds
are to be made available for restoration pursuant to Section 5.5 of the Deed of
Trust encumbering such Property, promptly upon the Borrower's receipt of the Net
Proceeds of such Event of Loss, the Borrower shall prepay Loans in an amount
equal to the Release Price of the Property subject to such Event of Loss.
2.6.3 Remargining. The Administrative Agent and the Banks shall have
-----------
the right to determine the Operating Portfolio Cash Flow Value for the Operating
Properties as of the dates that are six (6), twelve (12) and eighteen (18)
months after the Closing Date, and to adjust the amount of the Availability as
of each such date on the basis of the redetermined Operating Portfolio Cash Flow
Value as of such date. In the event that the aggregate outstanding principal
amount of the Loans on any such date exceeds the Availability (computed using
the Operating Portfolio Cash Flow Value determined as of such date for the
Operating Properties as of such date), the Borrower shall, within fifteen (15)
Business Days
23
<PAGE>
after the Administrative Agent's notice to the Borrower (with copies to the
Banks) of the existence and amount of such excess, either (a) prepay Loans in an
aggregate amount equal to the amount of such excess, or (b) identify to the
Administrative Agent and the Banks one or more real properties owned by the
Borrower, satisfactory to the Administrative Agent or the Supermajority Banks,
as applicable, and improved with an industrial, manufacturing or warehouse
distribution facility, a research and development facility, an office building,
or a shopping center, theater, restaurant facility or other similar retail
project or use (or any combination thereof), that, if encumbered with Deeds of
Trust for the benefit of the Administrative Agent, as administrative agent for
the Banks, would cause the Availability (computed using an Operating Portfolio
Cash Flow Value that assumes that such identified real properties have become
Operating Properties) as of the date of determination to equal or exceed the
aggregate outstanding principal amount of the Loans on such date. The Borrower
shall promptly provide to the Administrative Agent a "New Property Information
Package" containing the information described in Section 2.16.1 relating to each
--------------
of the identified real properties, and the Administrative Agent shall provide a
copy of the "New Property Information Package" to each Bank. In the event that
the Borrower timely identifies one or more real properties that satisfy the
conditions set forth in clause (b), above, and promptly delivers a "New Property
Information Package" to the Administrative Agent with respect to each such
identified real property, the Administrative Agent shall cause an Appraisal of
each such identified real property to be prepared and delivered to each of the
Banks for review and comment pursuant to Section 2.16.2, the Administrative
--------------
Agent or the Supermajority Banks, as applicable, shall approve or disapprove any
such identified real property pursuant to Section 2.16.3, and if any such
--------------
identified real property is approved by the Administrative Agent or the
Supermajority Banks pursuant to Section 2.16.3, the Borrower shall cause each of
--------------
the conditions set forth in Section 2.16 with respect to such property to be
------------
satisfied not later than ninety (90) days after the Administrative Agent's
notice to the Borrower of the existence and amount of such excess. If all such
conditions have not been satisfied with respect to all of the identified
properties within such ninety-day period, the amount by which the outstanding
principal amount of the Loans exceeds the Availability shall be immediately due
and payable on the first Business Day following the end of such ninety-day
period.
2.6.4 General. Any prepayments pursuant to this Section 2.6 shall be
------- -----------
applied first to any Reference Rate Loans then outstanding and then to LIBOR
Loans with the shortest Interest Periods remaining; provided, however, that if
-------- -------
the amount of Reference Rate Loans then outstanding is not sufficient to satisfy
the entire prepayment requirement, and so long as no Monetary Default or Event
of Default has occurred and remains uncured, the Borrower may, at its option,
place any amounts which it would otherwise be required to use to prepay LIBOR
Loans on a day other than the last day of the Interest Period therefor in an
interest-bearing account pledged to the Administrative Agent for the benefit of
the Banks until the end of such Interest Period, at which time such pledged
amounts will be applied to prepay such LIBOR Loans. The Borrower shall pay,
together with each prepayment under this Section 2.6, accrued interest on the
-----------
amount prepaid and any amounts required pursuant to Section 3.4.
-----------
24
<PAGE>
2.7 Repayment at Maturity. Subject to acceleration pursuant to the
---------------------
provisions of Section 8.2, the outstanding principal amount of the Loans shall
-----------
be due and payable in full, together with all accrued and unpaid interest, fees
and costs thereon, on the Maturity Date.
2.8 Interest.
--------
2.8.1 Accrual Rate. Each Loan shall bear interest on the outstanding
------------
principal amount thereof from the applicable Borrowing Date (which, in the case
of a drawing on a Letter of Credit, is the date of such drawing) at a rate per
annum equal to LIBOR or the Reference Rate, as the case may be (and subject to
the Borrower's right to convert to other Types of Loans under Section 2.4), plus
----------- ----
the Applicable Margin.
2.8.2 Payment. Interest on each Loan shall be paid in arrears on each
-------
Interest Payment Date. Not less than five (5) days prior to each Interest
Payment Date, . the Administrative Agent shall notify the Borrower, by
telecopier or other means reasonably selected by the Administrative Agent, of
the amount of accrued and unpaid interest due and payable on such Interest
Payment Date. During the existence of any Event of Default, interest shall be
paid on demand of the Administrative Agent at the request or with the consent of
the Majority Banks.
2.8.3 Default Interest. Notwithstanding the provisions of Section
---------------- -------
2.8.1, while any Event of Default exists the Borrower shall pay interest (after
- -----
as well as before entry of judgment thereon to the extent permitted by law) on
the principal amount of all outstanding Loans at a rate per annum which is
determined by adding three percent (3%) per annum to the Applicable Margin then
in effect for such Loans and, in the case of Obligations other than Loans, at a
rate per annum equal to the Reference Rate plus 3%; provided, however, that, on
and after the expiration of any Interest Period applicable to any LIBOR Loan
outstanding on the date of occurrence of such Event of Default, the principal
amount of such Loan shall, during the continuation of such Event of Default,
bear interest at a rate per annum equal to the Reference Rate plus 3%.
2.8.4 Maximum Legal Rate. Notwithstanding any contrary provision of
------------------
this Agreement, the Borrower's Obligations to any Bank hereunder shall be
subject to the limitation that payments of interest shall not be required, for
any period for which interest is computed hereunder, to the extent (but only to
the extent) that such Bank's contracting for or receiving such payment would be
contrary to the provisions of any law applicable to such Bank limiting the
highest rate of interest that such Bank may lawfully contract for, charge or
receive, and in such event the Borrower shall pay such Bank interest at the
highest rate permitted by applicable law.
2.9 Fees.
----
2.9.1 Administrative Agent Fees. The Borrower shall pay to the
-------------------------
Administrative Agent, for the Administrative Agent's own account, such fees as
required by
25
<PAGE>
the letter agreement of even date herewith (the "Fee Letter") between the
----------
Borrower and the Administrative Agent.
2.9.2 Commitment Fee. The Borrower shall pay to the Administrative
--------------
Agent on the Closing Date, for the account of each Bank, a commitment fee in an
amount (less any amounts previously paid to the Administrative Agent as a
transaction or commitment fee) equal to three-tenths of one percent (0.30%) of
the Maximum Commitment Amount on such date.
2.9.3 Unused Fee. The Borrower shall pay to the Administrative Agent,
----------
for the account of each Bank, an unused fee equal to one-eighth percent (0.125%)
per annum of the difference between the Maximum Commitment Amount and the
average daily amount outstanding hereunder, as calculated by the Administrative
Agent quarterly in arrears at the end of each calendar quarter after the Closing
Date, pro rated for partial calendar quarters. Such unused fee shall accrue from
the Closing Date to the Maturity Date, and shall be due and payable quarterly in
arrears on the 15th day of each January, April, July and October, commencing on
January 15, 1997, with the final payment to be made on the Maturity Date. The
unused fee provided in this Section 2.9.3 shall accrue at all times after the
-------------
Closing Date, including at any time during which one or more conditions in
Article 4 are not met.
- ---------
2.9.4 Letter of Credit Fees. The Borrower shall pay to the
---------------------
Administrative Agent, for the account of each Bank, a fee with respect to
outstanding Letters of Credit equal to one and three-quarters percent (1.750%)
per annum of the aggregate face amount of all Letters of Credit outstanding
hereunder (as reduced by the aggregate amount of any drawings thereunder), as
calculated by the Administrative Agent quarterly in arrears at the end of each
calendar quarter after the Closing Date during which one or more Letters of
Credit are outstanding, pro rated for partial calendar quarters; provided,
--------
however, that if as of the end of any fiscal quarter the Borrower has maintained
(a) Debt Coverage of not less than 1.60: 1.0, (b) Fixed Charge Coverage of not
less than 1.60: 1.0, and (c) Leverage not greater than 0.60: 1.0 (regardless of
the exchange of any of the Borrower's Series B preferred stock for subordinated
debt), the fee with respect to outstanding Letters of Credit shall be equal to
one and five-eighths percent (1.625%) per annum of the aggregate face amount of
all Letters of Credit outstanding hereunder (as reduced by the aggregate amount
of any drawings thereunder), during the next fiscal quarter following delivery
of the financial statements evidencing compliance with the foregoing conditions.
The letter of credit fee payable under this Section 2.9.4 shall accrue with
-----
respect to each Letter of Credit from the date of issuance to the date of
expiration, cancellation or drawing in full, and shall be due and payable
quarterly in arrears on the 15th day of each January, April, July and October.
2.10 Computation of Interest and Fees. All computations of interest for
--------------------------------
Reference Rate Loans shall be made on the basis of a year of 365 or 366 days, as
the case may be, and actual days elapsed. All other computations of fees and
interest shall be made on the basis of a 360-day year and actual days elapsed
(which results in more interest being paid than if computed on the basis of a
365-day year). Interest and fees shall accrue during each period during which
interest or such fees are computed from the first day thereof to the last day
26
<PAGE>
thereof Each determination of an interest rate by the Administrative Agent shall
be conclusive and binding on the Borrower and the Banks in the absence of
manifest error.
2.11 Payments by the Borrower.
------------------------
2.11.1 All payments (including prepayments) to be made by the
Borrower shall be made without set-off, recoupment or counterclaim. Except as
otherwise expressly provided herein, all payments by the Borrower shall be made
to the Administrative Agent for the account of the Banks at the Administrative
Agent's Payment Office, and shall be made in dollars and in immediately
available funds, no later than 11:00 a.m. San Francisco time on the date
specified herein. The Administrative Agent will promptly distribute to each Bank
its Pro Rata Share (or other applicable share as expressly provided herein) of
such payment in like funds as received. Any payment received by the
Administrative Agent later than 11:00 a.m. San Francisco time shall be deemed to
have been received on the following Business Day, and any applicable interest or
fee shall continue to accrue.
2.11.2 Subject to the provisions set forth in the definition of the
term "Interest Period", whenever any payment is due on a day other than a
Business Day, such payment shall be made on the following Business Day, and such
extension of time shall in such case be included in the computation of interest
or fees, as the case may be.
2.11.3 Unless the Administrative Agent receives notice from the
Borrower prior to the date on which any payment is due to the Banks that the
Borrower will not make such payment in full as and when required, the
Administrative Agent may assume that the Borrower has made such payment in fill
to the Administrative Agent on such date in immediately available funds and the
Administrative Agent may (but shall not be so required), in reliance upon such
assumption, distribute to each Bank on such due date an amount equal to the
amount then due such Bank. If and to the extent the Borrower has not made such
payment in full to the Administrative Agent, each Bank shall repay to the
Administrative Agent on demand such amount distributed to such Bank, together
with interest thereon at the Federal Funds Rate for each day from the date such
amount is distributed to such Bank until the date repaid.
2.12 Payments by the Banks to the Administrative Agent.
-------------------------------------------------
2.12.1 Unless the Administrative Agent receives notice from a Bank on
or prior to the Closing Date or, with respect to any Borrowing after the Closing
Date, at least one (1) Business Day prior to the date of such Borrowing, that
such Bank will not make available to the Administrative Agent, for the account
of the Borrower, the amount of that Bank's Pro Rata Share of the Borrowing as
and when required hereunder, the Administrative Agent may assume that each Bank
has made such amount available to the Administrative Agent in immediately
available funds on the Borrowing Date and the Administrative Agent may (but
shall not be so required), in reliance upon such assumption, make available to
the Borrower on such date a corresponding amount. If and to the extent any Bank
shall not have
27
<PAGE>
made its full amount available to the Administrative Agent in immediately
available funds and the Administrative Agent in such circumstances has made
available to the Borrower such amount, that Bank shall, on the Business Day
following such Borrowing Date, make such amount available to the Administrative
Agent, together with interest at the Federal Funds Rate for each day during such
period. A notice of the Administrative Agent submitted to any Bank with respect
to amounts owing under this Section 2.12.1 shall be conclusive, absent manifest
--------------
error. If such amount is so made available, such payment to the Administrative
Agent shall constitute such Bank's Loan on the date of Borrowing for all
purposes of this Agreement. If such amount is not made available to the
Administrative Agent on the Business Day following the Borrowing Date, the
Administrative Agent will notify the Borrower of such failure to fund and,
within five (5) Business Days following written demand by the Administrative
Agent, the Borrower shall pay such amount to the Administrative Agent for the
Administrative Agent's account, together with interest thereon for each day
elapsed since the date of such Borrowing, at a rate per annum equal to the
interest rate applicable at the time to the Loans comprising such borrowing (but
without payment of any breakage costs or other amounts described in Section
-------
3.4).
- ----
2.12.2 The failure of any Bank to make any Loan on any Borrowing Date
shall not relieve any other Bank of any obligation hereunder to make a Loan on
such Borrowing Date, but no Bank shall be responsible for the failure of any
other Bank to make the Loan to be made by such other Bank on any Borrowing Date.
Any Bank that fails to make a Loan to the Borrower on a Borrowing Date shall be
liable to the Borrower for such failure, and the Borrower may proceed to enforce
this Agreement against such defaulting Bank.
2.13 Sharing of Payments. If, other than as expressly provided elsewhere
-------------------
herein, any Bank shall obtain on account of the Obligations owing to it any
payment (whether voluntary, involuntary, through the exercise of any right of
set-off, or otherwise) in excess of its Pro Rata Share, such Bank shall
immediately (a) notify the Administrative Agent of such fact, and (b) purchase
from the other Banks such participations in the Loans made by them as shall be
necessary to cause such purchasing Bank to share the excess payment pro rata
with each of them; provided, however, that if all or any portion of such excess
--------
payment is thereafter recovered from the purchasing Bank, such purchase shall to
that extent be rescinded and each other Bank shall repay to the purchasing Bank
the purchase price paid therefor, together with an amount equal to such paying
Bank's ratable share (according to the proportion of (i) the amount of such
paying Bank's required repayment to (ii) the total amount so recovered from the
purchasing Bank) of any interest or other amount paid or payable by the
purchasing Bank in respect of the total amount so recovered. The Borrower agrees
that any Bank so purchasing a participation from another Bank may, to the
fullest extent permitted by law, exercise all its rights of payment (including
the right of set-off, as limited by Section 10.9) with respect to such
------------
participation as fully as if such Bank were the direct creditor of the Borrower
in the amount of such participation. The Administrative Agent will keep records
(which shall be conclusive and binding in the absence of manifest error) of
participations purchased under this Section 2.13, and will in each case notify
------------
the Banks following any such purchases or repayments.
28
<PAGE>
2.14 Security. All obligations of the Borrower under this Agreement, the
--------
Notes and all other Loan Documents (but not including the Environmental
Indemnity) shall be secured in accordance with the Collateral Documents.
2.15 Reconveyance. The Administrative Agent shall reconvey or release a
------------
Property from the lien of the applicable Deed of Trust upon the satisfaction of
all of the following conditions precedent:
(a) The Borrower shall have delivered to the Administrative Agent a
written request for the reconveyance or release of such Property at least
ten (10) days prior to the requested reconveyance or release date;
(b) The Borrower shall have paid to the Administrative Agent, for the
account of the Banks, as a mandatory prepayment of principal of the Loans,
an amount equal to the applicable Release Price for such Property;
(c) The Borrower shall have complied, with respect to such Property,
with all applicable Requirements of Law governing the subdivision and
transfer of real property;
(d) No Monetary Default or Event of Default shall have occurred and
be continuing, except the occurrence of any Monetary Default or Event of
Default that would be fully cured by the reconveyance or release of such
Property from the lien of the applicable Deed of Trust; and
(e) The Borrower shall have delivered to the Administrative Agent
such endorsements to the Administrative Agent's policies of title insurance
covering the Deeds of Trust as the Administrative Agent may reasonably
request.
The Administrative Agent and the Banks acknowledge that a portion of the
Property located in Woodridge, Illinois and more particularly described in
Exhibit I (the "Woodridge Property"), is the subject of a condemnation
- --------- ------------------
proceeding (the "Woodridge Condemnation Proceeding") commenced by the Illinois
---------------------------------
State Toll Highway Authority in connection with its proposed extension of
Interstate 355 from its current terminus at Interstate 55 to a new southern
terminus south of Internationale Centre. The parties anticipate that the
Illinois State Toll Highway Authority will condemn approximately 70.6833 acres
of the Woodridge Property in substantially the configuration set forth on
Exhibit J (the "Taking Area") for purposes of expanding the Interstate 55 and
- --------- -----------
355 interchange, extending the main line of Interstate 355 through the Woodridge
Property and using the surrounding areas for storm water retention.
Notwithstanding any contrary provision of this Agreement or the Deed of Trust
encumbering the Woodridge Property, and provided that no Event of Default has
occurred and remains uncured, the Taking Area is not increased in size without
the prior written consent of the Majority Banks and the location of the Taking
Area is not changed without the prior written consent of the Majority Banks:
29
<PAGE>
(i) the Borrower may retain all of the Net Proceeds of the Woodridge
Condemnation Proceeding for its own account;
(ii) at such time as title to the Taking Area is to vest in the
Illinois State Toll Highway Authority pursuant to the Woodridge
Condemnation Proceeding, the Administrative Agent shall, upon the
Borrower's request, cause the Taking Area to be released from the lien of
the Deed of Trust encumbering the Woodridge Property, without payment of
any Release Price but subject to all of the other conditions of this
Section 2.15; and
------------
(iii) the Borrower may, without the consent or participation of the
Administrative Agent or any Bank, settle or compromise the Woodridge
Condemnation Proceeding, and upon the Borrower's request, the
Administrative Agent, on behalf of the Banks, shall execute any documents
reasonably required to effectuate any such compromise or settlement (or
otherwise necessary in connection with the Woodridge Condemnation
Proceeding) so long as such documents do not impose additional obligations
on the Administrative Agent or any Bank.
2.16 Encumbrance of Additional Properties.
------------------------------------
2.16.1 The Borrower may, from time to time (but in no event more than
once during any calendar month) up to three (3) months prior to the Maturity
Date, submit to the Administrative Agent for the Administrative Agent's review
and, if required by the terms of this Section 2.16, the Supermajority Banks'
------------
approval, a real property owned by the Borrower that is either (i) improved with
an industrial, manufacturing or warehouse distribution facility, a research and
development facility, an office building, or a shopping center, theater,
restaurant facility or other similar retail project or use (or any combination
thereof) (which may include Entitled Land on which the Borrower has constructed
any of the foregoing types of improvements), or (ii) unimproved, but satisfies
all of the conditions set forth in the definition of the term "Entitled Land",
that the Borrower proposes to encumber with a Deed of Trust for the benefit of
the Administrative Agent, as administrative agent for the Banks, as additional
security for the Obligations. Any such submission shall be accompanied or
promptly supplemented by a "New Property Information Package" relating to the
property, containing all of the following information (except with respect to an
unimproved property, for which items (e) and (f) will not be required), in form
reasonably satisfactory to the Administrative Agent:
(a) a detailed site plan for the property;
(b) the most recent written appraisal of the property (if available);
(c) a preliminary title report (and copies of all exceptions noted
therein);
30
<PAGE>
(d) a "Phase 1" environmental assessment of the property prepared by
a qualified engineer or consultant reasonably acceptable to the
Administrative Agent;
(e) a rent roll for the property, together with copies of all tenant
leases;
(f) a statement of profit and loss for the property for the most
recent twelve (12) consecutive calendar months; and
(g) all other information reasonably required by the Administrative
Agent.
2.16.2 Upon its receipt of a complete New Property Information
Package for any property, the Administrative Agent shall provide a copy of such
New Property Information Package to each Bank, and shall cause an Appraisal of
the property to be prepared by (i) an independent appraiser selected by the
Administrative Agent or (ii) the BofA in-house appraisal department. The
Administrative Agent shall notify each Bank of the identity and qualifications
of the proposed appraiser, which appraiser shall be deemed approved unless a
Bank objects within three (3) Business Days after receipt of such notice. The
Administrative Agent shall deliver a copy of such Appraisal to each Bank, and
the Banks shall review such Appraisal within ten (10) Business Days after
receipt and, based upon such review and such comments as the Administrative
Agent may receive from any Bank within such ten (10) Business Day period, the
Administrative Agent shall make such adjustments to such Appraisal as the
Administrative Agent, on behalf of the Banks, reasonably deems appropriate.
2.16.3 Within five (5) Business Days after the Administrative Agent
determines the final Appraised Value for a property, the Administrative Agent
shall determine whether such property satisfies all of the following conditions:
(a) such property is improved with a completed industrial,
manufacturing or warehouse distribution facility, or is an R&D Property;
(b) 100% of the net rentable area of such property is subject to one
or more signed leases to paying third party tenants expiring not less than
five (5) years after the date of the Administrative Agent's determination;
and
(c) such property would, if encumbered with a Deed of Trust, cause an
increase in the Availability of $10,000,000.00 or less.
If the Administrative Agent determines that such property satisfies all of the
conditions set forth in this Section 2.16.3, the Administrative Agent may, in
--------------
its sole discretion, approve encumbering such property with a Deed of Trust for
the benefit of the Administrative Agent, as administrative agent for the Banks;
if the Administrative Agent determines that such property does not satisfy all
such conditions, then the Supermajority Banks may, in their sole discretion,
approve encumbering such property with a Deed of Trust for the benefit of the
Administrative Agent, as administrative agent for the Banks.
31
<PAGE>
2.16.4 Upon the satisfaction of all of the conditions set forth in
Sections 4.1.2 (if required by the Administrative Agent), 4.1.3 (if required by
- -------------- -----
the Administrative Agent), 4.1.6, 4.1.7, 4.1.8, 4.1.9 and 4.1.10 solely with
-------------------------------------
respect to the new property approved by the Administrative Agent or by the
Supermajority Banks, as applicable, such property shall be a "Property" for all
purposes under this Agreement and the other Loan Documents, and the Availability
shall be recomputed taking account of such additional Property.
2.17 Development of Entitled Land. The Borrower shall have the right,
----------------------------
without the consent of the Administrative Agent or the Banks, to develop any of
the Entitled Land (including the performance of site work, the installation of
utilities or infrastructure, the alteration or demolition of existing
improvements, if any, or the construction of improvements on any such Entitled
Land, or the taking of such actions as may be necessary to obtain permits or
approvals for the development of any such Entitled Land). However, unless the
Borrower submits such developed Entitled Land to the Administrative Agent
pursuant to Section 2.16, and such developed Entitled Land satisfies the
------------
requirements of Section 2.16, such Property shall continue to be considered
------------
Entitled Land notwithstanding the Borrower's construction of improvements
thereon.
ARTICLE 3.
TAXES, YIELD PROTECTION AND ILLEGALITY
--------------------------------------
3.1 Taxes. The Borrower shall pay all Other Taxes. In addition, if after
-----
the date hereof any new Taxes are at any time imposed on any payments under or
in respect of any LIBOR Loan or any instrument or agreement required hereunder,
including payments made pursuant to this Section 3.1, and the result thereof is
-----------
to increase the cost to any Bank or its Offshore Lending Office of making or
maintaining any LIBOR Loan or to reduce the amounts received or receivable by
such Bank or its Offshore Lending Office in connection with any LIBOR Loan, then
within thirty (30) days following such Lender's request, from time to time the
Borrower shall pay all such Taxes and shall also pay to the Administrative
Agent, at the time interest is paid, all additional amounts which such Bank
specifies as necessary to preserve the yield, after payment of such Taxes, that
such Bank would have received if such taxes had not been imposed; provided,
--------
however, that the Borrower shall not be obligated to pay such Bank any
compensation attributable to any period prior to the date that is ninety (90)
days prior to the date on which such Bank gave notice to the Borrower of the
circumstance entitling such Bank to compensation. Each Bank agrees to notify the
Borrower promptly of its actual knowledge of any event that would entitle such
Bank to compensation under this Section 3.1 (and further agrees to designate a
-----------
different Lending Office with respect to its LIBOR Loans if such redesignation
will avoid the need for or reduce the amount of any such compensation and will
not, in the judgment of such Bank, be illegal or otherwise disadvantageous to
such Bank); provided further, however, that a Lender's failure to give any such
----------------
notice shall not affect the Borrower's obligation to pay such compensation,
except as otherwise expressly provided above. If any Bank claims
32
<PAGE>
compensation or a right to reimbursement under this Section 3.1, the Borrower
-----------
may at any time, upon at least four (4) Business Days' prior written notice to
the Administrative Agent and the Bank and upon payment of all amounts then due
under this Section 3.1 plus any prepayment fee required under Section 3.4,
-----------
prepay such Bank's affected LIBOR Loans or request that such Bank's LIBOR Loans
be converted to Reference Rate Loans.
3.2 Illegality.
----------
3.2.1 If any Bank determines that (a) the introduction of any
Requirement of Law, or any change in any Requirement of Law, or in the
interpretation or administration of any Requirement of Law, occurring after the
date of this Agreement has made it unlawful, or (b) any central bank or other
Governmental Authority has asserted after the date of this Agreement that it is
unlawful for such Bank or its applicable Lending Office to make LIBOR Loans,
then, on notice thereof by such Bank to the Borrower and the Administrative
Agent, any obligation of such Bank to make LIBOR Loans shall be suspended until
such Bank notifies the Administrative Agent and the Borrower that the
circumstances giving rise to such determination no longer exist.
3.2.2 If any Bank determines that it is unlawful to maintain any
LIBOR Loan, the Borrower shall, upon its receipt of notice of such fact and
demand from such Bank (with a copy to the Administrative Agent), prepay in full
such Bank's LIBOR Loans then outstanding, together with interest accrued
thereon, but without any amounts that would otherwise be required to be paid in
connection with such prepayment under Section 3.4, either on the last day of the
-----------
Interest Period thereof, if such Bank may lawfully continue to maintain such
LIBOR Loans to such day, or immediately, if such Bank may not lawfully continue
to maintain such LIBOR Loans. If the Borrower is required to so prepay any LIBOR
Loan, then concurrency with such prepayment, the Borrower shall borrow from the
affected Bank, in the amount of such repayment, a Reference Rate Loan.
3.2.3 If the obligation of any Bank to make or maintain LIBOR Loans
has been so terminated or suspended, the Borrower may elect, by giving notice to
such Bank and the Administrative Agent, chat all Loans which would otherwise be
made by such Bank as LIBOR Loans shall be instead Reference Rate Loans.
3.2.4 Before giving any notice to the Borrower and the Administrative
Agent under this Section 3.2, the affected Bank shall designate a different
-----------
Lending Office with respect to its LIBOR Loans if such designation will avoid
the need for giving such notice or making such demand and will not, in the
judgment of such Bank, be illegal or otherwise disadvantageous to such Bank.
3.3 Increased Costs and Reduction of Return.
---------------------------------------
3.3.1 If any Bank determines that, due to either (i) the introduction
of, or any change in or in the interpretation of, any law or regulation
occurring after the date of
33
<PAGE>
this Agreement or (ii) the compliance by such Bank (or its Lending Office) with
any guideline or request from any central bank or other Governmental Authority
(whether or not having the force of law) imposed after the date hereof, there
shall be any increase in the cost to such Bank of agreeing to make or making,
funding or maintaining any LIBOR Loans, then the Borrower shall be liable for,
and shall from time to time, within thirty (30) days of demand by such Bank
(with a copy of such demand to be sent to the Administrative Agent), pay to the
Administrative Agent, for the account of such Bank, additional amounts as are
sufficient to compensate such Bank for such increased costs; provided, however,
--------
that the Borrower shall not be obligated to pay to the Administrative Agent, for
the account of such Bank, any compensation attributable to any period prior to
the date that is ninety (90) days prior to the date on which such Bank gave
notice to the Borrower of the circumstance entitling such Bank to compensation.
A Bank's statement claiming compensation under this Section 3.3.1 and setting
-------------
forth the additional amounts to be paid hereunder shall, in the absence of
manifest error, be conclusive and binding for all purposes so long as the amount
claimed is calculated and charged in the same manner as such amounts are
generally calculated and charged for such Bank's other similarly situated
borrowers. Each Bank agrees promptly to notify the Borrower (with a copy to the
Administrative Agent) of its actual knowledge of any event that would entitle
such Bank to compensation under this Section 3.3.1 (and further agrees to
-------------
designate a different Lending Office with respect to its LIBOR Loans if such
redesignation will avoid the need for, or reduce the amount of, any such
compensation and will not, in the judgment of such Bank, be illegal or otherwise
disadvantageous to such Bank); provided further, however, that a Bank's failure
----------------
to give any such notice(s) shall not affect the Borrower's obligation to pay
such additional amounts hereunder, except as otherwise expressly provided above.
If any Bank claims compensation under this Section 3.3.1, the Borrower may at
-------------
any time, upon at least four (4) Business Days' prior written notice to the
Administrative Agent and such Bank, and upon payment of all amounts required
under this Section 3.3.1 plus any prepayment fee required under Section 3.4,
------------- ---- -----------
prepay such Bank's LIBOR Loans or request that such Bank's LIBOR Loans be
converted to Reference Rate Loans.
3.3.2 If after the date of this Agreement any Bank determines that
(i) the introduction of any Capital Adequacy Regulation, (ii) any change in any
Capital Adequacy Regulation, (iii) any change in the interpretation or
administration of any Capital Adequacy Regulation by any central bank or other
Governmental Authority charged with the interpretation or administration
thereof, or (iv) compliance by such Bank (or its Lending Office), or any
corporation controlling such Bank, with any Capital Adequacy Regulation imposed
after the date hereof affects or would affect the amount of capital required or
expected to be maintained by such Bank or any corporation controlling such Bank,
and such Bank (taking into consideration such Bank's or such corporation's
policies with respect to capital adequacy and such Bank's desired return on
capital) determines that the amount of such capital is increased as a
consequence of its Commitment, loans, credits or obligations under this
Agreement, then, within thirty (30) days of such Bank's demand to the Borrower
(with a copy to the Administrative Agent), the Borrower shall pay to the
Administrative Agent, for the account of such Bank, from time to time as
specified by such Bank, additional amounts sufficient to compensate such Bank
for such increase; provided, however, that the
--------
34
<PAGE>
Borrower shall not be obligated to pay to the Administrative Agent, for the
account of such Bank, any compensation attributable to any period prior to the
date chat is ninety (90) days prior to the date on which such Bank gives notice
to the Borrower of the circumstance entitling such Bank to compensation. Each
Bank agrees promptly to notify the Borrower (with a copy to the Administrative
Agent) of any circumstances that would cause the Borrower to pay additional
amounts pursuant to this Section 3.3.2; provided further, however, that a Bank's
------------- ----------------
failure to give any such notice(s) shall not affect the Borrower's obligation to
pay such additional amounts hereunder, except as otherwise expressly provided
above. Notwithstanding the foregoing, the Borrower shall not be required to pay
any amount to any Bank under this Section 3.3.2 if such Bank has previously
-------------
received the compensation otherwise payable hereunder as a result of any other
payment made by the Borrower to such Bank under any other section of this
Agreement or under one of the other Loan Documents.
3.4 Funding Losses. The Borrower shall reimburse each Bank, and hold each
--------------
Bank harmless from, any loss or expense which the Bank may sustain or incur as a
consequence of:
(a) the Borrower's failure to borrow, continue or convert a Loan
after the Borrower has given (or is deemed to have given) a Notice of
Borrowing or a Notice of Conversion/Continuation;
(b) the Borrower's failure to make any prepayment in accordance with
any notice delivered under Section 2.5;
-----------
(c) the prepayment (including pursuant to Section 2.6) or other
-----------
payment (including after acceleration thereof) of a LIBOR Loan on a day
that is not the last day of the relevant Interest Period; or
(d) the automatic conversion under Section 2.4 of any LIBOR Loan to a
-----------
Reference Rate Loan on a day that is not the last day of the relevant
Interest Period;
to the extent that any such loss or expense arises from the liquidation or
reemployment of funds obtained by it to maintain its LIBOR Loans or from fees
payable to terminate the deposits from which such funds were obtained. For
purposes of this Section 3.4, the loss or expense arising from the liquidation
-----------
or reemployment of funds obtained to maintain any LIBOR Loans shall be an amount
equal to the sum of (i) $250.00 and (ii) the amount, if any, by which X exceeds
Y, and (iii) all other costs and expenses that such Bank would reasonably expect
to incur in connection with the prepayment of the applicable LIBOR Loans, where
"X" equals the additional interest that would have accrued on the principal
amount of the LIBOR Loan prepaid, without regard to the Applicable Margin, if
that principal amount had remained outstanding until the last day of the
applicable Interest Period, and "Y" equals the interest that such Bank could
recover by placing the prepaid funds on deposit in the London U.S. Dollar
interbank market for a period beginning on the day of prepayment and ending on
the last day of the applicable Interest Period, or for a comparable period for
which an appropriate rate quote can be obtained. For purposes of calculating
35
<PAGE>
amounts payable by the Borrower to a Bank under this Section 3.4 and under
-----------
Section 3.3.1, each LIBOR Loan made by a Bank (and each related reserve, special
- -------------
deposit or similar requirement) shall be conclusively deemed to have been funded
at the LIBOR for such LIBOR Loan by a matching deposit or other borrowing in the
London U.S. Dollar interbank market for a comparable amount and for a comparable
period, whether or not such LIBOR Loan is in fact so funded.
3.5 Inability to Determine Rates. If the Majority Banks reasonably
----------------------------
determine that for any reason beyond their reasonable control adequate and
reasonable means do not exist for determining LIBOR for any requested Interest
Period with respect to a proposed LIBOR Loan, or that the LIBOR applicable
pursuant to Section 2.8.1 for any requested Interest Period with respect to a
-------------
proposed LIBOR Loan does not adequately and fairly reflect the cost to such
Banks of funding such Loan (and, as a matter of general policy, the Majority
Banks are not making LIBOR Loans to other borrowers similarly situated), the
Administrative Agent will promptly so notify the Borrower and each Bank.
Thereafter, the obligation of the Banks to make or maintain LIBOR Loans
hereunder shall be suspended until the Administrative Agent, upon the
instruction of the Majority Banks, revokes such notice in writing. Upon receipt
of such notice, the Borrower may revoke any Notice of Borrowing or Notice of
Conversion/Continuation then submitted by it. If the Borrower does not revoke
such Notice, the Banks shall make, convert or continue the Loans, as proposed by
the Borrower, in the amount specified in the applicable notice submitted by the
Borrower, but such Loans shall be made, converted or continued as Reference Rate
Loans instead of LIBOR Loans. No breakage or other costs described in Section
-------
3.4 shall be charged or payable in connection with any revocation of a notice by
- ---
Borrower or any conversion of LIBOR Loans under this Section 3.5.
-----------
3.6 Certificates of Banks. Any Bank claiming reimbursement or
---------------------
compensation under this Article 3 shall deliver to the Borrower (with a copy to
---------
the Administrative Agent) a certificate setting forth in reasonable detail the
amount payable to such Bank hereunder, and such certificate shall be conclusive
and binding on the Borrower (a) so long as the amount payable is calculated and
charged in the same manner as such amounts are calculated and charged generally
to such Bank's other borrowers similarly situated and (b) in the absence of
manifest error.
3.7 Survival. The agreements and obligations of the Borrower in this
--------
Article 3 shall survive the payment and performance of all other Obligations.
- ---------
ARTICLE 4.
CONDITIONS PRECEDENT
--------------------
4.1 Conditions of Initial Loans. The obligation of each Bank to make its
---------------------------
initial Loan hereunder is subject to the condition that the Administrative Agent
shall have received on or before the Closing Date all of the following, in form
and substance reasonably
36
<PAGE>
satisfactory to the Administrative Agent and each Bank, and in sufficient copies
for each Bank:
4.1.1 Credit Agreement, Notes and Environmental Indemnity. This
---------------------------------------------------
Agreement, the Notes and the Environmental Indemnity covering each of the
Properties, each executed by the Borrower.
4.1.2 Resolutions; Incumbency.
-----------------------
(a) Copies of the resolutions of the board of directors of the
Borrower authorizing the transactions contemplated hereby, certified as of
the Closing Date by the Secretary or an Assistant Secretary of the
Borrower; and
(b) A certificate of the Secretary or Assistant Secretary of the
Borrower certifying the names and true signatures of the officers of the
Borrower authorized to execute and deliver this Agreement, all other Loan
Documents to be delivered by it hereunder, and the Environmental Indemnity.
4.1.3 Organization Documents; Good Standing. Each of the following
-------------------------------------
documents:
(a) the articles or certificate of incorporation of the Borrower
as in effect on the Closing Date, certified by the Secretary of State of
the jurisdiction of the Borrower's incorporation; and
(b) good standing and tax good standing certificates for the
Borrower from the Secretary of State (or similar, applicable Governmental
Authority) of its state of incorporation and each state in which a Property
is located, as of a recent date.
4.1.4 Legal Opinions.
--------------
(a) one or more opinions of counsel to the Borrower addressed to
the Administrative Agent and the Banks, collectively substantially in the
form of Exhibit D-1; and
-----------
(b) opinions of local counsel to the Administrative Agent in the
States of Arizona, Illinois, Oregon and Texas addressed to the
Administrative Agent and the Banks, substantially in the form of Exhibit D-
---------
2.
-
4.1.5 Payment of Fees. Evidence of payment by the Borrower of all
---------------
accrued and unpaid fees, costs and expenses to the extent then due and payable
on the Closing Date, together with Attorney Costs of BofA to the extent invoiced
prior to or on the Closing Date, plus such additional amounts of Attorney Costs
as shall constitute BofA's reasonable estimate of Attorney Costs incurred or to
be incurred by it through the closing proceedings (provided
37
<PAGE>
that such estimate shall not thereafter preclude final settling of accounts
between the Borrower and BofA); including any such costs, fees and expenses
arising under or referenced in Sections 2.9 and 10.4.
---------------------
4.1.6 Collateral Documents. The Collateral Documents, executed by the
--------------------
Borrower, in appropriate form for recording, where necessary, together with:
(a) copies of all UCC-1 financing statements to be filed,
registered or recorded to perfect the security interests of the
Administrative Agent, for the benefit of the Banks, or other evidence
satisfactory to the Administrative Agent that there will be filed,
registered or recorded all financing statements and other filings,
registrations and recordings necessary and advisable to perfect the Liens
of the Administrative Agent, for the benefit of the Banks, in accordance
with applicable law;
(b) written advice relating to such Lien and judgment searches as
the Administrative Agent shall have requested, and such termination
statements or other documents as may be necessary to confirm that the
Collateral is subject to no other Liens in favor of any Persons (other than
Permitted Liens);
(c) evidence that all other actions necessary or, in the
reasonable opinion of the Administrative Agent or the Banks, desirable to
perfect and protect the first priority security interest created by the
Collateral Documents will be taken, including the recording of each of the
Deeds of Trust;
(d) funds sufficient to pay any filing or recording tax or fee in
connection with any and all UCC-1 financing statements and the Deeds of
Trust;
(e) with respect to each Property, an A.L.T.A. Form B lender's
policy of title insurance, to the extent available in the jurisdiction in
which the applicable Property is located (or other form available in the
jurisdiction in which the applicable Property is located and otherwise
acceptable to the Administrative Agent and the Banks), or a binder
therefor, issued by a title insurance company satisfactory to the
Administrative Agent and the Banks (the Administrative Agent and the Banks
hereby acknowledging that Commonwealth Title Insurance Company is
acceptable) insuring (or undertaking to insure, in the case of a binder)
that the applicable Deed of Trust creates and constitutes a valid first
Lien encumbering such Property in favor of the Administrative Agent,
subject only to exceptions reasonably acceptable to the Administrative
Agent and the Banks, with such endorsements, affirmative insurance and
reinsurance as the Administrative Agent or any Bank may reasonably request;
(f) evidence that the Administrative Agent has been named as loss
payee under all policies of casualty insurance, and as additional insured
under all policies of liability insurance, required by this Agreement or
the applicable Deed of Trust;
38
<PAGE>
(g) to the extent required under Section 6.6, evidence of flood
-----------
insurance and earthquake insurance meeting the requirements of Section 6.6;
-----------
(h) current A.L.T.A. surveys and surveyor's certification as to
each Property in respect of which there is delivered a Deed of Trust, or as
may be reasonably required by the Administrative Agent, each in form and
substance reasonably satisfactory to the Administrative Agent and the
Banks;
(i) Appraisals of each Property;
(j) proof of payment of all title insurance premiums, documentary
stamp or intangible taxes, recording fees and mortgage taxes payable in
connection with the recording of any Deed of Trust or the issuance of the
title insurance policies (whether due on the Closing Date or in the
future);
(k) an estoppel certificate executed by the tenant under any
lease of a Property that covers twenty-five percent (25%) or more of the
net rentable area of such Property; and
(l) evidence that all other actions necessary or, in the
reasonable opinion of the Administrative Agent or the Banks, desirable to
perfect and protect any of the first priority Liens created by the
Collateral Documents, and to enhance the Administrative Agent's ability to
preserve and protect its interests in and access to any of the Collateral,
have been taken.
4.1.7 Environmental Review. An environmental site assessment with
--------------------
respect to each Property as to which the Administrative Agent is granted a Lien,
for the benefit of the Banks, dated as of a recent date prior to the Closing
Date, prepared by a qualified firm reasonably acceptable to the Administrative
Agent and the Banks (the Administrative Agent and the Banks hereby approving
Dames & Moore), confirming, among other things, that such Property is either
free from Hazardous Materials that violate applicable Environmental Laws or has
an acceptable remediation plan in place and that the current operations
conducted thereon are in compliance with all Environmental Laws.
4.1.8 Lease Review. Copies of all leases of each Property, which
------------
leases shall be satisfactory in form and substance to the Administrative Agent.
4.1.9 Certificate. A certificate signed by a Senior Officer, dated
-----------
as of the Closing Date, stating that:
(a) the representations and warranties contained in Article 5 are
true and correct on and as of such date, as though made on and as of such
date;
(b) no Default or Event of Default exists or would result from
the initial Borrowing; and
39
<PAGE>
(c) there has occurred since December 31, 1995, no event or
circumstance that has resulted or could reasonably be expected to result in
a Material Adverse Effect.
4.1.10 Other Documents. Such other approvals, opinions, documents or
---------------
materials as the Administrative Agent or any Bank may reasonably request.
4.2 Conditions to All Borrowings. The obligation of each Bank to make any
----------------------------
Loan to be made by it (including its initial Loan) is subject to the
satisfaction of all of the following conditions precedent on the relevant
Borrowing Date:
4.2.1 Notice of Borrowing. The Administrative Agent shall have
-------------------
received (with, in the case of the initial Loan only, a copy for each Bank) a
Notice of Borrowing.
4.2.2 Continuation of Representations and Warranties. The
----------------------------------------------
representations and warranties in Article 5 shall be true and correct on and as
---------
of such Borrowing Date with the same effect as if made on and as of such
Borrowing Date (except to the extent such representations and warranties
expressly refer to an earlier date, in which case they shall be true and correct
as of such earlier date); provided, however, that in connection with any Notice
--------
of Borrowing, the Borrower may supplement or update the representations and
warranties set forth in Article 5, by written notice to the Administrative
---------
Agent, and Article 5 shall automatically be deemed modified so long as the
---------
modifications requested by Borrower do not reflect changes in facts or
circumstances which constitute a Material Adverse Effect.
4.2.3 No Existing Default. No Monetary Default, other Default that e
-------------------
Borrower is not in the process of curing (to the extent permitted by Section
-------
8.1) or Event of Default shall exist or shall result from such Borrowing.
- ---
4.2.4 No Future Advance Notice. Neither the Administrative Agent nor
------------------------
any Bank shall have received from the Borrower, or from any other Person who has
reasonable cause to know, any notice that any Collateral Document will no longer
secure on a first priority basis future advances or future Loans to be made or
extended under this Agreement.
4.2.5 Further Assurances. The Borrower shall have executed and
------------------
acknowledged (or caused to be executed and acknowledged) and delivered to the
Administrative Agent all documents, and taken all actions, reasonably required
by the Administrative Agent from time to time to confirm the rights created or
now or hereafter intended to be created under the Loan Documents or the
Environmental Indemnity, to protect and further the validity, priority and
enforceability of the applicable Collateral Documents, to subject to the
Collateral Documents any property intended by the terms of any Loan Document to
be covered by the Collateral Documents, or otherwise to carry out the purposes
of the Loan Documents and the transactions contemplated by the Loan Documents.
4.2.6 Title Indorsements. The Administrative Agent shall have
------------------
received, at the Borrower's sole expense, a commitment for quarterly date-down
indorsements to the
40
<PAGE>
policies of title insurance covering the Properties, all in form and substance
satisfactory to the Administrative Agent and issued by the title insurer that
issued the original title policies.
Each Notice of Borrowing submitted by the Borrower hereunder shall constitute a
representation and warranty by the Borrower hereunder, as of the date of each
such notice and as of each Borrowing Date, that the conditions in Section 4.2
-----------
are satisfied, except as otherwise specified therein.
4.3 Letters of Credit. In addition to the conditions set forth in
-----------------
Sections 4.1 and 4.2, BofA's obligation to issue any Letter of Credit is subject
- ------------
to the satisfaction of all of the following conditions precedent on the relevant
issuance date:
4.3.1 Letter of Credit Application. The Borrower shall have executed
----------------------------
and delivered to the Administrative Agent an application and agreement for
standby letter of credit substantially in the form of Exhibit K.
---------
ARTICLE 5.
REPRESENTATIONS AND WARRANTIES
------------------------------
The Borrower represents and warrants to the Administrative Agent and
each Bank that:
5.1 Corporate Existence and Power. The Borrower:
-----------------------------
(a) is a corporation duly organized, validly existing and in good
standing under the laws of the jurisdiction of its incorporation;
(b) has the power and authority and all governmental licenses,
authorizations, consents and approvals to own its assets, carry on its
business and to execute, deliver, and perform its obligations under the
Loan Documents and the Environmental Indemnity;
(c) is duly qualified as a foreign corporation and is in good
standing under the laws of each jurisdiction where its ownership, lease or
operation of property or the conduct of its business requires such
qualification or license; and
(d) is in compliance with all Requirements of Law; except, in
each case referred to in clause (c) or clause (d) of this Section 5.1, to
-----------
the extent that the failure to do so could not reasonably be expected to
have a Material Adverse Effect.
5.2 Corporate Authorization; No Contravention. The execution, delivery
-----------------------------------------
and performance by the Borrower of this Agreement, each other Loan Document to
which the
41
<PAGE>
Borrower is party and the Environmental Indemnity, have been duly authorized by
all necessary corporate action, and do not and will not:
(a) contravene the terms of any of the Borrower's Organization
Documents;
(b) conflict with or result in any breach or contravention of, or
the creation of any Lien under (i) any document evidencing any Contractual
Obligation to which the Borrower is a party in a manner that could
reasonably be expected to cause a Material Adverse Effect, or (ii) any
order, injunction, writ or decree of any Governmental Authority known to
the Borrower to which the Borrower or its property is subject in a manner
that could reasonably be expected to cause a Material Adverse Effect; or
(c) violate any Requirement of Law in a manner that could
reasonably be expected to cause a Material Adverse Effect.
5.3 Governmental Authorization. No approval, consent, exemption,
--------------------------
authorization, or other action by, or notice to, or filing with, any
Governmental Authority (except for recordings or filings in connection with the
Liens granted to the Administrative Agent under the Collateral Documents) is
necessary or required in connection with the Borrower's execution, delivery or
performance of this Agreement, any other Loan Document to which the Borrower is
a party or the Environmental Indemnity, or, except as otherwise provided in the
opinions of counsel delivered to the Administrative Agent pursuant to Section
-------
4.1.4 (the "Opinions of Counsel"), the enforcement of any of such agreements
- ----- -------------------
against the Borrower.
5.4 Binding Effect. This Agreement, each other Loan Document to which the
--------------
Borrower is a party and the Environmental Indemnity constitute the legal, valid
and binding obligations of the Borrower, enforceable against the Borrower in
accordance with their respective terms, except as enforceability may be limited
by applicable bankruptcy, insolvency, or similar laws affecting the enforcement
of creditors' rights generally or by equitable principles relating to
enforceability, and subject to the other qualifications on enforceability set
forth in the Opinions of Counsel.
5.5 Litigation. Except as specifically disclosed in Schedule 5.5, there
---------- ------------
are no actions, suits, proceedings, claims or disputes pending, or to the best
knowledge of the Borrower, threatened or contemplated, at law, in equity, in
arbitration or before any Governmental Authority, against the Borrower or any of
its properties, which:
(a) purport to affect or pertain to this Agreement, any other
Loan Document or the Environmental Indemnity, or any of the transactions
contemplated hereby or thereby; or
(b) involve amounts in excess of Five Million Dollars
($5,000,000) and, if determined adversely to the Borrower, would reasonably
be expected to have a
42
<PAGE>
Material Adverse Effect. No injunction, writ, temporary restraining order
or any order of any nature has been issued by any court or other
Governmental Authority purporting to enjoin or restrain the execution,
delivery or performance of this Agreement, any other Loan Document or the
Environmental Indemnity, or directing that the transactions provided for
herein or therein not be consummated as herein or therein provided.
5.6 No Default. No Default or Event of Default exists or would result
----------
from the incurring of any Obligations by the Borrower or from the grant or
perfection of the Liens of the Administrative Agent and the Banks on the
Collateral. As of the Closing Date, the Borrower is not in default under or with
respect to any Contractual Obligation in any respect which, individually or
together with all such defaults, could reasonably be expected to have a Material
Adverse Effect.
5.7 ERISA Compliance.
----------------
(a) Except as specifically disclosed in Schedule 5.7, each Plan
------------
is in compliance with the applicable provisions of ERISA, the Code and
other federal or state law, except to the extent that any noncompliance
could reasonably be expected to result in a Material Adverse Effect. Except
as specifically disclosed in Schedule 5.7, each Plan which is intended to
------------
qualify under Section 401(a) of the Code has received a favorable
determination letter from the IRS and, to the best knowledge of the
Borrower, nothing has occurred which would cause the loss of such
qualification.
(b) There are no pending, or to the best knowledge of Borrower
threatened, claims, actions or lawsuits, or action by any Governmental
Authority, with respect to any Plan which has resulted or could reasonably
be expected to result in a Material Adverse Effect. There has been no
prohibited transaction or other violation of the fiduciary responsibility
rule with respect to any Plan which could reasonably result in a Material
Adverse Effect.
(c) Except as specifically disclosed in Schedule 5.7, no ERISA
------------
Event has occurred or is reasonably expected to occur with respect to any
Plan which could reasonably be expected to result in a Material Adverse
Effect.
(d) Except as specifically disclosed in Schedule 5.7, no Pension
------------
Plan has any unfunded pension liability.
(e) Except as specifically disclosed in Schedule 5.7, the
------------
Borrower has not incurred, nor does it reasonably expect to incur, any
liability under Title IV of ERISA with respect to any Plan (other than
premiums due and not delinquent under Section 4007 of ERISA), which could
reasonably be expected to result in a Material Adverse Effect.
43
<PAGE>
(f) Except as specifically disclosed in Schedule 5.7, the
------------
Borrower has not transferred any unfunded pension liability to any Person
or otherwise engaged in a transaction that could be subject to Section 4069
of ERISA.
(g) Neither the Borrower nor any ERISA Affiliate maintains or
contributes to any Plan subject to Section 412 of the Code. Neither the
Borrower nor any ERISA Affiliate has ever contributed to any Multiemployer
Plan.
5.8 Use of Proceeds; Margin Regulations. The proceeds of the Loans are to
-----------------------------------
be used solely for the purposes set forth in and permitted by Section 6.11 and
------------
Section 7.7. Neither the Borrower nor any Subsidiary is generally engaged in the
- -----------
business of purchasing or selling Margin Stock or extending credit for the
purpose of purchasing or carrying Margin Stock.
5.9 Title to Properties. Except with respect to the Property located at
-------------------
1065 North PacifiCenter Drive, Anaheim, California (the "Anaheim Office
--------------
Property"), the Borrower has good record and marketable title in fee simple to,
- --------
or valid leasehold interests in, all of the Properties, except for (i) Permitted
Encumbrances and (ii) such defects in title as could not, individually or in the
aggregate, have a Material Adverse Effect. With respect to the Anaheim Office
Property, SFPP, a wholly-owned Subsidiary of the Borrower, has good record and
marketable title in fee simple to such Property, except for (i) Permitted
Encumbrances and (ii) such defects in title as could not, individually or in the
aggregate, have a Material Adverse Effect. As of the Closing Date, the
Properties are subject to no Liens other than Permitted Liens or liens being
released in connection with the initial funding of the Loans on the Closing
Date.
5.10 Taxes. The Borrower and its Subsidiaries have filed all Federal and
-----
other material tax returns and reports required to be filed, and have paid all
Federal and other material taxes, assessments, fees and other governmental
charges levied or imposed upon them or their properties, income or assets
otherwise due and payable, except those which are being contested in good faith
by appropriate proceedings and for which adequate reserves have been provided in
accordance with GAAP. To the best of the Borrower's knowledge, there is no
proposed tax assessment against the Borrower or any of the Properties that
would, if made, have a Material Adverse Effect.
5.11 Financial Condition.
-------------------
(a) The audited consolidated financial statements of the Borrower and
its Subsidiaries dated December 31, 1995, and the related consolidated
statements of income or operations, shareholders equity and cash flows for
the fiscal year ended on that date (and the notes thereto):
(i) were prepared in accordance with GAAP consistently applied
throughout the period covered thereby, except as otherwise expressly noted
therein, subject to ordinary, good faith year-end audit adjustments;
44
<PAGE>
(ii) fairly present the financial condition of the Borrower and its
Subsidiaries as of the date thereof and results of operations for the
period covered thereby; and
(iii) except as specifically disclosed in Schedule 5.11, show
all material indebtedness and other liabilities of the Borrower and its
consolidated Subsidiaries as of the date thereof, including any liabilities
for taxes, material commitments and Contingent Obligations which are
required by GAAP to be shown in such financial statements.
(b) Since December 31, 1995, there has been no Material Adverse
Effect.
5.12 Environmental Matters.
---------------------
(a) Except as specifically disclosed in Schedule 5.12 or the reports
-------------
listed on Schedule 5.12, to the best of the Borrower's knowledge the on-
-------------
going operations of the Borrower and each of its Subsidiaries comply in all
respects with all Environmental Laws, except such non-compliance which
would not (if enforced in accordance with applicable law) result in
liability in excess of $5,000,000 for an individual site or $15,000,000 in
the aggregate.
(b) Except as specifically disclosed in Schedule 5.12 or the reports
-------------
listed on Schedule 5.12, to the best of the Borrower's knowledge the
-------------
Borrower and each of its Subsidiaries have obtained all licenses, permits,
authorizations and registrations required under any Environmental Law
("Environmental Permits") and necessary for their respective ordinary
---------------------
course operations, all such Environmental Permits are in good standing, and
the Borrower and each of its Subsidiaries are in compliance with all
material terms and conditions of such Environmental Permits.
(c) Except as specifically disclosed in Schedule 5.12 or the reports
-------------
listed on Schedule 5.12, none of the Borrower, any of its Subsidiaries or
-------------
any of their respective present property or operations, is subject to any
outstanding written order from or agreement with any Governmental
Authority, nor, to the best of the Borrower's knowledge, subject to any
judicial or docketed administrative proceeding, respecting any
Environmental Law, Environmental Claim or Hazardous Material.
(d) Except as specifically disclosed in Schedule 5.12 or the reports
-------------
listed on Schedule 5.12, to the best of the Borrower's knowledge there are
-------------
no Hazardous Materials or other conditions or circumstances existing with
respect to any property of the Borrower or any Subsidiary, or arising from
operations prior to the Closing Date, of the Borrower or any of its
Subsidiaries that would reasonably be expected to give rise to
Environmental Claims with a liability of the Borrower and its Subsidiaries
in excess of $5,000,000 for an individual condition or circumstance or
$15,000,000 in the aggregate for all such conditions and circumstances. In
addition, except as specifically disclosed in Schedule 5.12 or the reports
-------------
listed on Schedule 5.12, (i)
-------------
45
<PAGE>
neither the Borrower nor any Subsidiary has any underground storage tanks
(x) that are not properly registered or permitted under applicable
Environmental Laws, or r) that are leaking or disposing of Hazardous
Materials off-site, and (ii) the Borrower and its Subsidiaries have
notified all of their employees of the existence, if any, of any health
hazard arising from the conditions of their employment, to the extent
required by applicable Environmental Laws, and have met all notification
requirements under Title III of CERCLA and all other Environmental Laws.
5.13 Collateral Documents.
--------------------
(a) The provisions of each of the Collateral Documents are effective
to create in favor of the Administrative Agent, for the benefit of the
Banks, a legal, valid and enforceable (subject to any qualifications on
enforceability set forth in the Opinions of Counsel) first priority
security interest in all right, title and interest of the Borrower or SFPP,
as applicable, in the Collateral described therein.
(b) Each Deed of Trust, when delivered, will be effective to grant to
the Administrative Agent, for the benefit of the Banks, a legal, valid and
enforceable (subject to any qualifications on enforceability set forth in
the Opinions of Counsel) lien on all the right, title and interest of the
Borrower or SFPP, as applicable, in the Property described therein. When
each such Deed of Trust is duly recorded and the mortgage recording fees
and taxes in respect thereof are paid and compliance is otherwise had with
the formal requirements of state law applicable to the recording of real
estate deeds of trust or mortgages generally, each such Property, subject
to the encumbrances and exceptions to title set forth in the title policies
delivered to the Administrative Agent pursuant to Section 4.1.6(e),
----------------
encumbrances approved by the Administrative Agent pursuant to this
Agreement, and encumbrances for which the Administrative Agent's consent or
approval is not required under this Agreement (collectively, the "Permitted
---------
Encumbrances"), will be subject to a legal, valid, enforceable (subject to
------------
any qualifications on enforceability set forth in the Opinions of Counsel)
and perfected first priority lien. When financing statements have been duly
filed, such Deed of Trust shall also create a legal, valid, enforceable
(subject to any qualifications on enforceability set forth in the Opinions
of Counsel) and perfected first lien on, and security interest in, all
right, title and interest of the Borrower or SFPP, as applicable, in all
personal property and fixtures covered by such Deed of Trust, subject to no
other Liens except Permitted Liens.
(c) All representations and warranties of the Borrower or SFPP, as
applicable, contained in the Collateral Documents are true and correct.
5.14 Regulated Entities. Neither the Borrower, nor any Person controlling
------------------
the Borrower, nor any Subsidiary, is an "Investment Company within the meaning
of the Investment Company Act of 1940. The Borrower is not subject to regulation
under the Public Utility Holding Company Act of 1935, the Federal Power Act, the
Interstate Commerce Act,
46
<PAGE>
any state public utilities code, or any other Federal or state statute or
regulation limiting its ability to incur Indebtedness.
5.15 No Burdensome Restrictions. Neither the Borrower nor any Subsidiary
--------------------------
is a party to or bound by any Contractual Obligation, or subject to any
restriction in any Organization Document, or any Requirement of Law, which could
reasonably be expected to have a Material Adverse Effect.
5.16 Subsidiaries. As of the Closing Date, the Borrower has no
------------
Subsidiaries other than those specifically disclosed in part (a) of Schedule
--------
5.16 hereto, and has no equity investments in any other corporation or entity
- ----
other than those specifically disclosed in part (b) of Schedule 5.16.
-------------
5.17 Insurance. Except as specifically disclosed in Schedule 5.17, the
--------- -------------
properties of the Borrower and its Subsidiaries are insured with financially
sound and reputable insurance companies not Affiliates of the Borrower, in such
amounts, with such deductibles and covering such risks as are customarily
carried by companies of comparable financial capability engaged in similar
businesses and owning similar properties in localities where the Borrower or
such Subsidiary operates.
5.18 Solvency. The Borrower is Solvent.
--------
5.19 Full Disclosure. None of the representations or warranties made by
---------------
the Borrower in the Loan Documents or the Environmental Indemnity as of the date
such representations and warranties are made or deemed made, and none of the
statements contained in any exhibit, report, statement or certificate furnished
by a Responsible Officer of the Borrower to the Administrative Agent or the
Banks in connection with the Loan Documents (including the disclosure materials
delivered by a Responsible Officer of the Borrower to the Banks prior to the
Closing Date), contains any untrue statement of a material fact or omits any
material fact required to be stated therein or necessary to make the statements
made therein, in light of the circumstances under which they are made, not
misleading in any material respect as of the time when made or delivered.
5.20 Name and Principal Place of Business. The Borrower presently uses no
------------------------------------
trade name other than its actual name. The Borrower's principal place of
business is located at 201 Mission Street, San Francisco, California 94105.
ARTICLE 6.
AFFIRMATIVE COVENANTS
---------------------
So long as any Bank shall have any Commitment hereunder, or any Loan or
other Obligation shall remain unpaid or unsatisfied, unless the Administrative
Agent, on behalf of the Majority Banks, waives compliance or otherwise consents
in writing:
47
<PAGE>
6.1 Financial Statements. The Borrower shall deliver to the Administrative
--------------------
Agent, in form and detail reasonably satisfactory to the Administrative Agent
and the Majority Banks, with sufficient copies for each Bank:
6.1.1 Annual Borrower Financial Statements. As soon as available, but
------------------------------------
not later than one hundred twenty (120) days after the end of each fiscal year
(commencing with the fiscal year ended December 31, 1996), a copy of the audited
consolidated balance sheet of the Borrower and its subsidiaries as at the end of
such fiscal year and the related consolidated statements of income or
operations, shareholders' equity and cash flows for such fiscal year, setting
forth in each case in comparative form the figures for the previous fiscal year,
and accompanied by the opinion of a nationally-recognized independent public
accounting firm ("Independent Auditor"), which report shall state that such
-------------------
consolidated financial statements present fairly the financial condition and the
results of the operations of the Borrower and its subsidiaries for the periods
indicated in conformity with GAAP applied on a basis consistent with prior
years. Such opinion shall not be qualified or limited because of a restricted or
limited examination by the Independent Auditor of any material portion of the
Borrower's or any subsidiary's records;
6.1.2 Annual Borrower Cash Flow Projections. Not later than one
-------------------------------------
hundred twenty (120) days after the end of each fiscal year, a consolidated cash
flow projection for Borrower and its subsidiaries, and the operations of
Borrower and its subsidiaries, for the then-current fiscal year and the
following fiscal year, certified by a Senior Officer.
6.1.3 Quarterly Borrower Financial Statements. As soon as available,
---------------------------------------
but not later than fifty (50) days after the end of each fiscal quarter of each
fiscal year, a copy of the unaudited consolidated balance sheet of the Borrower
and its subsidiaries as of the end of such quarter and the related consolidated
statements of income, shareholders' equity and cash flows for the period
commencing on the first day and ending on the last day of such quarter, and
certified by a Responsible Officer as fairly presenting, in accordance with GAAP
(subject to ordinary, good faith year-end audit adjustments), the financial
position and the results of operations of the Borrower and its subsidiaries;
6.1.4 Quarterly Property Operating Statements and Rent Rolls. Within
------------------------------------------------------
fifty (50) days after the end of each of its first three fiscal quarters, for
each Property (a) a current rent roll for such Property and (b) a separate
statement of profit and loss for such Property as of the end of such quarter,
together with all supporting schedules. Such quarterly Property operating
statements, and all supporting schedules, shall set forth the profit and loss
for the applicable Property on a cash basis, except that rental revenue shall be
shown on an "as-billed" basis and real property taxes and casualty and public
liability insurance costs will be shown on an accrual basis.
6.2 Certificates; Other Information. The Borrower shall furnish to the
-------------------------------
Administrative Agent, with sufficient copies for each Bank:
48
<PAGE>
(a) concurrently with the delivery of the financial statements
referred to in Sections 6.1.1 and 6.1.3, a Compliance Certificate executed
-------------- -----
by a Responsible Officer;
(b) promptly, copies of all financial statements and regular,
periodical or special reports (including Forms 10K, 10Q and 8K) that the
Borrower may make to, or file with, the SEC;
(c) promptly, copies of all financial statements and reports that the
Borrower sends to its shareholders generally;
(d) promptly, such additional information regarding the Properties,
or the business, financial or corporate affairs of the Borrower or any
Subsidiary, as the Administrative Agent, at the request of any Bank, may
from time to time reasonably request, provided that disclosure of such
information is not restricted or prohibited by applicable Requirements of
Law or Contractual Obligations; and
(e) promptly following the date such payment would be delinquent,
evidence of the Borrower's payment of property taxes owing with respect to
any Property.
6.3 Notices. The Borrower shall notify the Administrative Agent within
-------
ten --(10) Business Days of a Senior Officer of the Borrower (or, if provided
below, a Responsible Officer of the Borrower) learning of any of the following:
(a) the occurrence of any Default or Event of Default;
(b) (i) any breach or non-performance of, or any default under, any
Contractual Obligation of the Borrower that is likely to result in a
Material Adverse Effect; and (ii) any dispute, litigation, investigation,
proceeding or suspension that may exist at any time between the Borrower
and any Governmental Authority that is likely to result in a Material
Adverse Effect;
(c) the commencement of, or any material development in, any
litigation or proceeding (i) affecting the Borrower (A) in which the amount
of damages claimed is $5,000,000 (or its equivalent in another currency or
currencies) or more, (B) in which injunctive or similar relief is sought
and which, if adversely determined, would reasonably be expected to have a
Material Adverse Effect, or (C) in which the relief sought is an injunction
or other stay of the performance of this Agreement, any other Loan Document
or the Environmental Indemnity; or (ii) relating to any Property between
the Borrower and (D) any Governmental Authority, (E) any Person having
rights under or in connection with any covenants, conditions, restrictions,
easements or rights-of-way affecting such Property, or (F) any tenant under
a Material Lease of such Property, in each case under this clause (ii) the
-----------
adverse determination of which might materially and adversely affect such
Property;
49
<PAGE>
(d) upon, but in no event later than ten (10) days after, a Senior
Officer's or a Responsible Officer's becoming aware of (i) any and all
enforcement, cleanup, removal or other governmental or regulatory actions,
instituted or threatened in writing against (A) the Borrower that involve
potential liability in excess of $5,000,000 for any single action or
$15,000,000 in the aggregate for all such actions, or (B) any of the
Properties, pursuant to any applicable Environmental Laws, (ii) all other
Environmental Claims against (C) the Borrower that involve potential
liability in excess of $5,000,000 for any single Environmental Claim or
$15,000,000 in the aggregate for all such Environmental Claims or (D) any
Property, and (iii) any environmental or similar condition on any real
property adjoining or in the vicinity of any Property that causes such
Property or any part thereof to be subject to any restrictions on the
ownership, occupancy, transferability or use of such Property under any
Environmental Laws;
(e) of any of the following events affecting the Borrower, together
with a copy of any notice with respect to such event that may be required
to be filed with a Governmental Authority and any notice delivered by a
Governmental Authority to the Borrower with respect to such event:
(i) an ERISA Event;
(ii) if any of the representations and warranties in Section 5.7
-----------
ceases to be true and correct;
(iii) the adoption of any new Pension Plan or other Plan subject
to Section 412 of the Code;
(iv) the adoption of any amendment to a Pension Plan or other
Plan subject to Section 412 of the Code, if such amendment results in
a material increase in contributions or unfunded pension liability;
or
(v) the commencement of contributions to any Pension Plan or
other Plan subject to Section 412 of the Code; and
(f) any trade name hereafter used by the Borrower and any change in
the Borrower's principal place of business.
Each notice under this Section shall be accompanied by a written
statement by a Senior Officer or a Responsible Officer setting forth details of
the occurrence referred to therein, and stating what action, if any, the
Borrower or any affected Subsidiary proposes to take with respect thereto and at
what time. Each notice under subsection 6.3 (a) shall describe with
particularity any and all clauses or provisions of this Agreement or other Loan
Document that have been breached or violated.
6.4 Preservation of Corporate Existence, Etc. The Borrower shall:
-----------------------------------------
50
<PAGE>
(a) preserve and maintain in full force and effect its corporate
existence and good standing under the laws of its state or jurisdiction of
incorporation;
(b) preserve and maintain in full force and effect all governmental
rights, privileges, qualifications, permits, licenses and franchises
necessary for the normal conduct of its business, except to the extent that
the failure to do so is not likely to cause a Material Adverse Effect; and
(c) use reasonable efforts, in the ordinary course of business, to
preserve its business organization and goodwill.
6.5 Maintenance of Property. The Borrower shall maintain and preserve all
-----------------------
its property which is used or useful in its business, including the Properties,
in good working order and condition, ordinary wear and tear excepted, and make
all necessary repairs thereto and renewals and replacements thereof except where
the failure to do so could not reasonably be expected to have a Material Adverse
Effect. The Borrower shall use the standard of care typical in the industry in
the operation and maintenance of its facilities.
6.6 Insurance. In addition to insurance requirements set forth in the
---------
Collateral Documents, while any Obligation remains outstanding, the Borrower
shall maintain or cause to be maintained, with insurers reasonably approved by
the Administrative Agent and the Majority Banks, the following policies of
insurance with respect to each Property (except that the Borrower shall not be
required to maintain or cause to be maintained the insurance required under
clauses (a), (b), (d) and (e), below, with respect to any Property consisting
solely of Entitled Land, whether or not subject to a ground lease), in form and
substance reasonably satisfactory to the Administrative Agent and the Majority
Banks:
(a) blanket fire and hazard "all risk" insurance covering 100% of the
replacement cost of the improvements located on such Property in the event
of fire, lightning, windstorm, vandalism, malicious mischief and all other
risks normally covered by "all risk" coverage policies in the area where
the Property is located (including loss by flood if the Property is in an
area designated as subject to the danger of flood);
(b) blanket (i.e., policies covering the Properties and other
properties of the Borrower and its subsidiaries) earthquake insurance, to
the extent maintained by the Borrower to cover improvements located on
Properties outside California, and blanket earthquake insurance, with
limits of at least $35,000,000 and with deductibles not in excess of 10% of
the insured value of the improvements, covering Properties located within
California (to the extent that such coverage and/or deductible is available
at commercially reasonable rates);
(c) blanket public liability and property damage insurance in amounts
reasonably required by the Administrative Agent from time to time, and in
no event less than $5,000,000 for "single occurrence";
51
<PAGE>
(d) such rental loss insurance as the Administrative Agent reasonably
requires (including insurance against income loss during a period of
restoration of at least six (6) months), which insurance coverage may be
included in the policies described in subparagraphs (a) and/or (b), above;
(e) workers' compensation insurance to the extent required by law in
connection with any Property; and
(f) all other insurance reasonably required by the Administrative
Agent from time to time and customarily carried by owners of similar
properties of comparable financial capability in the same general location
as the applicable Property.
All such insurance shall provide that such policies shall not be canceled for
nonpayment of premium, without at least ten (10) days' prior written notice to
the Administrative Agent, or otherwise canceled, surrendered without replacement
or materially amended (which term shall include any reduction in the scope or
limits of coverage) without at least thirty (30) days' prior written notice to
the Administrative Agent. The policies required under subparagraphs (a), (b) and
(d) shall include a "lender's loss payable endorsement" (Form 438BFU) in form
and substance satisfactory to the Administrative Agent, assuring the
Administrative Agent that all proceeds shall be paid to Administrative Agent,
for the benefit of the Banks, as encumbrancer. BofA, as Administrative Agent, in
all cases for the benefit of the Banks, shall be an additional named insured in
the policies required under subparagraph (c). No such insurance (other than
earthquake insurance) shall include deductible amounts in excess of $100,000 to
which the Administrative Agent has not previously consented in writing.
Certificates of insurance for the above policies (and/or, with respect to
property insurance policies, certified copies of the original policies, if
required by the Administrative Agent) shall be delivered to the Administrative
Agent from time to time within ten (10) days following written demand. All
policies insuring against damage to the improvements located on any Property
shall contain an agreed value clause or equivalent coverage sufficient to
eliminate any risk of co-insurance. Prior to the expiration of any such policy,
the Borrower shall deliver to the Administrative Agent evidence of renewal or
replacement of such policy reasonably satisfactory to the Administrative Agent.
6.7 Payment of Obligations. The Borrower shall pay and discharge prior to
----------------------
delinquency all of the following obligations and liabilities with respect to any
Property:
(a) all tax liabilities, assessments and governmental charges or
levies upon any Property; and
(b) all other lawful claims which, if unpaid, would by law become a
Lien upon any such Property;
and all other obligations and liabilities in excess of $10,000.00 with respect
to any Property. Notwithstanding the foregoing clauses (a) and (b), the Borrower
shall not be required to pay
52
<PAGE>
any such claim, tax, assessment or governmental charge so long as (i) its
validity is being contested in good faith and by appropriate proceedings and
(ii) the Borrower has demonstrated to the Administrative Agent's reasonable
satisfaction that leaving such claim, tax, assessment or governmental charge
unpaid or unperformed pending the outcome of such proceedings could not, in the
Administrative Agent's reasonable judgment, result in the sale of any Property
to satisfy such claim, tax, assessment or governmental charge or otherwise
impair the Banks' interests under the Loan Documents; provided that, if at any
time the Administrative Agent reasonably determines that the requirements of
clause (ii) are not satisfied, the Administrative Agent may require the Borrower
to deliver to the Administrative Agent a bond or other Surety Instrument
reasonably satisfactory to the Administrative Agent in an amount not less than
150% of the applicable claim, tax, assessment or governmental charge as a
condition of the Borrower's continued right to contest such claim, tax,
assessment or governmental charge.
6.8 Compliance with Laws. The Borrower shall comply with all Requirements
--------------------
of Law of any Governmental Authority having jurisdiction over it or its business
(including the Federal Fair Labor Standards Act), except such (i) as may be
contested in good faith, (ii) as to which a bona fide dispute may exist, or
(iii) as to which failure to comply could not reasonably be expected to cause a
Material Adverse Effect.
6.9 Inspection of Property and Books and Records. The Borrower shall
--------------------------------------------
maintain proper books of record and account, in which fill, true and correct
entries in conformity with GAAP consistently applied shall be made of all
financial transactions and matters involving the assets and business of the
Borrower. Subject to the requirements of Section 10.8, the Borrower shall permit
------------
representatives and independent contractors of the Administrative Agent or any
Bank to visit and inspect any of the Properties, to examine its corporate,
financial and operating records, and make copies thereof or abstracts therefrom,
and to discuss its affairs, finances and accounts with its directors, officers,
agents and independent public accountants, all at such reasonable times during
normal business hours and as often as may be reasonably desired, upon reasonable
advance notice to the Borrower; provided, however, that when an Event of Default
exists, the Administrative Agent or any Bank may do any of the foregoing at the
expense of the Borrower at any time during normal business hours and without
advance notice. The Administrative Agent and the Banks, in conducting any
inspections of any Property, shall comply with reasonable restrictions on access
imposed by tenants under tenant leases.
6.10 Environmental Laws.
------------------
(a) The Borrower shall conduct its operations and keep and maintain
its property in compliance with all Environmental Laws the failure to
comply with which could reasonably be expected to cause a Material Adverse
Effect.
(b) Upon the written request of the Administrative Agent or any Bank,
the Borrower shall submit to the Administrative Agent, at the Borrower's
sole cost and expense, at reasonable intervals, a report prepared by the
Borrower providing an
53
<PAGE>
update of the status of any environmental, health or safety compliance,
hazard or liability issue identified in any notice or report required
pursuant to subsection 6.3(d, that could, individually or in the
aggregate, reasonably be expected to cause a Material Adverse Effect.
6.11 Use of Proceeds. The Borrower shall use the proceeds of the Loans to
---------------
finance development and construction, to finance completed projects on an
interim basis, and for other general corporate purposes not in contravention of
any Requirement of Law or of any Loan Document.
6.12 Further Assurances.
------------------
(a) The Borrower shall use all reasonable efforts to ensure that all
written information, exhibits and reports furnished by or through the
Borrower to the Administrative Agent or the Banks do not and will not
contain any untrue statement of a material fact and do not and will not
omit to state any material fact or any fact necessary to make the
statements contained therein not misleading in any material respect in
light of the circumstances in which made, and will promptly disclose to the
Administrative Agent and the Banks and correct any defect or error that may
be discovered therein or in any Loan Document or in the execution,
acknowledgment or recordation thereof.
(b) Promptly upon request by the Administrative Agent or the Majority
Banks, the Borrower shall do, execute, acknowledge, deliver, record, re-
record, file, re-file, register and re-register, any and all such further
acts, deeds, conveyances, security agreements, mortgages, assignments,
estoppel certificates, financing statements and continuations thereof,
termination statements, notices of assignment, transfers, certificates,
assurances and other instruments as the Administrative Agent or such Banks,
as the case may be, may reasonably require from time to time in order (i)
to carry out more effectively the purposes of this Agreement or any other
Loan Document, (ii) to subject to the Liens created by any of the
Collateral Documents any of the properties, rights or interests intended to
be covered by any of the Collateral Documents, (iii) to perfect and
maintain the validity, effectiveness and priority of any of the Collateral
Documents and the Liens intended to be created thereby, and (iv) to better
assure, convey, grant, assign, transfer, preserve, protect and confine to
the Administrative Agent and the Banks the rights granted or now or
hereafter intended to be granted to the Banks under any Loan Document or
under any other document executed in connection therewith; provided,
--------
however, that nothing in this Section 6.12(b) shall require the Borrower to
---------------
modify any of its rights or increase any of its obligations under this
Agreement or any of the other Loan Documents.
6.13 Copies of Leases. The Borrower shall deliver to the Administrative
----------------
Agent, within fourteen (14) days after the Administrative Agent's request, a
true and complete copy of any lease or other agreement pursuant to which any
Person has a right to occupy or use any portion of any Property (and all
amendments, modifications and supplements thereto).
54
<PAGE>
6.14 Debt Coverage. The Borrower shall maintain Debt Coverage of not less
-------------
than (a) 1.20:1.0 at all times during the period prior to and including March
31, 1997, and (b) 1.30:1.0 at all times from and after April 1, 1997, evaluated
quarterly based on the most recent financial statements delivered to the
Administrative Agent pursuant to Section 6.1.
6.15 Fixed Charge Coverage. The Borrower shall maintain Fixed Charge
---------------------
Coverage of not less than 1.30:1.0 at all times, evaluated quarterly based on
the most recent financial statements delivered to the Administrative Agent
pursuant to Section 6.1.
6.16 Leverage. The Borrower shall maintain Leverage not greater than (a)
--------
0.85: 1.0 at all times in the event that none of the Borrower's Series B
preferred stock outstanding on the date of this Agreement is exchanged for
subordinated debt; (b) 0.95: 1.0 at all times in the event that $75,000,000 of
the Borrower's Series B preferred stock outstanding on the date of this
Agreement is exchanged for subordinated debt; or (c) 1.00:1.0 at all times in
the event that $150,000,000 of the Borrower's Series B preferred stock
outstanding on the date of this Agreement is exchanged for subordinated debt,
evaluated quarterly based on the most recent financial statements delivered to
the Administrative Agent pursuant to Section 6.1.
-----------
6.17 Tangible Net Worth. The Borrower and its subsidiaries shall maintain
------------------
at all times Tangible Net Worth (evaluated quarterly based on the most recent
financial statements delivered to the Administrative Agent pursuant to Section
-------
6.1) of not less than $373,260,553 (which amount reflects an aggregate payment
- ---
of $26,739,447 to redeem a portion of the Borrower's Series A Preferred Stock
prior to the date of this Agreement), plus fifty percent (50%) of the aggregate
----
net income of the Borrower, excluding the amount of dividends (whether or not
actually declared or paid) accrued on the Borrower's preferred stock, during the
period from and after the date of this Agreement, less the aggregate dollar
----
amount of the Borrower's Series A preferred stock that is redeemed from time to
time after the date of this Agreement, less the aggregate dollar amount of the
----
Borrower's Series B preferred stock that is exchanged for subordinated debt from
time to time after the date of this Agreement, plus the aggregate dollar amount
----
of such subordinated debt exchanged for Borrower's Series B Preferred stock
after the date of this Agreement that is subsequently exchanged for the
Borrower's common equity from time to time, plus fifty percent (50%) of the
----
aggregate amount of equity that the Borrower issues from time to time after the
date of this Agreement.
ARTICLE 7.
NEGATIVE COVENANTS
------------------
So long as any Bank shall have any Commitment hereunder, or any Loan
or other Obligation shall remain unpaid or unsatisfied, unless the
Administrative Agent, on behalf of the Majority Banks, waives compliance or
otherwise consents in writing:
7.1 Limitation on Liens. The Borrower shall not, directly or indirectly,
-------------------
make, create, incur, assume or suffer to exist any Lien upon or with respect to
any part of any
55
<PAGE>
Property, or any personal property encumbered from time to time by a Deed of
Trust, whether now owned or hereafter acquired, other than the following
("Permitted Liens"):
(a) any Lien created under any Loan Document;
(b) Liens for taxes, fees, assessments or other governmental charges
which are not delinquent, or remain payable without penalty, or to the
extent that non-payment thereof is permitted by Section 6.7, provided that
-----------
no notice of lien has been filed or recorded under the Code;
(c) carriers', warehousemen's, mechanics', landlords', materialmen's,
repairmen's or other similar Liens arising in the ordinary course of
business which are not delinquent, or remain payable without penalty, or
which are being contested in good faith and by appropriate proceedings,
which proceedings have the effect of preventing the forfeiture or sale of
the property subject thereto; and
(d) easements, rights-of-way, covenants, conditions and restrictions
and other similar encumbrances incurred in the ordinary course of business
which, in the aggregate, do not materially reduce the value of the Property
subject thereto or interfere with the ordinary conduct of the Borrower's
business; and upon the Borrower's written request, the Administrative Agent
shall cause the Lien of the applicable Deed of Trust to be subordinated to
any such easement, right-of-way, covenant, condition and restriction and
other similar encumbrance that does not materially and adversely affect the
value of the Property subject thereto.
7.2 Lease of a Property. The Borrower shall not enter into any ground
-------------------
lease of any Property, or enter into any lease of any space in any improvements
located on a Property that contains any of the following provisions if such
provision is not, by its terms, expressly subordinate to the lien of all deeds
of trust encumbering such Properly or approved by the Majority Banks as
hereinafter provided: (a) an option to purchase the Property on which the leased
premises are located, (b) a right of first refusal to purchase the Property on
which the leased premises are located, (c) a right on the part of the tenant to
self-insure, unless the tenant is a Fortune 500 Company, (d) an option to lease
space not located on the Property on which the leased premises are located, (e)
any agreement to extend or terminate the term of such Material Lease based on an
extension or termination of another lease of space not located on the Property
in which the leased premises are located, (f) an agreement by the lessor to
construct improvements for the tenant (other than (i) build-to-suit improvements
constructed on Entitled Land or (ii) ordinary tenant improvements to the leased
space located on the Property), or (g) any other provision that imposes a
financial obligation on the lessor's successor that is outside the scope of the
ordinary obligations of a passive lessor real property (but excluding
obligations to construct (i) build-to-suit improvements on Entitled Land or (ii)
ordinary tenant improvements to the leased space located on a Property). The
Borrower may enter into any lease (including any "build-to-suit" lease) that is
not prohibited by this Section 7.2 without the prior consent of the
-----------
Administrative Agent or the Banks. The Borrower may at any time and from time to
time submit to the Administrative Agent a lease
56
<PAGE>
that includes one or more of the foregoing provisions for approval of such
provision(s) by the Majority Banks. The Administrative Agent shall notify the
Borrower within fifteen (15) Business Days after the Administrative Agent's
receipt of such lease as to whether the Majority Banks approve or disapprove of
such lease provision(s), and upon the Administrative Agent's failure to respond
within such fifteen (15) Business Day period, the Borrower shall give a second
notice to the Administrative Agent and all of the Banks requesting approval or
disapproval of such lease provision(s), and the Administrative Agent's failure
to respond within ten (10) Business Days after receipt of such second notice
shall be deemed approval of such lease provision(s) by the Majority Banks. The
Banks agree not to unreasonably withhold their consent to any such lease
provision(s) (which the Banks may evaluate, for such purposes, in the context of
both the specific Property affected by such lease and all of the Properties
considered as a portfolio). Concurrently with its execution of a Material Lease
of any Property, the Borrower shall deliver to the Administrative Agent a copy
of such signed Material Lease, together with an estoppel certificate in the form
of Exhibit H signed by the tenant under such Material Lease. The Administrative
---------
Agent shall enter into a nondisturbance and attornment agreement, in form and
substance reasonably satisfactory to the Administrative Agent, with the tenant
under each Material Lease.
7.3 Consolidations and Mergers. The Borrower shall not merge, consolidate
--------------------------
with or into, or convey, transfer, lease or otherwise dispose of (whether in one
transaction or in a series of transactions) all or substantially all of its
assets (whether now owned or hereafter acquired) to or in favor of any Person,
except that the Borrower may merge with another Person provided that (i) the
Borrower is the continuing or surviving corporation and (ii) such merger does
not cause a Material Adverse Effect.
7.4 Limitation on Subordinated Indebtedness. The Borrower shall not
---------------------------------------
create or issue any subordinated bonds, debentures or other similar instruments
except (a) any subordinated Indebtedness existing on the Closing Date; and (b)
subordinated Indebtedness incurred in connection with the conversion of the
Borrower's Series B preferred stock pursuant to conversion options existing on
the Closing Date.
7.5 Limitation on Preferred Shares. The Borrower shall not issue or
------------------------------
suffer to exist any preferred shares, except preferred shares issued prior to
the Closing Date.
7.6 Transactions with Affiliates. The Borrower shall not enter into any
----------------------------
transaction with any Affiliate of the Borrower that could reasonably be expected
to cause a Material Adverse Effect.
7.7 Use of Proceeds. The Borrower shall not use any portion of the Loan
---------------
proceeds, directly or indirectly, (a) to purchase or carry Margin Stock, (b) to
repay or otherwise refinance indebtedness of the Borrower or others incurred to
purchase or carry Margin Stock, (c) to extend credit for the purpose of
purchasing or carrying any Margin Stock, or (d) to acquire any security in any
transaction that is subject to Section 13 or 14 of the Exchange Act.
57
<PAGE>
7.8 Change in Business. The Borrower shall not (a) engage in any material
------------------
line of business substantially different from those lines of business carried on
by the Borrower on the date hereof (provided, however, that this Section 7.8
-----------
shall not prohibit the Borrower from engaging in any line of business so long as
the Borrower's primary business focus remains real estate related), or (b)
change the primary use to which any Operating Property is devoted.
7.9 Accounting Changes. The Borrower shall not make any significant
------------------
change in its accounting treatment or reporting practices, except as required or
permitted by GAAP.
7.10 Lease Amendments. The Borrower shall not amend or modify any lease of
----------------
any Property to include a provision that would require the consent of the
Majority Banks pursuant to Section 7.2.
-----------
7.11 Leasing or Management Office. The Borrower shall not use more than
----------------------------
5,000 square feet of any Property for management or leasing offices for such
Property and other properties owned by the Borrower, and except for up to 22,000
square feet of space in the Anaheim Office Property, shall not use any portion
of any Property for general corporate offices.
7.12 Management Agreements. The Borrower shall not enter into any
---------------------
agreement, written or oral, providing for the management, leasing or operation
of any portion of any Property unless such agreement is made fully subject and
subordinate to the Lien of the applicable Deed of Trust.
ARTICLE 8.
EVENTS OF DEFAULT
-----------------
8.1 Event of Default. Each of the following shall constitute an "Event of
----------------
Default":
(a) Non-Payment. The Borrower fails to pay (i) any amount of
-----------
principal of, or interest on, any Loan on the Maturity Date; or (ii) when
and as required to be paid herein (other than on the Maturity Date), any
amount of principal of, or interest on, any Loan, and such failure is not
cured within three (3) Business Days after the date upon which written
notice thereof is given to the Borrower by the Administrative Agent; or
(iii) any amount owing to the Administrative Agent or the Banks under any
Loan Document (other than payments described in clauses (i) or (ii),
above), within ten (10) days after receipt of written notice; or
(b) Representation or Warranty. Any representation or warranty by the
--------------------------
Borrower made or deemed made herein, in any other Loan Document, or which
is contained in any certificate, document or financial or other statement
by the Borrower
58
<PAGE>
or any Responsible Officer, furnished at any time under this Agreement, or
in or under any other Loan Document, is incorrect in any material respect
on or as of the date made or deemed made; or
(c) Certain Specific Defaults. The Borrower fails to perform or
-------------------------
observe any term, covenant or agreement contained in any of Sections 6.3,
-------------
6.6, 6.9, 6.14, 6.15, 6.16 or 6.17 or in Article 7 (other than Section
---------------------------------- --------- -------
7.1), or the Borrower voluntarily creates any Lien on any Properly in
violation of Section 7.1; or
-----------
(d) Other Specific Defaults. The Borrower fails to perform or
-----------------------
observe any term, covenant or agreement contained in any of Sections 6.1
------------
or 6.2, and such default shall continue unremedied for a period of five (5)
---
days after the date upon which written notice thereof is given to the
Borrower by the Administrative Agent;
(e) Other Defaults. The Borrower fails to perform or observe any
--------------
other term or covenant contained in this Agreement or any other Loan
Document (other than obligations described in subparagraphs (a), (b), (c)
and (d), above), and such default shall continue unremedied for a period of
thirty (30) days after the date upon which written notice thereof is given
to the Borrower by the Administrative Agent; provided that, if cure cannot
--------
reasonably be effected within such 30-day period, such failure shall not be
an Event of Default so long as the Borrower promptly commences cure (in any
event, within ten (10) days after receipt of such notice), thereafter
diligently prosecutes such cure to completion, and completes such cure
within ninety (90) days after receipt of such notice; or
(f) Insolvency; Voluntary Proceedings. The Borrower (i) ceases or
---------------------------------
fails to be Solvent, or generally fails to pay, or admits in writing its
inability to pay, its debts as they become due, subject to applicable grace
periods, if any, whether at stated maturity or otherwise; (ii) voluntarily
ceases to conduct its business in the ordinary course for more than ten
(10) Business Days; (iii) commences any Insolvency Proceeding with respect
to itself; or (iv) takes any action to effectuate or authorize any of the
foregoing; or
(g) Involuntary Proceedings. (i) Any involuntary Insolvency
-----------------------
Proceeding is commenced or filed against the Borrower, or any writ,
judgment, warrant of attachment, execution or similar process, is issued or
levied against a substantial part of the Borrower's properties, and any
such proceeding or petition shall not be dismissed, or such writ, judgment,
warrant of attachment, execution or similar process shall not be released,
vacated or fully bonded within ninety (90) days after commencement, filing
or levy; (ii) the Borrower admits the material allegations of a petition
against it in any Insolvency Proceeding, or an order for relief (or similar
order under non-U.S. law) is entered against the Borrower in any Insolvency
Proceeding; or (iii) the Borrower acquiesces in the appointment of a
receiver, trustee, custodian, conservator, liquidator, mortgagee in
possession (or agent therefor), or other similar Person for itself or a
substantial portion of its property or business; or
59
<PAGE>
(h) Monetary Judgments. One or more non-interlocutory judgments, non-
------------------
interlocutory orders, decrees or arbitration awards is entered against the
Borrower involving in the aggregate a liability (to the extent not covered
by independent third-party insurance as to which the insurer does not
dispute coverage) as to any single or related series of transactions,
incidents or conditions, of $25,000,000.00 or more, and the same shall
remain unsatisfied, unvacated and unstayed pending appeal for a period of
sixty (60) days after the entry thereof; or
(i) Non-Monetary Judgments. Any non-monetary judgment, order or
----------------------
decree is entered against the Borrower which does or would reasonably be
expected to have a Material Adverse Effect, and there shall be any period
of sixty (60) consecutive days during which a stay of enforcement of such
judgment or order, by reason of a pending appeal or otherwise, shall not be
in effect; or
(j) Adverse Change. There occurs a Material Adverse Effect.
--------------
8.2 Remedies. After the occurrence and during the continuance of any
--------
Event of Default, the Administrative Agent shall, at the request of, or may,
with the consent of, the Majority Banks,
(a) declare the commitment of each Bank to make Loans to be
terminated, whereupon such commitments shall be terminated; provided,
however, that the Administrative Agent and the Banks shall continue to
honor any outstanding Letter of Credit;
(b) declare the unpaid principal amount of all outstanding Loans, all
interest accrued and unpaid thereon, and all other amounts owing or payable
hereunder or under any other Loan Document to be immediately due and
payable, without presentment, demand, protest or other notice of any kind,
all of which are hereby expressly waived by the Borrower;
(c) require that the Borrower deposit with the Administrative Agent,
for the benefit of the Banks, on demand and as cash security for the
Borrower's obligations under the Loan Documents, an amount equal to the
aggregate undrawn amount of all then-outstanding Letters of Credit (and the
Borrower hereby grants to the Administrative Agent, as administrative agent
for the Banks, a security interest in any such amount deposited with the
Administrative Agent, all earnings thereon and all proceeds thereof, and as
to such amounts the Administrative Agent shall have the rights and remedies
of a secured party under the California UCC); provided, however, that upon
--------
the occurrence of any event specified in subsection (f) or (g) of Section
-------
8.1 (in the case of clause (i) of subsection (g) upon the expiration of the
---
90-day period mentioned therein) such amounts shall automatically become
due and payable without further act of the Administrative Agent or any
Bank; and
60
<PAGE>
(d) exercise on behalf of itself and the Banks all rights and
remedies available to it and the Banks under the Loan Documents or
applicable law;
provided, however, that upon the occurrence of any event specified in subsection
- -------- -------
(f) or (g) of Section 8.1 (in the case of clause (i) of subsection (g) upon the
-----------
expiration of the 90-day period mentioned therein), the obligation of each Bank
to make Loans and the obligation of BofA to issue Letters of Credit shall
automatically terminate and the unpaid principal amount of all outstanding Loans
and all interest and other amounts as aforesaid shall automatically become due
and payable without further act of the Administrative Agent or any Bank.
8.3 Rights Not Exclusive. The rights provided for in this Agreement and
--------------------
the other Loan Documents are cumulative and are not exclusive of any other
rights, powers, privileges or remedies provided by law or in equity, or under
any other instrument, document or agreement now existing or hereafter arising.
ARTICLE 9.
THE ADMINISTRATIVE AGENT
------------------------
9.1 Appointment and Authorization. Each Bank hereby irrevocably appoints,
-----------------------------
designates and authorizes the Administrative Agent to take such action on its
behalf under the provisions of this Agreement, each other Loan Document and the
Environmental Indemnity, and to exercise such powers and perform such duties as
are expressly delegated to it by the terms of this Agreement, any other Loan
Document or the Environmental Indemnity, together with such powers as are
reasonably incidental thereto and as further provided in the Co-Lender Agreement
described below.
9.2 The Administrative Agent's Powers. Subject to the limitations set
---------------------------------
forth in the Loan Documents, the Environmental Indemnity and the Co-Lender
Agreement, the Administrative Agent's powers include, but are not limited to,
the power: (i) to administer, manage and service the Loans; (ii) to enforce the
Loan Documents and/or the Environmental Indemnity; (iii) to make all decisions
under the Loan Documents or the Environmental Indemnity in connection with the
day-to-day administration of the Loans, any inspections required by the Loan
Documents or the Environmental Indemnity, and other routine administration and
servicing matters; (iv) to collect and receive from the Borrower or any third
persons all payments of amounts due under the terms of the Loan Documents or the
Environmental Indemnity and to distribute the amounts thereof to the Banks; (v)
to collect and distribute or disburse all other amounts due under the Loan
Documents or the Environmental Indemnity, (vi) to grant or withhold consents,
approvals or waivers, and to make any other determinations in connection with
the Loan Documents or the Environmental Indemnity, and (vii) to exercise all
such powers as are incidental to any of the foregoing matters. The
Administrative Agent shall furnish to Banks copies of material documents,
including confidential ones, received from the Borrower regarding the Loans, the
Loan Documents, the Environmental Indemnity, the Collateral, any proposed new
Collateral and
61
<PAGE>
the transactions contemplated hereby and thereby. The Administrative Agent shall
have no responsibility with respect to the authenticity, validity, accuracy or
completeness of the information provided.
9.3 Limitation on the Administrative Agent's Duties. Notwithstanding any
-----------------------------------------------
contrary provision of any Loan Document or the Environmental Indemnity, the
Administrative Agent shall not have any duties or responsibilities except those
expressly set forth in the Loan Documents, the Environmental Indemnity or the
Co-Lender Agreement, nor shall the Administrative Agent have any fiduciary
relationship with any Bank, and no implied covenants, responsibilities, duties,
obligations or liabilities shall be read into this Agreement, any other Loan
Document, the Environmental Indemnity or the Co-Lender Agreement against the
Administrative Agent.
9.4 Acknowledgment of the Co-Lender Agreement. The Borrower acknowledges
-----------------------------------------
that the Banks have executed a Co-Lender Agreement to supplement the Loan
Documents with respect to the relationship of the Banks and the Administrative
Agent among themselves in connection with the Loans. The Co-Lender Agreement is
not a Loan Document.
9.5 Documentation Agent and Co-Agents. None of the Banks identified on
---------------------------------
the face page or the signature pages of this Agreement as a "Documentation
Agent" or a "Co-Agent" shall have any right, power, obligation, liability,
responsibility or duty under this Agreement or the other Loan Documents other
than those applicable to all Banks as such.
9.6 Successor Administrative Agent, Documentation Agent and Co-Agents.
-----------------------------------------------------------------
The Administrative Agent, the Documentation Agent or any Co-Agent may, and at
the request of the Majority Banks shall, resign as Administrative Agent,
Documentation Agent or Co-Agent, as the case may be, upon thirty (30) days'
notice to the Banks. If the Administrative Agent resigns under this Agreement,
the Majority Banks shall appoint from among the Banks a successor administrative
agent. If no successor administrative agent is appointed prior to the effective
date of the resignation of the Administrative Agent, the Administrative Agent
may appoint, after consulting with the Banks, a successor administrative agent
from among the Banks. Any successor administrative agent shall be enticed to any
fee payable by the Borrower to BofA, in its capacity as Administrative Agent,
from and after the date on which such successor administrative agent is
appointed. If the Documentation Agent or a Co-Agent resigns under this
Agreement, the Administrative Agent shall elect either (a) to assume the rights
and obligations, if any, of such Documentation Agent or Co-Agent, as applicable,
and thereupon all references to such Documentation Agent or Co-Agent, as
applicable, shall be deemed references to the Administrative Agent, or (b) to
appoint a successor Documentation Agent or Co-Agent, as applicable, from among
the Banks. Upon its acceptance of the appointment as successor administrative
agent, documentation agent or co-agent hereunder, as the case may be, such
successor shall succeed to all of the rights, powers and duties of the retiring
Administrative Agent, Documentation Agent or Co-Agent, as the case may be, the
term "Administrative Agent," "Documentation Agent" or "Co-Agent", as the case
may be, shall mean such successor, and the appointment,
62
<PAGE>
powers and duties of such retiring Administrative Agent, Documentation Agent or
Co-Agent, as the case may be, shall terminate. After any retiring Administrative
Agent's resignation hereunder as Administrative Agent, the provisions of the
Loan Documents or the Environmental Indemnity regarding payment of costs and
expenses and indemnification of the Administrative Agent shall inure to its
benefit as to any actions taken or omitted to be taken by it while it was the
Administrative Agent under this Agreement. If no successor administrative agent
has accepted appointment as Administrative Agent by the date which is thirty
(30) days following a retiring Administrative Agent's notice of resignation, the
retiring Administrative Agent's resignation shall nevertheless thereupon become
effective, and the Banks shall perform all of the duties of the Administrative
Agent hereunder until such time, if any, as the Majority Banks appoint a
successor administrative agent in the manner set forth above. Upon replacement
of the Administrative Agent as provided in this Agreement, the former
Administrative Agent shall promptly deliver to the new Administrative Agent an
assignment of all beneficial interest in any Deed of Trust and any other
Collateral Documents (if before acquisition of title to the Collateral
encumbered thereby), or a quitclaim deed to and assignment of any such property
(if after acquisition of title to the Collateral encumbered thereby) and copies
of any books, records and documents related to the Loans and the Collateral to
which the Banks are entitled and which is then in the former Administrative
Agent's possession.
ARTICLE 10.
MISCELLANEOUS
-------------
10.1 Amendments and Waivers. No amendment or waiver of any provision of
----------------------
this Agreement or any other Loan Document, and no consent with respect to any
departure by the Borrower therefrom, shall be effective unless the same shall be
in writing and signed by the Majority Banks (or by the Administrative Agent at
the written request of the Majority Banks) and the Borrower and acknowledged by
the Administrative Agent, and then any such waiver or consent shall be effective
only in the specific instance and for the specific purpose for which given;
provided, however, that no such waiver, amendment or consent shall, unless in
- --------
writing and signed by all the Banks and the Borrower and acknowledged by the
Administrative Agent, do any of the following:
(a) increase, decrease or extend the Commitment of any Bank (or
reinstate any Commitment terminated pursuant to Section 8.2), or subject
-----------
any Bank to any additional obligation; or
(b) postpone or delay any date fixed by this Agreement or any other
Loan Document for any payment of principal interest, fees or other amounts
due to the Banks (or any of them) hereunder or under any other Loan
Document; or
63
<PAGE>
(c) reduce the principal of, or the rate of interest specified herein
on any Loan, or any fees or other amounts payable hereunder or under any
other Loan Document; or
(d) change the percentage of the Commitments or of the aggregate
unpaid principal amount of the Loans which is required for the Banks or any
of them to take any action hereunder; or
(e) amend this Section 10.1, Section 8.1 or any other provision of
------------ -----------
any Loan Document relating to an Event of Default, Section 2.13, or any
------------
provision of any Loan Document providing for consent or other action by all
Banks; or
(f) release any material portion of the Collateral except as
otherwise may be provided in this Agreement or in the Collateral Documents
or except where the consent of the Majority Banks only is specifically
provided for;
and, provided further that (i) no amendment, waiver or consent shall,
-------- -------
unless in writing and signed by the Administrative Agent in addition to the
Majority Banks or all the Banks, as the case may be, affect the rights or
duties of the Administrative Agent under this Agreement, any other Loan
Document or the Environmental Indemnity, and (ii) the Fee Letters may be
amended, or rights or privileges thereunder waived, in a writing executed
by the parties thereto.
10.2 Notices.
-------
10.2.1 All notices, requests and other communications shall be in
writing (including, unless the context expressly otherwise provides, by
facsimile transmission, provided that any matter transmitted by the Borrower by
facsimile (i) shall be immediately confirmed by a telephone call to the
recipient at the number specified on Schedule 10.2, and (ii) shall be followed
-------------
promptly by delivery of a hard copy original thereof) and mailed, faxed or
delivered, to the address or facsimile number specified for notices on Schedule
--------
10.2; or, as directed to the Borrower or the Administrative Agent,to such other
- ----
address as shall be designated by such party in a written notice to the other
parties, and as directed to any other party, at such other address as shall be
designated by such party in a written notice to the Borrower and the
Administrative Agent.
10.2.2 All such notices, requests and communications shall, when
transmitted by overnight delivery, or faxed, be effective when delivered for
overnight (next-day) delivery, or transmitted in legible form by facsimile
machine, respectively, or if mailed, upon the third Business Day after the date
deposited into the U.S. mail, or if delivered, upon delivery; except that
notices pursuant to Article 2 or Article 9 shall not be effective until actually
--------- ---------
received by the Administrative Agent.
10.2.3 Any agreement of the Administrative Agent and the Banks herein
to receive certain notices by telephone or facsimile is solely for the
convenience and at
64
<PAGE>
the request of the Borrower. The Administrative Agent and the Banks shall be
entitled to rely on the authority of any Person purporting to be a Person
authorized by the Borrower to give such notice, and the Administrative Agent and
the Banks shall not have any liability to the Borrower or other Person on
account of any action taken or not taken by the Administrative Agent or the
Banks in reliance upon such telephonic or facsimile notice. The Borrower's
obligation to repay the Loans shall not be affected in any way or to any extent
by any failure by the Administrative Agent or the Banks to receive written
confirmation of any telephonic or facsimile notice or the receipt by the
Administrative Agent or the Banks of a confirmation which is at variance with
the terms understood by the Administrative Agent or the Banks to be contained in
the telephonic or facsimile notice.
10.3 No Waiver; Cumulative Remedies. No failure or delay by the
------------------------------
Administrative Agent or any Bank in exercising any right, remedy, power or
privilege hereunder shall operate as a waiver thereof; nor shall any single or
partial exercise of any right, remedy, power or privilege hereunder preclude any
other or further exercise thereof or the exercise of any other right, remedy,
power or privilege.
10.4 Costs and Expenses. The Borrower shall:
------------------
(a) whether or not the transactions contemplated hereby are
consummated, pay or reimburse BofA (including in its capacity as the
Administrative Agent) within ten (10) days after demand (subject to Section
-------
4.1.5) for all reasonable costs and expenses incurred by BofA (including in
-----
its capacity as the Administrative Agent) in connection with the
development, preparation, delivery and execution of, and any amendment,
supplement, waiver or modification to (in each case, whether or not
consummated), this Agreement, any Loan Document and any other documents
prepared in connection herewith or therewith, and the consummation of the
transactions contemplated hereby and thereby, including Attorney Costs
incurred by BofA (including in its capacity as the Administrative Agent)
with respect thereto; and
(b) pay or reimburse the Administrative Agent, and each Bank within
ten (10) days after demand (subject to Section 4.1.5) for all costs and
-----
expenses (including Attorney Costs) incurred by them in connection with the
enforcement, attempted enforcement, or preservation of any rights or
remedies under this Agreement or any other Loan Document during the
existence of an Event of Default or after acceleration of the Loans
(including in connection with any "workout" or restructuring regarding the
Loans, and including in any Insolvency Proceeding or appellate proceeding);
and
(c) pay or reimburse BofA (including in its capacity as the
Administrative Agent) or any successor administrative agent (including in
its capacity as the Administrative Agent) within five (5) Business Days
after demand (subject to Section 4.1.5) for all appraisal (including the
-------------
reasonable allocated cost of internal appraisal services), audit,
environmental inspection and review (including the allocated cost of such
internal services), search and filing costs, fees and expenses, incurred or
65
<PAGE>
sustained by BofA (including in its capacity as the Administrative Agent)
in connection with the matters referred to under subsections (a) and (b) of
this Section.
10.5 Indemnity.
---------
10.5.1 Whether or not the transactions contemplated hereby are
consummated, the Borrower shall indemnify, defend and hold the Agent-Related
Persons, and each Bank and each of its respective officers, directors,
employees, counsel, agents and attorneys-in-fact (each, an "Indemnified Person")
------------------
harmless from and against any and all liabilities, obligations, losses, damages,
penalties, actions, judgments, suits, costs, charges, expenses or disbursements
(including Attorney Costs) of any kind or nature whatsoever that may at any time
(including at any time following repayment of the Loans or following the
termination, resignation or replacement of the Administrative Agent or the
replacement of any Bank) be imposed on, incurred by or asserted against any such
Indemnified Person and that in any way relates to or arises out of (a) this
Agreement or any document contemplated by or referred to herein, (b) the
transactions contemplated hereby, or (c) any action taken or omitted by any such
Indemnified Person under or in connection with any of the foregoing, including
with respect to any investigation, litigation or proceeding (including any
Insolvency Proceeding or appellate proceeding) related to or arising out of this
Agreement or the Loans or the use of the proceeds thereof, whether or not any
Indemnified Person is a party thereto (all the foregoing, collectively, the
"Indemnified Liabilities") provided, that the Borrower shall have no obligation
- ------------------------ --------
hereunder to any Indemnified Person with respect to Indemnified Liabilities
resulting solely from (i) the gross negligence or willful misconduct of such
Indemnified Person, (ii) any breach or this Agreement or any other Loan Document
by such Indemnified Person, or (iii) any event or condition relating to a
Property that occurs after such Indemnified Person takes title to such Property.
The agreements in this Section shall survive payment of all other Obligations,
and the termination of all obligations of the Banks to the Borrower under the
Loan Documents.
10.5.2 The Borrower shall defend each such Indemnified Person using
legal counsel reasonably satisfactory to such Indemnified Person, at the sole
cost and expense of the Borrower. All amounts owing under this Section 10.5
------------
shall be paid within thirty (30) days after demand.
10.5.3 Each Indemnified Person shall use reasonable efforts to notify
the Borrower promptly of any Indemnified Liabilities; provided, however, that an
--------
Indemnified Person's failure to notify the Borrower shall not affect the
Borrower's obligations under this Section 10.5 except to the extent that the
------------
Borrower is materially prejudiced thereby. Upon demand by any Indemnified
Person, the Borrower shall defend any investigation, action or proceeding
involving any Indemnified Liabilities which is brought or commenced against any
Indemnified Person, whether alone or together with the Borrower or any other
person, all at the Borrower's own cost and by counsel to be approved by the
Indemnified Person in the exercise of its reasonable judgment. Such Indemnified
Person may participate in and direct such defense, and such Indemnified Person
shall cooperate with the Borrower in all reasonable respects in connection with
such proceeding. Subject to the
66
<PAGE>
limitations set forth in this Section 10.5.3, each Indemnified Person may elect
--------------
to defend itself, at the Borrower's cost, in connection with any such
investigation, action or proceeding, and the Borrower shall have no right to
participate in or direct any such defense. No Indemnified Person shall settle
any such proceeding unless such Indemnified Person has, except in case of
emergency, given the Borrower ten (10) days' prior written notice of such
settlement; provided, however, that nothing contained herein shall require any
--------
Indemnified Person to obtain the Borrower's consent to any such settlement in
order to enter into such settlement or to enforce the indemnity set forth in
this Section 10.5. In connection with any investigation, action or proceeding
------------
covered by this Section 10.5 against more than one Indemnified Person, all such
------------
Indemnified Persons shall be represented by the same legal counsel selected by
the Indemnified Persons; provided, however, that if such legal counsel
--------
determines in good faith that representing all such Indemnified Persons would or
could result in a conflict of interest under laws or ethical principles
applicable to such legal counsel, or that a defense or counterclaim is available
to an Indemnified Person that is not available to all such Indemnified Persons,
then to the extent reasonably necessary to avoid such a conflict of interest or
to permit unqualified assertion of such a defense or counterclaim, each
Indemnified Person shall be entitled to separate representation by legal counsel
selected by that Indemnified Person.
10.6 Assignments, Participations, etc.
---------------------------------
10.6.1 Any Bank may, with the written consent of the Borrower (except
during the existence of an Event of Default, when the Borrower's consent is not
required) and the Administrative Agent, which consents shall not be unreasonably
withheld or delayed, at any time assign and delegate to one or more Eligible
Assignees (each an "Assignee") all, or any ratable part of all, of the Loans,
--------
the Commitment and the other rights and obligations of such Bank under the Loan
Documents and the Environmental Indemnity, in a minimum amount of $20,000,000.00
and integral multiples of $1,000,000.00 in excess thereof; provided, however,
that BofA shall retain for its own account not less than $50,000,000.00 of such
Loans, Commitment and other rights and obligations; provided further, however,
that if a Bank other than BofA assigns less than all of its Loans, Commitment
and other rights and obligations to an Assignee, such Bank shall retain for its
own account not less than $25,000,000.00 of such Loans, Commitments and other
rights and obligations; and provided further, however, that the Borrower and the
----------------
Administrative Agent may continue to deal solely and directly with the assigning
Bank in connection with the interest so assigned to an Assignee until (i) the
assigning Bank and Assignee shall have delivered to the Borrower and the
Administrative Agent written notice of such assignment, together with payment
instructions, addresses and related information with respect to the Assignee;
(ii) the assigning Bank and its Assignee shall have delivered to the Borrower
and the Administrative Agent an Assignment and Acceptance in the form of Exhibit
-------
E (an "Assignment and Acceptance"); and (iii) the assigning Bank or Assignee has
- - -------------------------
paid to the Administrative Agent a processing fee in the amount of $5,000.00.
10.6.2 From and after the date on which the conditions set forth in
Section 10.6.1 are met and the Administrative Agent notifies the assigning Bank
- --------------
that it has
67
<PAGE>
received (and provided its consent with respect to) an executed Assignment and
Acceptance and payment of the above-referenced processing fee, (i) the Assignee
thereunder shall be a party hereto and, to the extent that rights and
obligations hereunder have been assigned to it pursuant to such Assignment and
Acceptance, shall have the rights and obligations of a Bank under the Loan
Documents and the Environmental Indemnity, and (ii) the assigning Bank shall, to
the extent that it has assigned its rights and obligations under this Agreement
and the other Loan Documents pursuant to such Assignment and Acceptance,
relinquish its rights and (so long as the Assignee is not an Affiliate or a
Subsidiary of the assigning Bank or of a Person of which the assigning Bank is
an Affiliate or a Subsidiary) be released from its obligations under the Loan
Documents.
10.6.3 Within five (5) Business Days after its receipt of notice by
the Administrative Agent that the Administrative Agent has received an executed
Assignment and Acceptance and payment of the processing fee, and provided that
it consents to such assignment in accordance with Section 10.6.1, the Borrower
--------------
shall execute and deliver to the Administrative Agent, new Notes evidencing such
Assignee's assigned Loans and Commitment and, if the assigning Bank has retained
a portion of its Loans and its Commitment, replacement Notes in the principal
amount of the Loans retained by the assigning Bank (such Notes to be in exchange
for, but not in payment of, the Notes held by such Bank). Immediately upon the
Administrative Agent's receipt of the executed Assignment and Acceptance and the
processing fee, this Agreement shall be deemed to be amended to the extent, but
only to the extent, necessary to reflect the addition of the Assignee and the
resulting adjustment of the Commitments arising therefrom. The Commitment
allocated to each Assignee shall reduce the Commitment of the assigning Bank pro
---
tanto.
- -----
10.6.4 Any Bank may, at any time, sell to one or more commercial
banks or other Persons that are not Affiliates of the Borrower (each a
"Participant") participation interests in any Loans, the Commitment of that Bank
- ------------
and the other interests of that Bank (the "originating Bank") under this
Agreement and the other Loan Documents; provided, however, that (i) the amount
-------- -------
of any such participation interest shall be not less than $20,000,000.00 and
shall be in integral multiples of $1,000,000.00 in excess thereof, (ii) the
originating Bank shall retain for its own account not less than $25,000,000.00
of the Loans, the Commitment and the other interests of such originating Bank
under this Agreement and the other Loan Documents, (iii) the originating Bank's
obligations under this Agreement shall remain unchanged, (iv) the originating
Bank shall remain solely responsible for the performance of such obligations,
(v) the Borrower and the Administrative Agent shall continue to deal solely and
directly with the originating Bank in connection with the originating Bank's
rights and obligations under this Agreement and the other Loan Documents, and
(vi) no Bank shall transfer or grant any participation interest under which the
Participant has rights to approve any amendment to, or any consent or waiver
with respect to, this Agreement or any other Loan Document, except to the extent
such amendment, consent or waiver would require unanimous consent of the Banks
described in the first proviso to Section 10.1. In the case of any such
----- ------- ------------
participation, the Participant shall not have any rights under this Agreement,
or any of the other Loan Documents, and all
68
<PAGE>
amounts payable by the Borrower hereunder shall be determined as if such Bank
had not sold such participation.
10.6.5 Notwithstanding any other provision in this Agreement, any
Bank may at any time create a security interest in, or pledge, all or any
portion of its rights under and interest in this Agreement and the Note it holds
in favor of any Federal Reserve Bank in accordance with Regulation A of the FRB
or U.S. Treasury Regulation 31 CFR (S) 203.14, and such Federal Reserve Bank may
enforce such pledge or security interest in any manner permitted under
applicable law.
10.7 Successors and Assigns. The provisions of this Agreement shall be
----------------------
binding upon, and shall inure to the benefit of, the parties hereto and their
respective successors and assigns, except that the Borrower may not assign or
transfer any of its rights or obligations under this Agreement without the prior
written consent of the Administrative Agent and each Bank, and except for the
limitations on assignments by the Administrative Agent and each Bank under
Section 10.6.
- ------------
10.8 Confidentiality. Each Bank agrees to maintain the confidentiality of
---------------
all financial statements, cash flow reports, projections, environmental reports
and appraisals provided to it by the Borrower, or by the Administrative Agent on
the Borrower's behalf, under this Agreement or any other Loan Document, and
neither a Bank nor any of its Affiliates shall use any such information other
than in connection with this Agreement and the other Loan Documents or the
enforcement thereof, or in connection with other business now or hereafter
existing or contemplated with the Borrower, except to the extent such
information (a) was or becomes generally available to the public other than as a
result of disclosure by any Bank, or (b) was or becomes available on a non-
confidential basis from a source other than the Borrower, provided that such
source is not bound by a confidentiality agreement with the Borrower known to
such Bank; provided, however, that any Bank may disclose such information (i)
-------- -------
pursuant to any requirement of any Governmental Authority to which such Bank is
subject or in connection with an examination of such Bank by any such authority;
(ii) pursuant to subpoena or other court process; (iii) when required to do so
in accordance with the provisions of any applicable Requirement of Law; (iv) to
the extent reasonably required in connection with any litigation or proceeding
relating to the Loans to which the Administrative Agent, any Bank or their
respective Affiliates may be party; (v) to the extent reasonably required in
connection with the exercise of any remedy hereunder or under any other Loan
Document; (vi) to such Bank's independent auditors and other professional
advisors; (vii) to any Participant or Assignee, actual or potential, provided
that such Person agrees in writing to keep such information confidential to the
same extent required of the Banks hereunder; (viii) as to any Bank or its
Affiliate, as expressly permitted under the terms of any other document or
agreement regarding confidentiality to which the Borrower is par or is deemed a
party with such Bank or such Affiliate; and (ix) to its Affiliates, provided
that such Affiliates agree in writing to be bound by the terms of this Section
-------
10.8.
- ----
69
<PAGE>
10.9 Set-off. NO BANK SHALL EXERCISE, OR ATTEMPT TO EXERCISE, ANY RIGHT OF
-------
SET-OFF, BANKER'S LIEN, OR THE LIKE, AGAINST ANY DEPOSIT ACCOUNT OR PROPERTY OF
THE BORROWER HELD OR MAINTAINED BY THE BANK WITHOUT THE PRIOR WRITTEN CONSENT OF
THE ADMINISTRATIVE AGENT AND THE MAJORITY BANKS.
10.10 Notification of Addresses, Lending Offices, Etc. Each Bank shall
-----------------------------------------------
notify the Administrative Agent in writing of any changes in the address to
which notices to the Bank should be directed, of addresses of any Lending
Office, of payment instructions in respect of all payments to be made to it
hereunder and of such other administrative information as the Administrative
Agent shall reasonably request.
10.11 Counterparts. This Agreement may be executed in any number of
------------
separate counterparts, each of which, when so executed, shall be deemed an
original, and all of which, taken together, shall be deemed to constitute but
one and the same instrument.
10.12 Severability. The illegality or unenforceability of any provision of
------------
this Agreement or any instrument or agreement required hereunder shall not, to
the fullest extent permitted by applicable law, in any way affect or impair the
legality or enforceability of the remaining provisions of this Agreement or any
instrument or agreement required hereunder.
10.13 No Third Parties Benefited. This Agreement is made and entered into
--------------------------
for the sole protection and legal benefit of the Borrower, the Banks, the
Administrative Agent and the Agent-Related Persons, and their permitted
successors and assigns, and except as otherwise provided in Section 10.5 in the
------------
case of an Indemnified Person, no other Person shall be a direct or indirect
legal beneficiary of, or have any direct or indirect cause of action or claim in
connection with, this Agreement or any of the other Loan Documents.
10.14 Governing Law and Jurisdiction.
------------------------------
(a) THIS AGREEMENT AND THE NOTES SHALL BE GOVERNED BY, AND CONSTRUED
IN ACCORDANCE WITH, THE LAW OF THE STATE OF CALIFORNIA; PROVIDED THAT THE
--------
ADMINISTRATIVE AGENT AND THE BANKS SHALL RETAIN ALL RIGHTS ARISING UNDER
FEDERAL LAW.
(b) SUBJECT TO THE PROVISIONS OF SECTION 10.15, ANY LEGAL ACTION OR
-------------
PROCEEDING WITH RESPECT TO THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT MAY BE
BROUGHT IN THE COURTS OF THE STATE OF CALIFORNIA OR OF THE UNITED STATES
FOR THE NORTHERN DISTRICT OF CALIFORNIA, AND BY EXECUTION AND DELIVERY OF
THIS AGREEMENT, EACH OF THE BORROWER, THE ADMINISTRATIVE AGENT AND THE
BANKS CONSENTS, FOR ITSELF AND IN RESPECT OF ITS PROPERTY, TO THE
NONEXCLUSIVE JURISDICTION OF THOSE COURTS. EACH OF THE BORROWER, THE
ADMINISTRATIVE AGENT AND THE BANKS IRREVOCABLY WAIVES ANY OBJECTION,
70
<PAGE>
INCLUDING ANY OBJECTION TO THE LAYING OF VENUE OR BASED ON THE GROUNDS OF
FORUM NON CONVENIENS, WHICH IT MAY NOW OR HEREAFTER HAVE TO THE BRINGING OF
ANY ACTION OR PROCEEDING IN SUCH JURISDICTION IN RESPECT OF THIS AGREEMENT
OR ANY DOCUMENT RELATED HERETO.
10.15 Reference and Arbitration.
-------------------------
10.15.1 Judicial Reference. In any judicial action between or among
------------------
the parties in any way based on, arising out of or relating to this Agreement,
the other Loan Documents or any Loan (including any action or cause of action
based on or arising from an alleged tort), all decisions of fact and law shall
at the request of any party be referred to a referee in accordance with
California Code of Civil Procedure Sections 638 et seq. The parties shall
-- ---
designate to the court a referee or referees selected under the auspices of the
American Arbitration Association ("AAA") in the same manner as arbitrators are
selected in AAA-sponsored proceedings. The presiding referee of the panel, or
the referee if there is a single referee, shall be an active attorney or retired
judge. Judgment upon the award rendered by such referee or referees shall be
entered in the court in which such proceeding was commenced in accordance with
California Code of Civil Procedure Sections 644 and 645.
10.15.2 Mandatory Arbitration. After all Deeds of Trust and any
---------------------
other real property security have been released, fully reconveyed or
extinguished, any controversy or claim between or among the parties in any way
based on, arising out of or relating to this Agreement, the other Loan Documents
or any Loan (including any controversy or claim based on or arising from an
alleged tort) shall at the request of any party be determined by arbitration.
The arbitration shall be conducted in accordance with the United States
Arbitration Act (Title 9, U.S. Code), notwithstanding any choice of law
provision in this Agreement, and under the Commercial Rules of the AAA. The
arbitrator(s) shall give effect to statutes of limitation in determining any
claim. Any controversy concerning whether an issue is arbitrable shall be
determined by the arbitrator(s). Judgment upon the arbitration award may be
entered in any court having jurisdiction. The institution and maintenance of an
action for judicial relief or pursuit of a provisional or ancillary remedy shall
not constitute a waiver of the right of any party, including the plaintiff, to
submit the controversy or claim to arbitration if any other party contests such
action for judicial relief.
10.15.3 Real Property Collateral. Notwithstanding the provisions of
------------------------
Section 10.15.2, no controversy or claim shall be submitted to arbitration
- ---------------
without the consent of all parties if, at the time of the proposed submission,
such controversy or claim arises from or relates to an obligation to the
Administrative Agent or the Banks that is secured by real property collateral.
If all parties do not consent to submission of such a controversy or claim to
arbitration, the controversy or claim shall be determined by reference as
provided in Section 10.15.1.
---------------
71
<PAGE>
10.15.4 Provisional Remedies, Self-Help and Foreclosure. No provision
-----------------------------------------------
of this Section 10.15 shall limit the right of any party to this Agreement to
-------------
exercise self-help remedies such as set off, foreclosure against or sale of any
real or personal property collateral or security, or to obtain provisional or
ancillary remedies (including provisional remedies such as claim and delivery
and ancillary remedies such as the issuance of temporary restraining orders and
preliminary injunctions pending submission of any action or cause of action to
judicial reference or arbitration as otherwise required hereunder) from a court
of competent jurisdiction before, after, or during the pendency of any
arbitration or other proceeding. The exercise of a remedy does not waive the
right of any party to resort to arbitration or reference. At the Administrative
Agent's option, foreclosure under a Deed of Trust or mortgage may be
accomplished either by exercise of the power of sale under the Deed of Trust or
mortgage or by judicial foreclosure.
10.16 Entire Agreement. This Agreement, together with the other Loan
----------------
Documents, embodies the entire agreement and understanding among the Borrower,
the Banks and the Administrative Agent, and supersedes all prior or
contemporaneous agreements and understandings of such Persons, verbal or
written, relating to the subject matter hereof and thereof.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed and delivered by their proper and duly authorized officers as
of the date first above written.
"Borrower"
CATELLUS DEVELOPMENT CORPORATION,
a Delaware corporation
By /s/ Stephen P. Wallace
------------------------------------------------
Stephen P. Wallace, Senior V.P. and CEO
------------------------------------------
[Printed Name and Title]
72
<PAGE>
"Administrative Agent"
BANK OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION,
as Administrative Agent
By /s/ Janice L. Sears
--------------------------------------------------
Janice L. Sears, Vice President
------------------------------------------------
[Printed Name and Title]
"Documentation Agent"
THE FIRST NATIONAL BANK OF CHICAGO,
as Documentation Agent
By /s/ Kevin L. Gillen
-------------------------------------------------
Kevin L. Gillen, Corporate Banking Officer
--------------------------------------------
[Printed Name and Title]
"Banks"
BANK OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION,
as a Bank
By /s/ Janice L. Sears
--------------------------------------------------
Janice L. Sears, Vice President
------------------------------------------------
[Printed Name and Title]
73
<PAGE>
Commitment: $85,000,000.00
THE FIRST NATIONAL BANK OF CHICAGO,
as a Bank
By /s/ Kevin L. Gillen
-------------------------------------------------
Kevin L. Gillen, Corporate Banking Officer
------------------------------------------
[Printed Name and Title]
Commitment: $40,000,000.00
CIBC INC.,
as a Co-Agent and a Bank
By /s/ D. James Armstrong
----------------------------------------------
Its Authorized Signatory
D. James Armstrong
------------------------------------------------
[Printed Name]
Commitment: $30,000,000.00
THE BANK OF NOVA SCOTIA,
SAN FRANCISCO AGENCY,
as a Co-Agent and a Bank
By /s/ Bruce Ganong
------------------------------------------------
Bruce Ganong, Relationship Manager
-------------------------------------------
[Printed Name and Title]
Commitment: $30,000,000.00
THE FIRST NATIONAL BANK OF BOSTON,
as a Co-Agent and a Bank
By /s/ Kathleen M. Ahern
-----------------------------------------------
Kathleen M. Ahern, Vice President
--------------------------------------------
[Printed Name and Title]
74
<PAGE>
Commitment: $30,000,000.00
COMMERZBANK AG,
LOS ANGELES BRANCH, as a Bank
By /s/ Werner Schmidbauer, /s/ Karla Wirth
------------------------------------------
Werner Schmidbauer, Vice President
--------------------------------------------
Karla Wirth, Asst. Treasurer
------------------------------------------------
[Printed Name and Title]
Commitment: $25,000,000.00
75
<PAGE>
SCHEDULE 1.1
LIST OF APPRAISED VALUES
------------------------
<TABLE>
<CAPTION>
PROPERTY LOCATION VALUE
-------- -------- -----
<S> <C> <C>
INDUSTRIAL
- ----------
4801 W. Polk Street Phoenix, AZ 4,980,000
421 W. Alameda Drive/Microage Tempe, AZ 5,000,000
Pacific Business Center Fremont, CA 9,400,000
30000 Eigenbrodt Way/SAAB Union City, CA 4,500,000
20801 & 21 Santa Fe Ave. Carson, CA 9,500,000
Multi-tenant Santa Fe Spr., CA 6,700,000
4900 Loma Vista; 4501-78 E. 49th Street Vernon, CA 4,390,000
Multi-tenant Vernon II Vernon, CA 4,400,000
Lucky Brand Dungarees Vernon, CA 3,340,000
1700, 1800 Bay Street Los Angeles, CA 3,530,000
Owens & Minor City of Industry, CA 9,175,000
Queen Carpet La Mirada, CA 12,400,000
Spicer's Paper Santa Fe Springs, CA 4,160,000
State of California Fullerton, CA 7,210,000
Lot 2 Fullerton, CA 2,600,000
Lot 5/Label-Aire Fullerton, CA 3,700,000
Lot 7/Sunwest Fasteners Fullerton, CA 2,400,000
LA Times Fullerton, CA 1,725,000
Lot 9/Day Runner Fullerton, CA 9,500,000
Insight for Living Anaheim, CA 1,425,000
LA Times Anaheim, Ca 1,300,000
Phase V Anaheim, CA 6,600,000
Microtechnology Anaheim, CA 8,300,000
4875-87 E. LaPalma Ave. Anaheim, CA 5,800,000
2245 N. Glassell St./OC Register Orange, CA 2,800,000
Iron Mountain Santa Ana, CA 2,400,000
Building 132 Tustin, CA 3,500,000
PacifiCenter Santa Ana Santa Ana, CA 4,750,000
Dunlop Ontario, CA 9,500,000
LA Times Ontario, CA 2,400,000
Pepsi Ontario, CA 8,000,000
4850 Airport Drive/Technicolor Ontario, CA 4,300,000
Ontario 400/Bridgestone Ontario, CA 12,475,000
Ontario 141/Duracell Ontario, CA 3,900,000
Interceramic Garland, TX 8,700,000
Livermore Valley Business Park Livermore, CA 4,500,000
OFFICE
- ------
Multi-tenant Anaheim, Ca 8,300,000
Multi-tenant Corona, CA 4,900,000
RETAIL
- ------
East Baybridge Emeryville, CA 48,000,000
Multi-tenant Anaheim, CA 1,800,000
</TABLE>
Schedule 1.1-1
<PAGE>
SCHEDULE 1.1
LIST OF APPRAISED VALUES
------------------------
<TABLE>
<CAPTION>
PROPERTY LOCATION VALUE
-------- -------- -----
<S> <C> <C>
Microcenter Tustin, CA 3,400,000
Raleigh West Retail Beaverton, OR 3,600,000
LAND
- ----
Crossroads Ontario, CA 11,210,000
Pacific Distribution Center Ontario, CA 2,870,000
Eastgate Ontario, CA 3,220,000
Rancho Cucamonga Rancho Cucamonga, CA 6,800,000
Corporate Center Anaheim, CA 4,200,000
Commerce Center Industry, CA 8,040,000
Stevenson/Boyce Fremont, CA 2,450,000
Alvarado Business Park Union City 2,200,000
Internationale Centre Woodridge, Illinois N/A
Romeoville Woodridge, Illinois N/A
Joliet Woodridge, Illinois N/A
Coppell Gateway Dallas, Texas N/A
Gateway East Dallas, Texas 9,700,000
LA Times Fullerton Land Fullerton, CA N/A
Pepsi Land Ontario, CA 700,000
</TABLE>
Schedule 1.1-2
<PAGE>
SCHEDULE 2.1
------------
COMMITMENTS
-----------
AND PRO RATA SHARES
-------------------
<TABLE>
<CAPTION>
BANK COMMITMENT SHARE
- ---- ---------- -----
<S> <C> <C>
Bank of America
National Trust &
Savings Association $ 85,000,000 35.41666667%
The First National
Bank of Chicago $ 40,000,000 16.66666667%
CIBC Inc. $ 30,000,000 12.50000000%
The Bank of Nova
Scotia, San Francisco
Agency $ 30,000,000 12.50000000%
The First National
Bank of Boston $ 30,000,000 12.50000000%
Commerzbank AG,
Los Angeles Branch $ 25,000,000 10.41666667%
TOTAL: $240,000,000 100.00000000%
</TABLE>
Schedule 2.1-1
<PAGE>
SCHEDULE 5.5
------------
LITIGATION
----------
NONE
Schedule 5.5-1
<PAGE>
SCHEDULE 5.7
------------
ERISA DISCLOSURES
-----------------
None
Schedule 5.7-1
<PAGE>
SCHEDULE 5.11
-------------
FINANCIAL CONDITION DISCLOSURES
-------------------------------
None
Schedule 5.11-1
<PAGE>
SCHEDULE 5.12
$240 Million Term Loan
ENVIRONMENTAL MATTERS
Reference is made to the information set forth in Schedule 4.9 and in Borrower's
public reports filed with the Securities and Exchange Commission (including
Borrower's audited and unaudited financial statements included therein), all of
which is incorporated herein by this reference. Borrower discloses the following
additional information pursuant to Section 5.12, subsections (a) through (d):
<TABLE>
<CAPTION>
PROPERTY & PARCEL NUMBER COMMENT
- ------------------------ -------
<S> <C>
Albany Landfill, CA Former refuse landfill undergoing
CA0010192-94 closure pursuant to applicable
environmental regulations.
Berkeley Landfill, CA Former refuse landfill in
CA0010202,6,10,13,17,26 and 27 post-closure pursuant to applicable
Point Isabel, CA environmental regulations. State
CA0130101, 203, 211 Superfund site which has been
remediated with remediation certified
as complete by the California
Department of Health Services. Long
term monitoring is ongoing.
Remediation of an additional area of
contamination which was recently
identified was completed pursuant to
directives of the California Regional
Water Quality Control Board. Catellus
is awaiting approval of closure.
Russo's Marine, CA Soil and groundwater from former
CA0530015 leaking underground tanks being
remediated pursuant to guidelines of
Regional Water Quality Control Board.
Stockton, CA Soil and groundwater from former
CA0770652 leaking underground tanks is
currently being remediated under
oversight of San Joaquin County
Health Department.
2608 Inwood Road, TX Plan B limited risk assessment
TX1131502 submitted to the Texas Natural
Resource Conservation Commission.
Catellus is awaiting approval of
closure.
Buttonwillow, CA Remediation of contaminated soil from
CA0290069 underground storage tank and sump has
been completed. Catellus is waiting
for the closure letter from the Kern
County Environmental Health
Department.
Santa Fe, NM The New Mexico Environmental
NM0490208 Department ("NMED") issued a
directive requiring the removal of an
abandoned tank currently located on
premises leased to a tenant. The
tenant has accepted responsibility
for the tank and is proceeding with
the removal.
</TABLE>
Page 1
<PAGE>
<TABLE>
<S> <C>
Mission Bay The Regional Water Quality Control
San Francisco, CA Board has been designated the lead
agency for this former railyard. The
RWQCB has issued a request for 1) a
shallow groundwater investigation of
a portion of the site and 2) the
development of risk management plans
for six former UST sites.
Topeka, KS Kansas Department of Health and
[SOLD] Environmental issued a draft consent
order requiring investigation and
remediation of two lagoons on a
property sold by a corporate
predecessor of Catellus. The
Atchison, Topeka and Santa Fe Railway
Company ("AT&SF") and the current
property owner were listed as PRPs.
Catellus intends to demonstrate that
its predecessor never owned or
managed the property and that
Catellus should not be named as a PRP.
Wasco, CA The Department of Toxic Substances
Control ("DTSC") has issued an order
of Eminent or Substantial
Endangerment for this property which
was held in trust by a corporate
predecessor of Catellus for AT&SF.
AT&SF and a previous tenant were also
notified. Catellus intends to
demonstrate that its predecessor
never owned or managed the property
and that Catellus should not be named
as a PRP.
</TABLE>
Page 2
<PAGE>
ENVIRONMENTAL REPORTS
$240 Million Revolving Credit Facility
BUILDINGS
=========
INDUSTRIAL
- ----------
AZ0131306
4801 W. Polk Phoenix
. Dames & Moore, 9/30196: Phase I Environmental Site Assessment
AZ0131407
Broadway Industrial Park/Microage, 421 W. Alameda, Tempe
. Dames & Moore, 10/1/96: Phase I Environmental Site Assessment
CA0010591-2
Pacific Business Center, Phase II, Fremont
. Dames & Moore, 12/15/95: Limited Phase I Environmental Site Assessment,
Two Vacant Lots, CA0010591 and CA0010592, Fremont, California
. Dames & Moore, 9/27/96: Update
Alvarado Business Center (SAAB-Scania Bldg), 30000 Eigenbrodt Way, Union City
. Dames & Moore, 10/2/96: Phase I Environmental Site Assessment
CA0370092
20801-21 Santa Fe Ave. (Santa Fe Business Center), Carson
. Dames & Moore, 10/4/96: Phase I Environmental Site Assessment
CA0370120
Multitenant Property, 12000, 12120 E Slauson Ave. 8620 Sorensen Ave., 12035,
12115 Burke St., Santa Fe Springs
. Dames & Moore, 9/4/91: Preliminary Site Assessment, Multi-tenant
Property, Santa Fe Springs, California
. Dames & Moore, 12/26/91: Phase I Environmental Assessment, Multi-
tenant Property, Santa Fe Springs, California
. Dames & Moore, 4/9/92: Supplemental Phase II Environmental Site
Assessment and Soil Removal, Multi-tenant Property, Santa Fe Springs,
California
. Recon, 5/26/95: Environmental Site Assessment Update, Pacific Spring
Multi-tenant Property, 12000-12110 Slauson Avenue, 1203S-12115
Burke Street, 8620 Sorensen Avenue, Santa Fe Springs, California
90670 RECON Project No. A50112
. Vista Information Solutions, Inc., 9/6/96: Site Assessment Plus
Report.
. Dames & Moore, 10/2/96: Update for Multi-tenant Property
1
<PAGE>
CA0372066-68
4900 Loma Vista Avenue, 45014578 E. 49th Street, Vernon
. Dames & Moore, 10/4/96: Phase I Environmental Site Assessment
CA0372081-82
4592,4604, 4614, 4626, 4664 E. 48th Street, 4593, 4625, 4665 E. 49th Street,
Vernon
. Converse Environmental West, 3123192: Phase I Environmental Site
Assessment, Tower Industrial Park, Phase II, Vernon, California
. Recon, 5/26/95: Environmental Site Assessment Update, Tower Industrial
Park: Phase II, 4592-4604-4614-4626 E. 48 Street, 4593-4625-4668 E.
49th Street, Vernon, California, RECON Project No. A50114
. Vista Information Solutions, Inc., 9/6/96: Site Assessment Plus Report
. Dames & Moore, 9/27/96: Update
CA0372083
4575 and 4599 District Boulevard, Vernon
. IT Corporation, 2/96: Phase I Environmental Site Assessment and Soil
Removal Report, Lucky Brand Dungarees, Inc., 4575 and 4599 District
Boulevard, Vernon, California
. Vista Information Solutions, Inc., 9/6/96: Site Assessment Plus Report
. Dames & Moore, 9/27/96: Update
CA0374501
1700 Bay Street, (Bay St. Team Track), Los Angeles
. Dames & Moore, 9/25/96: Phase I Environmental Site Assessment
CA0375020
Vacant Parcels, Lots 1-4, Corner of Spanish Lane and Cheryl Lane, City of
Industry
. Dames & Moore, 10/20/92: Phase I Preliminary Site Assessment, Vacant
Parcels, Lots 10, 14, 15, and 19, City of Industry, California
. Dames & Moore, 7/28/95: Report, Phase I Environmental Site Assessment,
Vacant Parcels, Lot No's. 1, 2, 3, 4 and A Triangular Lot South of
Parcel 2, City of Industry, California [CA0375002, 05, 03, 04]
. Dames & Moore, 7/28/95: Phase I Environmental Site Assessment, Vacant
Triangular Parcel, Northwest Corner of Spanish Lane and Brea Canyon
Road, City of Industry, California
. Dames & Moore, 10/3/96: Update for Parcel CA0375020, which consists of
Parcels CA0375006, 7, 10, 13-14, 16-17, 19, 24-26, 28, 30-32
CA0375303
North-Central Property (Spicers), 12202 East Slauson Avenue, Santa Fe Springs
. Dames & Moore, 9/4/91: Preliminary Site Assessment, Multi-tenant
Property, Santa Fe Springs, California
. Dames & Moore, 1/10/92: Remedial Investigation Workplan, Central
Property, Santa Fe Springs, California
2
<PAGE>
. Dames & Moore, 10/25/94: Phase II Investigation North Central
Property, Santa Fe Springs, California
. Dames & Moore, 6/23/95 Letter: Santa Fe Springs Property, Eastern
Portion of Central Property, Proposed Investigation
. Vista Information Solutions, Inc., 9/6/96: Site Assessment Plus
Report
. Dames & Moore, 10/2/96: Update for Multi-tenant parcel
CA0590911
SW Corner of Tustin & La Palma Avenues, Anaheim
. Dames & Moore, 10/4/96: Phase I Environmental Site Assessment
[CA0590905 is part of this]
CA0591023,28,31
CA0591018-33
Santa Fe Corporate Center, (Catellus Corporate Center), Anaheim
. Dames & Moore, 10/4/96: Phase I Environmental Site Assessment
CA0591018,21-23,26-27
NW Corner Landon Dr. & Kellogg Dr., NE Corner Landon Dr. & Manassero St.,
Anaheim
. Dames & Moore, 10/4/96: Phase I Environmental Site Assessment
CA0591028
SE Corner of Landon Drive & Manassero Street, Anaheim
. Dames & Moore, 10/4/96: Phase I Environmental Site Assessment
CA0591031
NE Corner of Manassero & La Palma (Microtechnology), Anaheim
. Dames & Moore, 10/4/96: Phase I Environmental Site Assessment
CA0591034
CA0591017,34-35
NE La Palma Ave. & Hancock, Anaheim
. Dames & Moore, 10/4/96: Phase I Environmental Site Assessment
CA0591034
NW Corner of La Palma Ave. & Manassero Street, Anaheim (Microtechnology)
. Dames & Moore, 10/4/96: Phase I Environmental Site Assessment
CA0591034
1260 Hancock (Santa Fe Corporate Center, Phase III), Anaheim
. Dames & Moore, 10/4/96: Phase I Environmental Site Assessment
CA0591103
OC Register, 2245 N. Glassell St., Orange
. Dames & Moore, 10/4/96: Phase I Environmental Site Assessment
3
<PAGE>
CA0591434
CA0591412,30-36
Iron Mountain, 1909 S. Grand Ave. (PacifiCenter West), Santa Ana
. Dames & Moore, 10/4/96: Phase I Environmental Site Assessment
CA0591512
CA0591504,12
15222, 15442 Del Amo Ave., Tustin
. Roy F. Weston, 6/93: Phase I Environmental Assessment, Siemens
Nixdorf/City of Tustin, 15222 Del Amo Avenue [CA0591512]
. Dames & Moore, 10/4/96: Update
CA0712412,28,30
CA0712401-28
Etiwanda Ave. & G Street, Ontario, 260 acres
SW Corner of 4th Street and Etiwanda Avenue
. Dames & Moore, 10/4/96: Phase I Environmental Site Assessment
CA0712402-5,11 -20,23 -27,29
Ontario Crossroads, Etiwanda Avenue & 4th St., Ontario
. Dames & Moore, 10/4/96: Phase I Environmental Site Assessment
CA0713512,524,551
CA0713512 (501)
4850 Airport Drive (Defense Technologies), Ontario
. Dames & Moore, 10/3/96: Phase I Environmental Site
CA0713524
1303-1393 South Sarah Place, Warehouse 400, Ontario
. Dames & Moore, 10/4/96: Phase I Environmental Site
CA0713551
5120-40 East Santa Ana St., Ontario
. Dames & Moore, 10/4/96: Phase I Environmental Site
TX1130336
Jupiter Road, Garland
. Dames & Moore, 10/4/96: Phase I Environmental Site, Jupiter Road
included with TX00310305, 24, 28, 33, 34
OFFICE
- ------
CA0590909
PacifiCenter, Anaheim
4
<PAGE>
. Dames & Moore, 10/4/96: Phase I Environmental Site [CA0590905 is part
of this]
CA0650942
2280 Wardlow Road, Corona
. Dames & Moore, 9/16/91: Report, Preliminary Site Assessment, Office
Building, 2280 Wardlow Road, Corona, California
. McLaren Hart, 3/19/92: Phase I Environmental Assessment Update, Westgate
Office-CA0650942, 2280 Wardlow Road, Corona, California
. Recon Environmental Corporation, 5126195: Environmental Site Assessment
Update, 2280 Wardlow Road, Corona, California, RECON Project No.A50111
. Vista Information Solutions, Inc., 916196: Site Assessment Plus Report
. Dames & Moore, 9/25/96: Update
RETAIL
- ------
CA0590905
[see CA0590909 above]
CA0591557
1100 Edinger Avenue, Tustin
. Dames & Moore, 8/20/93: Environmental Site Assessment, Builders
Emporium, 1100 Edinger Avenue, Tustin, California
. Vista Information Solutions, 9/10/96: Site Assessment Plus Report
. Dames & Moore, 10/4/96: Update
OR0670005
Raleigh West Shopping Center, 6677 SW Beaverton Hillsdale Highway, Portland
. Dames & Moore, 9127196: Phase I Environmental Site Assessment
LAND
- ----
CALIFORNIA
- ----------
CA0712402,07,11,13-22,24-27,31-32,53
Crossroads, Ontario, Etiwanda Ave. & G Street, Ontario, 260 acres
. Dames & Moore, 10/4/96: Phase I Environmental Site Assessment
CA07113547-50
Pacific Distribution Center, Ontario
. Dames & Moore, 10/4/96: Phase I Environmental Site Assessment
5
<PAGE>
CA0713532-44
Eastgate, Ontario
. Dames & Moore, 10/3/96: Phase I Environmental Site Assessment
CA0712301,03
Rancho Cucamonga
. Dames & Moore, 10/3/96: Phase I Environmental Site Assessment
CA0591018,21-22,26-27,29,32,35,39
Catellus Corporate Center, Anaheim
[see Anaheim above]
CA0375006-07,10,13- 14,16-17,19,24-26,28,31-32
Catellus Commerce Center, City of Industry
[see City of Industry above]
CA0010188
Stevenson/Boyce, Fremont
. Dames & Moore, 7/15/96: Phase I Environmental Site Assessment Update of
Vacant Lot, Boyce Road, Fremont, California
. Dames & Moore, 9/27/96: Update
CA0010519
Alvarado Business Park, Union City
. Dames & Moore, 8/16/96: Phase I Environmental Site Assessment Update of
Vacant Lot Volpey and Eigenbrodt Way, Union City, California
. Dames & Moore, 927/96: Update
ILLINOIS
- --------
IL1970301-4,11-12,18-19, IL0430101,06-10,12,14-16
Internationale-Centre, Woodridge
. Dames & Moore, 10/9/96: Phase I Environmental Site
IL1970101 (+NEW PARCEL)
I-55 & Normantown Road, Romeoville
. Dames & Moore, 7/11/96: Environmental Assessment, 118.2-Acre Parcel,
Normantown Road, Romeoville, Illinois
. Dames & Moore, 9/26/96: Update
South Frontage Road, Bolingbrook
. Dames & Moore, 7/8/96: Environmental Assessment, 22-Acre Parcel, South
Frontage Road, Bolingbrook, Illinois
. Dames & Moore, 9/25/96: Update
6
<PAGE>
IL1970201-05,09
I55 & Durkee Drive, Joliet
. Dames & Moore, 10/9/96: Phase I Environmental Site Assessment
TEXAS
- -----
TX1130601-06
Coppel Gateway, Dallas
. Terra-Mar, Inc., 9/89: Environmental Site Assessment, 103.3 Acre Tract,
IH 635 and Freeport Parkway
. McLaren Hart, 4/15/90: Property Assessment
. Terra-Mar, Inc. 5129192: Phase I Environmental Site Assessment, 222 Acre
Site Gateway-Coppell, IH 635 and Freeport Parkway
. Halff Associates, Inc., 7/94: Environmental Site Assessment, 10.5 Acres
of Vacant Land located in Block 2, Lot 2, Gateway Business Park,
Coppell, Texas
. Halff Associates Inc., 3/96: DRAFT Phase I Environmental Site Assessment
for the Evaluation of Potentially Hazardous Materials, 70.38 acre
Tract of Land located at the northwest corner of Gateway Boulevard
and Freeport Parkway in the City of Coppell, Dallas County, Texas
. Vista Information Solutions, 9/17/96: Site Assessment Plus Report
. Dames & Moore, 10/9/96: Phase I Environmental Site Assessment
TX1130305,24,28,33-34
Garland - Gateway East, Jupiter Road, Dallas,
. Dames & Moore, 10/9/96: Phase I Environmental Site Assessment
7
<PAGE>
SCHEDULE 5.16 A&B
SUBSIDIARIES AND JOINT VENTURES OF CATELLUS DEVELOPMENT
<TABLE>
<CAPTION>
JURISDICTION OF
PERCENTAGE PARTNERSHIP OR
OWNED BY STATE OF
CATELLUS INCORPORATION
----------- ---------------
<S> <C> <C>
Santa Fe Towers Land Company 100% Delaware
Santa Fe Towers Land Company 100% California
Seabridge Properties, Inc. 100% Delaware
Habor Drive Company 100% Delaware
SF Pacific Properties Inc. 100% Delaware
Westada Corporation 100% Delaware
Catellus Management Corporation 100% Delaware
Collinsville Property Corporation 100% Delaware
Catellus Construction Corporation 100% Delaware
Catellus Union Station, Inc. 100% Delaware
Catellus Residential Group, Inc. 100% California
Gilman Property Corporation 100% Delaware
Dallas International Ltd. 25.21% Texas
New Orleans International Hotel 14.15% Louisiana
International Rivercenter 25.16% Louisiana
New Orleans Rivercenter 38.75% Louisiana
Desman Road Partners 37.82% California
</TABLE>
8
<PAGE>
SCHEDULE 5.17
-------------
INSURANCE DISCLOSURES
---------------------
None
Schedule 5.17-1
<PAGE>
SCHEDULE 10.2
-------------
OFFSHORE AND DOMESTIC LENDING OFFICES,
--------------------------------------
ADDRESSES FOR NOTICES
---------------------
Catellus Development Corporation
201 Mission Street
San Francisco, CA 94105
Attention: Chief Financial Officer
Telephone: (415) 974-4500
Facsimile: (415) 974-4613
BANK OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION, as Administrative Agent
- ------------------------------------------------------
Bank of America National Trust
and Savings Association
SF National Accounts #9105
50 California Street, 11th Floor
San Francisco, CA 94111
Attention: Ms. Janice Sears
Vice President
Telephone: (415) 445-4448
Facsimile: (415) 445-4154
BANK OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION, as a Bank
- ------------------------------------------------------
Domestic and Offshore Lending Office:
Bank of America National Trust
and Savings Association
SF National Accounts #9105
50 California Street, 11th Floor
San Francisco, CA 94111
Attention: Ms. Phyllis Wong
Telephone: (415) 445-4213
Facsimile: (415) 445-4154
Notices (other than Borrowing Notices and Notices of
Conversion/Continuation):
Schedule 10.2-1
<PAGE>
Bank of America National Trust
and Savings Association
SF National Accounts #9105
50 California Street, 11th Floor
San Francisco, CA 94111
Attention: Ms. Janice Sears
Vice President
Telephone: (415) 445-4448
Facsimile: (415) 445-4154
THE FIRST NATIONAL BANK OF CHICAGO,
- ----------------------------------
as Documentation Agent and as a Bank
The First National Bank of Chicago
Real Estate Portfolio Management
One First National Plaza, Mail Suite 0151
Chicago, IL 60670-0151
Attention: Mr. Kevin L. Gillen
Corporate Banking Officer
Telephone: (312) 732-1486
Facsimile: (312) 732-1117
Payment Information:
- -----------------------
ABA No.: 071000013
Bank Name: The First National Bank of Chicago
Beneficiary Acct.: 7521-7653
Beneficiary Name: DCS Clearing Account
Ref: Catellus Development Corp.
Attn: Robert Rodzon
Admin. Contact: Robert Rodzon
Telephone: (312) 732-5097
Facsimile: (312) 732-1582
CIBC INC.,
- ---------
as Co-Agent and as a Bank
CIBC Inc.
350 South Grand Avenue, Suite 2600
Los Angeles, CA 90071
Attention: Ms. Diane Saunder
Director
Telephone: (213) 617-6284
Schedule 10.2-2
<PAGE>
Facsimile: (213) 346-0158
Payment Information:
- -------------------
ABA No.: 021000238
Bank Name: Morgan Guaranty Trust Company of New York
60 Wall Street
New York, NY 10260
Beneficiary Acct.: 630-00-480
Beneficiary Name: CIBC, New York Agency
Ref: Catellus Development Corp.
Attn: The Atlanta Agency
Admin. Contact: Elizabeth Jenkins
Telephone: (770) 319-4839
Facsimile: (770) 319-4951
THE FIRST NATIONAL BANK OF BOSTON,
- ---------------------------------
as Co-Agent and as a Bank
The First National Bank of Boston
100 Federal Street
Boston, MA 02106
Attention: Ms. Kathleen Ahern
Vice President
Telephone: (617) 434-2738
Facsimile: (617) 434-7108
Payment Information:
- -----------------------
ABA No.: 011000390
Bank Name: Bank of Boston
Beneficiary Acct.:
Beneficiary Name:
Ref: Catellus Development Corp.
Attn: Linda Wheeler/CLS Dept.
Admin. Contact: Deborah Washburn
Telephone: (617) 434-3188
Facsimile: (617) 434-7108
THE BANK OF NOVA SCOTIA, SAN FRANCISCO AGENCY,
- ---------------------------------------------
as Co-Agent and as a Bank
The Bank of Nova Scotia, San Francisco Agency
Schedule 10.2-3
<PAGE>
580 California Street, 21st Floor
San Francisco, CA 94104
Attention: Mr. Bruce Ganong
Vice President
Telephone: (415) 616-4108
Facsimile: (415) 397-0791
Payment Information:
- -----------------------
ABA No.: 026002532
Bank Name: Bank of Nova Scotia, New York Agency
Beneficiary Acct.: 0609838
Beneficiary Name: NCB, San Francisco Agency
Ref: Catellus Development Corp.
Attn: Nadine Bell
Admin. Contact: Nadine Bell
Telephone: (404) 877-1557
Facsimile: (404) 888-8998
COMMERZBANK AG. LOS ANGELES BRANCH,
- ----------------------------------
as a Bank
Commerzbank AG
660 South Figueroa Street, Suite 1450
Los Angeles, CA 90017
Attention: Mr. Werner Schmidbauer
Vice President
Telephone: (213) 623-8223
Facsimile: (213) 623-0039
Payment Information:
- -------------------
ABA No.: 026008044
Bank Name: Commerzbank AG, New York Branch
Beneficiary Acct.: 150/940123300USD
Beneficiary Name: Commerzbank AG, Los Angeles Branch
Ref.: Catellus Development Corp.
Acct. No. 123/1000918/05USD
Admin. Contact: Christina Humphrey
Telephone: (212) 266-7315
Facsimile: (212) 266-7593
Schedule 10.2-4
<PAGE>
EXHIBIT A
NOTICE OF BORROWING
-------------------
Borrowing No. __________________
The Borrower hereby requests a [Borrowing] [Letter of Credit] in the
amount, and on the [Borrowing Date] [issuance date], set forth below, pursuant
to that certain Line of Credit Loan Agreement (the "Agreement") dated as of
---------
October 28, 1996, between CATELLUS DEVELOPMENT CORPORATION, a Delaware
corporation (the "Borrower"), the Banks referred to therein, and BANK OF AMERICA
--------
NATIONAL TRUST AND SAVINGS ASSOCIATION, individually as a Bank and as
administrative agent for itself and the other Banks (in such capacity, the
"Administrative Agent"). Capitalized terms used and not otherwise defined herein
- ---------------------
shall have the meanings set forth for them in the Agreement.
[TOTAL BORROWING]
[STATED AMOUNT OF
LETTER OF CREDIT]: $__________
[LESS AMOUNT, IF ANY, TO
BE DISBURSED DIRECTLY BY
THE ADMINISTRATIVE AGENT
WITH RESPECT TO FEES AND
EXPENSES:] $_________
[NET AMOUNT OF BORROWING
TO BE DISBURSED DIRECTLY
BY THE ADMINISTRATIVE
AGENT TO THE BORROWER $_________
(NET BORROWING):]
REQUESTED [BORROWING]
[ISSUANCE] DATE: _________
[In accordance with the Agreement, the Borrower hereby requests that the
Borrowing initially consist of (i) Reference Rate Loans or (ii) LIBOR Loans for
the - Interest Period indicated below (check one box only).
[ ] Reference Rate Loans in the aggregate amount of $___________
A-1
<PAGE>
[ ] LIBOR Loans in the aggregate amounts of:
(i) $__________, for a ______ ( ) month Interest Period;
(ii) $__________, for a ______ ( ) month Interest Period; and
(iii) $__________, for a ______ ( ) month Interest Period.]
The Borrower hereby represents and warrants to the Administrative Agent
that (i) except as set forth on the Schedule attached hereto, all of the
representations and warranties set forth in the Agreement are true and correct
on the date of this request as if made on and as of the date of this request
(except to the extent such representations and warranties expressly refer to an
earlier date, in which case they are true and correct as of such earlier date),
and (ii) no Monetary Default, other Default that the Borrower is not in the
process of curing (to the extent permitted by Section 8.1 of the Agreement) or
-----------
Event of Default has occurred and remains uncured.
[Please wire transfer the requested amount, less any commitment fees, as
follows:
Wire to: ___________________________
___________________________
___________________________
ABA# ______________________
Credit: ___________________________
___________________________
___________________________
Account# __________________]
A-2
<PAGE>
[Please call _____________ at ___________________ the day prior to the date
of the wire transfer.]
CATELLUS DEVELOPMENT CORPORATION
a Delaware corporation
By ______________________________
_______________________________
[Printed Name and Title]
DATE: ______________
PAYMENT APPROVED:
____________________
Loan Officer
A-3
<PAGE>
EXHIBIT B
NOTICE OF CONVERSION/CONTINUATION
---------------------------------
This Notice of Conversion/Continuation is executed by CATELLUS DEVELOPMENT
CORPORATION, a Delaware corporation (the "Borrower"), pursuant to that certain
--------
Line of Credit Loan Agreement dated as of October 28, 1996 (the "Agreement"),
---------
among the Borrower, the Banks referred to therein, and BANK OF AMERICA NATIONAL
TRUST AND SAVINGS ASSOCIATION, individually as a Bank and as administrative
agent for itself and the other Banks (in such capacity, the "Administrative
--------------
Agent"). Capitalized terms used and not otherwise defined herein shall have the
- -----
meanings set forth for them in the Agreement.
In accordance with the Agreement, the Borrower hereby requests that the
Banks [convert] [continue] (i) the existing LIBOR Loans described below, and/or
(ii) outstanding Reference Rate Loans in the amount described below to LIBOR
Loans on the Conversion/Continuation Date, and for the Interest Period,
indicated below.
(a) Existing LIBOR Loans to be [converted] [continued] (if any):
EXPIRATION DATE OF CURRENT INTEREST PERIOD(S): _______________________.
AGGREGATE CURRENT
AMOUNT RATE
- ------ ----
$______________ ____%
$______________ ____%
$______________ ____%
(NOTE: Existing LIBOR Loans bearing different interest rates may be
[converted] [continued] pursuant to this Notice only if the existing Interest
Periods for all such LIBOR Loans expire on the same date.)
(b) Aggregate amount of Reference Rate Loans to be converted (if any):
(c) Conversion/Continuation Date: _________________.
(NOTE: If any existing LIBOR Loans are to be converted pursuant to this
Notice, the Conversion/Continuation Date must be the first Business Day
following the expiration of the existing Interest Period.)
(d) Aggregate amount of new [LIBOR] [Reference Rate] Loans: $____________.
B-1
<PAGE>
(NOTE: This Notice shall be ineffective in the event that this amount is
not the aggregate total of all of the Loans described in (a) and (b), above.)
(e) Redesignation:
[ ] LIBOR Loans in the aggregate amounts of:
(i) $_________, with a _______ ( ) month Interest Period;
(ii) $_________, with a _______ ( ) month Interest Period; and
(iii) $_________, with a _______ ( ) month Interest Period.
DATED: ___________________
CATELLUS DEVELOPMENT CORPORATION,
a Delaware corporation
By _________________________________
_________________________________
[Printed Name and Title]
* Note: More than one LIBOR Loan may be so redesignated.
B-2
<PAGE>
EXHIBIT C
FORM OF COMPLIANCE CERTIFICATE
------------------------------
To: BANK OF AMERICA NATIONAL TRUST AND
SAVINGS ASSOCIATION, as Administrative Agent
Pursuant to Section 6.2(a) of that certain Line of Credit Loan Agreement
--------------
dated as of October 28, 1996 (the "Agreement"), among the Borrower, the Banks
---------
referred to therein, and Bank of America National Trust and Savings Association,
as administrative agent for itself and the other Banks (in such capacity, the
"Administrative Agent"), the Borrower hereby represents and warrants to the
- ---------------------
Administrative Agent that, except as disclosed on the attached Schedule C, all
----------
of the representations and warranties set forth in the Agreement are true and
correct on the date of this certificate as if made on and as of such date, and
as of the date of this certificate (i) to the best of the Borrower's knowledge,
no Default has occurred and remains uncured except as described on the attached
Schedule C and (ii) no Event of Default has occurred and remains uncured except
- ----------
as described on the attached Schedule C.
----------
Capitalized terms used and not otherwise defined herein shall have the
meanings set forth for them in the Agreement.
DATED: ________________________
CATELLUS DEVELOPMENT CORPORATION
a Delaware corporation
By __________________________________
__________________________________
[Printed Name and Tide]
C-1
<PAGE>
EXHIBIT D-1
LEGAL OPINION OF BORROWER'S COUNSEL
-----------------------------------
D-1-1
<PAGE>
October __, 1996
(312) 368-2166
To: Each of the Financial Institutions
listed on Exhibit A attached hereto
c/o Bank of America National Trust
and Savings Association,
Administrative Agent
SF National Accounts #9105
50 California Stet, 11th Floor
San Francisco, California 94111
Attention: Ms. Janice Sears, Vice President
Re: Catellus Development Corporation ("Borrower")
Ladies and Gentlemen:
We have served as counsel for Borrower and SF Pacific Properties Inc., a
Delaware corporation ("SFPP), a wholly owned subsidiary of Borrower, in
connection with the Two Hundred Forty Million and No/100 Dollar
($240,000,000.00) secured revolving line of credit facility ("Loan")
contemplated by the Line of Credit Loan Agreement ("Loan Agreement") dated as of
October __, 1996 between Borrower, as "Borrower", Bank of American National
Trust and Savings Association ("BofA") as a Bank and as Administrative Agent,
and each of the other financial institutions which are listed on Exhibit A
---------
attached hereto and incorporated herein by reference (each, including BofA, a
"Bank" and collectively, including BofA the "Banks"), to be secured by certain
properties located in the States of Arizona, California, Illinois, Oregon and
Texas, which are more particularly described in the Loan Agreement and in
Exhibit A to each of the Deeds of Trust (as defined in the Loan Agreement). This
- ---------
opinion is being delivered to you at Borrower's request pursuant to Section
4.1.4 of the Loan Agreement.
We have examined and relied and base our opinion on originals or copies,
certified or otherwise identified to our satisfaction, of the Loan Agreement and
each of the documents listed in Schedule A attached hereto and incorporated
----------
herein by this reference (collectively, along with the Loan Agreement, the "Loan
Documents") each dated as of the date hereof, unless otherwise noted in Schedule
--------
A, and upon such matters of law as we have deemed necessary for the purposes of
- -
this opinion. The capitalized terms used herein but not defined in this opinion
or Schedule A to this opinion shall have the meanings set forth in the Loan
----------
Agreement.
The opinions set forth herein are qualified as stated therein and are
qualified further by the following:
a. This opinion is based upon existing laws, ordinances and regulations
in effect as of the date hereof and as they presently apply.
<PAGE>
Bank of America National
Trust and Savings Association
October , 1996
Page 3
b. We express no opinion as to the effect of the laws of any state or
jurisdiction other than the State of California and the laws of the United
States of America upon the transactions described herein.
c. We have assumed, without independent investigation, the competency of
the signatories to the Loan Documents, the genuineness of all signatures, the
authenticity of all documents submitted to us as originals, and the conformity
to original documents of all documents submitted to us as certified or
photostatic copies.
d. We have assumed, without independent investigation, that (i) the Loan
Documents have been duly authorized, executed and delivered by all of the
parties thereto, are within their respective corporate powers, and that each of
the parties to the Loan Documents is in compliance with all applicable laws,
rules and regulations governing the conduct of each such party's respective
businesses and this transaction, (ii) the Loan Documents will be enforced in
circumstances and in a manner which are commercially reasonable, (iii) the
parties to the Loan Documents are not subject to any statute, rule or regulation
or any impediment that requires them to obtain the consent of, or to make any
declaration or filing with, any governmental authority in connection with the
transactions contemplated by the Loan Documents, (iv) all terms, provisions and
conditions relating to the transaction referred to in this opinion letter are
correctly and completely reflected in the Loan Documents, and there are no
documents or agreements (other than the Loan Documents), between or among any of
the parties thereto and/or others which would expand or otherwise modify the
respective rights and obligations of the parties as set forth in the Loan
Documents or which would have an effect on the opinions rendered herein, and (v)
all of the Loan Documents are valid, binding and enforceable as to each of the
Banks.
e. In rendering this opinion, with your permission and without
independent investigation (unless otherwise noted), we are making and relying on
the following additional assumptions:
i. Each of the parties to the Loan Documents is (i) duly organized,
validly existing and in good standing under the laws of its jurisdiction of
formation and has all requisite power and authority to carry on its
business as now conducted, to enter into the Loan Documents, and to carry
out the terms of the Loan Documents and (ii) duly qualified to do business
and in good standing in the State of California.
ii. Neither Borrower nor any Bank now contemplate, nor did any of
them originally negotiate, a joint venture, partnership or other similar
relationship prior to the structuring of this Loan; and the Loan is
intended to create, as between Borrower and Banks, a relationship solely
that of debtor and creditor.
<PAGE>
Bank of America National
Trust and Savings Association
October , 1996
Page 4
iii. Each of the Banks has timely satisfied all of the requirements
imposed upon such parties under the laws of the State of California or any
political subdivision thereof with respect to the filing of tax returns,
the submission of any required informational reports, or the obtaining of
business licenses, and each has timely paid all taxes and fees due to the
State of California or any political subdivision thereof, including; but
not limited to, income, franchise, insurance, excise or sales and use
taxes.
iv. There is no action, proceeding or investigation pending or
threatened against or affecting any Bank, Borrower or SFPP, before any
court or commission, arbitrator, administrative agency or other
governmental instrumentality or authority which, if adversely decided,
would adversely affect the validity or enforceability of the Loan
Documents.
v. The proceeds of the Loan will be disbursed in accordance with the
terms of the Loan Documents.
vi. Each California Deed of Trust and California Assignment of
Leases will be duly and timely recorded in the office of the county
recorder of the County in which the Property to be encumbered by such Loan
Document is located and the California UCC-1s will be duly and timely filed
with the California Secretary of State.
vii. At all times material to our opinions, goods included in the
Collateral are located in the State of California.
viii. Other than the Anaheim Office Property, Borrower has or will
have an interest of record in each applicable Property at the time of the
recording of the California Deed of Trust and the California Assignment of
Leases for such Property, and SFPP has or will have an interest of record
in the Anaheim Office Property at the time of recording of the California
Deed of Trust and California Assignment of Leases for the Anaheim Office
Property.
ix. The granting of a security interest in the Collateral which
constitutes personal property ("Personal Property") consisting of a
governmental permit, license or other authorization is not prohibited or
restricted by law.
x. The granting of a security interest in Personal Property
consisting of rights under a contract is not restricted by the terms of
such contract or by law.
<PAGE>
Bank of America National
Trust and Savings Association
October , 1996
Page 5
xi. At all times material to our opinions, Borrower has "rights" in
the Personal Property within the meaning of Section 9203(1)(c) of the
California Uniform Commercial Code.
xii. At all times material to our opinions, Borrower's and SFPP's
places of business, or if Borrower and/or SFPP have more than one place of
business, their chief executive offices, are located in the State of
California.
xiii. Each of the Banks is either (a) a national bank duly organized
and operating under the laws of the United States or (b) a foreign (other
nation) bank, which at the time it makes the Loan (or executes a contract
therefor), has assets of at least $100,000,000.00, (1) is licensed to
maintain an office in California, (2) is licensed or is otherwise
authorized by another state to maintain an agency or branch office in that
state, or (3) maintains a federal agency or federal branch in any state.
f. The opinions hereafter expressed are qualified to the extent that:
(i) the characterization of, and the enforceability of any rights or remedies
in, any agreement or instrument may be limited by applicable bankruptcy,
insolvency, reorganization, moratorium, fraudulent conveyance or transfer,
equitable subordination, or similar laws and doctrines affecting the rights of
creditors generally and general equitable principles; (ii) the availability of
specific performance, injunctive relief or any other equitable remedy is subject
to the discretion of a court of competent jurisdiction; and (iii) the provisions
of any document, agreement or instrument that (A) may require indemnification or
contribution for liabilities in respect to the negligence or wrongful conduct of
the indemnified party or its representatives or agents, (B) purport to confer,
waive or consent to the jurisdiction of any court, or (C) waive any right
granted by common or statutory law, may be unenforceable as against public
policy.
g. Requirements in the Loan Documents specifying that provisions thereof
may only be waived in writing may not be valid, binding or enforceable to the
extent that an oral agreement or an implied agreement by trade practice or
course of conduct has been created modifying any provision of such documents.
h. We have not undertaken any independent review of (i) the status of
zoning of any Property, (ii) compliance of any Property with applicable health,
safety, zoning, building, environmental, pollution or other law or regulation,
(iii) title or ownership of any real or personal property, (iv) the creation,
existence or priority of liens under the Loan Documents or the effect of the
absence of such perfection or priority, or (v) the impact on any of the Loan
Documents or this transaction of any Federal or California banking, employee
benefits, securities, taxation or so called blue sky law, code or regulation,
and we render no opinion with respect to any of the foregoing.
<PAGE>
Bank of America National
Trust and Savings Association
October , 1996
Page 6
i. The opinions expressed herein are funkier subject to and limited by the
following:
(i) Certain provisions contained in the Loan Documents may be limited
or rendered ineffective by California laws or judicial decisions governing
such provisions, but such laws and judicial decisions do not render the
Loan Documents invalid as a whole, and in the event of a material breach of
a material covenant contained in the Loan Documents, there exist, in the
Loan Documents or pursuant to applicable law, legally adequate remedies for
realization of the principal benefits and/or security intended to be
provided by the Loan Documents;
(ii) Any failure by Banks or Administrative Agent to comply with
statutory or other legal requirements in the foreclosure or sale of any mal
or personal property security for the Loan, including, without limitation,
(A) California Code of Civil Procedure ("CCP") (S)(S) 580a, 580b and 580d,
respectively, which (1) limit any deficiency after judicial foreclosure to
the excess of the debt over the fair market value of the foreclosed
property at the time of sale and (2) prevent deficiency judgments after a
nonjudicial or trustee's foreclosure sale pursuant to a power of sale, (B)
Civil Code ("CC") (S)(S) 2924, 2924b and 2924c, which require that certain
procedures be followed by the holder of a deed of trust, which procedures
are designed to protect the rights of the borrower and certain other
persons to reinstate the obligations secured by the deed of trust under
certain circumstances, and (C) CCP (S) 726 and (S) 9501(4) of the
California Uniform Commercial Code, which provisions relate to and specify
the procedures for the sale of encumbered property, the application of
proceeds, the rendition in certain cases of a deficiency judgment and other
related matters. We advise you that in an action or proceeding to recover
on a debt or other obligation secured by real or real and personal
property, the debtor may require the creditor to exhaust all of its
security before a personal judgment may be obtained against the debtor for
a deficiency. We also advise you that failure to comply with those
provisions (including any attempt to exercise any statutory, equitable or
contractual right of set off with respect to any funds of the Borrower or
SFPP which may be deposited with the Banks or Administrative Agent, as
applicable, from time to time) may result in the loss of the liens on, and
security interests in, the real property that is described in the
California Deeds of Trust. The enforceability of any "environmental
provision" contained in any of the Loan Documents is also limited by, and
also subject to Banks' and Administrative Agent's, as applicable,
compliance with, statutory or other legal requirements, including, without
limitation, CCP 564, 726.5 and 736, and CC (S) 2929.5. As used above, the
term "environmental provision" has the meaning set forth in CCP (S)
736(f)(2);
<PAGE>
Bank of America National
Trust and Savings Association
October , 1996
Page 7
(iii) Laws regulating the types of transactions that can be properly
entered into by Banks and Administrative Agent, or the legal lending limits
applicable to any of the Banks;
(iv) The effect of CC (S) 1671(b) on the enforceability of the
prepayment fee provisions of the Loan Documents; and
(v) The effect of any Bank's failure to obtain any regulatory
approvals that may be required by the Federal Reserve, Comptroller of the
Currency or any other domestic or foreign governmental institution or
agency with regulatory authority over any Bank in order for such Bank to
exercise and enforce any or all of its rights in any Property or the
Personal Property.
j. We express no opinion as to (i) whether the Deeds of Trust or
Assignments of Leases, following execution and delivery thereof, will be duly
recorded as to any Property; (ii) the enforceability of a security interest in
any Personal Property excluded from the California Uniform Commercial Code by
Section 9104 thereof; (iii) the accuracy or legal sufficiency of the description
of any Property or Personal Property contained in any of the Loan Documents;
(iv) the effect of any regulation, law, covenant or agreement relating to
zoning, building codes, use, occupancy, subdivision or environmental control
requirements as applied to any Personal Property or any Property; (v) the
accuracy or completeness of any description of any Property or any Personal
Property described in any of the Loan Documents; (vi) the characterization in
the Loan Documents of any collateral for the Loan as mal property, personal
property or fixtures; (vii) the enforceability of any provision in the Loan
Documents imposing prepayment premiums or charges, late payment charges or an
increase in the applicable interest rate under the Loan in the event of
delinquency or default if and to the extent any of the foregoing would
constitute a penalty or forfeiture; (viii) the enforceability of any provision
pursuant to which Borrower agrees to make payments without set-off, defense or
counterclaim; (ix) provisions which specify the manner of foreclosure or
exercise of remedies in respect of deposit accounts insofar as the California
Uniform Commercial Code does not address the same; (x) provisions to the effect
that rights or remedies are not exclusive, that every right or remedy is
cumulative and may be exercised in addition to or with any other right or
remedy, that the election of some particular remedy or remedies does not
preclude recourse to one or another remedy or that failure to exercise or delay
in exercising rights or remedies will not operate as a waiver of any such right
or remedy; (xi) provisions with respect to the arbitration of disputes; (xii)
provisions purporting to waive statutory rights, including the right to receive
notice or to be allowed to cure, reinstate or redeem in the event of default, to
the extent such rights are not waivable under applicable law; (xiii) provisions
purporting to waive any applicable statutes of limitation or any right to a jury
trial or purporting to appoint Administrative Agent or the Bank's as Borrower's
or SFPP's attorney in fact; (xiv) provisions authorizing any Bank or
<PAGE>
Bank of America National
Trust and Savings Association
October , 1996
Page 8
Administrative Agent to set off and apply any deposits at any time held, and any
other indebtedness at any time owing, by such Bank or Administrative Agent, to
or for the account of Borrower, or (xv) the enforceability of any of the Arizona
Loan Documents, the Oregon Loan Documents, the Texas Loan Documents and/or the
Illinois Loan Documents (except, with respect to the Illinois Loan Documents, as
specifically set forth in our separate opinion of even date herewith addressing
matters of Illinois law only).
k. For your further information, we call your attention to, but offer no
opinion as to the effect on the Loan Documents of, the following:
i. CC (S) 2954.5 provides that before any default, delinquency or
late payment charge may be assessed for a loan secured by real property,
certain notices and, in some cases, an opportunity to cure the delinquency
must be given the borrower; and
ii. CC (S) 2954.1 imposes limits on the impounding of taxes and
insurance premiums.
1. We advise you, with respect to the SFPP Documents, of statutory
provisions and case law of the State of California to the effect that a surety
may be exonerated if the creditor modifies the original obligation of the
principal without the consent of the guarantor, elects remedies for default that
may impair the subrogation nights of the guarantor against the principal or
otherwise takes any action without notifying the guarantor which materially
prejudices the guarantor unless the guarantor validly waives such rights.
Based on the foregoing, and in reliance thereon, but subject to the
assumptions, limitations and qualifications expressed herein, we are of the
opinion that:
1) The Loan Documents to which Borrower is a party constitute legally
valid and binding obligations of Borrower, enforceable in accordance with their
respective terms.
2) The Loan Documents to which SFPP is a party constitute legally valid
and binding obligations of SFPP, enforceable in accordance with their respective
terms.
3) The payment by Borrower and receipt by Banks of all principal and
interest required to be paid pursuant to the terms of the Notes will not violate
the usury laws of the State of California.
We call your attention to the fact that, although we represent Borrower and
SFPP in connection with the subject transaction, our engagement has been limited
to specific matters as to which we have been consulted.
<PAGE>
Bank of America National
Trust and Savings Association
October , 1996
Page 9
This opinion is limited to the matters stated herein. We disavow any
obligation to update this opinion or advise you of any changes in our opinion in
the event of changes in applicable laws or facts or if additional or newly
discovered information is brought to our attention. This opinion is provided to
you as a legal opinion only and not as a guaranty or warranty of the matters
discussed herein or in the documents referred to herein. No opinion may be
inferred or implied beyond the matters expressly stated herein and no portion of
this opinion may be quoted or in any other way published without the prior
written consent of the undersigned. Further, this opinion may be relied upon
only by the Banks and not by any other party.
Very truly yours,
RUDNICK & WOLFE
Michael P. Kuppersmith*
MPK: CAS
cc: Maureen Sullivan, Esq.
_________________________
* Admitted in California and Illinois
<PAGE>
EXHIBIT A
TO LEGAL OPINION
LIST OF FINANCIAL INSTITUTIONS
------------------------------
1. Bank of America National Trust and Savings Association
2. The First National Bank of Chicago
3. CIBC Wood Gundy Securities Corp.
4. The Bank of Nova Scotia, San Francisco Agency
5. The First National Bank of Boston
6. Commerzbank AG, Los Angeles Branch
<PAGE>
EXHIBIT D-2
LEGAL OPINION OF THE ADMINISTRATIVE AGENT'S COUNSEL
---------------------------------------------------
D-2-1
<PAGE>
October __, 1996
To: Each of the Financial Institutions
listed on Exhibit A attached hereto
---------
c/o Bank of America National Trust
and Savings Association,
Administrative Agent
SF National Accounts #9105
50 California Street, 11th Floor
San Francisco, California 94111
Attention: Ms. Janice Sears, Vice President
Re: Catellus Development Corporation ("Borrower")
Ladies and Gentlemen:
We have served as special counsel for Borrower in Illinois in connection
with the Two Hundred Forty Million and No/100 Dollar ($240,000,000.00) secured
revolving line of credit facility ("Loan") contemplated by the Line of Credit
Loan Agreement ("Loan Agreement") dated as of October __, 1996 between Borrower,
as "Borrower", Bank of American National Trust and Savings Association ("BofA")
as a Bank and as Administrative Agent, and each of the other financial
institutions which are listed on Exhibit A attached hereto and incorporated
---------
herein by reference (each, including BofA, a "Bank" and collectively, including
BofA, the "Banks"), to be secured by certain properties located in the States of
Arizona, California, Illinois, Oregon and Texas, which are more particularly
described in the Loan Agreement and in Exhibit A to each of the Deeds of Trust
---------
(as defined in the Loan Agreement). This opinion is being delivered to you at
Borrower's request pursuant to Section 4.1.4 of the Loan Agreement.
We have examined and relied and base our opinion on originals or copies,
certified or otherwise identified to our satisfaction, of the Loan Agreement and
each of the documents listed in Schedule A attached hereto and incorporated
----------
herein by this reference ("Illinois Loan Documents") each dated as of the date
hereof, unless otherwise noted in Schedule A, and upon such matters of law as we
----------
have deemed necessary for the purposes of this opinion. The capitalized terms
used herein but not defined in this opinion or Schedule A to this opinion shall
----------
have the meanings set forth in the Loan Agreement.
The opinions set forth herein are qualified as stated therein and are
qualified further by the following:
a. This opinion is based upon existing laws, ordinances and regulations
in effect as of the date hereof and as they presently apply.
<PAGE>
Bank of America National
Trust and Savings Association
October , 1996
----
Page 3
b. We express no opinion as to the effect of the laws of any state or
jurisdiction other than the State of Illinois and the laws of the United States
of America upon the transactions described herein.
c. We have assumed, without independent investigation, the competency of
the signatories to the Loan Documents, the genuineness of all signatures, the
authenticity of all documents submitted to us as originals, and the conformity
to original documents of all documents submitted to us as certified or
photostatic copies.
d. We have assumed, without independent investigation, that (i) the Loan
Documents have been duly authorized, executed and delivered by all of the
parties thereto, are within their respective corporate powers, and that each of
the parties to the Loan Documents is in compliance with all applicable laws,
rules and regulations governing the conduct of each such party's respective
businesses and this transaction, (ii) the Loan Documents will be enforced in
circumstances and in a manner which are commercially reasonable, (iii) the
parties to the Loan Documents are not subject to any statute, rule or regulation
or any impediment that requires them to obtain the consent of, or to make any
declaration or filing with, any governmental authority in connection with the
transactions contemplated by the Loan Documents, (iv) all terms, provisions and
conditions relating to the transaction referred to in this opinion letter are
correctly and completely reflected in the Loan Documents, and there are no
documents or agreements (other than the Loan Documents), between or among any of
the parties thereto and/or others which would expand or otherwise modify the
respective rights and obligations of the parties as set forth in the Loan
Documents or which would have an effect on the opinions rendered herein, (v) all
of the Loan Documents to which Borrower is a party (other than the Illinois Loan
Documents) are valid, binding and enforceable as to Borrower, and (vi) all of
the Loan Documents are valid, binding and enforceable as to each of the Banks.
e. In rendering this opinion, with your permission and without
independent investigation (unless otherwise noted), we are making and relying on
the following additional assumptions:
i. Each of the parties to the Loan Documents is duly organized,
validly existing and in good standing under the laws of its jurisdiction of
formation and has all requisite power and authority to carry on its
business as now conducted, to enter into the Loan Documents, and to carry
out the terms of the Loan Documents.
ii. Neither Borrower nor any Bank now contemplate, nor did any of
them originally negotiate, a joint venture, partnership or other similar
relationship prior to the structuring of this Loan; and the Loan is
intended to create, as between Borrower and Banks, a relationship solely
that of debtor and creditor.
<PAGE>
Bank of America National
Trust and Savings Association
October , 1996
----
Page 4
iii. There is no action, proceeding or investigation pending or
threatened against or affecting any Bank or Borrower, before any court or
commission, arbitrator, administrative agency or other governmental
instrumentality or authority which, if adversely decided, would adversely
affect the validity or enforceability of the Loan Documents.
iv. The proceeds of the Loan will be disbursed in accordance with
the terms of the Loan Documents.
v. Each Illinois Mortgage and Illinois Assignment of Leases will be
duly and timely recorded in the office of the county recorder of the County
in which the Property to be encumbered by such Illinois Loan Document is
located and the Illinois UCC-1 will be duly and timely filed with the
Illinois Secretary of State.
vi. At all times material to our opinions, goods included in the
Collateral covered by the Illinois Loan Documents are located in the State
of Illinois.
vii. Borrower has or will have an interest of record in each
applicable Illinois Property at the time of the recording of the Illinois
Mortgage for such Property.
viii. The granting of a security interest in the Collateral which
constitutes personal property ("Personal Property") consisting of a
governmental permit, license or other authorization is not prohibited or
restricted by law.
f. The opinions hereafter expressed are qualified to the extent that:
(i) the characterization of, and the enforceability of any rights or remedies
in, any agreement or instrument may be limited by applicable bankruptcy,
insolvency, reorganization, moratorium, fraudulent conveyance or transfer,
equitable subordination, or similar laws and doctrines affecting the rights of
creditors generally and general equitable principles; (ii) the availability of
specific performance, injunctive relief or any other equitable remedy is subject
to the discretion of a court of competent jurisdiction; (iii) the provisions of
any document, agreement or instrument that (A) may require indemnification or
contribution for liabilities under the provisions of any Federal or State
securities laws or in respect to the negligence or wrongful conduct of the
indemnified party or its representatives or agents, (B) purport to confer, waive
or consent to the jurisdiction of any court, or (C) waive any right granted by
common or statutory law, may be unenforceable as against public policy, and (iv)
any provisions of the Illinois Loan Documents granting so called "self-help" or
extrajudicial remedies may not be enforceable.
<PAGE>
Bank of America National
Trust and Savings Association
October , 1996
----
Page 5
g. Requirements in the Illinois Loan Documents specifying that
provisions thereof may only be waived in writing may not be valid, binding or
enforceable to the extent that an oral agreement or an implied agreement by
trade practice or course of conduct has been created modifying any provision of
such documents.
h. We render no opinion with respect to the enforceability under
Illinois law of any provision of the Illinois Loan Documents, if any, which
provides for the compounding of interest or the payment or accrual of interest
on interest. Please note that the Illinois Supreme Court has held in Bowman v.
---------
Neely, 151 Ill. 37 (1894) and 137 Ill. 443 (1891) and its progeny that
- -----
compounding of interest and charging interest on interest is contrary to the
public policy of the State of Illinois.
i. We have not undertaken any independent review of (i) the status of
zoning of any Property, (ii) compliance of any Property with applicable health,
safety, zoning, building, environmental, pollution or other law or regulation,
(iii) title or ownership of any real or personal property, (iv) the creation,
existence or priority of liens under the Illinois Loan Documents or the effect
of the absence of such perfection or priority, or (v) the impact on any of the
Illinois Loan Documents or this transaction of any Federal or Illinois banking,
employee benefits, securities, taxation or so called blue sky" law, code or
regulation, and we render no opinion with respect to any of the foregoing.
j. The opinions expressed herein are further subject to and limited by
the following:
(i) Certain provisions contained in the Illinois Loan Documents
may be limited or rendered ineffective by Illinois laws or judicial
decisions governing such provisions, but such laws and judicial decisions
do not render the Illinois Loan Documents invalid as a whole, and in the
event of a material breach of a material covenant contained in the Illinois
Loan Documents, there exist, in the Illinois Loan Documents or pursuant to
applicable law, legally adequate remedies for realization of the principal
benefits and/or security intended to be provided by the Illinois Loan
Documents;
(ii) Laws regulating the types of transactions that can be properly
entered into by Banks and Administrative Agent, or the legal lending limits
applicable to any of the Banks;
(iii) The effect of any Bank's failure to obtain any regulatory
approvals that may be required by the Federal Reserve, Comptroller of the
Currency or any other domestic or foreign governmental institution or
agency with regulatory authority over
<PAGE>
Bank of America National
Trust and Savings Association
October , 1996
----
Page 6
any Bank in order for such Bank to exercise and enforce any or all of its
rights in any Property or the Personal Property.
k. We express no opinion as to (i) whether the Illinois Loan Documents,
following execution and delivery thereof, will be duly recorded as to any
Property; (ii) the accuracy or legal sufficiency of the description of any
Property or Personal Property contained in any of the Illinois Loan Documents;
(iv) the effect of any regulation, law, covenant or agreement relating to
zoning, building codes, use, occupancy, subdivision or environmental control
requirements as applied to any Personal Property or any Property; (v) the
accuracy or completeness of any description of any Property or any Personal
Property described in any of the Illinois Loan Documents; (vi) the
characterization in the Illinois Loan Documents of any collateral for the Loan
as real property, personal property or fixtures; (vii) provisions with respect
to the arbitration of disputes; provisions purporting to waive statutory rights,
including the right to receive notice or to be allowed to cure, reinstate or
redeem in the event of default, to the extent such rights are not waivable under
applicable law; (viii) provisions purporting to waive any applicable statutes of
limitation, objections to jurisdiction or any right to a jury trial or
purporting to appoint Administrative Agent or the Banks as Borrower's attorney-
in-fact; or (ix) the enforceability of any of the Loan Documents other than the
Illinois Loan Documents, (except, with respect to the California Loan Documents,
as specifically set forth in our separate opinion of even date herewith
addressing matters of California law only).
l. We express no opinion on provisions in any of the Illinois Loan
Documents which waive the requirements of good faith, notice and commercial
reasonableness under the Uniform Commercial Code as enacted in any state,
which requirements cannot be waived by consent. We further advise that the
award and the amount of attorney's fees are subject to the discretion of
the court before which any proceeding involving the Illinois Loan Documents
may be brought.
m. Notwithstanding provisions of the Illinois Loan Documents to the
contrary, 735 ICLS 5/15-1602(b)(1992) grants a mortgagor the right, which
is exercisable once every five years, to cure the default of a loan secured
by real estate by payment of delinquent payments and costs within certain
time periods specified in the statute.
Based on the foregoing, and in reliance thereon, but subject to the
assumptions, limitations and qualifications expressed herein, we are of the
opinion that the Illinois Loan Documents constitute legally valid and binding
obligations of Borrower, enforceable in accordance with their respective terms.
<PAGE>
Bank of America National
Trust and Savings Association
October , 1996
----
Page 7
We call your attention to the fact that, although we represent Borrower in
connection with the subject transaction, our engagement has been limited to
specific matters as to which we have been consulted.
This opinion is limited to the matters stated herein. We disavow any
obligation to update this opinion or advise you of any changes in our opinion in
the event of changes in applicable laws or facts or if additional or newly
discovered information is brought to our attention. This opinion is provided to
you as a legal opinion only and not as a guaranty or warranty of the matters
discussed herein or in the documents referred to herein. No opinion may be
inferred or implied beyond the matters expressly stated herein and no portion of
this opinion may be quoted or in any other way published without the prior
written consent of the undersigned. Further, this opinion may be relied upon
only by the Banks and not by any other party.
Very truly yours,
RUDNICK & WOLFE
Michael P. Kuppersmith
MPK:cf
cc: Maureen Sullivan, Esq.
<PAGE>
EXHIBIT A
TO LEGAL OPINION
LIST OF FINANCIAL INSTITUTIONS
------------------------------
1. Bank of America National Trust and Savings Association
2. The First National Bank of Chicago
3. CIBC Wood Gundy Securities Corp.
4. The Bank of Nova Scotia, San Francisco Agency
5. The First National Bank of Boston
6. Commerzbank AG, Los Angeles Branch
A-1
<PAGE>
EXHIBIT E
ASSIGNMENT AND ACCEPTANCE AGREEMENT
-----------------------------------
This ASSIGNMENT AND ACCEPTANCE AGREEMENT (the "Assignment and Acceptance")
-------------------------
dated as of _________________, 199_ is made by and between
___________________________ (the "Assignor") and ------------------------------
(the "Assignee"). --------
-------------
RECITALS
--------
WHEREAS, the Assignor is party to that certain Line of Credit Loan
Agreement dated as of October 28, 1996 (as it may be amended, amended and
restated, modified, supplemented or renewed from time to time, the "Loan
----
Agreement"), among Catellus Development Corporation, a Delaware corporation (the
- ---------
"Borrower"), the several financial institutions from time to time party thereto
--------
(collectively, including the Assignor, the "Banks"), and Bank of America
-----
National Trust and Savings Association, as administrative agent for the Banks
(in such capacity, the "Administrative Agent"). Capitalized terms used in this
--------------------
Assignment and Acceptance and not defined herein have the meanings given to them
in the Loan Agreement;
WHEREAS, the Assignor is also a party to that certain Co-Lender Agreement
dated as of October __, 1996 (as it may be amended, amended and restated,
modified, supplemented or renewed from time to time, the "Co-Lender Agreement"),
-------------------
between the Banks and the Administrative Agent;
WHEREAS, as provided under the Loan Agreement, the Assignor has committed
to making Loans to the Borrower (collectively, the "Committed Loans") and
---------------
participating in Letters of Credit issued by BofA for the Borrower's account in
an aggregate principal amount not to exceed $__________ (the "Commitment");
----------
WHEREAS, [the Assignor has made Committed Loans in the aggregate principal
amount of $____________ to the Borrower] [no Committed Loans are outstanding
under the Loan Agreement];
WHEREAS, [no outstanding] Letters of Credit [in the aggregate outstanding
stated amount of $__________ ] have been issued by BofA for the Borrower's
account;
WHEREAS, the Assignor wishes to assign to the Assignee [a portion] [all] of
the rights and obligations of the Assignor under the Loan Agreement in respect
of its Commitment, in an amount equal to $_______________ (the "Assigned
--------
Amount") on the terms and subject to the conditions set forth herein, and the
Assignee wishes to accept assignment of such rights and to assume such
obligations from the Assignor on such terms and subject to such conditions;
E-1
<PAGE>
NOW, THEREFORE, in consideration of the foregoing and the mutual agreements
contained herein, the parties hereto agree as follows:
1. Assignment and Acceptance.
-------------------------
1.1 Subject to the terms and conditions of this Assignment and
Acceptance, (i) the Assignor hereby sells, transfers and assigns to the
Assignee, and (ii) the Assignee hereby purchases, assumes and undertakes from
the Assignor, without recourse and without representation or warranty (except as
provided in this Assignment and Acceptance) __% (the "Assignee's Percentage
---------------------
Share") of (A) the Commitment of the Assignor and (B) all related rights,
- -----
benefits, obligations, liabilities and indemnities of the Assignor under and in
connection with the Loan Agreement, the Loan Documents and the Co-Lender
Agreement.
1.2 With effect on and after the Effective Date (as defined in
Section 5 hereof), the Assignee shall be a party to the Loan Agreement and the
- ---------
Co-Lender Agreement and shall succeed to all of the rights and be obligated to
perform all of the obligations of a Bank under the Loan Agreement and the Co-
Lender Agreement, including the requirements concerning confidentiality and the
payment of indemnification, with a Commitment in an amount equal to the Assigned
Amount. The Assignee agrees that it will perform in accordance with their terms
all of the obligations which it is required to perform as a Bank under the Loan
Agreement or the Co-Lender Agreement. It is the intent of the parties hereto
that the Commitment of the Assignor shall, as of the Effective Date, be reduced
by an amount equal to the Assigned Amount and the Assignor shall relinquish its
rights and be released from its obligations under the Loan Agreement and the Co-
Lender Agreement to the extent such obligations have been assumed by the
Assignee; provided, however, that the Assignor shall not relinquish its rights
--------
under Section 10.5 of the Loan Agreement, Section 9.4 of the Co-Lender Agreement
------------ -----------
or the Environmental Indemnity to the extent such rights relate to the time
prior to the Effective Date.
1.3 After giving effect to the assignment and assumption set forth
herein, on the Effective Date the Assignor's Commitment will be $__________.
1.4 After giving effect to the assignment and assumption set forth
herein, on the Effective Date the Assignee's Commitment will be $__________.
2. Payments.
2.1 As consideration for the sale, assignment and transfer
contemplated in Section 1 hereof, the Assignee shall pay to the Assignor on the
---------
Effective Date in immediately available funds an amount equal to $___________,
representing the Assignee's Pro Rata Share of the principal amount of all
Committed Loans.
2.2 The [Assignor] [Assignee] further agrees to pay to the
Administrative Agent a processing fee in the amount specified in Section 10.6.1
--------------
of the Loan Agreement.
E-2
<PAGE>
3. Reallocation of Payments.
------------------------
Any interest, fees and other payments accrued to the Effective Date
with respect to the Commitment shall be for the account of the Assignor. Any
interest, fees and other payments accrued on and after the Effective Date with
respect to the Assigned Amount shall be for the account of the Assignee. Each of
the Assignor and the Assignee agrees that it will hold in trust for the other
party any interest, fees and other amounts which it may receive to which the
other party is entitled pursuant to the preceding sentence and pay to the other
party any such amounts which it may receive promptly upon receipt.
4. Independent Credit Decision.
---------------------------
The Assignee (a) acknowledges that it has received a copy of the Loan
Agreement and the Schedules and Exhibits thereto, together with copies of the
most recent financial statements referred to in Section 6.1 of the Loan
-----------
Agreement, and such other documents and information as it has deemed appropriate
to make its own credit and legal analysis and decision to enter into this
Assignment and Acceptance; and (b) agrees that it will, independently and
without reliance upon the Assignor, the Administrative Agent or any other Bank
and based on such documents and information as it shall deem appropriate at the
time, continue to make its own credit and legal decisions in taking or not
taking action under the Loan Agreement and the Co-Lender Agreement.
5. Effective Date; Notices.
-----------------------
5.1 As between the Assignor and the Assignee, the effective date for
this Assignment and Acceptance shall be _____________, 199_ (the "Effective
---------
Date"); provided that the following conditions precedent have been satisfied on
- ----
or before the Effective Date:
(a) this Assignment and Acceptance shall be executed and delivered by the
Assignor and the Assignee;
(b) the consent of the Borrower and the Administrative Agent required for
an effective assignment of the Assigned Amount by the Assignor to the Assignee
under Section 10.6.1 of the Loan Agreement shall have been duly obtained and
--------------
shall be in full force and effect as of the Effective Date;
(c) the Assignee shall pay to the Assignor all amounts due to the Assignor
under this Assignment and Acceptance;
(d) the Assignee shall have complied with Section 10.6.1 of the Loan
--------------
Agreement (if applicable);
(e) the processing fee referred to in Section 2.2 hereof and in Section
----------- -------
10.6.1 of the Loan Agreement shall have been paid to the Administrative Agent;
- ------
and
E-3
<PAGE>
(f) the Assignor shall have assigned and the Assignee shall have assumed a
percentage equal to the Assignee's Percentage Share of the rights and
obligations of the Assignor under the Loan Agreement and the Co-Lender
Agreement.
5.2 Promptly following the execution of this Assignment and
Acceptance, the Assignor shall deliver to the Borrower and the Administrative
Agent for acknowledgment by the Administrative Agent, a Notice of Assignment
[substantially] in the form attached hereto as Schedule 1.
----------
[6. Administrative Agent. [INCLUDE ONLY IF THE ASSIGNOR IS ADMINISTRATIVE
AGENT]
6.1 The Assignee hereby appoints and authorizes the Assignor to take
such action as administrative agent on its behalf and to exercise such powers
under the Loan Agreement and the Co-Lender Agreement as are delegated to the
Administrative Agent by the Banks pursuant to the terms of the Loan Agreement or
the Co-Lender Agreement.
6.2 The Assignee shall assume no duties or obligations held by the
Assignor in its capacity as Administrative Agent under the Loan Agreement.]
7. Withholding Tax.
---------------
The Assignee (a) represents and warrants to the Banks, the
Administrative Agent and the Borrower that under applicable law and treaties no
tax will be required to be withheld by the Banks with respect to any payments to
be made to the Assignee hereunder, (b) agrees to furnish (if it is organized
under the laws of any jurisdiction other than the United States or any state
thereof) to the Administrative Agent and the Borrower prior to the time that the
Administrative Agent or the Borrower is required to make any payment of
principal, interest or fees hereunder, duplicate executed originals of either
U.S. Internal Revenue Service Form 4224 or U.S. Internal Revenue Service Form
1001 (wherein the Assignee claims entitlement to the benefits of a tax treaty
that provides for a complete exemption from U.S. federal income withholding tax
an all payments hereunder) and agrees to provide new Forms 4224 or 1001 upon the
expiration of any previously delivered form or comparable statements in
accordance with applicable U.S. law and regulations and amendments thereto, duly
executed and completed by the Assignee, and (c) agrees to comply with all
applicable U.S. laws and regulations with regard to such withholding tax
exemption.
8. Representations and Warranties.
------------------------------
8.1 The Assignor represents and warrants that (i) it is the legal and
beneficial owner of the interest being assigned by it hereunder and that such
interest is free and clear of any Lien or other adverse claim; (ii) it is duly
organized and existing and it has the full power and authority to take, and has
taken, all action necessary to execute and deliver this Assignment and
Acceptance and any other documents required or permitted to be executed or
delivered by it in connection with this Assignment and Acceptance and to fulfill
E-4
<PAGE>
its obligations hereunder; (iii) no notices to, or consents, authorizations or
approvals of, any Person are required (other than any already given or obtained)
for its due execution, delivery and performance of this Assignment and
Acceptance, and apart from any agreements or undertakings or filings required by
the Loan Agreement, no further action by, or notice to, or filing with, any
Person is required of it for such execution, delivery or performance; and (iv)
this Assignment and Acceptance has been duly executed and delivered by it, and
constitutes the legal, valid and binding obligation of the Assignor, enforceable
against the Assignor in accordance with the terms hereof, subject, as to
enforcement, to bankruptcy, insolvency, moratorium, reorganization and other
laws of general application relating to or affecting creditors' rights and to
general equitable principles.
8.2 The Assignor makes no representation or warranty and assumes no
responsibility with respect to any statements, warranties or representations
made in or in connection with the Loan Agreement or the execution, legality,
validity, enforceability, genuineness, sufficiency or value of the Loan
Agreement or any other instrument or document furnished pursuant thereto. The
Assignor makes no representation or warranty in connection with, and assumes no
responsibility with respect to, the solvency, financial condition or statements
of the Borrower, or the performance or observance by the Borrower of any of its
respective obligations under the Loan Agreement or any other instrument or
document furnished in connection therewith.
8.3 The Assignee represents and warrants that (i) it is duly organized
and existing and it has full power and authority to take, and has taken, all
action necessary to execute and deliver this Assignment and Acceptance and any
other documents required or permitted to be executed or delivered by it in
connection with this Assignment and Acceptance, and to fulfill its obligations
hereunder; (ii) no notices to, or consents, authorizations or approvals of, any
Person are required (other than any already given or obtained) for its due
execution, delivery and performance of this Assignment and Acceptance; and apart
from any agreements or undertakings or filings required by the Loan Agreement,
no further action by, or notice to, or filing with, any Person is required of it
for such execution, delivery or performance; (iii) this Assignment and
Acceptance has been duly executed and delivered by it, and constitutes the
legal, valid and binding obligation of the Assignee, enforceable against the
Assignee in accordance with the terms hereof, subject, as to enforcement, to
bankruptcy, insolvency, moratorium, reorganization and other laws of general
application relating to or affecting creditors' rights and to general equitable
principles; and (iv) it is an Eligible Assignee.
9. Further Assurances.
------------------
The Assignor and the Assignee each hereby agree to execute and deliver such
other instruments, and take such other action, as either party may reasonably
request in connection with the transactions contemplated by this Assignment and
Acceptance, including the delivery of any notices or other documents or
instruments to the Borrower or the Administrative Agent, which may be required
in connection with the assignment and assumption contemplated hereby.
E-5
<PAGE>
10. Miscellaneous.
10.1 Any amendment or waiver of any provision of this Assignment and
Acceptance shall be in writing and signed by the parties hereto. No failure or
delay by either party hereto in exercising any right, power or privilege
hereunder shall operate as a waiver thereof, and any waiver of any breach of the
provisions of this Assignment and Acceptance shall be without prejudice to any
rights with respect to any other or further breach thereof.
10.2 All payments made hereunder shall be made without any set-off
or counterclaim.
10.3 The Assignor and the Assignee shall each pay its own costs and
expenses incurred in connection with the negotiation, preparation, execution and
performance of this Assignment and Acceptance.
10.4 This Assignment and Acceptance may be executed in any number of
counterparts, and all of such counterparts taken together shall be deemed to
constitute one and the same instrument.
10.5 THIS ASSIGNMENT AND ACCEPTANCE SHALL BE GOVERNED BY, AND CONSTRUED IN
ACCORDANCE WITH, THE LAWS OF THE STATE OF CALIFORNIA. The Assignor and the
Assignee each irrevocably submits to the non-exclusive jurisdiction of any State
or Federal court sitting in California over any suit, action or proceeding
arising out of or relating to this Assignment and Acceptance, and irrevocably
agrees that all claims in respect of such action or proceeding may be heard and
determined in such California State or Federal court. Each party to this
Assignment and Acceptance hereby irrevocably waives, to the fullest extent it
may effectively do so, the defense of an inconvenient forum to the maintenance
of such action or proceeding.
10.6 THE ASSIGNOR AND THE ASSIGNEE EACH HEREBY KNOWINGLY, VOLUNTARILY AND
INTENTIONALLY WAIVE ANY RIGHTS THEY MAY HAVE TO A TRIAL BY JURY IN RESPECT OF
ANY LITIGATION BASED HEREON, OR ARISING OUT OF, UNDER, OR IN CONNECTION WITH
THIS ASSIGNMENT AND ACCEPTANCE, THE LOAN AGREEMENT, THE CO-LENDER AGREEMENT, ANY
RELATED DOCUMENTS AND AGREEMENTS OR ANY COURSE OF CONDUCT, COURSE OF DEALING, OR
STATEMENTS (WHETHER ORAL OR WRITTEN).
IN WITNESS WHEREOF, the Assignor and the Assignee have caused this
Assignment and Acceptance to be executed and delivered by their duly authorized
officers as of the date first above written.
[ASSIGNOR]
By: ________________________________
E-6
<PAGE>
Title: _____________________________
By: ________________________________
Title: _____________________________
Address:
[ASSIGNEE]
By: _________________________________
Title: ______________________________
By: _________________________________
Title: ______________________________
Address:
E-7
<PAGE>
SCHEDULE 1
TO EXHIBIT E
------------
NOTICE OF ASSIGNMENT AND ACCEPTANCE
-----------------------------------
________, 199_
Bank of America National Trust and
Savings Association, as Administrative Agent
50 California Street, 11th Floor
San Francisco, California 94111
Attention: Janice Sears
Vice President
Catellus Development Corporation
201 Mission Street
San Francisco, California 94105
Attention: Chief Financial Officer
Ladies and Gentlemen:
We refer to the Line of Credit Loan Agreement dated as of October 28, 1996
(as it may be amended, amended and restated, modified, supplemented or renewed
from time to time the "Loan Agreement") among Catellus Development Corporation,
--------------
a Delaware corporation (the "Borrower"), the Banks referred to therein and Bank
--------
of America National Trust and Savings Association, as administrative agent for
the Banks (in such capacity, the "Administrative Agent"). Capitalized terms used
--------------------
but not defined herein shall have the meanings given to them in the Loan
Agreement.
1. We hereby give you notice of, and request your consent to, the
assignment by _____________ (the "Assignor") to ________________ (the
--------
"Assignee") of % of the right, title and interest of the Assignor in and to the
--------
Loan Agreement (including, without limitation, the right, title and interest of
the Assignor in and to the Commitments of the Assignor and all outstanding Loans
made by the Assignor) pursuant to the Assignment and Acceptance Agreement
attached hereto (the "Assignment and Acceptance"). Before giving effect to such
-------------------------
assignment the Assignor's Commitment is $ ________________ [,] [and] the
aggregate amount of its outstanding Loans is $_________________.
2. The Assignee agrees that, upon receiving the consent of the
Administrative Agent and, if applicable, the Borrower to such assignment, the
Assignee will be bound by the terms of the Loan Agreement as fully and to the
same extent as if the Assignee were the Bank originally holding such interest in
the Loan Agreement.
E-8
<PAGE>
3. The following administrative details apply to the Assignee:
(A) Notice Address:
Assignee name: ____________________________
Address: ____________________________
____________________________
____________________________
Attention: ____________________________
Telephone: ____________________________
Telecopier: ____________________________
(B) Assignee's Payment Instructions to the Administrative Agent:
Account Number: ____________________________
At: __________________________________
__________________________________
__________________________________
Reference: __________________________________
Attention: __________________________________
4. You are entitled to rely upon the representations, warranties and
covenants of each of the Assignor and the Assignee contained in the Assignment
and Acceptance.
IN WITNESS WHEREOF, the Assignor and the Assignee have caused this
Notice of Assignment and Acceptance to be executed by their respective duly
authorized officials, officers or agents as of the date first above mentioned.
Very truly yours,
[NAME OF ASSIGNOR]
By _________________________________
____________________________________
[Printed Name and Title]
By _________________________________
____________________________________
[Printed Name and Title]
E-9
<PAGE>
[NAME OF ASSIGNEE]
By __________________________________
_____________________________________
[Printed Name and Title]
By __________________________________
_____________________________________
[Printed Name and Title]
ACKNOWLEDGED AND ASSIGNMENT
CONSENTED TO:
CATELLUS DEVELOPMENT CORPORATION
a Delaware corporation
By ______________________________
_________________________________
[Printed Name and Title]
BANK OF AMERICA NATIONAL TRUST AND
SAVINGS ASSOCIATION, as Administrative Agent
By ______________________________
_________________________________
[Printed Name and Title]
E-10
<PAGE>
EXHIBIT F
PROMISSORY NOTE
---------------
____________$ ___________, 199_
San Francisco, California
FOR VALUE RECEIVED, the undersigned promises to pay to the order of
_____________________________ (the "Bank"), the principal amount of
----
_______________________________ DOLLARS ($____________), or such lesser
aggregate amount of Loans as may be advanced by the holder hereof and
outstanding from time to time under the Loan Agreement hereinafter described,
payable as hereinafter set forth. The undersigned promises to pay interest on
the principal amount hereof remaining unpaid from time to time from the date
hereof until the date of payment in full, payable as hereinafter set forth.
Reference is made to the Line of Credit Loan Agreement dated as of October
28, 1996, among the undersigned, as the Borrower, Bank of America National Trust
and Savings Association, a national banking association, individually as a Bank
and as the Administrative Agent, and the other Banks referred to therein (as
amended, modified or supplemented from time to time, the "Loan Agreement").
--------------
Capitalized terms used and not otherwise defined herein shall have the meanings
defined for those terms in the Loan Agreement. This is one of the Notes referred
to in the Loan Agreement, and any holder hereof permitted under the Loan
Agreement is entitled to all of the rights, remedies, benefits and privileges
provided for in the Loan Agreement, as originally executed or as it may from
time to time be supplemented, modified, or amended. The Loan Agreement, among
other things, provides that amounts outstanding hereunder from time to time may
be repaid pursuant to the Loan Agreement and reborrowed from time to time
pursuant to the Loan Agreement, and contains provisions for acceleration of the
maturity hereof upon the occurrence of certain stated events.
The principal indebtedness evidenced by this Note shall be payable as
provided in the Loan Agreement. This Note may be amended, modified, supplemented
or replaced, as provided in the Loan Agreement.
Interest shall be payable on the outstanding daily unpaid principal amount
of the Bank's Loans under the Loan Agreement from the date of each such Loan
until payment in full, and shall accrue and be payable at the rates and on the
dates set forth in the Loan Agreement both before and after default and before
and after maturity and judgment, with overdue interest to bear interest at the
rate set forth in Section 2.8.3 of the Loan Agreement, in accordance with the
-------------
terms of the Loan Agreement, to the fullest extent permitted by applicable law.
The amount of each payment hereunder shall be made to the Administrative
Agent at such office of the Administrative Agent as the Administrative Agent may
designate from time
F-1
<PAGE>
to time, for the account of the Banks, in lawful money of the United States of
America and in immediately available funds not later than 11:00 a.m., San
Francisco time, on the day of payment (which must be a Business Day). All
payments received after 11:00 a.m., San Francisco time, on any Business Day,
shall be deemed received on the next succeeding Business Day. The Administrative
Agent, on behalf of the Banks, shall use its best efforts to keep a record of
Loans made by the Bank and payments of principal with respect to this Note, and
such records shall be presumptive evidence of the principal amount owing under
this Note.
The undersigned hereby waives presentment, demand for payment, dishonor,
notice of dishonor, protest, notice of protest and any other notice or formality
(other than a notice expressly required by the Loan Agreement or any other Loan
Document), to the fullest extent permitted by applicable laws.
Payment of the indebtedness evidenced by this Note is secured by, among
other things, a lien on one or more parcels of real property owned by the
undersigned.
This Note shall be delivered to and accepted by the Administrative Agent
for the benefit of the Bank in the State of California, and shall be governed
by, and construed and enforced in accordance with, the local laws thereof.
CATELLUS DEVELOPMENT CORPORATION,
a Delaware corporation
By _________________________________
____________________________________
[Printed Name and Title]
F-2
<PAGE>
EXHIBIT G
LIST OF OPERATING PROPERTIES
----------------------------
PROPERTY LOCATION
INDUSTRIAL
- ----------
4801 W. Polk Street Phoenix, AZ
421 W. Alameda Drive/Microage Tempe, AZ
Pacific Business Center Fremont, CA
30000 Eigenbrodt Way/SAAB Union City, CA
20801 & 21 Santa Fe Ave. Carson, CA
Multi-tenant Santa Fe Spr., CA
4900 Loma Vista; 4501-78 E. 49th Street Vernon, CA
Multi-tenant Vernon II Vernon, CA
Lucky Brand Dungarees Vernon, CA
1700, 1800 Bay Street Los Angeles, CA
Owens & Minor City of Industry, CA
Queen Carpet La Mirada, CA
Spicer's Paper Santa Fe Springs, CA
State of California Fullerton, CA
Lot 2 Fullerton, CA
Lot 5/Label-Aire Fullerton, CA
Lot 7/Sunwest Fasteners Fullerton, CA
LA Times Fullerton, CA
Lot 9/Day Runner Fullerton, CA
Insight for Living Anaheim, CA
LA Times Anaheim, CA
Phase V Anaheim, CA
Microtechnology Anaheim, CA
4875-87 E. LaPalma Ave. Anaheim, CA
2245 N. Glassell St./OC Register Orange, CA
Iron Mountain Santa Ana, CA
Building 132 Tustin, CA
PacifiCenter Santa Ana Santa Ana, CA
Dunlop Ontario, CA
LA Times Ontario, CA
Pepsi Ontario, CA
4850 Airport Drive/Technicolor Ontario, CA
Ontario 400/Bridgestone Ontario, CA
Ontario 141/Duracell Ontario, CA
Interceramic Garland, TX
Livermore Valley Business Park Livermore, CA
OFFICE
- ------
Multi-tenant Anaheim, CA
Multi-tenant Anaheim, CA
TAIL
- ----
Baybridge Emeryville, CA
??nant Anaheim, CA
???center Tustin, CA
Raleigh West Retail Beaverton, OR
<PAGE>
EXHIBIT H
TENANT ESTOPPEL LETTER
----------------------
Bank of America, NT & SA
50 California Street. 11th Floor
National Accounts #9105
San Francisco, CA 94111
Attn: Janice Sears
Vice President
Lease between _______________________________________, as Landlord,
and ______________________________________, as Tenant, dated
_____________________________, a true and correct copy of which is attached
hereto as Exhibit "A" (the "Lease").
Mesdames/Gentlemen:
The undersigned ("Tenant"), as Tenant(s) under the Lease certifies
and agrees as follows for your reliance:
1. The commencement date of the Lease is _____________________.
The termination date of the Lease (not including any options to extend
referenced in paragraph
8 below) is ________________.
2. Tenant has accepted and is occupying the leased premises, rent
payments have commenced under the Lease and all improvements on the leased
premises have been completed by Landlord in accordance with plans and
specifications approved by Tenant.
3. Except as set forth in item 9 below regarding security deposits
and/or last months rent, Tenant has not paid rent or additional rent and charges
beyond the current month and agrees not to pay rent or additional rent and
charges more than one month in advance at any time.
4. Landlord has not granted Tenant any free rent or tenant improvement
contribution under the Lease, except as specified in the Lease, and Landlord has
not assumed nor is Landlord reimbursing Tenant for any rental obligation that
Tenant may have under any Lease.
5. Tenant has not advanced any funds for or on behalf of Landlord for
which Tenant has the right to deduct such sums from future rent payments under
the Lease.
6. The Lease is in full force and effect. There are no defaults under
the Lease on the part of either Landlord or Tenant nor do there exist any facts
or circumstances which with the passage of time or the giving of notice or both
would constitute an event of the default under the Lease on the part of either
Landlord or Tenant.
7. The Lease is the entire agreement between Landlord and Tenant
pertaining to the leased premises and the Lease has not been amended, except as
follows (if none, state "none"): _______________________________. All Amendments
to the Lease are attached hereto.
H-1
<PAGE>
8. Tenant has no option to purchase, right of expansion, option to
extend, or right of first refusal, except as provided in the following sections
of the Lease:
_________________________________________.
9. Tenant has paid $_______________ to Landlord as a security deposit
and $__________________ to Landlord as a last months rent under the Lease.
Except for such sums, Tenant is not entitled to the return of any amounts or a
credit against future rent or other charges in any amount. No portion of the
security deposit has been applied to cure any default by Tenant under the Lease.
10. The fixed monthly rent under the Lease is
$_________________________________. (Base Rent Increase Schedule:
________________________________). Tenant's share of insurance, taxes and
operating expenses for the leased premises is _____%. Rent has been paid to
_______________________________.
11. No portion of the Premises has been subleased nor has the Lease been
assigned, except as follows (if none, state "none"):
_______________________________________.
Tenant understands that you will rely upon this certificate in
connection with a proposed loan from you to the Landlord, and agrees that this
certificate shall remain in effect, as of the date of execution until released
by you in writing.
Dated: _____________________
TENANT:
By:
Its:
H-2
<PAGE>
EXHIBIT I
DESCRIPTION OF THE WOODRIDGE PROPERTY
-------------------------------------
PARCEL 1;
- --------
That part of the Southwest 1/4 of Section 13, and that part of the Southeast 1/4
of Section 14, Township 37 North, Range 10 East of the Third Principal Meridian
described as follows:
Beginning at the Northwest corner of Lot 1 in Internationale Centre Unit No. 7,
being a subdivision according to the plat thereof recorded December 20, 1995, as
document No. R95-98866; thence South 02 degrees 40 minutes 15 seconds, East
along the West line of said Lot 1, 627.00 feet to the Southwest corner thereof;
thence South 87 degrees 19 minutes 45 seconds West along the Westerly extension
of the South line of aforesaid Lot 1, 70.00 feet; thence South 02 degrees 40
minutes 15 seconds East, 561.27 feet to the South line of the Southwest 1/4 of
Section 13, Township and Range aforesaid; thence South 87 degrees 18 minutes 26
seconds West along said South line, 1200.52 feet to the Southeast corner of
Section 14, Township and Range aforesaid; thence South 88 degrees 36 minutes 26
seconds West along the South line of Section 14, 464.89 feet to the
Southeasterly right-of-way line of Joliet Road, being a line 50.0 feet
Southeasterly (measured at right angles thereto) of the centerline thereof;
thence North 27 degrees 01 minute 08 seconds East along said East line of Joliet
Road, 37.52 feet to a point 33.00 feet Northerly, measured at right angles from
the South line of said Section 14 also being the Southwest corner of a parcel
conveyed to the State of Illinois by deed recorded September 10, 1991 as
document R91-51S78; thence North 88 degrees 36 minutes 26 seconds East along the
South line of aforesaid Parcel 28.42 feet to the Southeast corner of said
Parcel; thence North 27 degrees 01 minute 08 seconds East along the East line of
said parcel, 1543.96 feet to an angle point therein; thence North 72 degrees 01
minute 08 seconds West, along said East line 71.22 feet to the Southerly right-
of-way line of Internationale Parkway as recorded November 22, 1990, as document
No. R90-65538; thence Easterly along the following 4 courses being the Southerly
right-of-way line of aforesaid Internationale Parkway; thence South 62 degrees
58 minutes 52 seconds East, 129.86 feet; thence Easterly along a curve convex
Southeasterly, having a radius of 1228.50 feet, and arc distance of 210.27 feet
(chord to said curve bears South 67 degrees 53 minutes 04 seconds East, 210.01
feet); thence Easterly along a curved line convex Southerly, having a radius of
1028.50 feet, an arc distance of 356.91 feet (chord to said curve bears South 82
degrees 43 minutes 45 seconds East, 355.12 feet); thence North 87 degrees 19
minutes 45 seconds East, 201.62 feet to the place of beginning, in Will County,
Illinois.
PARCEL 2:
- --------
Lot 1 in Internationale Centre Unit 4, being a subdivision of part of the
Southwest 1/4 of Section 13, Township 37 North, Range 10 East of the Third
Principal Meridian, according to the plat thereof recorded October 29, 1992, as
Document No. R92-86037, in Will County, Illinois.
1
<PAGE>
PARCEL 3:
- --------
That part of the Southwest 1/4 of Section 13, Township 37 North, Range 10 East
of the Third Principal Meridian, described as follows:
Beginning at the Southeast corner of Lot 5 in Internationale Centre Unit No. 1,
being a subdivision according to the plat thereof recorded October 3, 1990, as
Document No. R90-55142; thence South 87 degrees 19 minutes 45 seconds West,
along the South line of said Lot 5, 661.24 feet to the Southwest corner thereof,
also being a point on the East line of Internationale Centre Unit No. 7, being a
subdivision according to the plat thereof recorded December 20, 1995, as
Document No. R95-98866; thence South 02 degrees 40 minutes 14 seconds East along
said East line 193.67 feet; thence South 87 degrees 19 minutes 45 seconds West
along the South line of aforesaid Lot 1, 447.00 feet; thence South 02 degrees 40
Minutes 15 seconds East, 400 feet; thence North 87 degrees 19 minutes 45 seconds
East, 493.44 feet to the centerline of Davey Road; thence North 58 degrees 06
minutes 53 seconds East along the centerline of Davey Road, 772.41 feet to the
East line of the Southwest 1/4 of aforesaid Section 13; thence North 00 degrees
54 minutes 25 seconds West along said East line, 38.50 feet to the Southerly
line of Marmon Drive as dedicated on October 17, 1980, by Document No. R80-
27940; thence south 58 degrees 06 minutes 28 seconds West, along the Southerly
line of Marmon Drive, 76.99 feet to the Southwest corner thereof; thence North
00 degrees 54 minutes 25 seconds West along the West line of Marmon Drive,
215.85 feet to the place of beginning, in Will County, Illinois.
PARCEL 3A:
- ---------
Perpetual non-exclusive easement for the benefit of Parcels 1 and 3 for
pedestrian and vehicular ingress and egress, as created by Grant of Mutual and
Reciprocal Easement Rights by and between Catellus Development Corporation and
Harlem Furniture, Inc., dated December 19, 1995 and recorded December 29, 1995
as document R95-100761, over and upon the following described property:
That part of the Southwest 1/4 of Section 13, Township 37 North Range 10 East of
the Third Principal Meridian, and which part is more particularly described as
follows:
Beginning at the Northwest corner of Lot 5 of Internationale Centre Unit 1,
recorded October 3, 1990 as document number R90-55142; thence South 87 degrees
19 minutes 45 seconds West along and upon the Southerly right-of-way line of
Internationale Parkway, dedicated April 13, 1990 as document number R905538, for
a distance of 676.73 feet to the point of beginning; thence South 02 degrees 40
minutes 15 seconds East for a distance of 80.00 feet; thence North 87 degrees 19
minutes 45 seconds East for a distance of 40.00 feet; thence North 02 degrees 40
minutes 15 seconds West for a distance of 80.00 feet to a point on the Southerly
right-of-way line of said Internationale Parkway; thence South 87 degrees 19
minutes 45 seconds West along and upon said Southerly right-of-way line, for a
distance of 40.00 feet to the point of beginning, in the County of Will, State
of Illinois.
2
<PAGE>
PARCEL 3B:
- ---------
Perpetual non-exclusive easement for the benefit of Parcels 1 and 3 for storm
sewer for constructing, reconstructing, installing, operating, inspecting,
repairing, replacing and remodeling underground storm sewer pipelines and
facilities, as created by Grant of Mutual and Reciprocal Easement Rights by and
between Catellus Development Corporation and Harlem Furniture, Inc., dated
December 19, 1995 and recorded December 29, 1995 as document R95-100762, over
and upon the following described property:
The Eest 10 feet of Lot 1 of Internationale Centre Unit 7, being a subdivision
of part of the Southwest 1/4 of Section 13, Township 37 North, Range 10 East of
the Third Principal Meridian, in Will County, Illinois, according to the plat
thereof recorded as document R95-098869.
PARCEL 3C:
- ---------
Perpetual non-exclusive easement for the benefit of Parcels 1 and 3 for storm
sewer ant constructing, reconstructing, installing, operating, inspecting,
repairing, maintaining, replacing and remodeling underground storm sewer
pipelines and facilities, as created by Grant of Mutual and Reciprocal Easement
Rights by and between Catellus Development Corporation and Harlem Furniture,
Inc., dated December 19, 1995 and recorded December 29, 1995 as document R95-
100763, over and upon the following described property:
The West 10 feet of Lot 1 of Internationale Centre Unit 7, being a subdivision
of part of the Southwest 1/4 of Section 13, Township 37 North, Range 10 East of
the Third Principal Meridian, in Will County, Illinois, according to the plat
thereof recorded as document R95098869.
PARCEL 4:
- --------
That part of the Southwest 1/4 of Section 13, Township 37 North, Range 10 East
of the Third Principal Meridian lying Southeasterly of the centerline of Davey
Road, together with the North 30 acres of the East 1/2 of the Northwest 1/4 of
Section 24, Township 37 North, Range 10 East of the Third Principal Meridian, in
Will County, Illinois.
PARCEL 5:
- --------
That part of the Southeast 1/4 of Section 13, Township 37 North, Range 10 East
of the Third Principal Meridian, described as follows:
Commencing at the Northwest corner of said Section 13, thence South 00 degrees
54 minutes 25 seconds East along and upon the West line of said Southeast 1/4,
which is also the East right-of-way line of a 66-foot wide right-of-way
dedicated for Marmon Drive per document number R80-27940, for a distance of
1320.63 feet to a point, being the point-of-intersection of Internationale
Parkway Northerly right-of-way line with the Easterly right-of-way line of
3
<PAGE>
Marmon Drive, and also with said West line; thence South 46 degrees 47 minutes
20 seconds East along and upon said Northerly right-of-way line of
Internationale Parkway, as dedicated per document number R90-65538, for a
distance of 41.77 feet; thence North 87 degrees 19 minutes 45 seconds East
continuing along and upon said Northerly right-of-way line, for a distance of
520.41 feet, to the Southwest comer of Internationale Centre Unit 5, being a
subdivision according to the plat thereof recorded August 25, 1994, as document
No. R9483045, and the place of beginning; thence North 02 degrees 40 minutes 15
seconds West along and upon the West line of said subdivision, for a distance of
603.07 feet to the Northwest corner of said subdivision; thence North 87 degrees
19 minutes 45 seconds East along and upon the North line of said subdivision,
for a distance of 288.92 feet to the Northeast corner of said subdivision;
thence North 02 degrees 40 minutes 15 seconds West along the Northerly extension
of the East line of said subdivision, for a distance of 709.55 feet to a point
on the Southerly line of the railway right-of-way described in document No.
R6912954; thence South 56 degrees 55 minutes 28 seconds West along and upon said
Southerly right-of-way, 392.96 feet to the Northeast comer of the parcel of land
described in Document No. R93-22682; thence South 02 degrees 40 minutes 15
seconds East along the East line of the parcel described in Document No. R93-
22682, and its Southerly extension, for a distance of 1113.74 feet to an
intersection with the Northerly right-of-way line of aforesaid Internationale
Parkway; thence North 87 degrees 19 minutes 45 seconds East along said right-of-
way line, for a distance of 50.00 feet to the place of beginning, in the Village
of Woodridge, Will County, Illinois.
PARCEL 6:
- --------
That part of the Northeast 1/4 of Section 13, Township 37 North, Range 10 East
of the Third Principal Meridian lying North of the Atchinson, Topeka and Santa
Fe RailRoad Right-of-Way, per deed recorded June 13, 1969 as document R69-12954,
and lying south of a line being 35.00 feet South of and parallel and concentric
with the centerline of the Atchinson, Topeka and Santa Fe Railroad spur track
(as measured at right angles) described as follows:
Commencing at the intersection of a line 35.00 feet south of and parallel with
the centerline of the Atchinson, Topeka and Santa Fe Railroad spur track as
measured at right angles with the Easterly property line of the Marmon/Keystone
Corporation per deed recorded November 17, 1978 as document R7846129; thence
North 87 degrees 16 minutes 37 seconds East along the last described parallel
line, 107.94 feet to the point of beginning; thence North 87 degrees 16 minutes
37 seconds East along said parallel line 211.68 feet to a point; thence south 09
degrees 56 minutes 22 seconds East 150.00 feet; thence South 16 degrees 56
minutes 08 seconds East 327.64 feet to a point on the Northerly right-of-way of
the aforementioned Atchinson, Topeka, Santa Fe Railroad, said point being 280.00
feet Northeasterly of the intersection of said Northerly right-of-way with the
North line of the South 107.00 feet (as measured at right angles) of the
Northeast 1/4 of said Section 13, as described in Document R79-42445, (as
measured along said Northerly right-of-way line); thence South 56 degrees 55
minutes 28 seconds West along said Northerly right-of-way line 288.67 feet to a
point; thence North 04 degrees 27 minutes 20 seconds West 137.09 feet to a
4
<PAGE>
point of curvature; thence Northerly along a curve having a radius of 533.00
feet, convexed to the East and whose chord bears North 07 degrees 11 minutes 51
seconds West for an arc distance of 51.01 feet to a point of tangency; thence
North 09 degrees 56 minutes 22 seconds West, 527.81 feet to the point of
beginning, all in Will County, Illinois.
PARCEL 7A:
- ---------
That part of the Southwest 1/4 of Section 7, Township 37 North, Range 11 East of
the Third Principal Meridian, lying South of the center line of Old Joliet and
Chicago Road (now FAI-55) and West of the center line of Old Naperville and
Lemont Road (now Orchard and Murphy Road) except that part described as follows:
Commencing at the point of intersection of the West line of the East 80 acres of
the Southwest Fractional 1/4 of said Section 7 with the center line of Joliet
and Chicago Road; thence Northeasterly along the center line of said Joliet and
Chicago Road, 119.8 feet to the place of beginning; thence South parallel with
the West line of said East 80 acres of said Southwest Fractional 1/4, 251.2
feet; thence East at right angles to the last described course, 78.S feet;
thence North at right angles to the last described course, 302.8 feet, more or
less, to the center line of said Joliet and Chicago Road; thence Southwesterly
along the center line of said road, 94.13 fees, more or less, to the place of
beginning; also except that part condemned for highway purposes as Parcel 0-3 of
condemnation filed March 18, 1959, County Court, DuPage County, Illinois, Case
408-59; also except therefrom that part dedicated for road purposes by
instruments recorded as documents 409826 and 409850 in DuPage County, Illinois;
also excepting therefrom that part conveyed by grantor to Citizens Utilities
Company of Illinois by deed dated February 18, 1966, and recorded in the
recorder's office on August 4, 1967, as document number 67-28912; also excepting
that part taken for The North-South Tollway along FAI Route 55; also excepting
therefrom that part thereof lying Southerly and Easterly of that part conveyed
to the Atchison, Topeka and Santa Fe Railway Company by deed dated June 13,
1969, and recorded in the recorder's office on July 18, 1969, as document number
69-31976, in DuPage County, Illinois.
PARCEL 7B:
- ---------
That part of the South 1/2 of the Southeast 1/4 of Section 7, Township 37 North,
Range 11 East of the Third Principal Meridian, lying South and West of the
center line of Orchard Road; excepting therefrom that part conveyed by grantor
to the Atchison, Topeka and Santa Fe Railway Company by deed dated June 13,
1969, and recorded in recorder's office on July 18, 1969, as document number 69-
31974, and also excepting therefrom that part thereof lying Southerly of that
part conveyed to the Atchison, Topeka and Santa Fe Railway Company by deed dated
June 13, 1969, and recorded in the recorder's office on July 18, 1969, as
document number 69-31976, in DuPage County, Illinois.
PARCEL 8:
- --------
5
<PAGE>
The Northwest 1/4 of Section 18, Township 37 North, Range 11 East of the Third
Principal Meridian, excepting therefrom the North 142.5 feet thereof, excepting
the South 15 feet of the North 157.5 feet of the West 986.2 feet thereof, and
also excepting that part thereof lying Southeasterly of the Northwesterly line
of that part conveyed to the Atchison, Topeka and Santa Fe Railway Company by
deed dated June 13, 1969, and recorded in recorder's office on July 18, 1969, as
document 69-31974, in DuPage County, Illinois.
PARCEL 9:
- --------
That part of the Northeast 1/4 of Section 18 lying South of the North 142.5 feet
thereof, North of Internationale Centre Unit No. 8 according to the plat thereof
recorded June 25, 1996 as document number R96-105972 and West of the center line
of Orchard Road; that part of the Southwest 1/4 of Section 18 lying Northerly of
the center line of Davey Road; and that part of the Northwest 1/4 of Section 18
lying South of the North 142.5 feet thereof, Southerly of the Southerly line of
that part conveyed to the Atchison, Topeka and Santa Fe Railway Company by deed
dated June 13, 1969, as document number 69-31974, (excepting from said Northwest
1/4 that part described as follows: Beginning at a point on the North line of
the Southwest 1/4 of Section 18, where it intersects the center line of Davey
Road; thence North 56 degrees 54 minutes 59 seconds East, along the center line
of Davey Road, 53.90 feet; thence North 00 degrees 55 minutes 41 seconds West,
parallel with the West line of the East 1/2 of the Northwest 1/4 of said Section
18, a distance of 609.46 feet; thence North 54 degrees 33 minutes 27 seconds
East, 1171.16 feet; thence North 89 degrees 01 minutes 40 seconds east, 464.48
feet; thence South 00 degrees 58 minutes 16 seconds East, along the East line of
the Northwest 1/4 of Section 18, a distance of 381.13 feet; thence South 57
degrees 07 minutes 46 seconds West along the old center line of Davey Road (now
vacated), 310.96 feet; thence South 00 degrees 58 minutes 16 seconds East along
the West line of the East 264 feet of the Northwest 1/4 of said Section 18, a
distance of 757.33 feet; thence South 89 degrees 06 minutes 49 seconds West,
along the South line of the Northwest 1/4 of said Section 18, a distance of
1212.11 feet to the point of beginning) (and also excepting Lot 1 in
Internationale Centre Unit Number 8, being a subdivision of part of the
Northeast 1/4 and Northwest 1/4 of Section 18, according to the plat thereof
recorded June 25, 1996 as document number R96 105972, all in Township 37 North,
Range 11 East of the Third Principal Meridian, in DuPage County, Illinois.
PARCEL 10:
- ---------
That part of the Northeast 1/4 (except the North 142.50 feet thereof) of Section
18, Township 37 North, Range 11 East of the Third Principal Meridian, described
as follows:
Commencing at the Northeast corner of said Northeast 1/4 of Section 18, thence
South 00 degrees 49 minutes 43 seconds East along the East line of said
Northeast 1/4 a distance of 142.50 feet to the intersection of the South line of
the North 142.50 feet of said Northeast 1/4 with the East line of said Northeast
1/4; thence South 89 degrees 08 minutes 39 seconds West along the South line of
the North 142.50 feet of said Northeast 1/4 a distance of 1202.00 feet to the
intersection of said South line with the Northerly extension of the West
6
<PAGE>
line of Internationale Centre Unit 6 recorded February 17, 1995 as Document R95-
19772; thence South 00 degrees 49 minutes 43 seconds East, parallel with the
aforesaid East line of the Northeast 1/4 and along the aforesaid Northerly
extension of the West line of Unit 6 and the West line of said Unit 6 a distance
of 435.60 feet to the point of beginning; thence continuing South 00 degrees 49
minutes 43 seconds East, along a continuation of the last described line a
distance of 554.39 feet to the Northerly right of way line of Internationale
Parkway; thence Westerly 363.23 feet along said Northerly right of way line
being the arc of a circle convex Northerly, having a radius of 1215.00 feet and
whose chord bears South 83 degrees 03 minutes 27 seconds West, 361.88 feet to a
point of tangency; thence South 74 degrees 29 minutes 35 seconds West, along
said Northerly right of way line a distance of 178.22 feet to a point of
curvature; thence continuing Westerly 90.94 feet along said Northerly right of
way line, being the arc of a circle convex Southerly, having a radius of 1185.00
feet and whose chord bears South 76 degrees 41 minutes 30 seconds West, 90.92
feet; thence North 00 degrees 49 minutes 43 seconds West, parallel with the
aforesaid East line of the Northeast 1/4 a distance of 579.86 feet; thence North
89 degrees 08 minutes 39 seconds East, parallel with the South line of the North
142.50 feet of said Northeast 1/4 a distance of 255.65 feet; thence Northerly
77.19 feet along the arc of a circle convex Westerly, having a radius of 60.00
feet and whose chord bears North 18 degrees 56 minutes 51 seconds East, 71.98
feet; thence North 00 degrees 49 minutes 43 seconds West, 9.86 feet; thence
North 89 degrees 08 minutes 39 seconds East, parallel with the South line of the
North 142.50 feet of said Northeast 1/4 a distance of 341.00 feet to the point
of beginning, in DuPage County, Illinois.
PARCEL 11:
- ---------
That part of the Northeast 1/4 (except the North 142.50 feet thereof) of Section
18, Township 37 North, Range 11 East of the Third Principal Meridian, described
as follows:
Commencing at the Northeast corner of said Section 18; thence South 00 degrees
49 minutes 43 seconds East, along the East line of the Northeast 1/4 of said
Section 18, a distance of 142.50 feet to the intersection of the South line of
the North 142.50 feet of said Northeast 1/4 with the East line of said Northeast
1/4, said intersection being the point of beginning; thence South 00 degrees 49
minutes 43 seconds East, along said East line, a distance of 420.86 feet to the
Northeast corner of Internationale Centre Unit 2 recorded October 1, 1990 as
document R90-131342; thence South 89 degrees 10 minutes 17 seconds West, along
the North line of said Unit 2, a distance of 592.00 feet to the Northwest corner
thereof; thence North 00 degrees 49 minutes 43 seconds West, parallel with the
East line of said Northeast 1/4 and along the Northerly extension of the West
line of said Unit 2, a distance of 420.58 feet to the South line of the North
142.50 feet of said Northeast 1/4; thence North 89 degrees 08 minutes 39 seconds
East, along said South line, a distance of 592.00 feet, to the point of
beginning, in DuPage County, Illinois.
PARCEL 12:
- ---------
7
<PAGE>
Lots 2 and 3 in Internationale Centre Unit 12, being a subdivision of Part of
the Northwest 1/4 of Section 17, Township 37 North, Range 11 East of the Third
Principal Meridian, according to the plat thereof recorded August 28, 1996, as
document number R96-142140; together with that part of the Northeast 1/4 of
Section 18, Township and Range aforesaid, lying East of the East line (and its
Southerly extension) of Internationale Centre Unit Number 8, being a subdivision
according to the plat thereof recorded June 25, 1996, as document number
R96105972, and lying South of the Southerly right-of-way line of Internationale
Parkway (Eastbound), according to the plat of dedication recorded as document
number R90131342, all in DuPage County, Illinois.
PARCEL 13:
- ---------
All that part of the West 1/2 of the Southeast 1/4 and part of the East 264 feet
of the Southwest 1/4 of Section 18, Township 37 North, Range 11 East of the
Third Principal Meridian, described as follows:
Beginning at a point at the Northwest corner of the East 264 feet of the
Southwest 1/4 of said Section 18; thence South 00 degrees 58 minutes 58 seconds
East, along said West line, 610.00 feet; thence North 89 degrees 19 minutes 41
seconds East, 1589.32 feet; thence North 00 degrees 56 minutes 54 seconds West,
along the East line of the West 1/2 of the Southeast 1/4 of said Section 18, a
distance of 610.00 feet; thence South 89 degrees 22 minutes 14 seconds West,
along the North line of the Southeast 1/4 of said Section 18, a distance of
1325.69 feet; thence South 89 degrees 06 minutes 49 seconds West, along the
North line of the East 264 feet of the Southwest 1/4 of said Section 18, a
distance of 264.00 feet to the point of beginning, in DuPage County, Illinois.
8
<PAGE>
EXHIBIT J
CONFIGURATION OF THE WOODRIDGE PROPERTY TAKING AREA
---------------------------------------------------
J-1
<PAGE>
TOTAL HOLDING DIAGRAM NS-700-007.1
<PAGE>
[NS-700-007 DIAGRAM APPEARS HERE]
<PAGE>
DETAIL OF NS-700-007.1
<PAGE>
EASEMENT EXHIBIT
<PAGE>
EXHIBIT K
LETTER OF CREDIT APPLICATION FORM
---------------------------------
K-1
<PAGE>
[LOGO OF BANK OF AMERICA] PAGE 1 OF FORM OF
APPLICATION AND AGREEMENT
FOR STANDBY LETTER OF CREDIT
<PAGE>
PAGE 2 OF FORM OF
APPLICATION AND AGREEMENT
FOR STANDBY LETTER OF CREDIT
<PAGE>
EXHIBIT 10.21A
FIRST AMENDMENT
TO
AMENDED AND RESTATED EXECUTIVE STOCK OPTION PLAN
THIS FIRST AMENDMENT TO CATELLUS DEVELOPMENT CORPORATION AMENDED AND
RESTATED EXECUTIVE STOCK OPTION PLAN is made effective as of July 16, 1996.
I. AMENDMENT TO SECTION 4: PLAN ADMINISTRATION
Section 4 of the Catellus Development Corporation Amended and Restated
Executive Stock Option Plan is hereby amended by amending the first three
sentences of such Section 4 to read in their entirety as follows:
"The Plan shall be administered by the Compensation and Benefits Committee of
the Board, or any other committee designated by the Board (the "Committee"), or,
with respect to the grant of any Options to employees (other than an executive
officer as defined in Rule 3b-7 or Rule 16a-1 under the Securities Exchange Act
of 1934, as amended (the "Exchange Act"), a committee of one or more directors
who need not be a "disinterested person" within the meaning of Regulation 16b-3
("Regulation 16b-3") promulgated under the Exchange Act or an "outside director"
within the meaning of Section 162(m) of the Internal Revenue Code (the "Code")
and regulations issued thereunder to the extent the amount and terms of the
Option are duly authorized by the Committee. Except as provided above, the
members of the Committee shall each be a "disinterested person" within the
meaning of Regulation 16b-3 and an "outside director" within the meaning of
Section 162(m) of the Code, and regulations issued thereunder. Except with
respect to Options granted to nonemployee directors pursuant to Section 18 and
Options granted pursuant to the previous sentence, the Committee shall have the
sole authority to determine (a) to whom Options shall be granted under the Plan;
(b) the type, amount and terms of the Options to be granted; (c) the time when
Options will be granted and the duration of the exercise period; and (d) any
other matters arising under the Plan."
<PAGE>
EXHIBIT 10.44A
FIRST AMENDMENT
TO
1996 PERFORMANCE AWARD PLAN
THIS FIRST AMENDMENT TO CATELLUS DEVELOPMENT CORPORATION 1996 PERFORMANCE
AWARD PLAN is made effective as of
January 30, 1996.
SECTION 1. Amendment to Section 8: Administration
Sections 8(a) and (b) of the 1996 Performance Award Plan are hereby amended
to read in their entirety as follows:
"(a) Committee Authority and Structure. This Plan and all Awards granted under
this Plan shall be administered by the Compensation and Benefits Committee of
the Board, or such other committee of the Board as may be designated by the
Board and constituted so as to permit this Plan to comply with the disinterested
administration requirement of Rule 16b-3 under the Exchange Act and the "outside
director" requirement of Code Section 162(m), or, with respect to the grant of
any Options to Employees (other than an Executive Officer), a committee of one
or more directors who need not be a "disinterested person" within the meaning of
Rule 16b-3 under the Exchange Act or an "outside director" within the meaning of
Code Section 162(m) to the extent the amount and terms of the Option are duly
authorized by the Committee. The members of the Committee shall be designated
by the Board. A majority of the members of the Committee (but not fewer than
two) shall constitute a quorum. The vote of a majority of a quorum or the
unanimous written consent of the Committee shall constitute action by the
Committee.
(b) Selection and Grant. Except as provided in Section 8(a) above, the Committee
shall have the authority to determine the Employees (if any) to who Awards will
be granted under this Plan, the type of Award or Awards to be made, and the
nature, amount, pricing, timing, and other terms of Awards to be made to any one
or more of these individuals, and to establish the installments (if any) in
which such Awards shall become exercisable or shall vest, or determine that no
delayed exercisability or vesting is required, and establish the events of
termination or reversion of such Awards, subject to the terms of this Plan."
<PAGE>
EXHIBIT 10.45
EMPLOYMENT AGREEMENT
BETWEEN
CATELLUS DEVELOPMENT CORPORATION
AND
DAVID FRIEDMAN
DATED AS OF
FEBRUARY 1, 1996
<PAGE>
TABLE OF CONTENTS
PAGE
1. Performance of Services................................................ 2
2. Compensation........................................................... 4
3. Termination of Employment.............................................. 8
4. Benefits Upon Termination.............................................. 12
5. Miscellaneous Provisions............................................... 15
Exhibit A OPTION AGREEMENT
Exhibit B CATELLUS DEVELOPMENT CORPORATION
BENEFITS SUMMARY 1995
i
<PAGE>
EMPLOYMENT AGREEMENT
BETWEEN
CATELLUS DEVELOPMENT CORPORATION
AND
DAVID FRIEDMAN
This Employment Agreement ("Agreement") is made and entered into as of
February 1, 1996 (the "Effective Date") by and between DAVID FRIEDMAN (the
"Executive") and CATELLUS DEVELOPMENT CORPORATION, a Delaware corporation having
its principal executive offices in San Francisco, California (the "Company").
RECITALS
A. The Company is engaged in the business of developing, managing and
marketing real estate, and owns substantial landholdings in the desert and San
Joaquin Valley regions of California.
B. The Executive has substantial experience and expertise in the
fields of real estate, real property environmental concerns, and resource
development.
C. The Company desires to secure the services of the Executive as
Vice President of the Company and President of Catellus Resources Group, a
division of the Company, and the Executive desires to perform such services for
the Company on the terms and conditions hereinafter set forth.
1
<PAGE>
A G R E E M E N T:
NOW, THEREFORE, in consideration of the mutual agreements set forth
below, the Executive and the Company hereby agree as follows:
1. Performance of Services. The Executive shall be employed by the Company in
-----------------------
accordance with the following terms and conditions:
1.1 Position, Duties and Authority. The Company hereby agrees to
------------------------------
employ the Executive as Vice President of the Company and President of Catellus
Resources Group, a division of the Company. The Executive shall report only to
the Chief Executive Officer of the Company and shall have such responsibilities,
duties and authority as may be established by the Chief Executive Officer after
mutual consultation with the Executive, including strategic corporate planning
and the coordination of the Company's environmental remediation activities. The
Executive shall be a member of the senior management group of the Company and,
at the direction of the Chief Executive Officer, shall work with other officers
of the Company in order to facilitate the consummation of Company projects. He
shall have the corporate authority that is customary for the position in which
he is employed and that is reasonably required for the discharge of the duties
to which he may be assigned by the Company's Chief Executive Officer (after
consultation with the Executive) in the course of his employment by the Company.
2
<PAGE>
1.2 Commitment. Subject to the provisions hereof, the Executive
----------
shall devote his full-time best efforts to his employment. Notwithstanding the
foregoing, the Executive may devote reasonable time to activities other than
those required under this Agreement, including the supervision of his personal
investments and activities involving professional, charitable, educational,
religious and similar types of organizations, speaking engagements, writing for
publication, membership on the board of directors of other organizations and
similar activities to the extent that such other activities do not, in the
reasonable judgment of the Chief Executive Officer of the Company, inhibit
performance of the Executive's duties under this Agreement or conflict with the
business of the Company; provided, however, that the Executive shall not serve
on the board of directors of any for-profit company, or hold any other position
with any for-profit company (other than the Company) without the prior consent
of the Chief Executive Officer of the Company.
1.3 Place of Performance. The Executive shall be based in, or in the
--------------------
immediate vicinity of, downtown Los Angeles, California, except for required
business travel for the Company. The Executive shall not be required to
relocate to any other area without his express written consent.
1.4 Term of Agreement. The term of this Agreement shall commence on
-----------------
the Effective Date and shall continue in effect through January 31, 2001,
unless otherwise terminated in accordance with the provisions of this Agreement;
provided, however, that unless the Company, in its sole discretion, gives
written notice of termination to the Executive at least 90 days prior to January
31, 2001, the term of this Agreement shall be
3
<PAGE>
automatically extended for an additional 12-month period and for each subsequent
12-month period thereafter until the Company provides the Executive with a
written notice of termination at least 90 days prior to January 31 of any year.
2. Compensation.
------------
2.1 Base Salary. The Executive shall receive an annual base salary
-----------
(the "Base Salary") payable in substantially equal installments no less than
twice monthly, with the first payment to occur on or about February 15, 1996.
The Executive's initial annual Base Salary under this Agreement shall be
$175,000.
2.2 Base Salary Review. At the end of each calendar year, the
------------------
Executive's then effective Base Salary shall be reviewed by the Chief Executive
Officer of the Company and, as a result of that review, shall be subject to
possible increase, but not decrease, based on the Executive's performance during
the immediately preceding year as measured against operating goals mutually
established by the Executive and the Chief Executive Officer of the Company.
Any increase in the amount of the Executive's then-effective Base Salary which
results from that review will be effective on the immediately following January
1st and such new Base Salary shall become the minimum Base Salary for all
purposes under this Agreement, subject to further increases, if any, resulting
from further Base Salary reviews.
4
<PAGE>
2.3 Bonuses.
-------
2.3.1 Base Bonus. The Executive shall be eligible to receive a base
----------
bonus (the "Base Bonus") after the end of each year equal to a maximum of 100%
of his then-effective Base Salary. Fifty percent of the Base Bonus shall be
determined on the basis of subjective factors to be evaluated by the Chief
Executive Officer of the Company and 50% of the Base Bonus shall be determined
on the basis of the achievement of objective standards that will be mutually
defined by the Executive and the Chief Executive Officer of the Company. The
Executive shall receive a minimum Base Bonus of not less than $87,500 for the
calendar year ending December 31, 1996.
2.3.2 Additional Bonus. The Executive shall also be eligible to
----------------
receive a second bonus (the "Additional Bonus") after the end of each year equal
to a maximum of 100% of his then-effective Base Salary, determined on the basis
of the achievement of objective standards that will be mutually defined by the
Executive and the Chief Executive Officer of the Company; provided that the
Additional Bonus in any year may not exceed the Base Bonus for such year.
2.3.3 Bonus Payments. Unless the Executive otherwise agrees in
--------------
writing, any Base Bonus and Additional Bonus shall be paid as a lump sum,
subject to appropriate withholding and other legal requirements, no later than
February 15 of the immediately following calendar year.
5
<PAGE>
2.4 Stock Options. On the Effective Date, the Executive will be
-------------
granted a non-qualified stock option to purchase 100,000 shares of the common
stock, $0.01 par value per share, of the Company ("Company Common Stock") in
accordance with the provisions of the Company's then-existing Amended and
Restated Executive Stock Option Plan and as approved by the Compensation and
Benefits Committee of the Board of Directors of the Company and the Option
Agreement shall be in the form of Exhibit A attached hereto (the "Initial
Grant"). Such stock option shall be granted with the initial per share exercise
price set at the average closing market price for such Common Stock for the five
trading days prior to the date of this Agreement. Such option will have a
mandatory withholding feature whereby the Company will withhold such number of
shares at the time of any exercise of the option which will satisfy the
estimated amount of federal and state taxes applicable to the exercise.
Subsequent to the Initial Grant, the Executive shall be eligible to receive
additional options to purchase Company Common Stock ("Subsequent Grant") in
amounts as may be determined by the Compensation and Benefits Committee. The
terms and conditions of each such Subsequent Grant, if any, shall be no less
favorable than the terms and conditions of similar stock option grants, if any,
made to other similarly situated Company executives and shall be in accordance
with the provisions of the Company's then-existing stock option plans.
2.5 Vacation. Paid vacations of three weeks every 12 months shall be
--------
permitted. The Executive shall be entitled to take such vacation at such time
or times (without regard to the accrual thereof) as he shall choose, but for
purposes of calculation of amounts payable pursuant to Section 4 hereof, such
vacation entitlement shall accrue in accordance with the
6
<PAGE>
terms of the Company's vacation policy as in effect from time to time for
executive officers generally.
2.6 Disability. The Executive shall receive from the Company
----------
disability income replacement coverage which will provide for replacement of 80%
of his then effective Base Salary, to the extent available at a commercially
reasonable rate of premium, during any period in which the Executive is disabled
if the disability arose during the term of this Agreement and prior to the
Executive's date of termination. During any period while the Executive is
disabled, and is otherwise entitled to receive salary under this Agreement, any
salary payments to the Executive shall be reduced by the amount of any benefits
paid for the same period of time pursuant to such disability income replacement
coverage.
2.7 Benefits and Perquisites. The Executive shall be entitled to
------------------------
receive from the Company employee benefits (including, but not limited to,
retirement, deferred income, pension, medical, dental, life and disability
insurance) and perquisites in such amounts and subject to terms and conditions
at least as favorable as are provided to any other senior executive of the
Company (other than the Chief Executive Officer). The Company's current benefit
programs are described on Exhibit B attached hereto and such benefits shall not
be materially altered except for across the board modifications applicable to
all Company executives. The Executive will also be entitled to participate in
the Company's 401K plan. In addition, the Executive will be entitled to ample
office space, a desktop computer, parking, a cellular phone and all other
customary supplies and equipment to fulfill the
7
<PAGE>
requirements of his corporate duties and position under this Agreement as well
as a full-time secretary.
2.8 Expenses. The Executive shall be authorized to incur reasonable
--------
expenses for entertainment, travel, meals, lodging, and similar items in the
conduct of the Company's business. The Company shall reimburse the Executive
for all reasonable expenses so incurred, including, without limitation, an
automobile allowance of $749.92 per month and $.1504 per mile and the expense of
purchasing a Powerbook computer system.
2.9 Transition Payment. On the Effective Date, the Executive will
------------------
receive a lump sum payment of $50,000 as compensation for his transition
expenses, including partnership withdrawal costs, loss of annual law firm bonus
and cancellation of certain speaking and writing contracts.
3. Termination of Employment.
-------------------------
3.1 Death. The Executive's employment under this Agreement shall
-----
terminate upon his death.
3.2 Permanent Disability. The Company may terminate the Executive's
--------------------
employment with the Company during any period in which the Executive is
Permanently Disabled, which shall mean for purposes of this Agreement, any
period of time in which the Executive (i) has a physical or mental disability
which renders him incapable, after
8
<PAGE>
reasonable accommodation, of performing his duties under this Agreement; (ii)
such disability is determined by the Chief Executive Officer of the Company to
be of a long-term nature; and (iii) the Executive is eligible for income
replacement benefits under the Company's long-term disability plan during such
time period. In the event of any dispute as to whether the Executive is
Permanently Disabled, the Company may refer the dispute to a licensed practicing
physician of the Company's choice, and the Executive shall agree to such
reasonable tests and examinations as the physician may require to advise the
Company of the Executive's condition.
3.3 For Cause. The Company may terminate the Executive's employment
---------
under this Agreement at any time for Cause. For the purposes of this Agreement,
"Cause" shall mean the willful and continued failure by the Executive to
substantially perform his material duties with the Company (other than any such
failure resulting from his incapacity due to physical or mental illness).
Notwithstanding the foregoing, the Executive shall not be terminated for Cause
pursuant to this Section 3.3 unless and until the Executive (a) has received
written notice of a proposed termination for Cause which specifically identifies
the manner in which the Chief Executive Officer of the Company believes that the
Executive has not substantially performed his material duties, (b) the Executive
has had an opportunity to confer with the Chief Executive Officer of the
Company, and (c) the Executive has had 60 days after receipt of such notice to
cure any alleged non-performance of his duties. If at the end of such sixty-day
period the non-performance has not been cured to the reasonable satisfaction of
the Chief Executive Officer, then the Company, upon the determination of the
Compensation and Benefits Committee of the Board of Directors of the Company,
may terminate the
9
<PAGE>
Executive's employment for Cause. For purposes of this Section, no act, or
failure to act, on the Executive's part shall be deemed "willful" unless done,
or omitted to be done, by the Executive not in good faith and without reasonable
belief that the Executive's action or omission was in the best interests of the
Company.
3.4 Constructive Discharge. The Executive may terminate his
----------------------
employment due to his Constructive Discharge if without the Executive's express
written consent, any of the following occurs:
(i) a reduction by the Company in the Executive's annual Base Salary
as in effect on the date hereof or as the same may be increased from time
to time; or
(ii) a demotion from the position or title of Vice President of the
Company or President of Catellus Resources Group or an assigning of duties
to the Executive that are inconsistent in any substantial respect with or
are a reduction in any substantial respect from the position, authority, or
responsibilities associated with the position of Vice President of the
Company or President of Catellus Resources Group, or imposition of a
requirement that the Executive report to anyone other than the Chief
Executive Officer of the Company; or
(iii) a relocation of the Company's Los Angeles office to an area
outside of Los Angeles or requirement for the Executive to be based
anywhere other than within 50 miles from the site of the Los Angeles office
of the Company; or
10
<PAGE>
(iv) the failure of the Company to obtain a satisfactory agreement
from any successor to the Company to assume and perform the obligations of
the Company under this agreement in the event there is a successor to the
Company; or
(v) the failure of the Company, without the Executive's written
consent, to pay the Executive any portion of his Base Salary, Base Bonus,
Additional Bonus, any installment or deferred compensation payment, or
expense reimbursement within ten days of when due and payable, or the
failure to issue shares of Company Common Stock in accordance with any
stock options granted to the Executive upon the valid exercise thereof; or
(vi) the failure of the Company to fulfill any of its obligations
under this Agreement.
3.5 Voluntary Resignation by Executive. The Executive may resign from and
----------------------------------
terminate his employment under this Agreement at any time by giving the Company
written notice no less than 30 days prior to the date his resignation shall
become effective.
3.6 Termination by Company Without Cause. The Company may terminate the
------------------------------------
Executive's employment at any time without Cause; provided, however, that
termination under this Section 3.6 shall be deemed to have occurred only if such
termination did not occur for any reason described in Section 3.1, 3.2., 3.3.,
3.4 or 3.5 of this Agreement.
11
<PAGE>
4. Benefits Upon Termination.
-------------------------
4.1 Base Termination Benefits. If the Executive's employment is
-------------------------
terminated pursuant to Section 3.1 (due to death), Section 3.2 (due to Permanent
Disability), Section 3.3 (for Cause), or Section 3.5 (voluntary resignation by
the Executive) of this Agreement, the Company shall pay to the Executive (i) any
accrued and unpaid Base Salary , Base Bonus or Additional Bonus, and any other
due and payable compensation through the date of such termination; (ii) an
amount in respect of the Executive's accrued, unused vacation days as of the
date of such termination, determined in accordance with then-effective Company
policy; and (iii) any other payments or benefits to be provided to the Executive
by the Company pursuant to any employee benefit plans or any other arrangements
adopted by the Company, to the extent such amounts are due from the Company.
All such payments due the Executive under this Section 4.1 shall be paid in a
lump sum by the Company no later than the fifth day following the date the
Executive's employment terminates; provided, however, that the amount of any
such benefits shall be reduced by any other benefits provided upon termination
of the Executive's employment to which the Executive may be entitled under any
severance agreement with the Company.
4.2 Additional Benefits Upon Constructive Discharge or Termination Without
----------------------------------------------------------------------
Cause. If the Executive's employment is terminated pursuant to Section 3.4 (due
- -----
to Constructive Discharge) or Section 3.6 (without Cause) of this Agreement, the
Company shall pay to the Executive (i) an amount in respect of the Executive's
accrued, unused vacation days as of the date of such termination determined in
accordance with then-effective
12
<PAGE>
Company policy; (ii) in the event that the termination of employment occurs
prior to the first anniversary of the date hereof, the sum of (a) the number of
full months remaining in this Agreement, but not to exceed 24, multiplied by the
Executive's monthly Base Salary as of the date of such termination and (b) the
number of full months remaining in this Agreement, but not to exceed 24,
multiplied by $87,500 divided by 12; (iii) in the event that the termination of
employment occurs following the first anniversary of the date hereof, the sum of
(a) the number of full months remaining in this Agreement, but not to exceed 24,
multiplied by the average monthly Base Salary for the immediately preceding 2-
year period or, if the Executive has not served the Company for 24 months, then
the average monthly Base Salary for such shorter period and (b) the number of
full months remaining in this Agreement, but not to exceed 24, multiplied by the
average monthly Base Bonus and Additional Bonus for the immediately preceding 2-
year period or, if the Executive has not served the Company for 24 months, then
the average monthly Base Bonus and Additional Bonus for such shorter period;
(iv) any accrued and unpaid Base Salary, Base Bonus or Additional Bonus, and any
other due and payable compensation through the date of such termination; and (v)
any other payments or benefits to be provided to the Executive by the Company
pursuant to any employee benefit plans or any other arrangements adopted by the
Company, including stock options, to the extent such amounts are due from the
Company. All such payments due the Executive under this Section 4.2 shall be
paid in a lump sum by the Company no later than the fifth day following the date
the Executive's employment terminates; provided, however, that the amount of any
such benefits shall be reduced by any other benefits provided upon termination
of the Executive's employment to which the Executive may be entitled under any
severance agreement with the Company. From the
13
<PAGE>
termination date of the Executive's employment pursuant to Section 3.4 or 3.6 of
this Agreement, and for the remaining period of the term of this Agreement, the
Executive shall be treated as an employee for purposes of the Company's group
health and dental programs, but not for purposes of life, dependent care
reimbursement, health care reimbursement, business travel accident insurance, or
long- or short-term disability programs, tax-qualified retirement plans, or any
other employee benefit plan or program of the Company, and shall receive
benefits substantially comparable to those in effect on the day before the
Executive's date of termination subject to any reduction or termination of such
benefits similarly affecting all management personnel of the Company.
4.3 Mitigation and Set-Off. The Executive shall not be required to
----------------------
mitigate the amount of any payment provided for in this Agreement by seeking
other employment or otherwise. The Company shall not be entitled to set off
against the amounts payable to the Executive under this Agreement any amounts
owed to the Company by the Executive, any amounts earned by the Executive in
other employment after termination of his employment by the Company, or any
amounts which might have been earned by the Executive in other employment had he
sought such other employment.
14
<PAGE>
5. Miscellaneous Provisions.
------------------------
5.1 Indemnity. To the fullest extent permitted by applicable law and the
---------
Bylaws of the Company, as the same now exist or may hereafter be amended (but,
in the case of any amendment, only to the extent that such amendment permits the
Company to provide broader indemnification rights than said law or Bylaws
permitted the Company to provide prior to such amendment), the Company shall
indemnify the Executive and hold the Executive harmless for any acts or
decisions made in good faith while performing services for the Company, and the
Company shall use its best efforts to obtain coverage for the Executive under
any liability insurance policy or policies now in force or hereafter obtained
during the term of this Agreement that cover other officers of the Company
having comparable or lesser status and responsibility. To the same extent, the
Company will pay and advance all expenses, including reasonable attorneys' fees
and costs of court approved settlements, actually and necessarily incurred by
the Executive in connection with the defense of or settlement of any action,
suit or proceeding and in connection with any appeal thereon, which has been
brought against the Executive by reason of the Executive's service as an officer
or agent of the Company or of a subsidiary of the Company.
5.2 Covenant Against Competition. The Executive agrees that from the
----------------------------
Effective Date until the termination of his employment, the Executive will not,
without the prior written approval of the Chair of the Board of the Company,
directly or indirectly, as owner, partner, officer or employee, engage in any
business which is substantially competitive with any business then actively
conducted by the Company or by any of its subsidiaries or under-
15
<PAGE>
take to consult with or advise any such competitive business, or otherwise,
directly or indirectly, engage in any activity which is substantially
competitive with or in any way adversely and substantially affecting any
activity of the Company or any of its subsidiaries; provided, however, that
ownership by the Executive of not more than 5% of the outstanding shares of
stock of any such business listed on any national stock exchange or quoted on an
automated quotation system, or of not more than 15 percent of the stock of any
such business not so listed or quoted, shall not be deemed a violation of this
covenant.
5.3 Trade Secrets and Other Confidential Information. In further
------------------------------------------------
consideration of the payments to be made to the Executive hereunder, the
Executive agrees that:
(i) During the term of his employment under this Agreement and for a
period of 5 years thereafter, he will not divulge to anyone, other than to
persons designated by the Company in writing or as may be required by law, any
trade secrets or other confidential or propriety information (including, without
limitation any inventions, formulae, methods or products whether or not patented
or patentable) directly or indirectly useful in any aspect of the Company's
business, as conducted from time to time, as to which the Executive at any time
during his employment shall become, informed and which is not then generally
known to the public or recognized as standard practice and shall use reasonable
precautions to ensure that such information remains confidential; and
(ii) During the employment period, upon termination of employment
under this Agreement or at any subsequent time upon request, the Executive will
return promptly to
16
<PAGE>
the Company as its property, all corporate documents and records in whatever
form they may exist, which are then in his custody, possession or control,
including those related to trade secrets or other confidential information.
5.4 Change of Control Payments. In the event that a Change of Control (as
--------------------------
defined in paragraph 5.4(iii) hereof) occurs during the term of this Agreement
while the Executive is employed by the Company, Executive shall be entitled to
certain payments as follows:
(i) If, within 12 months after the occurrence of the Change of
Control, the Executive's employment by the Company or its successor is
terminated by the Company without Cause (as defined in Section 3.3 or by the
Executive pursuant to Section 3.4 (relating to Constructive Discharge), then the
Executive shall be entitled to receive from the Company or such successor, in
lieu of, and not in addition to, the amounts otherwise payable to the Executive
pursuant to Section 4 hereof, a lump sum payment in an amount which is equal to
three times the "base amount" in respect of the Executive as defined in Section
280G of the Internal Revenue Code of 1986, as amended (the "Code"), or any
successor to that provision. In addition, the stock option described in Section
2.4 hereof shall become fully vested in such event.
(ii) If any payments under this Agreement, after taking into account
all other payments to which the Executive is entitled from the Company, or any
affiliate thereof, are more likely than not to result in a loss of a deduction
to the Company by reason of
17
<PAGE>
Section 280G of the Code or any successor provision to that section, such
payments shall be reduced to the extent required to avoid such loss of
deduction. The Executive shall be entitled to select the order in which
payments are to be reduced in accordance with the preceding sentence.
If requested by the Company, the Executive shall provide complete
compensation and tax data on a timely basis to the Company and to an accounting
or law firm designated by the Company in order to enable the Company to
determine the extent to which payments from the Company and its affiliates may
result in a loss of a deduction. If the Executive incurs fees or expenses in
accumulating such information, the Company shall reimburse the Executive for any
reasonable fees and expenses so incurred.
If the Executive and the Company disagree as to whether a payment
under this Agreement is more likely than not to result in the loss of a
deduction, the matter shall be resolved by an opinion of tax counsel chosen by
the Company's independent auditors. The Company shall pay the fees and expenses
of such counsel, and shall make available such information as may be reasonably
requested by such counsel to prepare the opinion.
If, by reason of the limitations of this Section 5.4(ii), the maximum
amount payable to the Executive cannot be determined prior to the due date for
such payment, the Company shall pay on the due date the minimum amount which it
in good faith determines to be payable and shall pay the remaining amount, with
interest at a rate, compounded semi-annually, equal to 120% of the applicable
Federal rate determined under Section 1274(d) of
18
<PAGE>
the Code, as soon as such remaining amount is determined in accordance with this
Section 5.4(ii).
(iii) A "Change of Control" of the Company shall be deemed to have
occurred upon the happening of any of the following events:
(a) the acquisition or holding, other than in or as a result of a
transaction approved by the Continuing Directors (as defined in paragraph
(b) below) of the Company, by any individual, entity or group (within the
meaning of Section 13(d)(3) or 14(d)(2) of the Exchange Act) (an
"Acquiror") of beneficial ownership (within the meaning of Rule 13d-3
promulgated under the Exchange Act) of 25% or more of the combined voting
power of the then outstanding shares of common stock and other stock of the
Company entitled to vote generally in the election of directors, but
excluding for this purpose:
(1) any such acquisition (or holding) by California Public
Employees' Retirement System, which as of the Effective Date holds
approximately 41% of the issued and outstanding common stock of the
Company ("CalPERS"), or while CalPERS is the beneficial owner of
shares having a greater percentage of such combined voting power than
the shares held by the Acquiror;
19
<PAGE>
(2) any such acquisition (or holding) by the Company or any of
its Subsidiaries, or any employee benefit plan (or related trust) of
the Company or such Subsidiaries; or
(3) any such acquisition (or holding) by any corporation with
respect to which, following such acquisition, more than 50% of,
respectively, the then outstanding shares of common stock of such
corporation and the combined voting power of the then outstanding
voting securities of such corporation entitled to vote generally in
the election of directors is then beneficially owned, directly or
indirectly, by all or substantially all of the individuals and
entities who were the beneficial owners, respectively, of the common
stock and other voting securities of the Company immediately prior to
such acquisition in substantially the same proportion as their
ownership, immediately prior to such acquisition, of the then
outstanding shares of common stock of the Company and of the combined
voting power of the then outstanding voting securities of the Company
entitled to vote generally in the election of directors;
(b) individuals who, as of the date hereof, constitute the Board (the
"Continuing Directors") cease for any reason to constitute at least a
majority of the Board, provided that any individual becoming a director
subsequent to the date hereof whose election, or nomination for election by
the Company's stockholders, was approved by a vote of at least a majority
of the persons then comprising the
20
<PAGE>
Continuing Directors shall be considered a Continuing Director, but
excluding, for this purpose, any such individual whose initial election as
a member of the Board is in connection with an actual or threatened
"election contest" relating to the election of the directors of the Company
(as such term is used in Rule 14a-11 of Regulation 14A promulgated under
the Exchange Act); or
(c) approval by the Company's stockholders of (1) a reorganization,
merger or consolidation of the Company, with respect to which in each case
all or substantially all of the individuals and entities who were the
respective beneficial owners of the common stock and voting securities of
the Company immediately prior to such reorganization, merger or
consolidation do not, following such reorganization, merger or
consolidation, beneficially own, directly and indirectly, more than 50% of,
respectively, the then outstanding shares of common stock and the combined
voting power of the then outstanding voting securities entitled to vote
generally in the election of directors, of the corporation or other entity
resulting from such reorganization, merger of consolidation, or (2) of a
complete liquidation or dissolution of the Company, or (3) the sale or
other disposition of all or substantially all of the assets of the Company.
5.5 Integration. With respect to the matters covered herein, this
-----------
Agreement contains the entire agreement and understanding between the Executive
and the Company and supersedes all prior oral and written agreements,
understandings, commitments and practices between the parties, whether or not
fully performed by the Executive before the effective
21
<PAGE>
date of this Agreement, between the Executive and the Company. No amendments to
this Agreement may be made except by a writing signed by both parties.
5.6 Severability; Governing Law. The invalidity or unenforceability of
---------------------------
any provision of this Agreement shall not affect the validity or enforceability
of any other provision of this Agreement, which shall remain in full force and
effect. This Agreement shall be interpreted under, and governed by, the laws of
the State of California.
5.7 Title and Headings. Title and headings are for ease of reference and
------------------
convenience only and shall not be construed to affect the meaning of any
provision of this Agreement.
5.8 Notices. Any notices to the Company required or permitted hereunder
-------
shall be given in writing to the Company, either by personal service or by
registered or certified mail, postage prepaid, duly addressed to the secretary
of the Company at its then principal place of business. Any such notice to the
Executive shall be given in like manner, and if mailed shall be addressed to the
Executive at the Los Angeles office of the Company or at his home address as
recorded in the employment records of the Company (initially 10960 Westwood
Blvd., Culver City, CA 90230). For the purpose of determining compliance with
any time limit herein, a notice shall be deemed given at the time of postmark
date.
5.9 Nonassignability. This Agreement shall not be transferable or
----------------
assignable by either the Executive or the Company, except that this Agreement
shall be binding upon the
22
<PAGE>
Company and its successors in the event of dissolution, reorganization,
consolidation or merger, and upon any person acquiring, whether by merger,
consolidation, purchase of assets, or otherwise, all or substantially all of the
Company' assets or business. The rights of the Executive to receive payment of
amounts of compensation provided for in this Agreement shall inure to the
benefit of, and may be enforced by, the Executive's estate in the event of his
death.
5.10 Attorneys' Fees and Costs for Proceedings. If any action at law or in
-----------------------------------------
equity, or any proceeding pursuant to Section 5.13 hereof, is commenced to
enforce or interpret the terms of this Agreement, the prevailing party shall be
entitled to reasonable attorneys' fees, costs and necessary disbursements in
addition to any other relief to which he may be entitled.
5.11 Full Settlement. The Company's obligation to make the payments
---------------
provided for in this Agreement and otherwise to perform its obligations
hereunder shall not be affected by any set-off, counterclaim, recoupment,
defense or other claim, right or action which the Company may have against the
Executive or others.
5.12 Waiver. Either party's failure to enforce any provision or provisions
------
of this Agreement shall not in any way be construed as a waiver of any such
provision, or provisions, nor prevent that party thereafter from enforcing each
and every other provision of this Agreement. The rights granted both parties
herein are cumulative and shall not constitute a waiver of either party's right
to assert all other legal remedies available to it under the circumstances.
23
<PAGE>
5.13 Arbitration of All Disputes. Any controversy or claim arising out of
---------------------------
or relating to this Agreement (or the breach thereof) shall be settled by
binding and non-appealable arbitration in San Francisco, California by an
arbitrator. The Executive and the Company shall initially confer and attempt to
reach agreement on the individual to be appointed as such arbitrator. If no
agreement is reached, the parties shall request from the Los Angeles office of
the Judicial Arbitration and Mediation Services ("JAMS") a list of five retired
judges affiliated with JAMS. The Executive and the Company shall each
alternately strike names from such list until only one name remains and such
person shall thereby be selected as the arbitrator. Except as otherwise
provided for herein, such arbitration shall be conducted in conformity with the
procedures specified in the California Arbitration Act (Cal. C.C.P. (S)(S) 1280
et seq.). The arbitrator shall not be authorized to award punitive damages with
- -- ---
respect to any claim, dispute or controversy. The parties intend that this
Section 4.10 shall be valid, binding, enforceable and irrevocable and shall
survive the termination of this Agreement and that any arbitration proceeding
hereunder shall be concluded within 60 days after the initiation thereof. The
Company and the Executive shall jointly so instruct the Arbitrator chosen to
arbitrate any dispute arising hereunder and agree that the criteria used by them
to select such Arbitrator shall include his or her availability to act
expeditiously within not more than the 60-day period referred to herein. The
parties hereto agree that the final decisions of the Arbitrator so chosen may be
enforced by a court of competent jurisdiction.
5.14 Survival and Enforceability. Except as otherwise expressly provided
---------------------------
in this Agreement, the rights and obligations of the parties to this Agreement
shall survive the
24
<PAGE>
termination of the Executive's employment with the Company. Except as otherwise
noted in this Agreement, the enforceability of this Agreement shall not cease or
otherwise be adversely affected by the termination of the Executive's employment
with the Company.
5.15 Payment of Fees for Counsel. The Company shall pay the legal fees of
---------------------------
any outside legal counsel employed by the Executive for the negotiation of the
Agreement, which fees shall not exceed $10,000.
5.16 Personnel Policies and Legal Compliance Manuals. The Executive
-----------------------------------------------
acknowledges that he has received a copy of the document entitled Personnel
Policies Manual, revised October 4, 1995, and the Legal Compliance Manual dated
February 16, 1996. The Executive understands and agrees that it is his
responsibility to read and familiarize himself with the provisions contained in
the Personnel Policies Manual and to abide by the rules, policies and standards
set forth in the Personnel Policies Manual. All policies, rules and regulations
contained in the Personnel Policies Manual are subject to change, with or
without notice, at the Company's discretion. In addition, the Executive
acknowledges that he has reviewed and understands the provisions of the Legal
Compliance Manual and agrees to comply with the Company's policies and
guidelines contained therein and to strictly follow all laws relating to the
performance of his duties.
25
<PAGE>
IN WITNESS WHEREOF, the Company has caused this Agreement to be
executed by an authorized officer and the Executive has executed this Agreement
as of the date first above written.
CATELLUS DEVELOPMENT CORPORATION
By: /s/ Nelson C. Rising
-------------------------------
Nelson C. Rising
Chief Executive Officer
"EXECUTIVE"
/s/ David Friedman
----------------------------------
David Friedman
26
<PAGE>
EXHIBIT A
CATELLUS DEVELOPMENT CORPORATION
AMENDED AND RESTATED EXECUTIVE STOCK OPTION PLAN
NON-QUALIFIED STOCK OPTION AWARD AGREEMENT
(Executive)
This Award Agreement ("Agreement") is entered into as of
February 1, 1996 (the "Date of Grant") between Catellus Development Corporation,
a Delaware corporation ("Catellus"), and
David B. Friedman
an employee of Catellus (the "Executive").
The Board of Directors (the "Board") of Catellus wishes to reward the
Executive whose performance will contribute to the long-term success and growth
of Catellus and to further the identity of interests of the Executive with the
stockholders of Catellus by granting the Executive a non-qualified stock option
to acquire common stock of Catellus, par value $.01 per share ("Common Stock"),
pursuant to the Amended and Restated Executive Stock Option Plan (the "Plan").
Catellus and the Executive hereby agree as follows:
1. NUMBER OF OPTION SHARES. This Agreement evidences the grant by
Catellus to the Executive, on the terms, conditions and restrictions set forth
herein and in the Plan, of a non-qualified stock option (the "Option") to
purchase, from time to time, a total of
100,000
shares of Common Stock (the "Option Shares").
2. OPTION PURCHASE PRICE. Upon exercise, the Executive shall pay to
Catellus $7.00 per Option Share (the "Option Purchase Price").
3. OPTION EXPIRATION DATE. Unless terminated sooner in accordance
with the provisions of the Plan or this Agreement, the right to exercise the
Option shall expire on February 1, 2006 (the "Expiration Date").
1
<PAGE>
4. VESTING RESTRICTIONS. The Option shall be exercisable in
accordance with the following provisions:
a. No portion of the Option may be exercised for any reason
until at least six months have elapsed following the Date of Grant.
b. Subject to the provisions of Section 5 of this Agreement,
the Option shall become exercisable (i) as to the entire number of the Option
Shares on and after the eighth anniversary of the Date of Grant or (ii) if
earlier, in the amounts indicated on and after the dates set forth below (each,
a "Vesting Date") in accordance with the provisions of Section 4c of this
Agreement:
(A) The Option may be exercised as to up to 25% of the Option
Shares on and after the first anniversary of the Date of Grant provided the
conditions specified in Section 4c of this Agreement are met.
(B) The Option may be exercised as to up to 50% of the Option
Shares on and after the second anniversary of the Date of Grant provided
the conditions specified in Section 4c of this Agreement are met.
(C) The Option may be exercised as to up to 75% of the Option
Shares on and after the third anniversary of the Date of Grant provided the
conditions specified in Section 4c of this Agreement are met.
(D) The Option may be exercised as to up to the entire number of
the Option Shares on and after the fourth anniversary of the Date of Grant
provided the conditions specified in Section 4c of this Agreement are met.
c. The Option may be exercised as to (i) 25% of the Option
Shares provided the average of the Closing Price (as defined below) of a Common
Share (as defined in the Plan) for any 30 consecutive trading days following the
Date of Grant is at least $8.50; (ii) 50% of the Option Shares provided the
average of the Closing Price of a Common Share for any 30 consecutive trading
days following the Date of Grant is at least $10.50; (iii) 75% of the Option
Shares provided the average of the Closing Price of a Common Share for any 30
consecutive trading days following the Date of Grant is at least $12.50; and
(iv) 100% of the Option Shares provided the average of the Closing Price of a
Common Share for any 30 consecutive trading days following the Date of Grant is
at least $15.00.
For purposes of this Section 4c, the term "Closing Price" shall mean,
for any trading day, the closing price of a Common Share on such day (i) on the
New York Stock Exchange ("NYSE"), if the Common Shares are then listed on such
exchange, (ii) if the Common Shares are not listed on the NYSE, on the principal
national stock exchange on which the Common Shares are then listed, or (iii) if
not listed on any national stock
2
<PAGE>
exchange, as reported by NASDAQ. If the Common Shares are not then listed on
any national stock exchange or reported by NASDAQ, then the Closing Price shall
be determined in any reasonable manner approved by the Committee (as defined in
the Plan).
5. EFFECT OF CERTAIN EVENTS ON VESTING AND EXERCISE.
a. TERMINATION OF EMPLOYMENT.
(i) General. In the event of the Executive's termination of
-------
employment for any reason, any portion of the Option that (A) has not
vested as of such termination, or (B) is vested as of such termination or
becomes vested as a result of such termination in accordance with Section
5a(ii) and is not exercised within the period specified in Section 5c,
shall be forfeited.
(ii) Termination as a Result of Retirement, Disability or Death.
----------------------------------------------------------
In the event of the Executive's termination of employment prior to the
first anniversary of the Date of Grant by reason of (A) retirement at or
after age 65, (B) disability (as defined in the Plan), or (C) death, a
portion of the Option will vest equal to the number of Option Shares
subject to the Option multiplied by a fraction, the numerator of which is
the number of months elapsed from the Date of Grant and the denominator of
which is the number of months from the Date of Grant to the final Vesting
Date.
(iii) Termination for Cause. In the event of the Executive's
---------------------
termination of employment "for cause" (as defined in the Plan), any
unexercised portion of the Option, whether vested or unvested, shall be
immediately forfeited.
b. FORFEITURE. Notwithstanding any other provision herein, any
unexercised portion of the Option, whether vested or unvested, shall be
immediately forfeited if the Executive (i) is employed by a competitor of, or
engaged in any activity in competition with, Catellus without Catellus' consent,
(ii) divulges without Catellus' consent any secret or confidential information
belonging to Catellus, or (iii) is engaged in any other activities which would
constitute grounds for termination "for cause".
c. EXERCISE PERIOD FOLLOWING TERMINATION OF EMPLOYMENT.
(i) In the event of the Executive's termination of employment by
reason of death, any unexercised portion of the Option that is or becomes
vested upon his or her death in accordance with Section 5a(ii) of this
Agreement may be exercised by the Executive's personal representative or by
the person or persons to whom the Option shall have been transferred by
will or the laws of descent and distribution at any time within one year
following his or her death, but in no event after the Expiration Date.
3
<PAGE>
(ii) In the event of the Executive's termination of employment
(A) for any reason (1) other than death or (2) other than "for cause" or
(B) by reason of the resignation of the Executive, any unexercised portion
of the Option that is or becomes vested upon such termination in accordance
with Section 5a(ii) of this Agreement (unless such unexercised portion is
forfeited in accordance with Section 5a(iii) or 5b of this Agreement) may
be exercised by the Executive at any time within three months following
such termination of employment, but in no event after the Expiration Date.
6. EXERCISE OF OPTION.
a. All or a portion of the Option may be exercised in
accordance with procedures (including requisite holding periods) established
from time to time by the Committee. If shares of Common Stock are tendered as
payment, such shares of Common Stock shall be valued at their Fair Market Value
(as defined in the Plan) on the date of exercise of the Option.
b. No fractional shares, or cash in lieu thereof, shall be
issued under the Option.
c. As a condition to the grant of the Option, the Executive
agrees (i) that Catellus may deduct from any payments of any kind otherwise due
to the Executive from Catellus the aggregate amount of any federal, state or
local taxes of any kind required by law to be withheld with respect thereto or,
if no such payments are due or to become due to the Executive, that the
Executive shall pay to Catellus, or make arrangements satisfactory to Catellus
regarding the payment to it of, such taxes and (ii) that Catellus or its
subsidiaries may withhold from the shares of Common Stock to be issued upon
exercise of the Option that number of shares of Common Stock that is equivalent
(valuing such shares of Common Stock at their Fair Market Value on the date of
exercise of the Option) to the amount of any federal, state or local withholding
or other taxes due upon the exercise of the Option. The Committee has approved
without further condition the offset of shares of Common Stock for such purposes
(subject to any applicable legal limitations) and the Executive irrevocably
elects this means of payment of such taxes. If any such taxes should become due
after the date of exercise, the Executive must pay, or arrange (to the
satisfaction of Catellus) to pay, the amount due.
d. No shares of Common Stock shall be issued or transferred
upon exercise of the Option unless and until all legal requirements applicable
to the issuance or transfer of such Common Stock have been complied with to the
satisfaction of the Committee.
7. CHANGE IN CAPITALIZATION. In the event of a change in the
capitalization of Catellus due to a stock split, stock dividend,
recapitalization, merger,
4
<PAGE>
consolidation, combination or similar event, an appropriate adjustment shall be
made in the number of Common Shares subject to the Plan and the terms of the
Option may be adjusted by the Committee to reflect such change. Any adjustments
pursuant to this Section shall be determined by the Committee in its sole
discretion.
8. NO ASSIGNABILITY. The Option is not assignable or transferable
by the Executive, other than by will, by the laws of descent and distribution or
pursuant to a qualified domestic relations order (as defined by the Internal
Revenue Code of 1986, as amended, or Title I of the Employee Retirement Income
Security Act of 1974, or the rules thereunder), and may be exercised during the
lifetime of the Executive only by the Executive or, if the Executive becomes
disabled, by his or her legal representative.
9. OTHER PROVISIONS.
a. Nothing in this Agreement or in the Plan shall confer any
right to continue employment with Catellus nor restrict Catellus from
termination of the employment relationship of the Executive at any time. The
Executive is employed as an employee-at-will and may be terminated from
employment at any time with or without notice, and with or without cause.
b. Nothing in this Agreement or in the Plan shall confer any
rights as a stockholder upon the Executive or any other person entitled to
exercise the Option with respect to any Option Shares covered by the Option
until such time as the Executive or such other person shall have become the
holder of record of such Option Shares.
c. The Executive acknowledges receipt of a copy of the Plan,
which is made a part hereof by this reference, and agrees to be bound by the
terms thereof. In the event of a conflict between the terms of this Agreement
and the Plan, the Plan shall be the controlling document; provided, however,
-------- -------
that Catellus and the Executive acknowledge that pursuant to its authority under
the Plan, the Committee has established the Option Purchase Price contained in
Section 2 of this Agreement and the vesting schedule contained in Sections 4b
and 4c of this Agreement. Capitalized terms used but not defined herein shall
have the respective meanings ascribed to them in the Plan.
d. The Executive acknowledges that Catellus has the right to
terminate, modify or amend the Plan at any time, but that no such termination,
modification or amendment may, without the Executive's consent, adversely affect
the rights of the Executive under the Option. The Executive further
acknowledges that the grant of the Option or of any other option in one year or
at one time does not in any way obligate Catellus to make a grant of an option
at any future time or in any given amount.
5
<PAGE>
e. In the event that any provision of this Agreement is held to be
invalid, void or unenforceable, the same shall not affect, in any respect
whatsoever, the validity of any other provision of this Agreement.
f. The rights and obligations under this Agreement shall inure
to the benefit of, and shall be binding upon, Catellus, the Executive and the
Executive's representatives and beneficiaries.
g. Any communication under this Agreement shall be in writing
and addressed to Catellus at 201 Mission Street, San Francisco, California
94105, Attention: Secretary and to the Executive at the address given beneath
the Executive's signature, or at such other address as either party may
hereafter designate in writing to the other.
h. The interpretation, performance and enforcement of the
Option and this Agreement shall be governed by the laws of the State of
California.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the day and year first above written.
"CATELLUS"
CATELLUS DEVELOPMENT CORPORATION
By:
--------------------------------------
ATTEST:
- ---------------------------
Assistant Secretary "EXECUTIVE"
-----------------------------------------
Print Name:
------------------------------
Address:
---------------------------------
6
<PAGE>
EXHIBIT B
C A T E L L U S
[LOGO OF CATELLUS]
CATELLUS DEVELOPMENT CORPORATION
BENEFITS SUMMARY
1995
<PAGE>
CATELLUS DEVELOPMENT CORPORATION
INSTRUCTIONS FOR OPEN ENROLLMENT
NOVEMBER 9 - 18, 1994
. If you are not making any changes to your plans, you need only to complete
---
the Flexible Benefits Plan Enrollment Form.
. If you are changing plans or adding/dependents, please obtain appropriate
forms from the Administrative Support person at your location.
. Medical-Prudential will continue to provide our medical coverage with an
HMO and PruCare Plus option. Kaiser will remain in place only for those
employees currently covered under the plan.
. Dental - Our dental plan will continue to be offered through Phoenix Home
Life.
. Supplemental Life/AD&D - This benefit will continue to be provided by
Phoenix Home Life at your cost. All employees presently covered will have
their coverage automatically carried over.
. All other benefits are paid for by Catellus and enrollment is automatic.
These benefits include:
. Vision Coverage
. Short Term/Long Term Disability
. Basic Life/AD&D
<PAGE>
CATELLUS DEVELOPMENT CORPORATION
BENEFIT CHANGES
. January 1, 1995 will see two minor changes to Catellus Development
Corporation's benefit program.
. Flexible Benefit Plan Benefit Increased
Unreimbursed medical expenses increased to S1,500 per year.
. Vision Plan Modified
New eyeglass frames can be purchased once every 24 months.
1995 MONTHLY COST OF HEALTH BENEFITS: SAME AS l994
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
Salary Range Employee/Dependent HMO Cost PruCare Plus* Dental Cost
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Up to $25,000 Employee $5 $15 $4
Dependent $10 $30 $6
- --------------------------------------------------------------------------------
$25,001 - $35,000 Employee $16.51 $26.51 $8
Dependent $23.63 $53.63 $12
- --------------------------------------------------------------------------------
$35,001 - $50,000 Employee $21.51 $36.51 $10
Dependent $33.63 $73.63 $14
- --------------------------------------------------------------------------------
$50,001 - $70,000 Employee $26.51 $41.51 $13
Dependent $43.63 $103.63 $18
- --------------------------------------------------------------------------------
$70,001 AND UP Employee $31.51 $51.51 $15
Dependent $73.63 $133.63 $23
- --------------------------------------------------------------------------------
</TABLE>
*All Health Options Include Vision Coverage through VSP
<PAGE>
CATELLUS DEVELOPMENT CORPORATION
OPEN ENROLLMENT
MEDICAL CHOICES
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
HMO
Benefits PruCare
- --------------------------------------------------------------------------------
Services from or through your
Prudential Primary Care Physician
<S> <C>
Annual Deductible None
(amount you pay before plan pays)
- --------------------------------------------------------------------------------
Doctor Visits 100% after $10 copay
- --------------------------------------------------------------------------------
Hospital Stay 100%
- --------------------------------------------------------------------------------
Emergency Room Visit 100% after $25 copay*
- --------------------------------------------------------------------------------
Preventive Care 100% after $10 copay
(well baby care, physicals)
- --------------------------------------------------------------------------------
Prescription Drugs 100% after $5 copay**
- --------------------------------------------------------------------------------
Out-of-Pocket Maximum $2,000 per individual
- --------------------------------------------------------------------------------
</TABLE>
* In Dallas, the copay is $50
** In Dallas, the copay is $5 for generic and $10 for brand name drugs
<PAGE>
CATELLUS DEVELOPMENT CORPORATION
OPEN ENROLLMENT
MEDICAL CHOICES
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
Point-of-Service (POS)
Benefits PruCare Plus
- --------------------------------------------------------------------------------
Services from or Non-Network
through your Providers
Prudential Primary
Care Physician
- --------------------------------------------------------------------------------
<S> <C> <C>
Annual Deductible None $200 individual
(amount you pay before
plan pays) $500 family
- --------------------------------------------------------------------------------
Doctor Visits 100% after $10 copay 70% after deductible
- --------------------------------------------------------------------------------
Hospital Stay 90% 70% after deductible
- --------------------------------------------------------------------------------
Emergency Room Visit 100% after $25 copay 70% after deductible
- --------------------------------------------------------------------------------
Preventive Care 100% after $10 copay 70% after deductible
(well baby care, physicals) Well Child Care:
Maximum eligible
charges: $15/visit,
$10/immunizations,
$100/year
- --------------------------------------------------------------------------------
Prescription Drugs 100% after $5 copay
- --------------------------------------------------------------------------------
Out-of-Pocket Maximum $2,000 per individual
- --------------------------------------------------------------------------------
</TABLE>
<PAGE>
CATELLUS DEVELOPMENT CORPORATION
<TABLE>
<CAPTION>
DENTAL
PHOENIX HOME LIFE
- --------------------------------------------------------------------------------
In-Network Out-of-Network
Deductible $25 individual/$75 family
- --------------------------------------------------------------------------------
<S> <C> <C>
Preventive 100% deductible waived 100% deductible waived
Basic 90% 80%
Major 60% 50%
Orthodontia 50% 50%
</TABLE>
Calendar Year maximum $l,000 per individual
Orthodontia Lifetime Maximum $1,000 per individual
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
LONG TERM DISABILITY
CIGNA
- --------------------------------------------------------------------------------
<S> <C>
Elimination Period: 90 days
Monthly Benefit: 66.67% of basic monthly earnings to a maximum
monthly benefit of $10,000.
Definition of Disability You cannot perform each of the material duties of
your regular occupation; and after benefits have
been paid for 24 months you cannot perform each of
the material duties of any gainful occupation for
which you are reasonably fitted by training,
education or experience.
- --------------------------------------------------------------------------------
SHORT TERM DISABILITY
CIGNA
- --------------------------------------------------------------------------------
Elimination Period: 7 days accident
7 days illness
Monthly Benefit: 66.67% of basic monthly earnings to
a maximum of $2,037
Benefit Period: 13 weeks maximum (90 days).
</TABLE>
- --------------------------------------------------------------------------------
<PAGE>
CORE LIFE/AD&D
PHOENIX HOME LIFE
- --------------------------------------------------------------------------------
Employee: 1.5 times basic annual earnings to a maximum benefit of
$300,000
- --------------------------------------------------------------------------------
SUPPLEMENTAL LIFE/AD&D
PHOENIX HOME LIFE
- --------------------------------------------------------------------------------
Option 1: 1.5 times basic annual earnings to a maximum benefit of $300,000
Option 2: 2.5 times basic annual earnings to a maximum benefit of S300,000
Rates: 100% employee paid
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Rate per $1,000 Rate per $1,000
Age Bands per month Age Bands per month
<S> <C> <C> <C>
16-29 .11 50-54 .587
30-34 .135 55-59 .953
35-39 .154 60-64 1.411
40-44 .250 65-69 2.300
45-49 .364 70-74 3.433
- --------------------------------------------------------------------------------
</TABLE>
SUPPLEMENTAL LIFE/AD&D - FAMILY LIFE BENEFITS
PHOENIX HOME LIFE
- --------------------------------------------------------------------------------
Spouse: In $10,000 units to a maximum benefit of $100,000
- --------------------------------------------------------------------------------
Rates for Spousal Benefit - Spouses rates based on Employee's spouse age
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Rate per $1,000 Rate per $1,000
Age Bands per month Age Bands per month
<S> <C> <C> <C>
up to 20 .11 45-49 .364
20-24 .11 50-54 .587
25-29 .11 55-59 .953
30-34 .135 60-64 1.411
35-39 .154 65-69 2.30
40-44 .250 70-74 Terminates
- --------------------------------------------------------------------------------
</TABLE>
Child(ren) In $2,500 units to a maximum benefit of $10,000
- --------------------------------------------------------------------------------
Rates for Children(ren): $.60 per $2,500 per month
- --------------------------------------------------------------------------------
<PAGE>
CATELLUS DEVELOPMENT CORPORATION
FLEXIBLE SPENDING ACCOUNTS
Catellus Development Corporation will continue to offer the tax advantage of
Flexible Spending Arrangements in 1995. These benefits include:
. Pre-tax treatment of all employee contributions for health coverages.
. Pre-tax treatment of up to $1,500 in unreimbursed medical expenses.
. Pre-tax treatment of up to $5,000 in dependent care costs.
In 1995 Catellus Development Corporation will continue to use Lipman
Administrators of Fremont, California to administer its flexible spending
program.
. Reimbursement checks will continue to be paid twice monthly.
. Claims may be filed on a timely basis by fax machine.
Carefully determine your flexible spending account contributions for 1995.
Remember the use it or lose it provision governing these benefits.
. Complete the election form, sign it and return it with your other
enrollment forms.
This summary of benefits is a brief outline of your
insurance coverages. Please see the booklets for
the complete plan descriptions.
<PAGE>
EXHIBIT 10.46
EMPLOYMENT AGREEMENT
BETWEEN
CATELLUS DEVELOPMENT CORPORATION
AND
IRA YELLIN
DATED AS OF
FEBRUARY 1, 1996
<PAGE>
TABLE OF CONTENTS
PAGE
ARTICLE I
EMPLOYMENT RELATIONSHIP........................................... 2
1.1 Employment.............................................. 2
1.2 Term.................................................... 5
1.3 Base Salary............................................. 6
1.4 Bonuses................................................. 6
1.5 Stock Option............................................ 8
1.6 Place of Performance.................................... 8
1.7 Termination of Employment............................... 9
1.8 Benefits Upon Termination............................... 12
1.9 Benefits................................................ 16
1.10 Expenses................................................ 17
1.11 Indemnity............................................... 18
1.12 Transfer of Development Projects........................ 19
ARTICLE II
COVENANTS......................................................... 19
2.1 Covenant Against Competition............................ 19
2.2 Confidential Information................................ 20
ARTICLE III
CHANGE OF CONTROL................................................. 21
3.1 Change of Control Payments.............................. 21
ARTICLE IV
ADMINISTRATION, ENFORCEMENT AND OTHER MATTERS..................... 26
4.1 Amendment............................................... 26
4.2 Severability; Governing Law............................. 26
4.3 Title and Headings...................................... 27
4.4 Notices................................................. 27
4.5 Nonassignability........................................ 27
4.6 Attorneys' Fees and Costs for Proceedings............... 28
4.7 Full Settlement......................................... 28
4.8 Waiver.................................................. 28
4.9 Arbitration of All Disputes............................. 29
4.10 Personnel Policies and Legal Compliance Manuals......... 30
i
<PAGE>
EXHIBIT A OPTION AGREEMENT
EXHIBIT B CATELLUS DEVELOPMENT CORPORATION BENEFITS SUMMARY 1995
EXHIBIT C DESCRIPTION OF PURCHASED WORK IN PROGRESS AND DEVELOPMENT
PROJECTS
ii
<PAGE>
EMPLOYMENT AGREEMENT
BETWEEN
CATELLUS DEVELOPMENT CORPORATION
AND
IRA YELLIN
This Employment Agreement (this "Agreement") is made and entered into
as of the 1st day of February, 1996 by and between IRA YELLIN ("Executive") and
CATELLUS DEVELOPMENT CORPORATION, a Delaware corporation, with its principal
office located in San Francisco, California (the "Company").
RECITALS
A. The Company is engaged in the business of developing, managing and
marketing real estate.
B. Executive has substantial experience and expertise in the field of
real estate.
C. The Company desires to secure the services of Executive as Senior
Vice President, Southern California Development of the Company (it being
understood for purposes of this Agreement and all other purposes that such title
and position does not extend
1
<PAGE>
to the Company's residential and industrial development activities) and
Executive desires to perform such services for the Company on the terms and
conditions hereinafter set forth.
A G R E E M E N T:
NOW, THEREFORE, Executive and the Company hereby agree as follows:
ARTICLE I
EMPLOYMENT RELATIONSHIP
1.1 Employment.
----------
(a) The Company hereby employs Executive as Senior Vice President,
Southern California Development of the Company, with a term of service to
commence on February 1, 1996. Executive shall report directly to the Chief
Executive Officer of the Company and shall have such duties as may be prescribed
by the Chief Executive Officer, including being the most senior executive in
charge of all Southern California development (other than residential and
industrial development) for the Company and strategic corporate planning and
managerial and administrative duties assigned by the Chief Executive Officer,
and shall be part of the senior management group of the Company. The Company
agrees that the duties which may be assigned to Executive shall be the usual and
customary duties of the offices to which he may from time to time be elected or
appointed and shall not be inconsistent with the provisions of the charter
documents of the Company or applicable law
2
<PAGE>
(both as in effect from time to time) and Executive shall not, without his
consent, be assigned tasks that would be inconsistent with those of the most
senior executive in charge of all Southern California development (other than
residential and industrial development) for the Company.
(b) During the term of this Agreement, Executive shall, except as
described in clauses (c), (d) and (e) below and subject to the other provisions
hereof, devote his full-time energy and talent to his employment and shall not
engage in any other business activities which would represent a material
conflict with his duties to the Company.
(c) The Company and Executive acknowledge that The Yellin Company, of
which Executive is the sole shareholder and which employs an adequate
administrative and support staff to perform the necessary management functions
thereof, will continue to perform its obligations under The Yellin Company-
Keller CMS Agreement for Project Executive Services for Cathedral Square dated
as of September 1, 1995 (the "Cathedral Square Agreement") and that Executive
shall continue to devote a portion of his time to the activities of The Yellin
Company in connection with the Cathedral Square Agreement and to receive a
portion of the income paid to The Yellin Company each year under the Cathedral
Square Agreement (the "Cathedral Square Income"). In the event that the
Cathedral Square Agreement is terminated, Executive shall have the right to
engage in other activities that would provide him with additional compensation
approximately equal to the Cathedral Square Income, provided Executive's time
commitment to such activities does not exceed Executive's time commitment to
activities related to the Cathedral Square Agreement and
3
<PAGE>
such activities are not competitive with or would in any way have an adverse
effect on any activity of the Company or any of its subsidiaries.
The Company and Executive acknowledge that The Yellin Company will
also continue to perform its obligations under the Grand Central Square Limited
Partnership Agreement, the Grand Central Associates Limited Partnership
Agreement, the Metropolitan Property Associates Limited Partnership Agreement
and the Bradbury Associates Limited Partnership Agreement and in connection with
the DeAnza Independent Committee and that Executive shall continue to devote a
portion of his time to the activities of The Yellin Company in connection with
such agreements and to receive a portion of the income paid to The Yellin
Company each year under each such agreements.
Executive agrees that his time commitment to the activities described
in this clause (c) shall not conflict with his duties to the Company.
(d) Notwithstanding the foregoing, Executive may devote reasonable
time to activities other than those required under this Agreement, including
supervision of personal investments and activities involving professional,
charitable, educational, political, religious and similar types of
organizations, speaking engagements, memberships of boards of directors of other
organizations and similar activities, provided that Executive shall not serve on
the board of directors of any other business or hold any other position with any
business (except as otherwise permitted in the preceding paragraphs) without the
consent of the Chief Executive Officer of the Company.
4
<PAGE>
(e) Paid vacations of three weeks every 12 months shall be permitted
and such vacation time shall vest immediately, and Executive shall be entitled
to take such vacations at such time or times as he shall choose.
(f) The Executive shall not be required to perform services under this
Agreement during any period that he is disabled. The Executive shall be
considered "disabled" during any period in which he has a physical or mental
disability which renders him incapable, after reasonable accommodation, of
performing his duties under this Agreement and is eligible to receive income
replacement benefits during such period under a long-term disability plan or
disability insurance provided by the Company. In the event of a dispute as to
whether Executive is disabled, the Company may refer the same to a licensed
practicing physician of the Company's choice, and the Executive agrees to submit
to such tests and examinations as such physician shall deem appropriate.
1.2 Term.
----
This Agreement shall commence on February 1, 1996, and shall continue
in effect through December 31, 2000, subject to the termination provisions
contained in Section 1.7.
5
<PAGE>
1.3 Base Salary.
-----------
Executive shall receive a minimum annual base salary (the "Base
Salary") payable in substantially equal installments no less than twice monthly,
with the first payment to occur on or about February 15, 1996 for corporate
officer services commencing on February 1, 1996. The Base Salary shall be
reviewed every 12 months by the Chief Executive Officer of the Company and, as a
result of that review, shall be subject to possible increase but not decrease
based upon the attainment of reasonable operating goals as mutually determined
by Executive and the Chief Executive Officer of the Company. Any increase to
Base Salary which results from that review will be effective on each February
1st by the amount which results from that review and such revised base salary
shall thereafter represent the minimum annual base salary. Executive's initial
annual Base Salary under this Agreement shall be $260,000.
1.4 Bonuses.
-------
(a) Executive shall be eligible to receive an annual bonus (the "Base
Bonus") equal to up to 100% of Base Salary. For the year ended December 31,
1996, Executive shall receive a minimum Base Bonus of at least $130,000, which
minimum Base Bonus shall be payable monthly, in the amount of $13,000 per month,
with the first payment to occur on or about March 1, 1996. Fifty percent of the
Base Bonus each year shall be determined on the basis of subjective factors and
50% of the Base Bonus each year shall be determined on the basis of the
achievement of objective standards negotiated in good faith
6
<PAGE>
annually in advance with Executive by the Chief Executive Officer of the Company
on or before January 31 of each year.
(b) Executive shall be eligible to receive an additional bonus (the
"Additional Bonus") equal to up to 100% of Base Salary determined on the basis
of the achievement of objective standards negotiated in good faith annually in
advance with Executive by the Chief Executive Officer of the Company on or
before January 31 of each year; provided that the Additional Bonus may not
exceed the Base Bonus in any year.
(c) All bonus payments shall be subject to appropriate withholding
payments deducted therefrom.
(d) The Company acknowledges that many of the projects for which
Executive will be responsible are long term in nature and will not generate
substantial income to the Company in the near term. The Company further
acknowledges that the objective standards and subjective factors used in
determining Executive's Base Bonus and Additional Bonus will take this fact into
account.
7
<PAGE>
1.5 Stock Option.
------------
On the date hereof, Executive will be granted non-qualified stock
options covering an aggregate of 300,000 shares of Common Stock of the Company
in accordance with the Company's existing Amended and Restated Executive Stock
Option Plan and as approved by the Compensation and Benefits Committee of the
Board of Directors of the Company and the Option Agreement shall be in the form
of Exhibit A attached hereto, which option shall be effective as of the date
hereof. Such stock option shall be granted with the initial per share exercise
price set at the average closing market price for such Common Stock for the five
trading days prior to the date of this Agreement. Such option will have a
mandatory withholding feature whereby the Company will withhold such number of
shares at the time of any exercise of the option which will satisfy the
estimated amount of federal and state taxes applicable to the exercise.
Additional option and other awards, if any, shall be made to Executive
in an equitable manner consistent with Executive's senior position and otherwise
in a manner consistent with the Company's executive compensation policies.
1.6 Place of Performance.
--------------------
In connection with his employment hereunder, Executive shall be based
at the Los Angeles office of the Company, except for required business travel
for the Company.
8
<PAGE>
1.7 Termination of Employment.
-------------------------
(a) If at any time during the term of this Agreement, (i) Executive
involuntarily ceases to be an employee of the Company for any reason other than
termination for Cause, at a time when Executive is receiving disability benefits
under a long-term disability plan or disability insurance provided by the
Company, death, or normal retirement under the Company's pension plan or a
qualified retirement plan of the Company or (ii) Executive terminates employment
with the Company for Good Reason (as defined below), then Executive shall be
entitled to the benefits provided in Section 1.8.
(b) For purposes of this Agreement, the following definitions are set
forth below:
(i) Termination by the Company for "Cause" shall mean termination upon the
willful and continued failure by Executive to substantially perform
his material duties with the Company (other than any such failure
resulting from his incapacity due to physical or mental illness)
after the issuance of a Notice of Termination as set forth in this
Section 1.7(b)(i) is delivered to Executive by the Chief Executive
Officer of the Company, which Notice specifically identifies the
manner in which the Chief Executive Officer of the Company believes
that Executive has not substantially performed his duties. For
purposes of this Section, no act, or failure to act, on Executive's
part shall be
9
<PAGE>
deemed "willful" unless done, or omitted to be done, by
Executive not in good faith and without reasonable belief that
Executive's action or omission was in the best interest of the
Company.
Notwithstanding the foregoing, Executive shall not be terminated
for Cause pursuant to this Section 1.7(b)(i) unless and until
Executive (a) has received notice of a proposed termination for cause
with a written explanation of the grounds for such proposed
termination, (b) Executive has had an opportunity to confer with the
Chief Executive Officer of the Company, and (c) Executive has had 60
days after receipt of such notice to cure any alleged non-performance
of his duties. If at the end of such sixty-day period the
nonperformance has not been cured to the satisfaction of the Chief
Executive Officer, then the Company, upon the determination of
the Compensation and Benefits Committee of the Board of Directors of
the Company, may terminate this Agreement for Cause.
(ii) "Good Reason" shall exist if, without Executive's express written
consent, any of the following occurs:
(1) a reduction by the Company in Executive's Base Salary as in effect
on the date hereof or as the same may be increased from time to time; or
10
<PAGE>
(2) a demotion from the position or title of Senior Vice President,
Southern California Development or an assigning of duties to Executive that
are inconsistent in any substantial respect with or are a reduction in any
substantial respect from the position, authority, or responsibilities
associated with the position of Senior Vice President, Southern California
Development of the Company and the most senior executive in charge of
Southern California development (other than residential and industrial
development); or
(3) a relocation of the Company's Los Angeles office to an area
outside of Los Angeles or requirement for Executive to be based anywhere
other than within 50 miles from the site of the current Los Angeles office
of the Company; or
(4) the failure of the Company to fulfill its obligations under this
Agreement; or
(5) the intentional failure of the Company, without Executive's
consent, to pay to Executive any portion of his salary, earned bonus, or
other current compensation (if any), or to pay to Executive any portion of
any installment of deferred compensation under any deferred compensation
program of the Company within ten business days of the date such
compensation is due or to issue shares of common stock of the Company in
accordance with the terms of stock options granted to Executive upon valid
exercise thereof.
11
<PAGE>
(iii) For purposes of this Agreement, "Date of Termination" shall mean
the effective date specified in the Notice of Termination as of
which Executive's employment terminates (which shall not be less
than 60 days after the date such Notice of Termination is given)
or, in the event of termination of employment other than for
Cause, the date as of which Executive's employment terminates.
(c) Executive may terminate his employment hereunder at any time by
giving the Company prior written notice, which notice shall be effective not
less than 30 days after it is given to the Company.
1.8 Benefits Upon Termination.
-------------------------
(a) If at any time during the term of this Agreement, (i) Executive
involuntarily ceases to be an employee of the Company for any reason other than
(A) termination for Cause, (B) at a time when Executive is receiving disability
benefits under a long-term disability plan or disability insurance provided by
the Company, (C) death, or (D) normal retirement under the Company's pension
plan or a qualified retirement plan of the Company or (ii) Executive terminates
employment with the Company for Good Reason (as defined below), then the amount
of such benefits shall be equal to the sum of:
12
<PAGE>
(i) unpaid salary with respect to any vacation days accrued but not
taken as of the Date of Termination; and
(ii) in the event that the termination of employment occurs prior to the
first anniversary of the date hereof, the sum of (1) the number of
full months remaining in this Agreement, but not to exceed 24,
multiplied by Executive's monthly Base Salary (determined without
regard to amounts payable under any bonus program, or other forms of
extraordinary compensation) as of the Date of Termination; and (2)
the number of full or partial months remaining in the period
commencing on the first day following the most recent period in
respect of which the Base Bonus has been paid and ending December
31, 2000, but not to exceed 24, multiplied by $130,000 divided by
12; or
(iii) in the event that the termination of employment occurs after the
first anniversary of the date hereof, the sum of (1) the number of
full months remaining in this Agreement, but not to exceed 24,
multiplied by the average monthly Base Salary for the immediately
preceding 2-year period or, if Executive has not served the Company
for 24 months, then the average monthly Base Salary (determined
without regard to amounts payable under any bonus program, or other
forms of extraordinary compensation) for such shorter period; and
(2) the number of full or partial months remaining in the period
commencing on the first day following the most recent period in
respect of which the Base Bonus has been paid and ending December
31, 2000, but
13
<PAGE>
not to exceed 24, multiplied by the average monthly Base Bonus and
Additional Bonus for the immediately preceding 2-year period or, if
Executive has not served the Company for 24 months, then the average
monthly Base Bonus and Additional Bonus for such shorter period,
provided, however, that the amount of such benefits shall be reduced by any
- -------- -------
other benefits provided upon termination of employment to which Executive may be
entitled under any severance agreement with the Company.
Executive shall not be required to mitigate the amount of any payment
provided for in this Agreement by seeking other employment or otherwise. The
Company shall not be entitled to set off against the amounts payable to
Executive under this Agreement any amounts owed to the Company by Executive, any
amounts earned by Executive in other employment after termination of his
employment with the Company, or any amounts which might have been earned by
Executive in other employment had he sought such other employment.
The Company shall pay Executive, no later than the fifth day following
the Date of Termination, a lump sum payment, in cash, equal to the amount due
under Section 1.8(a); provided, however, Executive may elect any time prior to
-------- -------
the Date of Termination to receive the amounts due under Section 1.8(a) on an
installment basis as may be mutually agreed by the Company and Executive.
14
<PAGE>
(b) During the remainder of the term of this Agreement, Executive
shall continue to be treated as an employee for purposes of the Company's group
health and dental programs, but not for purposes of life, dependent care
reimbursement, health care reimbursement, business travel accident insurance, or
long- or short-term disability programs (except to the extent Executive is
drawing benefits at the time of termination), tax-qualified retirement plans, or
any other employee benefit plan or program of the Company, and shall receive
benefits substantially comparable to those in effect on the day before
Executive's Date of Termination subject to any reduction or termination of such
benefits similarly affecting all senior management personnel of the Company.
(c) If Executive ceases to be an employee for any other reason, then
Executive shall be entitled to the sum of (i) unpaid accrued salary, (ii) unpaid
salary with respect to any vacation days accrued but not taken as of the Date of
Termination and (iii) any bonus or portion thereof to which Executive is
entitled under any then effective bonus plan or program.
(d) In the event that any employment agreement between Nelson C.
Rising and the Company provides for the payment of an amount equal to Mr.
Rising's base salary and base bonus for a period of more than two years upon
termination of Mr. Rising's employment for "Good Reason" (as defined in such
employment agreement), the Company agrees to enter into an amendment to this
Agreement that extends the period for which Executive receives termination
benefits under clause 1.8(a) to a comparable period.
15
<PAGE>
1.9 Benefits.
--------
Executive shall be entitled to receive employee benefits (including,
but not limited to, pension, medical, insurance and disability benefits) and
perquisites no less favorable than those provided to any other senior executive
of the Company (other than the Chief Executive Officer). The Company shall also
assume the payment of insurance premiums on Executive's existing life insurance
policy and shall assume the payment of insurance premiums on Executive's
existing disability policy unless comparable insurance may be obtained under the
Company's group disability insurance policy for a lower annual premium.
With respect to medical coverage, Executive shall be entitled to
coverage for his family for the term of this Agreement unless Executive is
terminated for Cause in which case coverage shall terminate on the Date of
Termination except for any applicable COBRA coverage. If, at any time during
the term of this Agreement, Executive involuntarily ceases to be employed by the
Company for any reason other than Termination for Cause or Executive terminates
employment with the Company for Good Reason, then Executive shall be entitled to
medical insurance for the full term of this Agreement as provided in Section
1.8(b).
During any period while Executive is disabled, and is otherwise
entitled to receive salary under this Agreement, any salary payments to
Executive shall be reduced by
16
<PAGE>
the amount of any benefits paid for the same period of time pursuant to such
disability income replacement coverage.
Executive also will be entitled to ample office space and appropriate
furniture and all other customary supplies and equipment to fulfill the
requirements of his corporate position as well as a full-time secretary.
In addition to the benefits described above, Executive shall be
entitled to participate in a retirement program under the Company's 401-K Plan.
The Company's current benefit programs are described on Exhibit B and
such benefits and the benefits described in this Section 1.9 shall not be
materially altered except for across the board modifications applicable to all
Company executives.
1.10 Expenses.
--------
Executive shall be entitled to monthly reimbursement for all
reasonable business and business-related entertainment expenses, including an
automobile allowance in an amount no less than the allowance for senior
executives with comparable duties, as well as reimbursement for car phone
expenses. The Company shall also reimburse Executive for the initiation fee and
monthly dues for a membership in the California Club in Los Angeles and monthly
dues for one club membership in West Los Angeles, Beverly Hills, Century City or
Santa Monica.
17
<PAGE>
Executive shall be entitled to reimbursement for legal and accountant
fees of up to $15,000 for services of legal counsel in reviewing and negotiating
this Agreement.
1.11 Indemnity.
---------
To the fullest extent permitted by applicable law and the Bylaws of
the Company, as the same now exist or may hereafter be amended (but, in the case
of any amendment, only to the extent that such amendment permits the Company to
provide broader indemnification rights than said law or Bylaws permitted the
Company to provide prior to such amendment), the Company shall indemnify
Executive and hold Executive harmless for any acts or decisions made in good
faith while performing services for the Company, and the Company shall use its
best efforts to obtain coverage for Executive under any liability insurance
policy or policies now in force or hereafter obtained during the term of this
Agreement that cover other officers of the Company having comparable or lesser
status and responsibility. To the same extent, the Company will pay and advance
all expenses, including reasonable attorneys' fees and costs of court approved
settlements, actually and necessarily incurred by Executive in connection with
the defense of or settlement of any action, suit or proceeding and in connection
with any appeal thereon, which has been brought against Executive by reason of
Executive's service as an officer or agent of the Company or of a subsidiary of
the Company.
18
<PAGE>
1.12 Transfer of Development Projects.
--------------------------------
Executive will receive a lump sum payment of $100,000 on the date
hereof to compensate Executive for the Company's purchase of certain work in
progress and Executive's interests in the development projects described in
Exhibit C attached hereto (collectively, the "Transferred Projects") and the
transfer documents executed on the date hereof. Executive and the Company agree
that in the event Executive terminates his employment with the Company for Good
Reason, and the Company has not actively pursued one or more of the Transferred
Projects during the six months preceding Executive's termination of employment,
the Company shall, at Executive's request, assign its interest in any such
Transferred Projects to Executive without any consideration, representation or
warranty.
ARTICLE II
COVENANTS
2.1 Covenant Against Competition. Executive agrees that for the
----------------------------
period ending on the earlier of the expiration of the term of this Agreement or
when employment is terminated hereunder, Executive will not, except as provided
in Sections 1.1(c) and 1.1(d), without the prior written approval of the Chair
of the Board of the Company, directly or indirectly, as owner, partner, officer
or employee, engage in any business which is substantially competitive with any
business then actively conducted by the Company or by
19
<PAGE>
any of its subsidiaries or undertake to consult with or advise any such
competitive business, or otherwise, directly or indirectly, engage in any
activity which is substantially competitive with or in any way adversely and
substantially affecting any activity of the Company or any of its subsidiaries;
provided, however, that ownership by Executive of not more than 5% of the
outstanding shares of stock of any such business listed on any national stock
exchange or quoted on an automated quotation system, or of not more than 15% of
the stock of any such business not so listed or quoted, shall not be deemed a
violation of this covenant.
2.2 Confidential Information. In further consideration of the
------------------------
payments to be made to Executive hereunder, Executive agrees that:
(a) During the term of his employment under this Agreement and for a
period of 5 years thereafter, he will not divulge to anyone, other than to
persons designated by the Company in writing or as may be required by law, any
confidential information concerning the Company or its business as to which
Executive at any time during his employment shall become informed and which is
not then generally known to the public or recognized as standard practice and
shall use reasonable precautions to ensure that such information remains
confidential; and
(b) During the employment period, upon termination of employment under
this Agreement or at any subsequent time upon request, Executive will return
promptly to the Company as its property, all corporate documents and records in
whatever form they may
20
<PAGE>
exist, which are then in his custody, possession or control, including those
related to trade secrets or other confidential information.
Nothing in the foregoing provisions of this Section 2.2 shall be construed so as
to prevent Executive from using, in connection with his employment for himself
or an employer other than the Company, knowledge that was acquired by him during
the course of his employment with the Company that is generally known to persons
of his experience in other companies in the same industry.
ARTICLE III
CHANGE OF CONTROL
3.1 Change of Control Payments.
--------------------------
In the event that a Change of Control (as defined in Section 3.1(c) or
as defined in any employment agreement between Nelson C. Rising and the Company)
occurs during the term of this Agreement while the Executive is employed by the
Company, Executive shall be entitled to certain payments as follows:
(a) If, within twelve months after the occurrence of the Change of
Control, the Executive's employment by the Company or its successor is
terminated by the Company without Cause (as defined in Section 1.7(b)(i)) or by
Executive pursuant to Section 1.7(b)(ii) (relating to Termination for Good
Reason), then the Executive shall be entitled to receive
21
<PAGE>
from the Company or such successor, in lieu of, and not in addition to, the
amounts otherwise payable to the Executive pursuant to Section 1.8, a lump sum
payment in an amount which is equal to three times the "base amount" in respect
of Executive as defined in Section 280G of the Internal Revenue Code of 1986, as
amended (the "Code"), or any successor to that provision. In addition, the stock
option described in Section 1.5 shall become fully vested in such event.
(b) If any payments under this Agreement, after taking into account
all other payments to which Executive is entitled from the Company, or any
affiliate thereof, are more likely than not to result in a loss of a deduction
to the Company by reason of Section 280G of the Code or any successor provision
to that section, such payments shall be reduced to the extent required to avoid
such loss of deduction. Executive shall be entitled to select the order in
which payments are to be reduced in accordance with the preceding sentence.
If requested by the Company, Executive shall provide complete
compensation and tax data on a timely basis to the Company and to an accounting
or law firm designated by the Company in order to enable the Company to
determine the extent to which payments from the Company and its affiliates may
result in a loss of a deduction. If Executive incurs fees or expenses in
accumulating such information, the Company shall reimburse the Executive for any
reasonable fees and expenses so incurred.
If Executive and the Company disagree as to whether a payment under
this Agreement is more likely than not to result in the loss of a deduction, the
matter shall be
22
<PAGE>
resolved by an opinion of tax counsel chosen by the Company's independent
auditors. The Company shall pay the fees and expenses of such counsel, and shall
make available such information as may be reasonably requested by such counsel
to prepare the opinion.
If, by reason of the limitations of this Section 3.1(b), the maximum
amount payable to the Executive cannot be determined prior to the due date for
such payment, the Company shall pay on the due date the minimum amount which it
in good faith determines to be payable and shall pay the remaining amount, with
interest at a rate, compounded semi-annually, equal to 120% of the applicable
Federal rate determined under Section 1274(d) of the Code, as soon as such
remaining amount is determined in accordance with this Section 3.1(b).
(c) A "Change of Control" of the Company shall be deemed to have
occurred upon the happening of any of the following events:
(1) the acquisition or holding, other than in or as a result of a
transaction approved by the Continuing Directors (as defined in paragraph
(b) below) of the Company, by any individual, entity or group (within the
meaning of Section 13(d)(3) or 14(d)(2) of the Exchange Act) (an
"Acquiror") of beneficial ownership (within the meaning of Rule 13d-3
promulgated under the Exchange Act) of 25% or more of the combined voting
power of the then outstanding shares of common stock and other stock of the
Company entitled to vote generally in the election of directors, but
excluding for this purpose:
23
<PAGE>
(i) any such acquisition (or holding) by California Public
Employees' Retirement System, which as of the Effective Date holds
approximately 41% of the issued and outstanding common stock of the
Company ("CalPERS"), or while CalPERS is the beneficial owner of
shares having a greater percentage of such combined voting power than
the shares held by the Acquiror;
(ii) any such acquisition (or holding) by the Company or any of
its Subsidiaries, or any employee benefit plan (or related trust) of
the Company or such Subsidiaries; or
(iii) any such acquisition (or holding) by any corporation with
respect to which, following such acquisition, more than 50% of,
respectively, the then outstanding shares of common stock of such
corporation and the combined voting power of the then outstanding
voting securities of such corporation entitled to vote generally in
the election of directors is then beneficially owned, directly or
indirectly, by all or substantially all of the individuals and
entities who were the beneficial owners, respectively, of the common
stock and other voting securities of the Company immediately prior to
such acquisition in substantially the same proportion as their
ownership, immediately prior to such acquisition, of the then
24
<PAGE>
outstanding shares of common stock of the Company and of the combined
voting power of the then outstanding voting securities of the Company
entitled to vote generally in the election of directors;
(2) individuals who, as of the date hereof, constitute the Board (the
"Continuing Directors") cease for any reason to constitute at least a
majority of the Board, provided that any individual becoming a director
subsequent to the date hereof whose election, or nomination for election by
the Company's stockholders, was approved by a vote of at least a majority
of the persons then comprising the Continuing Directors shall be considered
a Continuing Director, but excluding, for this purpose, any such individual
whose initial election as a member of the Board is in connection with an
actual or threatened "election contest" relating to the election of the
directors of the Company (as such term is used in Rule 14a-11 of Regulation
14A promulgated under the Exchange Act); or
(3) approval by the Company's stockholders of (i) a reorganization,
merger or consolidation of the Company, with respect to which in each case
all or substantially all of the individuals and entities who were the
respective beneficial owners of the common stock and voting securities of
the Company immediately prior to such reorganization, merger or
consolidation do not, following such reorganization, merger or
consolidation, beneficially own, directly and indirectly, more than 50% of,
respectively, the then outstanding shares of common stock and the combined
voting power of the then outstanding voting securities entitled to vote
generally in the
25
<PAGE>
election of directors, of the corporation or other entity resulting from
such reorganization, merger of consolidation, or (ii) of a complete
liquidation or dissolution of the Company, or (iii) the sale or other
disposition of all or substantially all of the assets of the Company.
ARTICLE IV
ADMINISTRATION, ENFORCEMENT AND OTHER MATTERS
4.1 Amendment.
---------
No amendments to this Agreement may be made except by a writing signed
by both parties.
4.2 Severability; Governing Law.
---------------------------
The invalidity or unenforceability of any provision of this Agreement
shall not affect the validity or enforceability of any other provision of this
Agreement, which shall remain in full force and effect. This Agreement shall be
interpreted under, and governed by, the laws of the State of California.
26
<PAGE>
4.3 Title and Headings.
------------------
Title and headings are for ease of reference and convenience only and
shall not be construed to affect the meaning of any provision of this Agreement.
4.4 Notices.
-------
Any notices to the Company required or permitted hereunder shall be
given in writing to the Company, either by personal service or by registered or
certified mail, postage prepaid, duly addressed to the secretary of the Company
at its then principal place of business. Any such notice to Executive shall be
given in like manner, and if mailed shall be addressed to Executive at his home
address as recorded in the employment records of the Company. For the purpose
of determining compliance with any time limit herein, a notice shall be deemed
given at the time of postmark date.
4.5 Nonassignability.
----------------
This Agreement shall not be transferable or assignable by either
Executive or the Company, except to the successor of the Company in the event of
its reorganization, merger or consolidation, approved in writing by Executive.
The terms, covenants and conditions of this Agreement shall be binding upon the
Company and its successors in the event of dissolution, reorganization,
consolidation or merger of the Company, approved in writing by Executive.
27
<PAGE>
4.6 Attorneys' Fees and Costs for Proceedings.
-----------------------------------------
If any action at law or in equity, or any proceeding pursuant to
Section 4.9, is commenced to enforce or interpret the terms of this Agreement,
the prevailing party shall be entitled to reasonable attorneys' fees, costs and
necessary disbursements in addition to any other relief to which he may be
entitled.
4.7 Full Settlement.
---------------
The Company's obligation to make the payments provided for in this
Agreement and otherwise to perform its obligations hereunder shall not be
affected by any set-off, counterclaim, recoupment, defense or other claim, right
or action which the Company may have against Executive or others.
4.8 Waiver.
------
Either party's failure to enforce any provision or provisions of this
Agreement shall not in any way be construed as a waiver of any such provision,
or provisions, nor prevent that party thereafter from enforcing each and every
other provision of this Agreement. The rights granted both parties herein are
cumulative and shall not constitute a waiver of either party's right to assert
all other legal remedies available to it under the circumstances.
28
<PAGE>
4.9 Arbitration of All Disputes.
---------------------------
Any controversy or claim arising out of or relating to this Agreement
(or the breach thereof) shall be settled by binding and non-appealable
arbitration in Los Angeles, California by an arbitrator. Executive and the
Company shall initially confer and attempt to reach agreement on the individual
to be appointed as such arbitrator. If no agreement is reached, the parties
shall request from the Los Angeles office of the Judicial Arbitration and
Mediation Services ("JAMS") a list of five retired judges affiliated with JAMS.
Executive and the Company shall each alternately strike names from such list
until only one name remains and such person shall thereby be selected as the
arbitrator. Except as otherwise provided for herein, such arbitration shall be
conducted in conformity with the procedures specified in the California
Arbitration Act (Cal. C.C.P. (S)(S) 1280 et seq.). The arbitrator shall not be
-- ---
authorized to award punitive damages with respect to any claim, dispute or
controversy. The parties intend that this Section 4.9 shall be valid, binding,
enforceable and irrevocable and shall survive the termination of this Agreement
and that any arbitration proceeding hereunder shall be concluded within 60 days
after the initiation thereof. The Company and Executive shall jointly so
instruct the Arbitrator chosen to arbitrate any dispute arising hereunder and
agree that the criteria used by them to select such Arbitrator shall include his
or her availability to act expeditiously within not more than the 60-day period
referred to herein. The parties hereto agree that the final decisions of the
Arbitrator so chosen may be enforced by a court of competent jurisdiction.
29
<PAGE>
4.10 Personnel Policies and Legal Compliance Manuals.
-----------------------------------------------
Executive acknowledges that he has received a copy of the document
entitled Personnel Policies Manual, revised October 4, 1995, and the Legal
Compliance Manual dated February 16, 1996. Executive understands and agrees
that it is his responsibility to read and familiarize himself with the
provisions contained in the Personnel Policies Manual and to abide by the rules,
policies and standards set forth in the Personnel Policies Manual. All
policies, rules and regulations contained in the Personnel Policies Manual are
subject to change, with or without notice, at the Company's discretion. In
addition, Executive acknowledges that he has reviewed and understands the
provisions of the Legal Compliance Manual and agrees to comply with the
Company's policies and guidelines contained therein and to strictly follow all
laws relating to the performance of his duties.
30
<PAGE>
IN WITNESS WHEREOF, the Company has caused this Agreement to be
executed by an authorized officer and Executive has executed this Agreement as
of the date first above written.
CATELLUS DEVELOPMENT CORPORATION
By /s/ Nelson C. Rising
-------------------------------
Nelson C. Rising
Chief Executive Officer
"EXECUTIVE"
/s/ Ira Yellin
----------------------------------
Ira Yellin
31
<PAGE>
EXHIBIT A
CATELLUS DEVELOPMENT CORPORATION
AMENDED RESTATED EXECUTIVE STOCK OPTION PLAN
NON-QUALIFIED STOCK OPTION AWARD AGREEMENT
(Executive)
This Award Agreement ("Agreement") is entered into as of February 1, 1996
(the "Date of Grant") between Catellus Development Corporation, a Delaware
corporation ("Catellus"), and
Ira E. Yellin
an employee of Catellus (the "Executive").
The Board of Directors (the "Board") of Catellus wishes to reward the
Executive whose performance will contribute to the long-term success and growth
of Catellus and to further the identify of interests of the Executive with the
stockholders of Catellus by granting the Executive a non-qualified stock option
to acquire common stock of Catellus, par value $.01 per share ("Common Stock"),
pursuant to the Amended and Restated Executive Stock Option Plan (the "Plan").
Catellus and the Executive hereby agree as follows:
1. NUMBER OF OPTION SHARES. This Agreement evidences the grant by Catellus
to the Executive, on the terms, conditions and restrictions set forth herein and
in the Plan, of a non-qualified stock option (the "Option") to purchase, from
time to time, a total of
300,000
shares of Common Stock (the "Option Shares").
2. OPTION PURCHASE PRICE. Upon exercise, the Executive shall pay to
Catellus $7.00 per Option Share (the "Option Purchase Price").
3. OPTION EXPIRATION DATE. Unless terminated sooner in accordance with the
provisions of the Plan or this Agreement, the right to exercise the Option shall
expire on February l, 2006 (the "Expiration Date").
4. VESTING RESTRICTIONS. The Option shall be exercisable in accordance with
the following provisions:
l
<PAGE>
a. No portion of the Option may be exercised for any reason until at least
six months have elapsed following the Date of Grant.
b. Subject to the provisions of Section 5 of this Agreement, the Option
shall become exercisable (i) as to the entire number of the Option Shares on and
after the eighth anniversary of the Date of Grant or (ii) if earlier, in the
amounts indicated on and after the dates set forth below (each, a "Vesting
Date") in accordance with the provisions of Section 4c of this Agreement:
(A) The Option may be exercised as to up to 25% of the Option Shares
on and after the first anniversary of the Date of Grant provided the conditions
specified in Section 4c of this Agreement are met.
(B) The Option may be exercised as to up to 50% of the Option Shares
on and after the second anniversary of the Date of Grant provided the conditions
specified in Section 4c of this Agreement are met.
(C) The Option may be exercised as to up to 75% of the Option Shares
on and after the third anniversary of the Date of Grant provided the conditions
specified in Section 4c of this Agreement are met.
(D) the Option may be exercised as to up to the entire number of the
Option Shares on and after the fourth anniversary of the Date of Grant provided
the conditions specified in Section 4c of this Agreement are met.
c. The Option may be exercised as of (i) 25% of the Option Shares provided
the average of the Closing Price (as defined below) of a Common Share (as
defined in the Plan) for any 30 consecutive trading days following the Date of
Grant is at least $8.50; (ii) 50% of the Option Shares provided the average of
the Closing Price of a Common Share for any 30 consecutive trading days
following the Date of Grant is at least $10.50; (iii) 75% of the Option Shares
provided the average of the Closing Price of a Common Share for any 30
consecutive trading days following the Date of Grant is at least $12.50; and
(iv) 100% of the Option Shares provided the average of the Closing Price of a
Common Share for any 30 consecutive trading days following the Date of Grant is
at least $15.00.
For purposes of this Section 4c, the term "Closing Price" shall mean, for
any trading day, the closing price of a Common Share on such day (i) on the New
York Stock Exchange ("NYSE"), if the Common Shares are then listed on such
exchange, (ii) if the Common Shares are not listed on the NYSE, on the principal
national stock exchange on which the Common Shares are then listed, or (iii) if
not listed on any national stock exchange, as reported by NASDAQ. If the Common
Shares are not then listed on any national stock exchange or reported by NASDAQ,
then the Closing Price shall be determined in any reasonable manner approved by
the Committee (as defined in the Plan).
2
<PAGE>
5. EFFECT OF CERTAIN EVENTS ON VESTING AND EXERCISE.
a. TERMINATION OF EMPLOYMENT.
(i) General. In the event of the Executive's termination of employment
-------
for any reason, any portion of the Option that (A) has not vested as of
such termination, or (B) is vested as of such termination or becomes
vested as a result of such termination in accordance with Section 5a(ii)
and is not exercised within the period specified in Section 5c, shall be
forfeited.
(ii) Termination as a Result of Retirement, Disability or Death. In
----------------------------------------------------------
the event of the Executive's termination of employment prior to the first
anniversary of the Date of Grant by reason of (A) retirement at or after
age 65, (B) disability (as defined in the Plan), or (C) death, a portion of
the Option will vest equal to the number of Option Shares subject to the
Option multiplied by a fraction, the numerator of which is the number of
months elapsed from the Date of Grant and the denominator of which is the
number of months from the Date of Grant to the final Vesting Date.
(iii) Termination for Cause. In the event of the Executive's
---------------------
termination of employment "for cause" (as defined in the Plan), any
unexercised portion of the Option, whether vested or unvested shall be
immediately forfeited.
b. FORFEITURE. Notwithstanding any other provision herein, any
unexercised portion of the Option, whether vested or unvested, shall be
immediately forfeited if the Executive (i) is employed by a competitor of, or
engaged in any activity in competition with, Catellus without Catellus' consent,
(ii) divulges without Catellus' consent any secret or confidential information
belonging to Catellus, or (iii) is engaged in any other activities which would
constitute grounds for termination "for cause".
c. EXERCISE PERIOD FOLLOWING TERMINATION OF EMPLOYMENT.
(i) In the event of the Executive's termination of employment by
reason of death, any unexercised portion of the Option that is or becomes
vested upon his or her death in accordance with Section 5a(ii) of this
Agreement may be exercised by the Executive's personal representative or by
the person or persons to whom the Option shall have been transferred by
will or the laws of descent and distribution at any time within one year
following his of her death, but in no event after the Expiration Date.
(ii) In the event of the Executive's termination of employment (A) for
any reason (1) other than death or (2) other than "for cause" or (B) by
reason of the resignation of the Executive, any unexercised portion of the
Option that is or becomes vested upon such termination in accordance with
Section 5a(ii) of this Agreement (unless such unexercised portion is
forfeited in accordance
3
<PAGE>
with Section 5a(iii) or 5b of this Agreement) may be exercised by the
Executive at any time within three months following such termination of
employment, but in no event after the Expiration Date.
6. EXERCISE OF OPTION.
a. All or a portion of the Option may be exercised in accordance with
procedures (including requisite holding periods) established from time to
time by the Committee. If shares of Common Stock are tendered as payment
such shares of Common Stock shall be valued at their Fair Marker Value (as
defined in the Plan) on the date of exercise of the Option.
b. No fractional shares, or cash in lieu thereof, shall be issued
under the Option.
c. As a condition to the grant of the Option, the Executive agrees (i)
that Catellus may deduct from any payments of any kind otherwise due to the
Executive from Catellus the aggregate amount of any federal, state or local
taxes of any kind required by law to be withheld with respect thereto or,
if no such payments are due or to become due to the Executive, that the
Executive shall pay to Catellus, or make arrangements satisfactory to
Catellus regarding the payment to it of, such taxes and (ii) that Catellus
or its subsidiaries may withhold from the shares of Common Stock to be
issued upon exercise of the Option that number of shares of Common Stock
that is equivalent (valuing such shares of Common Stock at their Fair
Market Value on the date of exercise of the Option) to the amount of any
federal, state or local withholding or other taxes due upon the exercise of
due Option. The Committee has approved without further condition the offset
of shares of Common Stock for such purposes (subject to any applicable
legal limitations) and the Executive irrevocably elects this means of
payment of such taxes. If any such taxes should become due after the date
of exercise, the Executive must pay, or arrange (to the satisfaction of
Catellus) to pay, the amount due.
d. No shares of Common Stock shall be issued or Transferred upon
exercise of the Option unless and until all legal requirements applicable
to the issuance or transfer of such Common Stock have been complied with to
the satisfaction of the Committee.
7. CHANGE IN CAPITALIZATION. In the event of a change in the
capitalization of Catellus due to a stock split, stock divided,
recapitalization, merger, consolidation, combination or similar event, an
appropriate adjustment shall be made in the number of Common Shares subject to
the Plan and the terms of the Option may be adjusted by the Committee to reflect
such change. Any adjustments pursuant to this Section shall be determined by the
Committee in its sole discretion.
8. NO ASSIGNABILITY. The Option is not assignable or transferable by the
Executive, other than by will, by the laws of descent and distribution or
pursuant to a
4
<PAGE>
qualified domestic relation, order (as defined by the Internal Revenue Code of
1986, as amended, or Title I of the Employee Retirement Income Security Act of
1974, or the rules thereunder), and may be exercised during the lifetime of the
Executive only by the Executive or, if the Executive becomes disabled, by his or
her legal representative.
9. OTHER PROVISIONS.
a. Nothing in this Agreement or in the Plan shall confer any right to
continue employment with Catellus nor restrict Catellus from termination of the
employment relationship of the Executive at any time. The Executive is employed
as an employee-at-will and may be terminated from employment at any time with or
without notice, and with or without cause.
b. Nothing in this Agreement or in the Plan shall confer any rights as
a stockholder upon the Executive or any other person entitled to exercise the
Option with respect to any Option Shares covered by the Option until such time
as the Executive or such other person shall have become the holder of record of
such Option Shares.
c. The Executive acknowledges receipt of a copy of the Plan, which is
made a part hereof by this reference, and agrees to be bound by the terms
thereof. In the event of a conflict between the terms of this Agreement and the
Plan, the Plan shall be the controlling document; provided, however, that
-------- -------
Catellus and the Executive acknowledge that pursuant to its authority under the
Plan, the Committee has established the Option Purchase Price contained in
Section 2 of this Agreement and the vesting schedule contained in Sections 4b
and 4c of this Agreement. Capitalized terms used bur not defined herein shall
have the respective meanings ascribed to then in the Plan.
d. The Executive acknowledges that Catellus has the right to
terminate, modify or amend the Plan at any time, but that no such termination,
modification or amendment may, without the Executive's consent, adversely affect
the rights of the Executive under the Option. The Executive further acknowledges
that the grant of the Option or of any other option in one year or at one time
does not in any way obligate Catellus to make a grant of an option at any future
time or in any given amount.
e. In the event that any provision of this Agreement is held to be
invalid, void or unenforceable, the same shall not affect, in any respect
whatsoever, the validity of any other provision of this Agreement.
f. The rights and obligations under this Agreement shall inure to the
benefit of, and shall be binding upon, Catellus, the Executive and the
Executive's representatives and beneficiaries.
g. Any communication under this Agreement shall be in writing and
addressed to Catellus at 201 Mission Street, San Francisco, California 94105,
Attention:
5
<PAGE>
Secretary and to the Executive at the address given beneath the Executive's
signature, or at such other address as either party may hereafter designate in
writing to the other.
h. The interpretation, performance and enforcement of the Option and
this Agreement shall be governed by the laws of the State of California.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the day and year first above written.
"CATELLUS"
CATELLUS DEVELOPMENT CORPORATION
By:
------------------------------
ATTEST:
- ----------------------------
Assistant Secretary "EXECUTIVE"
Print Name
-----------------------
Address:
-------------------------
---------------------------------
6
<PAGE>
EXHIBIT B
C A T E L L U S
[LOGO OF CATELLUS]
CATELLUS DEVELOPMENT CORPORATION
BENEFITS SUMMARY
1995
<PAGE>
CATELLUS DEVELOPMENT CORPORATION
INSTRUCTIONS FOR OPEN ENROLLMENT
NOVEMBER 9 - 18, 1994
. If you are not making any changes to your plans, you need only to complete
---
the Flexible Benefits Plan Enrollment Form.
. If you are changing plans or adding/dependents, please obtain appropriate
forms from the Administrative Support person at your location.
. Medical-Prudential will continue to provide our medical coverage with an
HMO and PruCare Plus option. Kaiser will remain in place only for those
employees currently covered under the plan.
. Dental - Our dental plan will continue to be offered through Phoenix Home
Life.
. Supplemental Life/AD&D - This benefit will continue to be provided by
Phoenix Home Life at your cost. All employees presently covered will have
their coverage automatically carried over.
. All other benefits are paid for by Catellus and enrollment is automatic.
These benefits include:
. Vision Coverage
. Short Term/Long Term Disability
. Basic Life/AD&D
<PAGE>
CATELLUS DEVELOPMENT CORPORATION
BENEFIT CHANGES
. January 1, 1995 will see two minor changes to Catellus Development
Corporation's benefit program.
. Flexible Benefit Plan Benefit Increased
Unreimbursed medical expenses increased to S1,500 per year.
. Vision Plan Modified
New eyeglass frames can be purchased once every 24 months.
1995 MONTHLY COST OF HEALTH BENEFITS: SAME AS l994
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
Salary Range Employee/Dependent HMO Cost PruCare Plus* Dental Cost
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Up to $25,000 Employee $5 $15 $4
Dependent $10 $30 $6
- --------------------------------------------------------------------------------
$25,001 - $35,000 Employee $16.51 $26.51 $8
Dependent $23.63 $53.63 $12
- --------------------------------------------------------------------------------
$35,001 - $50,000 Employee $21.51 $36.51 $10
Dependent $33.63 $73.63 $14
- --------------------------------------------------------------------------------
$50,001 - $70,000 Employee $26.51 $41.51 $13
Dependent $43.63 $103.63 $18
- --------------------------------------------------------------------------------
$70,001 AND UP Employee $31.51 $51.51 $15
Dependent $73.63 $133.63 $23
- --------------------------------------------------------------------------------
</TABLE>
*All Health Options Include Vision Coverage through VSP
<PAGE>
CATELLUS DEVELOPMENT CORPORATION
OPEN ENROLLMENT
MEDICAL CHOICES
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
HMO
Benefits PruCare
- --------------------------------------------------------------------------------
Services from or through your
Prudential Primary Care Physician
<S> <C>
Annual Deductible None
(amount you pay before plan pays)
- --------------------------------------------------------------------------------
Doctor Visits 100% after $10 copay
- --------------------------------------------------------------------------------
Hospital Stay 100%
- --------------------------------------------------------------------------------
Emergency Room Visit 100% after $25 copay*
- --------------------------------------------------------------------------------
Preventive Care 100% after $10 copay
(well baby care, physicals)
- --------------------------------------------------------------------------------
Prescription Drugs 100% after $5 copay**
- --------------------------------------------------------------------------------
Out-of-Pocket Maximum $2,000 per individual
- --------------------------------------------------------------------------------
</TABLE>
* In Dallas, the copay is $50
** In Dallas, the copay is $5 for generic and $10 for brand name drugs
<PAGE>
CATELLUS DEVELOPMENT CORPORATION
OPEN ENROLLMENT
MEDICAL CHOICES
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
Point-of-Service (POS)
Benefits PruCare Plus
- --------------------------------------------------------------------------------
Services from or Non-Network
through your Providers
Prudential Primary
Care Physician
- --------------------------------------------------------------------------------
<S> <C> <C>
Annual Deductible None $200 individual
(amount you pay before
plan pays) $500 family
- --------------------------------------------------------------------------------
Doctor Visits 100% after $10 copay 70% after deductible
- --------------------------------------------------------------------------------
Hospital Stay 90% 70% after deductible
- --------------------------------------------------------------------------------
Emergency Room Visit 100% after $25 copay 70% after deductible
- --------------------------------------------------------------------------------
Preventive Care 100% after $10 copay 70% after deductible
(well baby care, physicals) Well Child Care:
Maximum eligible
charges: $15/visit,
$10/immunizations,
$100/year
- --------------------------------------------------------------------------------
Prescription Drugs 100% after $5 copay
- --------------------------------------------------------------------------------
Out-of-Pocket Maximum $2,000 per individual
- --------------------------------------------------------------------------------
</TABLE>
<PAGE>
CATELLUS DEVELOPMENT CORPORATION
<TABLE>
<CAPTION>
DENTAL
PHOENIX HOME LIFE
- --------------------------------------------------------------------------------
In-Network Out-of-Network
Deductible $25 individual/$75 family
- --------------------------------------------------------------------------------
<S> <C> <C>
Preventive 100% deductible waived 100% deductible waived
Basic 90% 80%
Major 60% 50%
Orthodontia 50% 50%
</TABLE>
Calendar Year maximum $l,000 per individual
Orthodontia Lifetime Maximum $1,000 per individual
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
LONG TERM DISABILITY
CIGNA
- --------------------------------------------------------------------------------
<S> <C>
Elimination Period: 90 days
Monthly Benefit: 66.67% of basic monthly earnings to a maximum
monthly benefit of $10,000.
Definition of Disability You cannot perform each of the material duties of
your regular occupation; and after benefits have
been paid for 24 months you cannot perform each of
the material duties of any gainful occupation for
which you are reasonably fitted by training,
education or experience.
- --------------------------------------------------------------------------------
SHORT TERM DISABILITY
CIGNA
- --------------------------------------------------------------------------------
Elimination Period: 7 days accident
7 days illness
Monthly Benefit: 66.67% of basic monthly earnings to
a maximum of $2,037
Benefit Period: 13 weeks maximum (90 days).
</TABLE>
- --------------------------------------------------------------------------------
<PAGE>
CORE LIFE/AD&D
PHOENIX HOME LIFE
- --------------------------------------------------------------------------------
Employee: 1.5 times basic annual earnings to a maximum benefit of
$300,000
- --------------------------------------------------------------------------------
SUPPLEMENTAL LIFE/AD&D
PHOENIX HOME LIFE
- --------------------------------------------------------------------------------
Option 1: 1.5 times basic annual earnings to a maximum benefit of $300,000
Option 2: 2.5 times basic annual earnings to a maximum benefit of S300,000
Rates: 100% employee paid
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Rate per $1,000 Rate per $1,000
Age Bands per month Age Bands per month
<S> <C> <C> <C>
16-29 .11 50-54 .587
30-34 .135 55-59 .953
35-39 .154 60-64 1.411
40-44 .250 65-69 2.300
45-49 .364 70-74 3.433
- --------------------------------------------------------------------------------
</TABLE>
SUPPLEMENTAL LIFE/AD&D - FAMILY LIFE BENEFITS
PHOENIX HOME LIFE
- --------------------------------------------------------------------------------
Spouse: In $10,000 units to a maximum benefit of $100,000
- --------------------------------------------------------------------------------
Rates for Spousal Benefit - Spouses rates based on Employee's spouse age
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Rate per $1,000 Rate per $1,000
Age Bands per month Age Bands per month
<S> <C> <C> <C>
up to 20 .11 45-49 .364
20-24 .11 50-54 .587
25-29 .11 55-59 .953
30-34 .135 60-64 1.411
35-39 .154 65-69 2.30
40-44 .250 70-74 Terminates
- --------------------------------------------------------------------------------
</TABLE>
Child(ren) In $2,500 units to a maximum benefit of $10,000
- --------------------------------------------------------------------------------
Rates for Children(ren): $.60 per $2,500 per month
- --------------------------------------------------------------------------------
<PAGE>
CATELLUS DEVELOPMENT CORPORATION
FLEXIBLE SPENDING ACCOUNTS
Catellus Development Corporation will continue to offer the tax advantage of
Flexible Spending Arrangements in 1995. These benefits include:
. Pre-tax treatment of all employee contributions for health coverages.
. Pre-tax treatment of up to $1,500 in unreimbursed medical expenses.
. Pre-tax treatment of up to $5,000 in dependent care costs.
In 1995 Catellus Development Corporation will continue to use Lipman
Administrators of Fremont, California to administer its flexible spending
program.
. Reimbursement checks will continue to be paid twice monthly.
. Claims may be filed on a timely basis by fax machine.
Carefully determine your flexible spending account contributions for 1995.
Remember the use it or lose it provision governing these benefits.
. Complete the election form, sign it and return it with your other
enrollment forms.
This summary of benefits is a brief outline of your
insurance coverages. Please see the booklets for
the complete plan descriptions.
<PAGE>
EXHIBIT C
1. Transfer of interest under Letter Agreement dated June 27, 1995 relating to
Westlake-MacArthur Park Station Area Master Plan, including the Exclusive Right
to Negotiate with the Metropolitan Transportation Agency.
2. Work in progress toward acquisition of (i) Chinatown "Little Joe's" site
and (ii) El Pueblo "Antique Block" site.
3. Work in progress toward the design-build-redevelopment of the Old Broadway
(Luby) Building.
4. Concept work in progress on (i) Los Angeles Civic Center Mall development,
(ii) Cathedral Square residential community, (iii) the development of the Grand
Central Square Block, and (iv) Beverly Hills-Century City transit related
development.
<PAGE>
EXHIBIT 10.47
E x e c u t i o n C o p y
As of February 1, 1996
Mr. Ira Yellin
The Yellin Company
304 South Broadway
Suite 201
Los Angeles, CA 90013
Dear Ira:
This letter will confirm our understanding with respect to certain benefits
to be provided to you by Catellus Development Corporation ("Catellus") pursuant
to that certain Employment Agreement between Catellus and you dated as of
February 1, 1996 (the "Employment Agreement"). Capitalized terms used herein
but not defined shall be used as defined in the Employment Agreement.
Section 1.9 of the Employment Agreement provides that the Company will
assume the payment of insurance premiums on your existing life insurance policy.
The current premium on such existing policy is $7,287.76 per year, which premium
may, pursuant to the terms of such existing policy, increase over time. Section
1.9 also provides that the Company will assume the payment of insurance premiums
on your existing disability policy unless comparable insurance may be obtained
under the Company's group disability insurance policy for a lower annual
premium. The current premium on that policy is $7,100 per year.
Section 1.10 of the Employment Agreement provides that you will be entitled
to monthly reimbursement for certain business expenses, including an automobile
allowance comparable to that received by other senior executives. Catellus
agrees that in the event the auto allowance given other senior executives is not
$900 per month, Catellus will enter into an amendment to the Employment
Agreement to provide for an auto allowance of $900 per month or increase your
Base Salary in the amount of the difference between $900 per month and your auto
allowance.
In addition, Catellus and you agree that during the term of the Employment
Agreement Catellus will reimburse you for the annual fees, parking and related
expenses for a season box at the Hollywood Bowl, provided such box is made
<PAGE>
available to other employees of Catellus for business-related purposes.
Catellus agrees that you will continue to own the rights to the box and will be
responsible for allocating the use of the box.
Very truly yours,
CATELLUS DEVELOPMENT CORPORATION
By: /s/ Nelson C. Rising
-----------------------------
Title:
--------------------------
ACKNOWLEDGED AND AGREED TO:
/s/ Ira Yellin
Ira Yellin
<PAGE>
EXHIBIT 10.48
EMPLOYMENT AGREEMENT
BETWEEN
CATELLUS DEVELOPMENT CORPORATION
AND
KATHLEEN SMALLEY
DATED AS OF
DECEMBER 3, 1996
<PAGE>
TABLE OF CONTENTS
PAGE
ARTICLE I EMPLOYMENT RELATIONSHIP................................ 2
1.1 Employment.......................................... 2
1.2 Term................................................ 4
1.3 Base Salary......................................... 4
1.4 Bonuses............................................. 5
1.5 Stock Option........................................ 6
1.6 Place of Performance................................ 7
1.7 Termination of Employment........................... 7
1.8 Benefits Upon Termination........................... 10
1.9 Benefits............................................ 14
1.10 Expenses............................................ 15
1.11 Indemnity........................................... 16
1.12 Relocation Expenses................................. 16
1.13 Housing Arrangement................................. 17
ARTICLE II COVENANTS............................................. 18
2.1 Covenant Against Competition........................ 18
2.2 Confidential Information............................ 19
ARTICLE III CHANGE OF CONTROL.................................... 20
3.1 Change of Control Payments........................... 20
ARTICLE IV ADMINISTRATION, ENFORCEMENT AND OTHER MATTERS......... 25
4.1 Amendment............................................ 25
4.2 Severability; Governing Law.......................... 25
4.3 Title and Headings................................... 25
4.4 Notices.............................................. 26
4.5 Nonassignability..................................... 26
4.6 Attorneys' Fees and Costs for Proceedings............ 26
4.7 Full Settlement...................................... 27
4.8 Waiver............................................... 27
4.9 Arbitration of All Disputes.......................... 27
4.10 Personnel Policies and Legal Compliance Manuals...... 28
4.11 Expenses............................................. 29
Signatures................................................. 30
i
<PAGE>
EXHIBIT A OPTION AGREEMENT
EXHIBIT B TERMS AND CONDITIONS FOR PURCHASE OF NEW HOME IN SAN
FRANCISCO AREA FOR EXECUTIVE
EXHIBIT C CATELLUS DEVELOPMENT CORPORATION BENEFITS
SUMMARY 1995
ii
<PAGE>
EMPLOYMENT AGREEMENT
BETWEEN
CATELLUS DEVELOPMENT CORPORATION
AND
KATHLEEN SMALLEY
This Employment Agreement (this "Agreement") is made and entered into
as of the 3rd day of December, 1996 by and between KATHLEEN SMALLEY
("Executive") and CATELLUS DEVELOPMENT CORPORATION, a Delaware corporation, with
its principal office located in San Francisco, California (the "Company").
RECITALS
The Company desires to secure the services of Executive as Senior Vice
President and General Counsel of the Company and Executive desires to perform
such services for the Company on the terms and conditions hereinafter set forth.
A G R E E M E N T:
NOW, THEREFORE, Executive and the Company hereby agree as follows:
1
<PAGE>
ARTICLE I
EMPLOYMENT RELATIONSHIP
1.1 Employment.
----------
(a) The Company hereby employs Executive as Senior Vice President and
General Counsel of the Company, with a term of service to commence on January 1,
1997 (the "Commencement Date"). Executive shall report directly to the Chief
Executive Officer of the Company and shall have such duties as may be prescribed
by the Chief Executive Officer and shall be part of the senior management group
of the Company. The Company agrees that the duties which may be assigned to
Executive shall be the usual and customary duties of the offices to which she
may from time to time be elected or appointed and shall not be inconsistent with
the provisions of the charter documents of the Company or applicable law (both
as in effect from time to time).
(b) During the term of this Agreement, Executive shall, except as
described in clause (c) below and subject to the other provisions hereof, devote
her full-time energy and talent to her employment and shall not engage in any
other business activities which would represent a material conflict with her
duties to the Company. Executive may make and manage personal business
investments of her choice, provided that such activities and services do not
substantially interfere or conflict with the performance of duties hereunder or
create any conflict of interest with such duties.
2
<PAGE>
(c) Notwithstanding the foregoing, Executive may devote reasonable
time to activities other than those required under this Agreement, including
supervision of personal investments and activities involving professional,
charitable, educational, political, religious and similar types of
organizations, speaking engagements, memberships of boards of directors of other
organizations and similar activities, provided that Executive shall not serve on
the board of directors of any other business or hold any other position with any
business without the consent of the Chief Executive Officer of the Company.
Company recognizes that Executive serves as a Lecturer at Harvard Law School and
as Chairman of the Visiting Committee of Harvard Law School and agrees that
Executive shall continue to serve in these capacities at her discretion.
(d) Paid vacations of three weeks (subject to increase in accordance
with the Company's policy with regard to vacation for senior executives) every
12 months shall be permitted and Executive shall be entitled to take such
vacations at such time or times as she shall choose.
(e) The Executive shall not be required to perform services under this
Agreement during any period that she is disabled. The Executive shall be
considered "disabled" during any period in which she has a physical or mental
disability which renders her incapable, after reasonable accommodation, of
performing her duties under this Agreement and is eligible to receive income
replacement benefits during such period under a long-term disability plan or
disability insurance provided by the Company. In the event of a dispute as to
whether Executive is disabled, the Company may refer the same to a licensed
3
<PAGE>
practicing physician of the Company's choice, and the Executive agrees to submit
to such tests and examinations as such physician shall deem appropriate.
1.2 Term.
----
This Agreement shall commence on December 3, 1996, and shall continue
in effect through December 31, 1999 (as such date may be extended in accordance
with this Section 1.2, the "Expiration Date"), subject to the termination
provisions contained in Section 1.7 hereof; provided, however, that (i) unless
-------- -------
the Company gives notice of termination to Executive on or before the December
31 immediately preceding the Expiration Date, the Expiration Date shall be
automatically extended by an additional 12 months to the next succeeding
December 31 and (ii) the Company's obligations under Sections 1.8, 1.12 and 1.13
hereof and Executive's obligations under Section 2.2 hereof shall survive the
termination of this Agreement.
1.3 Base Salary.
-----------
Executive shall receive a minimum annual base salary (the "Base
Salary") payable in substantially equal installments no less than twice monthly,
with the first payment to occur on or about January 15, 1997 for services
commencing on the Commencement Date. The Base Salary shall be reviewed every 12
months by the Chief Executive Officer of the Company and, as a result of that
review, shall be subject to possible increase but not decrease based upon the
attainment of reasonable performance goals as mutually determined
4
<PAGE>
by Executive and the Chief Executive Officer of the Company. Any increase to
Base Salary which results from that review will be effective on each February
1st by the amount which results from that review and such revised base salary
shall thereafter represent the minimum annual base salary. Executive's initial
annual Base Salary under this Agreement shall be $231,000.
1.4 Bonuses.
-------
(a) Executive shall be eligible to receive an annual bonus (the "Base
Bonus") equal to up to 60% of Base Salary commencing with the year ended
December 31, 1997. The Base Bonus each year shall be determined on the basis of
the achievement of performance goals negotiated in good faith annually in
advance with Executive by the Chief Executive Officer of the Company on or
before February 28 of each year. The Base Bonus shall be payable each year no
later than March 31.
(b) Executive shall be eligible to receive an additional bonus (the
"Additional Bonus") equal to up to 60% of Base Salary commencing with the year
ended December 31, 1997. The Additional Bonus each year shall be determined on
the basis of the achievement of performance goals negotiated in good faith
annually in advance with Executive by the Chief Executive Officer of the Company
on or before February 28 of each year; provided that the Additional Bonus may
not exceed the Base Bonus in any year. Such Additional Bonus will be payable
for outstanding service determined on the basis of
5
<PAGE>
reasonably attainable performance goals. The Additional Bonus shall be payable
each year no later than March 31.
(c) All bonus payments shall be subject to appropriate withholding
payments deducted therefrom.
1.5 Stock Option.
------------
As of January 1, 1997, Executive will be granted non-qualified stock
options covering an aggregate of 75,000 shares of Common Stock of the Company in
accordance with the Company's existing Amended and Restated Executive Stock
Option Plan and as approved by the Compensation and Benefits Committee of the
Board of Directors of the Company, and the Option Agreement shall be in the form
of Exhibit A attached hereto, which option shall be effective as of the date
hereof. Such stock option shall be granted with the initial per share exercise
price set at the average closing market price for such Common Stock for the five
trading days prior to the date of this Agreement. Such option will have a
mandatory withholding feature whereby the Company will withhold such number of
shares at the time of any exercise of the option which will satisfy the
estimated amount of federal and state taxes applicable to the exercise.
Additional option and other awards, if any, shall be made to Executive
in an equitable manner consistent with Executive's senior position and otherwise
in a manner consistent with the Company's executive compensation policies;
provided, however, the
- -------- -------
6
<PAGE>
Company acknowledges that it is contemplated that options for an additional
75,000 shares would be granted to Executive during the 1997 fiscal year if
Executive's performance is of high quality. The issuance of any shares of
Common Stock of the Company issuable upon exercise of such options shall be
registered under the Securities Act of 1933.
1.6 Place of Performance.
--------------------
In connection with her employment hereunder, Executive shall be based
at the San Francisco office of the Company, except for required business travel
for the Company and for any leave of absence.
1.7 Termination of Employment.
-------------------------
(a) If at any time during the term of this Agreement, (i) Executive
involuntarily ceases to be an employee of the Company for any reason other than
(A) termination for Cause, (B) disability at a time when Executive is receiving
disability benefits under a long-term disability plan or disability insurance
provided by the Company, (C) death, or (D) normal retirement under the Company's
pension plan or a qualified retirement plan of the Company or (ii) Executive
terminates employment with the Company for Good Reason (as defined below), then
Executive shall be entitled to the benefits provided in Section 1.8 hereof.
7
<PAGE>
(b) For purposes of this Agreement, the following definitions are set
forth below:
(i) Termination by the Company for "Cause" shall mean termination upon the
willful and continued failure by Executive to substantially perform
her material duties with the Company (other than any such failure
resulting from her incapacity due to physical or mental illness) after
a Notice of Termination as set forth in this Section 1.7(b)(i) is
delivered to Executive by the Chief Executive Officer of the Company,
which Notice specifically identifies the manner in which the Board of
Directors believes that Executive has not substantially performed her
duties. For purposes of this Section, no act, or failure to act, on
Executive's part shall be deemed "willful" unless done, or omitted to
be done, by Executive not in good faith and without reasonable belief
that Executive's action or omission was not inconsistent with the best
interest of the Company.
Notwithstanding the foregoing, Executive shall not be terminated
for Cause pursuant to this Section 1.7(b)(i) unless and until
Executive (A) has received notice of a proposed termination for cause
with a written explanation of the grounds for such proposed
termination, (B) Executive has had an opportunity to confer with the
Chief Executive Officer of the Company, and (C) Executive has had 60
days after receipt of such notice to cure any alleged non-performance
of her duties. If at the end of such sixty-day period the
8
<PAGE>
nonperformance has not been cured to the satisfaction of the Chief
Executive Officer, then the Company, upon the determination of the
Compensation and Benefits Committee of the Board of Directors of the
Company, may terminate this Agreement for Cause.
(ii) "Good Reason" shall exist if, without Executive's express written
consent, any of the following occurs:
(A) a reduction by the Company in Executive's Base Salary as in effect
on the date hereof or as the same may be increased from time to time; or
(B) a demotion from the position or title of Senior Vice President and
General Counsel of the Company or an assigning of duties to Executive that
are inconsistent in any substantial respect with or are a reduction in any
substantial respect from the position, authority, or responsibilities
associated with the position of Senior Vice President and General Counsel
of the Company; or
(C) the failure of the Company to fulfill its obligations under this
Agreement; or
(D) the intentional failure of the Company, without Executive's
consent, to pay to Executive any portion of her salary, earned bonus, or
other current compensation (if any), or to pay to Executive any portion of
any installment of
9
<PAGE>
deferred compensation under any deferred compensation program of the
Company within ten business days of the date such compensation is due or to
issue shares of Common Stock of the Company in accordance with the terms of
stock options granted to Executive upon valid exercise thereof; or
(E) a relocation of the Company headquarters or requirement for
Executive to be based anywhere other than within 25 miles from the site of
the current headquarters of the Company.
(iii) For purposes of this Agreement, "Date of Termination" shall mean
the effective date specified in the Notice of Termination as of
which Executive's employment terminates (which shall not be less
than 60 days after the date such Notice of Termination is given)
or, in the event of termination of employment other than for
Cause, the date as of which Executive's employment terminates.
(c) Executive may terminate her employment hereunder at any time by
giving the Company prior written notice, which notice shall be effective not
less than 30 days after it is given to the Company.
10
<PAGE>
1.8 Benefits Upon Termination.
-------------------------
(a) If, at any time during the term of this Agreement, (i) Executive
involuntarily ceases to be an employee of the Company for any reason other than
(A) termination for Cause, (B) disability at a time when Executive is receiving
disability benefits under a long-term disability plan or disability insurance
provided by the Company, (C) death, or (D) normal retirement under the Company's
pension plan or a qualified retirement plan of the Company or (ii) Executive
terminates employment with the Company for Good Reason (as defined below), then
the amount of benefits payable (as hereinafter described) on account of such
termination shall be equal to the sum of:
(i) unpaid salary with respect to any vacation days accrued but not taken
as of the Date of Termination; and
(ii) in the event that the termination of employment occurs prior to the
first anniversary of the Commencement Date, the sum of (1) the number
of full months remaining in this Agreement, but not to exceed 24,
multiplied by Executive's monthly Base Salary (determined without
regard to amounts payable under any bonus program, or other forms of
extraordinary compensation) as of the Date of Termination; and (2) the
number of full or partial months remaining in the period commencing on
the first day following the most recent period in respect of which the
Base Bonus has been paid and
11
<PAGE>
ending on the Expiration Date, but not to exceed 24, multiplied by
$138,600 divided by 12; or
(iii) in the event that the termination of employment occurs after the
first anniversary of the Commencement Date, the sum of (1) the number
of full months remaining in this Agreement, but not to exceed 24,
multiplied by the average monthly Base Salary (determined without
regard to amounts payable under any bonus program, or other forms of
extraordinary compensation) for the immediately preceding two-year
period or, if Executive has not served the Company for 24 months, then
the average monthly Base Salary (determined without regard to amounts
payable under any bonus program, or other forms of extraordinary
compensation) for such shorter period; and (2) the number of full or
partial months remaining in the period commencing on the first day
following the most recent period in respect of which the Base Bonus
has been paid and ending on the Expiration Date, but not to exceed 24,
multiplied by the average monthly Base Bonus and Additional Bonus for
the immediately preceding two-year period or, if Executive has not
served the Company for 24 months, then the average monthly Base Bonus
and Additional Bonus for such shorter period,
provided, however, that the amount of such benefits shall be reduced by any
- -------- -------
other benefits provided upon termination of employment to which Executive may be
entitled under any severance agreement with the Company.
12
<PAGE>
Executive shall not be required to mitigate the amount of any payment
provided for in this Agreement by seeking other employment or otherwise. The
Company shall not be entitled to set off against the amounts payable to
Executive under this Agreement any amounts owed to the Company by Executive, any
amounts earned by Executive in other employment after termination of her
employment with the Company, or any amounts which might have been earned by
Executive in other employment had she sought such other employment.
The Company shall pay Executive, no later than the fifth day following
the Date of Termination, a lump sum payment, in cash, equal to the amount due
under Section 1.8(a) hereof; provided, however, Executive may elect any time
-------- -------
prior to the Date of Termination to receive the amounts due under Section 1.8(a)
hereof on an installment basis as may be mutually agreed by the Company and
Executive.
(b) If, at any time during the term of this Agreement, Executive
ceases to be an employee for any reason described in Section 1.8(a) hereof,
during the remainder of the term of this Agreement, Executive shall continue to
be treated as an employee for purposes of the Company's group health and dental
programs, but not for purposes of life, dependent care reimbursement, business
travel accident insurance, or long- or short-term disability programs (except to
the extent Executive is drawing benefits at the time of termination), tax-
qualified retirement plans, or any other employee benefit plan or program of the
Company, and shall receive benefits substantially comparable to those in effect
on the
13
<PAGE>
day before the Date of Termination subject to any reduction or termination of
such benefits similarly affecting all senior management personnel of the
Company.
(c) If, at any time during the term of this Agreement, Executive
ceases to be an employee for any other reason, then Executive shall be entitled
to the sum of (i) unpaid accrued salary, (ii) unpaid salary with respect to any
vacation days accrued but not taken as of the Date of Termination and (iii) any
bonus or portion thereof to which Executive is entitled under any then effective
bonus plan or program.
1.9 Benefits.
--------
Executive shall be entitled to receive employee benefits (including,
but not limited to, pension, medical, insurance and disability benefits) and
perquisites no less favorable than those provided to other senior executives of
the Company (other than the Chief Executive Officer).
With respect to medical coverage, Executive shall be entitled to
coverage for her family for the term of this Agreement unless Executive is
terminated for Cause in which case coverage shall terminate on the Date of
Termination except for any applicable COBRA coverage. If, at any time during
the term of this Agreement, Executive involuntarily ceases to be employed by the
Company for any reason other than Termination for Cause or Executive terminates
employment with the Company for Good Reason, then Executive shall
14
<PAGE>
be entitled to medical insurance for the full term of this Agreement as provided
in Section 1.8(b) hereof.
Executive shall, to the extent available at a commercially reasonable
rate of premium, receive from the Company disability income replacement coverage
under the Company's enhanced disability program benefits which will provide for
replacement of 70% of Base Salary during any period in which Executive is
disabled if the disability arose during the term of this Agreement and prior to
the Date of Termination. During any period while Executive is disabled, and is
otherwise entitled to receive salary under this Agreement, any salary payments
to Executive shall be reduced by the amount of any benefits paid for the same
period of time pursuant to such disability income replacement coverage.
Executive also will be entitled to ample office space and appropriate
furniture and all other customary supplies and equipment to fulfill the
requirements of her corporate position as well as to a full-time secretary.
In addition to the benefits described above, Executive shall be
entitled to participate in a retirement program under the Company's 401-K Plan.
The Company's current benefit programs are described on Exhibit C
attached hereto and such benefits and the benefits described in this Section 1.9
shall not be materially altered except for across the board modifications
applicable to all Company executives.
15
<PAGE>
1.10 Expenses.
--------
Executive shall be entitled to monthly reimbursement for all
reasonable business and business-related entertainment expenses, including an
automobile allowance in an amount not less than $981.05 per month as well as
reimbursement for cellular phone expenses.
1.11 Indemnity.
---------
To the fullest extent permitted by applicable law and the Bylaws of
the Company, as the same now exist or may hereafter be amended, the Company
shall indemnify Executive and hold Executive harmless for any acts or decisions
made in good faith while performing services for the Company, and the Company
shall use its best efforts to obtain coverage for Executive under any liability
insurance policy or policies now in force or hereafter obtained during the term
of this Agreement that cover other officers of the Company having comparable or
lesser status and responsibility and to obtain professional malpractice
insurance coverage for Executive. To the same extent, the Company will pay and
advance all expenses, including reasonable attorneys' fees and costs of court
approved settlements, actually incurred by Executive in connection with the
defense of or settlement of any action, suit or proceeding and in connection
with any appeal thereon, which has been brought against Executive by reason of
Executive's service as an officer or agent of the Company or as a director,
officer or agent of any subsidiary of the Company.
16
<PAGE>
1.12 Relocation Expenses.
-------------------
(a) Executive will receive a lump sum payment of $108,707 within 30
days from the date hereof which is designed to cover costs of moving personal
property, including (i) the cost of an interim move of personal property of
Executive to temporary storage; (ii) the cost of additional storage for personal
property of Executive for up to seven months following the Commencement Date;
(iii) the amount of the commission due to a broker for the sale of Executive's
condominium in Dallas; (iv) the cost of the title policy issued in connection
with the sale of Executive's condominium in Dallas; (v) miscellaneous related
expenses; and (vi) federal and state taxes, if any, payable by reason of the
income effect of the items described in this Section 1.12(a).
(b) In addition to the lump sum payment to Executive described in
clause (a) above, Executive also will receive, from time to time during fiscal
year 1997, the following: (i) $4,000 per month until the earlier of (A) the
sale of Executive's condominium in Dallas and (B) ten months after the
Commencement Date; (ii) the cost of furniture rental for the same period
referenced in clause (b)(i) above; (iii) Executive's closing costs for the sale
of such condominium, other than the broker's commission and the cost of the
title policy; (iv) origination costs for the financing of the purchase of a new
residence in the San Francisco area for Executive; (v) closing costs incurred in
connection with the purchase of a new residence in the San Francisco area for
Executive; and (vi) federal and state taxes, if any, payable by reason of the
income effect of the items described in this Section 1.12(b).
17
<PAGE>
Such payments shall be payable promptly upon receipt by the Company of a
statement setting forth, in reasonable detail, the calculation of such amounts.
1.13 Housing Arrangement.
-------------------
Executive and the Company shall enter into arrangements for the
purchase of a new residence in the San Francisco area in accordance with the
terms and conditions set forth in Exhibit B attached hereto.
ARTICLE II
COVENANTS
2.1 Covenant Against Competition. Executive agrees that for the
----------------------------
period ending on the earlier of the expiration of the term of this Agreement or
when employment is terminated hereunder, Executive will not, except as provided
in Section 1.1(c) hereof, without the prior written approval of the Chair of the
Board of Directors of the Company, directly or indirectly, as owner, partner,
officer or employee, engage in any business which is substantially competitive
with any business then actively conducted by the Company or by any of its
subsidiaries or undertake to consult with or advise any such competitive
business, or otherwise, directly or indirectly, engage in any activity which is
substantially competitive with or in any way adversely and substantially
affecting any activity of the Company or any of its subsidiaries; provided,
--------
however, that ownership by Executive of rental homes, of not
- -------
18
<PAGE>
more than 5% of the outstanding shares of stock of any such business listed on
any national stock exchange or quoted on an automated quotation system, or of
not more than 15% of the stock of any such business not so listed or quoted,
shall not be deemed a violation of this covenant, and provided further that
Executive may, without further approval, perform services, including but not
limited to consulting, providing legal advice, conducting negotiations, and
directing outside counsel, to Trammell Crow Interests Company d/b/a Crow Family
Holdings ("CFH"), as appropriate to assist in transition as her responsibilities
at CFH are transferred to other persons.
2.2 Confidential Information. In further consideration of the
------------------------
payments to be made to Executive hereunder, Executive agrees that:
(a) During the term of her employment under this Agreement and for a
period of five years thereafter, she will not divulge to anyone, other than to
persons designated by the Company in writing or as may be required by law, any
confidential information concerning the Company or its business as to which
Executive at any time during her employment shall become informed and which is
not then generally known to the public or recognized as standard practice and
shall use reasonable precautions to ensure that such information remains
confidential; and
(b) During the employment period, upon termination of employment under
this Agreement or at any subsequent time upon request, Executive will return
promptly to the Company as its property, all corporate documents and records in
whatever form they may
19
<PAGE>
exist, which are then in her custody, possession or control, including those
related to trade secrets or other confidential information, provided that
Executive may retain copies of any form files and any nonconfidential
information.
ARTICLE III
CHANGE OF CONTROL
3.1 Change of Control Payments.
--------------------------
In the event that a Change of Control (as defined in Section 3.1(c)
hereof) occurs during the term of this Agreement while Executive is employed by
the Company, Executive shall be entitled to certain payments as follows:
(a) If, following the execution of an agreement providing for a Change
of Control or within 12 months after the occurrence of the Change of Control,
Executive's employment by the Company or its successor is terminated by the
Company without Cause (as defined in Section 1.7(b)(i) hereof) or by Executive
pursuant to Section 1.7(b)(ii) hereof (relating to Termination for Good Reason),
then Executive shall be entitled to receive from the Company or such successor,
in lieu of, and not in addition to, the amounts otherwise payable to Executive
pursuant to Section 1.8 hereof, a lump sum payment in an amount which is equal
to three times the "base amount" in respect of Executive as defined in Section
280G of the Internal Revenue Code of 1986, as amended (the "Code"), or any
successor to
20
<PAGE>
that provision. In addition, the stock options described in Section 1.5 hereof
shall become fully vested in such event.
(b) If any payments under this Agreement, after taking into account
all other payments to which Executive is entitled from the Company, or any
affiliate thereof, are more likely than not to result in a loss of a deduction
to the Company by reason of Section 280G of the Code or any successor provision
to that section, such payments shall be reduced to the extent required to avoid
such loss of deduction. Executive shall be entitled to select the order in
which payments are to be reduced in accordance with the preceding sentence.
If reasonably requested by the Company, Executive shall provide
complete compensation and tax data on a timely basis to the Company and to an
accounting or law firm designated by the Company in order to enable the Company
to determine the extent to which payments from the Company and its affiliates
may result in a loss of a deduction. If Executive incurs fees or expenses in
accumulating such information, the Company shall reimburse Executive for any
reasonable fees and expenses so incurred.
If Executive and the Company disagree as to whether a payment under
this Agreement is more likely than not to result in the loss of a deduction, the
matter shall be resolved by an opinion of independent tax counsel chosen by the
Company's independent auditors. The Company shall pay the fees and expenses of
such counsel, and shall make available such information as may be reasonably
requested by such counsel to prepare the opinion.
21
<PAGE>
If, by reason of the limitations of this Section 3.1(b), the maximum
amount payable to Executive cannot be determined prior to the due date for such
payment, the Company shall pay on the due date the minimum amount which it in
good faith determines to be payable and shall pay the remaining amount, with
interest at a rate compounded semi-annually, equal to 120% of the applicable
Federal rate determined under Section 1274(d) of the Code, as soon as such
remaining amount is determined in accordance with this Section 3.1(b).
(c) A "Change of Control" of the Company shall be deemed to have
occurred upon the happening of any of the following events:
(1) the acquisition or holding, other than in or as a result of a
transaction approved by the Continuing Directors (as defined in clause (b)
below) of the Company, by any individual, entity or group (within the
meaning of Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act of
1934) (an "Acquiror") of beneficial ownership (within the meaning of Rule
13d-3 promulgated under the Securities Exchange Act of 1934) of 25% or more
of the combined voting power of the then outstanding shares of Common Stock
and other stock of the Company entitled to vote generally in the election
of directors, but excluding for this purpose:
(i) any such acquisition (or holding) by California Public
Employees' Retirement System ("CalPERS"), which as of the Effective
Date holds approximately 40% of the issued and outstanding Common
Stock of the
22
<PAGE>
Company, or while CalPERS is the beneficial owner of shares having a
greater percentage of such combined voting power than the shares held
by the Acquiror;
(ii) any such acquisition (or holding) by the Company or any of
its Subsidiaries, or any employee benefit plan (or related trust) of
the Company or such Subsidiaries; or
(iii) any such acquisition (or holding) by any corporation with
respect to which, following such acquisition, more than 50% of,
respectively, the then outstanding shares of common stock of such
corporation and the combined voting power of the then outstanding
voting securities of such corporation entitled to vote generally in
the election of directors is then beneficially owned, directly or
indirectly, by all or substantially all of the individuals and
entities who were the beneficial owners, respectively, of the Common
Stock and other voting securities of the Company immediately prior to
such acquisition in substantially the same proportion as their
ownership, immediately prior to such acquisition, of the then
outstanding shares of Common Stock of the Company and of the combined
voting power of the then outstanding voting securities of the Company
entitled to vote generally in the election of directors;
23
<PAGE>
(2) individuals who, as of the date hereof, constitute the Board of
Directors (the "Continuing Directors") cease for any reason to constitute
at least a majority of the Board, provided that any individual becoming a
director subsequent to the date hereof whose election, or nomination for
election by the stockholders of Company, was approved by a vote of at least
a majority of the persons then comprising the Continuing Directors shall be
considered a Continuing Director, but excluding, for this purpose, any such
individual whose initial election as a member of the Board is in connection
with an actual or threatened "election contest" relating to the election of
the directors of the Company (as such term is used in Rule 14a-11 of
Regulation 14A promulgated under the Securities Exchange Act of 1934); or
(3) approval by the stockholders of the Company of (i) a
reorganization, merger or consolidation of the Company, with respect to
which in each case all or substantially all of the individuals and entities
who were the respective beneficial owners of the Common Stock and voting
securities of the Company immediately prior to such reorganization, merger
or consolidation do not, following such reorganization, merger or
consolidation, beneficially own, directly and indirectly, more than 50% of,
respectively, the then outstanding shares of common stock and the combined
voting power of the then outstanding voting securities entitled to vote
generally in the election of directors of the corporation or other entity
resulting from such reorganization, merger or consolidation, or (ii) a
complete liquidation or dissolution of the Company, or (iii) the sale or
other disposition of all or substantially all of the assets of the Company.
24
<PAGE>
ARTICLE IV
ADMINISTRATION, ENFORCEMENT AND OTHER MATTERS
4.1 Amendment.
---------
No amendments to this Agreement may be made except by a writing signed
by both parties.
4.2 Severability; Governing Law.
---------------------------
The invalidity or unenforceability of any provision of this Agreement
shall not affect the validity or enforceability of any other provision of this
Agreement, which shall remain in full force and effect. This Agreement shall be
interpreted under, and governed by, the laws of the State of California.
4.3 Title and Headings.
------------------
Title and headings are for ease of reference and convenience only and
shall not be construed to affect the meaning of any provision of this Agreement.
25
<PAGE>
4.4 Notices.
-------
Any notices to the Company required or permitted hereunder shall be
given in writing to the Company, either by personal service or by registered or
certified mail, postage prepaid, duly addressed to the secretary of the Company
at its then principal place of business. Any such notice to Executive shall be
given in like manner, and if mailed shall be addressed to Executive at her home
address as recorded in the employment records of the Company. For the purpose
of determining compliance with any time limit herein, a notice shall be deemed
given at the time of postmark date.
4.5 Nonassignability.
----------------
This Agreement shall not be transferable or assignable by either
Executive or the Company, except to the successor of the Company in the event of
its reorganization, merger or consolidation, approved in writing by Executive.
The terms, covenants and conditions of this Agreement shall be binding upon the
Company and its successors in the event of dissolution, reorganization,
consolidation or merger of the Company, approved in writing by Executive.
4.6 Attorneys' Fees and Costs for Proceedings.
-----------------------------------------
If any action at law or in equity, or any proceeding pursuant to
Section 4.9 hereof, is commenced to enforce or interpret the terms of this
Agreement, the prevailing
26
<PAGE>
party shall be entitled to reasonable attorneys' fees, costs and necessary
disbursements in addition to any other relief to which she or it may be
entitled.
4.7 Full Settlement.
---------------
The Company's obligation to make the payments provided for in this
Agreement and otherwise to perform its obligations hereunder shall not be
affected by any set-off, counterclaim, recoupment, defense or other claim, right
or action which the Company may have against Executive or others.
4.8 Waiver.
------
Either party's failure to enforce any provision or provisions of this
Agreement shall not in any way be construed as a waiver of any such provision,
or provisions, nor prevent that party thereafter from enforcing each and every
other provision of this Agreement. The rights granted both parties herein are
cumulative and shall not constitute a waiver of either party's right to assert
all other legal remedies available to it under the circumstances.
4.9 Arbitration of All Disputes.
---------------------------
Any controversy or claim arising out of or relating to this Agreement
(or the breach thereof) shall be settled by binding and non-appealable
arbitration in San Francisco,
27
<PAGE>
California by an arbitrator. Executive and the Company shall initially confer
and attempt to reach agreement on the individual to be appointed as such
arbitrator. If no agreement is reached, the parties shall request from the San
Francisco office of the Judicial Arbitration and Mediation Services ("JAMS") a
list of five retired judges affiliated with JAMS. Executive and the Company
shall each alternately strike names from such list until only one name remains
and such person shall thereby be selected as the arbitrator. Except as
otherwise provided for herein, such arbitration shall be conducted in conformity
with the procedures specified in the California Arbitration Act (Cal. C.C.P.
(S)(S) 1280 et seq.). The arbitrator shall not be authorized to award punitive
-- ---
damages with respect to any claim, dispute or controversy. The parties intend
that this Section 4.9 shall be valid, binding, enforceable and irrevocable and
shall survive the termination of this Agreement and that any arbitration
proceeding hereunder shall be concluded within 60 days after the initiation
thereof. The Company and Executive shall jointly so instruct the Arbitrator
chosen to arbitrate any dispute arising hereunder and agree that the criteria
used by them to select such Arbitrator shall include his or her availability to
act expeditiously within not more than the 60-day period referred to herein.
The parties hereto agree that the final decisions of the Arbitrator so chosen
may be enforced by a court of competent jurisdiction.
4.10 Personnel Policies and Legal Compliance Manuals.
-----------------------------------------------
Executive acknowledges that she has received a copy of the document
entitled Personnel Policies Manual, revised February 4, 1995, and the Legal
Compliance Manual dated February 16, 1996. Executive understands and agrees
that it is her responsibility to
28
<PAGE>
read and familiarize herself with the provisions contained in the Personnel
Policies Manual and to abide by the rules, policies and standards set forth in
the Personnel Policies Manual. All policies, rules and regulations contained in
the Personnel Policies Manual are subject to change, with or without notice, at
the Company's discretion. In addition, Executive acknowledges that she has
reviewed and understands the provisions of the Legal Compliance Manual and
agrees to comply with the Company's policies and guidelines contained therein
and to strictly follow all laws relating to the performance of her duties. This
Agreement will control in the event there are any inconsistencies between this
Agreement and such policies.
4.11 Expenses.
--------
The Company shall be responsible for the fees payable to Francis &
Associates, CPAs, and to Vinson & Elkins L.L.P., for the tax and legal advice
provided to Executive in connection with the preparation of this Agreement in an
aggregate amount not to exceed $10,000.
29
<PAGE>
IN WITNESS WHEREOF, the Company has caused this Agreement to be
executed by an authorized officer and Executive has executed this Agreement as
of the date first above written.
"COMPANY"
CATELLUS DEVELOPMENT CORPORATION
By /s/ Nelson C. Rising
-----------------------------------
Nelson C. Rising
Chief Executive Officer
"EXECUTIVE"
By /s/ Kathleen Smalley
-----------------------------------
Kathleen Smalley
30
<PAGE>
EXHIBIT A
CATELLUS DEVELOPMENT CORPORATION
1996 PERFORMANCE AWARD PLAN
NON-QUALIFIED STOCK OPTION AWARD AGREEMENT
(Executive)
This Award Agreement ("Agreement") is entered into as of
January 1, 1997 (the "Date of Grant") between Catellus Development Corporation,
a Delaware corporation ("Catellus"), and
Kathleen Smalley
an employee of Catellus (the "Executive").
The Board of Directors (the "Board") of Catellus wishes to encourage
high levels of performance by individuals who contribute to the success of
Catellus and to further the identity of interests of the Executive with the
stockholders of Catellus by granting the Executive a non-qualified stock option
to acquire common stock of Catellus, par value $.01 per share ("Common Stock"),
pursuant to the 1996 Performance Award Plan (the "Plan").
Catellus and the Executive hereby agree as follows:
1. NUMBER OF OPTION SHARES. This Agreement evidences the grant by
Catellus to the Executive, on the terms, conditions and restrictions set forth
herein and in the Plan, of a non-qualified stock option (the "Option") to
purchase, from time to time, a total of
75,000
shares of Common Stock (the "Option Shares").
2. OPTION PURCHASE PRICE. Upon exercise, the Executive shall pay to
Catellus $11.05 per Option Share (the "Option Purchase Price").
3. OPTION EXPIRATION DATE. Unless terminated sooner in accordance
with the provisions of the Plan or this Agreement, the right to exercise the
Option shall expire on January 1, 2007 (the "Expiration Date").
1
<PAGE>
4. VESTING RESTRICTIONS. The Option shall be exercisable in
accordance with the following provisions:
a. Except as otherwise provided herein, no portion of the
Option may be exercised for any reason until at least six months have elapsed
following the Date of Grant.
b. Subject to the provisions of Section 5 of this Agreement,
the Option shall become exercisable (i) as to the entire number of the Option
Shares on and after the eighth anniversary of the Date of Grant or (ii) if
earlier, in the amounts indicated on and after the dates set forth below (each,
a "Vesting Date") in accordance with the provisions of Section 4c of this
Agreement:
(A) The Option may be exercised as to up to 25% of the Option
Shares on and after the first anniversary of the Date of Grant provided the
conditions specified in Section 4c of this Agreement are met.
(B) The Option may be exercised as to up to 50% of the Option
Shares on and after the second anniversary of the Date of Grant provided
the conditions specified in Section 4c of this Agreement are met.
(C) The Option may be exercised as to up to 75% of the Option
Shares on and after the third anniversary of the Date of Grant provided the
conditions specified in Section 4c of this Agreement are met.
(D) The Option may be exercised as to up to the entire number of
the Option Shares on and after the fourth anniversary of the Date of Grant
provided the conditions specified in Section 4c of this Agreement are met.
c. The Option may be exercised as to (i) 25% of the Option
Shares provided the average of the Closing Price (as defined below) of a Common
Share (as defined in the Plan) for any 30 consecutive trading days following the
Date of Grant is at least $13.26; (ii) 50% of the Option Shares provided the
average of the Closing Price of a Common Share for any 30 consecutive trading
days following the Date of Grant is at least $15.91; (iii) 75% of the Option
Shares provided the average of the Closing Price of a Common Share for any 30
consecutive trading days following the Date of Grant is at least $19.09; and
(iv) 100% of the Option Shares provided the average of the Closing Price of a
Common Share for any 30 consecutive trading days following the Date of Grant is
at least $22.90.
For purposes of this Section 4c, the term "Closing Price" shall mean,
for any trading day, the closing price of a Common Share on such day (i) on the
New York Stock Exchange ("NYSE"), if the Common Shares are then listed on such
exchange, (ii) if the
2
<PAGE>
Common Shares are not listed on the NYSE, on the principal national stock
exchange on which the Common Shares are then listed, or (iii) if not listed on
any national stock exchange, as reported by NASDAQ. If the Common Shares are
not then listed on any national stock exchange or reported by NASDAQ, then the
Closing Price shall be determined in any reasonable manner approved by the
Committee (as defined in the Plan).
5. EFFECT OF CERTAIN EVENTS ON VESTING AND EXERCISE.
a. TERMINATION OF EMPLOYMENT.
(i) General. In the event of the Executive's termination of
-------
employment for any reason, any portion of the Option that (A) has not
vested as of such termination, or (B) is vested as of such termination
or becomes vested as a result of such termination in accordance with
Section 5a(ii), 5a(iii), or 5b of this Agreement and is not exercised
within the period specified in Section 5d of this Agreement, shall be
forfeited.
(ii) Termination as a Result of Retirement, Disability or
----------------------------------------------------
Death. In the event of the Executive's termination of employment
-----
prior to the first anniversary of the Date of Grant by reason of (A)
retirement at or after age 65, (B) disability (as defined in the
Plan), or (C) death, a portion of the Option will vest equal to the
number of Option Shares subject to the Option multiplied by a
fraction, the numerator of which is the number of months elapsed from
the Date of Grant and the denominator of which is the number of months
from the Date of Grant to the final Vesting Date.
(iii) Termination Without Cause or for Good Reason. In the
--------------------------------------------
event the Executive terminates her employment with Catellus for Good
Reason, or in the event the Executive involuntarily ceases to be an
employee of Catellus for any reason other than as a result of
retirement, disability, death or for Cause, the Option will vest as to
the entire number of Option Shares (and will be exercisable as to such
entire number of Option Shares without regard to the conditions of
Section 4a, 4b or 4c of this Agreement). "Good Reason" and "Cause"
shall have the meaning set forth in the Employment Agreement, dated as
of December 3, 1996, between the Executive and Catellus (the
"Employment Agreement").
(iv) Termination for Cause. Notwithstanding any other
---------------------
provision herein, in the event of the Executive's termination of
employment for Cause (as defined in the Employment Agreement), any
unexercised portion of the Option, whether vested or unvested, shall
be immediately forfeited.
3
<PAGE>
b. CHANGE OF CONTROL. If, following the execution of an agreement
providing for a Change of Control or within 12 months after the occurrence of a
Change of Control, the Executive's employment by Catellus or its successor is
terminated by Catellus without Cause (as defined in the Employment Agreement) or
by the Executive for Good Reason (as defined in the Employment Agreement), the
Option shall vest immediately as to the entire number of Option Shares (and will
be exercisable as to such entire number of Option Shares without regard to the
conditions of Section 4a, 4b or 4c of this Agreement). For purposes of this
Agreement, a "Change of Control" of Catellus shall be deemed to have occurred
upon the happening of any of the following events:
(i) the acquisition or holding, other than in or as a result of a
transaction approved by the Continuing Directors (as defined in clause
(ii) below) of Catellus, by any individual, entity or group (within
the meaning of Section 13(d)(3) or 14(d)(2) of the Securities Exchange
Act of 1934) (an "Acquiror") of beneficial ownership (within the
meaning of Rule 13d-3 promulgated under the Securities Exchange Act of
1934) of 25% or more of the combined voting power of the then
outstanding shares of Common Stock and other stock of Catellus
entitled to vote generally in the election of directors, but excluding
for this purpose:
(A) any such acquisition (or holding) by the California
Public Employees' Retirement System ("CalPERS"), which as of the date
hereof holds approximately 40% of the issued and outstanding Common
Stock of Catellus, or while CalPERS is the beneficial owner of shares
having a greater percentage of such combined voting power than the
shares held by the Acquiror;
(B) any such acquisition (or holding) by Catellus or any of
its subsidiaries, or any employee benefit plan (or related trust) of
Catellus or such subsidiaries; or
(C) any such acquisition (or holding) by any corporation
with respect to which, following such acquisition, more than 50% of,
respectively, the then outstanding shares of common stock of such
corporation and the combined voting power of the then outstanding
voting securities of such corporation entitled to vote generally in
the election of directors is then beneficially owned, directly or
indirectly, by all or substantially all of the individuals and
entities who were the beneficial owners, respectively, of the Common
Stock and other voting securities of Catellus immediately prior to
such acquisition in substantially the same proportion as their
ownership, immediately prior to such acquisition, of the then
outstanding shares of Common Stock of Catellus and of the combined
voting power of the then
4
<PAGE>
outstanding voting securities of Catellus entitled to vote generally
in the election of directors;
(ii) individuals who, as of the date hereof, constitute the
Board of Directors (the "Continuing Directors") cease for any reason
to constitute at least a majority of the Board, provided that any
individual becoming a director subsequent to the date hereof whose
election, or nomination for election by the stockholders of Catellus,
was approved by a vote of at least a majority of the persons then
comprising the Continuing Directors shall be considered a Continuing
Director, but excluding, for this purpose, any such individual whose
initial election as a member of the Board is in connection with an
actual or threatened "election contest" relating to the election of
the directors of Catellus (as such term is used in Rule 14a-11 of
Regulation 14A promulgated under the Securities Exchange Act of 1934);
or
(iii) approval by the stockholders of Catellus of (A) a
reorganization, merger or consolidation of Catellus, with respect to
which in each case all or substantially all of the individuals and
entities who were the respective beneficial owners of the Common Stock
or voting securities of Catellus immediately prior to such
reorganization, merger or consolidation do not, immediately following
such reorganization, merger or consolidation, beneficially own,
directly and indirectly, more than 50% of, respectively, the then
outstanding shares of common stock and the combined voting power of
the then outstanding voting securities entitled to vote generally in
the election of directors of the corporation or other entity resulting
from such reorganization, merger or consolidation, or (B) a complete
liquidation or dissolution of Catellus, or (C) the sale or other
disposition of all or substantially all of the assets of Catellus.
c. FORFEITURE. Notwithstanding any other provision herein, any
unexercised portion of the Option, whether vested or unvested, shall be
immediately forfeited if the Executive (i) is employed by a competitor of, or
engaged in any activity in competition with, Catellus without Catellus' consent,
(ii) divulges without Catellus'
consent any secret or confidential information belonging to Catellus, or (iii)
is engaged in any other activities which would constitute grounds for
termination "for cause" (as defined in the Plan).
d. EXERCISE PERIOD FOLLOWING TERMINATION OF EMPLOYMENT.
(i) In the event of the Executive's termination of employment by
reason of death, any unexercised portion of the Option that is or
becomes vested upon her death in accordance with Section 5a(ii) of
this Agreement may be exercised by the Executive's personal
representative or by the person or
5
<PAGE>
persons to whom the Option shall have been transferred by
will or the laws of descent and distribution at any time within one
year following her death, but in no event after the Expiration Date.
(ii) In the event of the Executive's termination of employment
(A) for any reason (1) other than death or (2) other than for Cause
(as defined in the Employment Agreement) or (B) by reason of the
resignation of the Executive, any unexercised portion of the Option
that is or becomes vested upon such termination in accordance with
Section 5a(ii), 5a(iii), or 5b of this Agreement (unless such
unexercised portion is forfeited in accordance with Section 5a(iv) or
5c of this Agreement) may be exercised by the Executive at any time
within three months following such termination of employment, but in
no event after the Expiration Date.
6. EXERCISE OF OPTION.
a. All or a portion of the Option may be exercised in accordance
with procedures (including requisite holding periods)
established from time to time by the Committee. If shares of
Common Stock are tendered as payment, such shares of Common
Stock shall be valued at their Fair Market Value (as defined
in the Plan) on the date of exercise of the Option.
b. No fractional shares, or cash in lieu thereof, shall be issued
under the Option.
c. As a condition to the grant of the Option, the Executive
agrees (i) that Catellus may deduct from any payments of any
kind otherwise due to the Executive from Catellus the
aggregate amount of any federal, state or local taxes of any
kind required by law to be withheld with respect thereto or,
if no such payments are due or to become due to the Executive,
that the Executive shall pay to Catellus, or make arrangements
satisfactory to Catellus regarding the payment to it of, such
taxes and (ii) that Catellus or its subsidiaries may withhold
from the shares of Common Stock to be issued upon exercise of
the Option that number of shares of Common Stock that is
equivalent (valuing such shares of Common Stock at their Fair
Market Value on the date of exercise of the Option) to the
amount of any federal, state or local withholding or other
taxes due upon the exercise of the Option. The Committee has
approved without further condition the offset of shares of
Common Stock for such purposes (subject to any applicable
legal limitations) and the Executive irrevocably elects this
means of payment of such taxes. If any such taxes should
become due after the date of exercise, the Executive must pay,
or arrange (to the satisfaction of Catellus) to pay, the
amount due.
d. No shares of Common Stock shall be issued or transferred upon
exercise of the Option unless and until all legal requirements
applicable to the issuance or
6
<PAGE>
transfer of such Common Stock have been complied with to the satisfaction of the
Committee.
7. CHANGE IN CAPITALIZATION. In the event of a change in the
capitalization of Catellus due to a stock split, stock dividend,
recapitalization, merger, consolidation, combination or similar event, an
appropriate adjustment shall be made in the number of Common Shares subject to
the Plan and the terms of the Option may be adjusted by the Committee to reflect
such change. Any adjustments pursuant to this Section shall be determined by
the Committee in its sole discretion.
8. NO ASSIGNABILITY. The Option is not assignable or transferable
by the Executive, other than by will, by the laws of descent and distribution or
pursuant to a qualified domestic relations order (as defined by the Internal
Revenue Code of 1986, as amended, or Title I of the Employee Retirement Income
Security Act of 1974, or the rules thereunder), and may be exercised during the
lifetime of the Executive only by the Executive or, if the Executive becomes
disabled, by her legal representative.
9. OTHER PROVISIONS.
a. Nothing in this Agreement or in the Plan shall confer any
right to continue employment with Catellus nor restrict Catellus from
termination of the employment relationship of the Executive at any time in
accordance with the Employment Agreement.
b. Nothing in this Agreement or in the Plan shall confer any
rights as a stockholder upon the Executive or any other person entitled to
exercise the Option with respect to any Option Shares covered by the Option
until such time as the Executive or such other person shall have become the
holder of record of such Option Shares.
c. The Executive acknowledges receipt of a copy of the Plan,
which is made a part hereof by this reference, and agrees to be bound by the
terms thereof. In the event of a conflict between the terms of this Agreement
and the Plan, the Plan shall be the controlling document. Capitalized terms
used but not defined herein shall have the respective meanings ascribed to them
in the Plan.
d. The Executive acknowledges that Catellus has the right to
terminate, modify or amend the Plan at any time, but that no such termination,
modification or amendment may, without the Executive's consent, adversely affect
the rights of the Executive under the Option. The Executive further
acknowledges that the grant of the Option or of any
7
<PAGE>
other option in one year or at one time does not in any way obligate Catellus to
make a grant of an option at any future time or in any given amount.
e. In the event that any provision of this Agreement is held to be
invalid, void or unenforceable, the same shall not affect, in any respect
whatsoever, the validity of any other provision of this Agreement.
f. The rights and obligations under this Agreement shall inure
to the benefit of, and shall be binding upon, Catellus, the Executive and the
Executive's representatives and beneficiaries.
g. Any communication under this Agreement shall be in writing
and addressed to Catellus at 201 Mission Street, San Francisco, California
94105, Attention: Secretary and to the Executive at the address given beneath
the Executive's signature, or at such other address as either party may
hereafter designate in writing to the other.
h. The interpretation, performance and enforcement of the
Option and this Agreement shall be governed by the laws of the State of
California.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the day and year first above written.
"CATELLUS"
CATELLUS DEVELOPMENT CORPORATION
By: /s/ Stephen P. Wallace
----------------------------------------
Stephen P. Wallace
Chief Financial Officer
ATTEST:
- ---------------------------
Assistant Secretary "EXECUTIVE"
--------------------------------------------
Kathleen Smalley
c/o Catellus Development Corporation
201 Mission Street
San Francisco, CA 94105
8
<PAGE>
EXHIBIT B
HOUSING ARRANGEMENT
1. Structure. The Company's investment in the residence will be structured as
---------
an interest-free second participating mortgage.
2. Terms.
-----
Investment:
- ----------
Executive will invest the first $400,000 from any combination of personal funds
and first mortgage loan proceeds; the Company will loan up to $400,000 as an
interest-free second participating mortgage; Executive will invest any
additional funds, from any combination of personal funds and first mortgage loan
proceeds. The total Company loan amount must be used to acquire a residence
(within the meaning of Section 217 of the Code and the regulations thereunder).
The Company will cooperate reasonably with Executive as necessary to prevent the
Company's interest from affecting first mortgage financing.
Timing:
- ------
The investment must be made within a reasonable time after Executive's
relocation to San Francisco with the expectation that Executive will enter into
a six-month lease for temporary housing in the San Francisco area.
<PAGE>
Control:
- -------
Executive will be the controlling owner of the residence, and the Company will
have no rights of control. In particular, Executive will have the sole right to
determine (i) when to sell the residence and the sales price, (ii) the proper
level of maintenance, (iii) appropriate security and insurance, and (iv)
improvements.
Participation:
- -------------
There will be no current return payable on the Company's loan. On Final Sale
(as defined below) of the residence, the Company will receive an amount equal to
the product of the net proceeds (after expenses of sale and repayment of the
first mortgage loan) and a fraction the numerator of which is the Company's loan
and the denominator of which is the total basis of the residence (including
subsequent improvements made by Executive). Executive will have no
responsibility, beyond forwarding the Company's share of proceeds, for the
return to the Company and will be protected from liability for any loss or poor
performance of the investment.
Expenses:
- --------
Executive will be responsible for taxes, insurance, and maintenance. Executive
will determine the appropriate level of insurance and deductible; the Company
will be a named insured to the extent of its interest. In the event of
earthquake damage, any deductible that exceeds the deductible for any other
damage under the homeowner's policy will be borne first by the Company.
2
<PAGE>
Executive Option to Purchase:
- ----------------------------
Executive will have the option to purchase, at any time, the Company note for an
amount equal to the product of 94% of the Appraised Value and a fraction the
numerator of which is the amount of the Company's loan and the denominator of
which is the total basis of the residence.
Interim Sale:
- ------------
If Executive sells the residence while employed by the Company and reinvests in
a new residence, the Company will reinvest its share of the proceeds in the new
residence in the same proportion that Executive reinvests her share of the
proceeds in the new residence, provided that Executive must always have at least
$400,000 invested in the new residence.
Termination of Employment:
- -------------------------
If Executive's employment is terminated for any reason by either party
("Termination"), the Company may, within 30 days of Termination, demand that a
Final Sale of the residence occur within 24 months of the end of the term of the
Employment Agreement. If no sale to a third party has occurred by the end of
that period, the Company will have the right to buy Executive's interest in the
residence at the product of 94% of the Appraised Value and a fraction the
numerator of which is the total basis in the residence less the Company loan and
the denominator of which is the total basis in the residence. If the Company
does not make such a demand or exercise its right to purchase Executive's
interest, the Company's debt will be deemed to have been converted to an
equity investment, but otherwise subject to the remaining conditions of this
agreement, and the next sale of the residence will the Final Sale.
3
<PAGE>
On Final Sale of the residence, the Company will be entitled to retain its share
of the net proceeds with no obligation to reinvest.
Appraised Value: For purposes hereof, "Appraised Value" means the value
- ---------------
determined by an MAI appraiser selected by Executive. The costs of such
appraisal shall be borne by Executive in the event of an exercise of her option
to purchase the Company note and by the Company in the event of an exercise of
its option to require the sale of the residence or to purchase Executive's
interest.
4
<PAGE>
EXHIBIT C
C A T E L L U S
[LOGO OF CATELLUS]
CATELLUS DEVELOPMENT CORPORATION
BENEFITS SUMMARY
1995
<PAGE>
CATELLUS DEVELOPMENT CORPORATION
INSTRUCTIONS FOR OPEN ENROLLMENT
NOVEMBER 9 - 18, 1994
. If you are not making any changes to your plans, you need only to complete
---
the Flexible Benefits Plan Enrollment Form.
. If you are changing plans or adding/dependents, please obtain appropriate
forms from the Administrative Support person at your location.
. Medical-Prudential will continue to provide our medical coverage with an
HMO and PruCare Plus option. Kaiser will remain in place only for those
employees currently covered under the plan.
. Dental - Our dental plan will continue to be offered through Phoenix Home
Life.
. Supplemental Life/AD&D - This benefit will continue to be provided by
Phoenix Home Life at your cost. All employees presently covered will have
their coverage automatically carried over.
. All other benefits are paid for by Catellus and enrollment is automatic.
These benefits include:
. Vision Coverage
. Short Term/Long Term Disability
. Basic Life/AD&D
<PAGE>
CATELLUS DEVELOPMENT CORPORATION
BENEFIT CHANGES
. January 1, 1995 will see two minor changes to Catellus Development
Corporation's benefit program.
. Flexible Benefit Plan Benefit Increased
Unreimbursed medical expenses increased to S1,500 per year.
. Vision Plan Modified
New eyeglass frames can be purchased once every 24 months.
1995 MONTHLY COST OF HEALTH BENEFITS: SAME AS l994
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
Salary Range Employee/Dependent HMO Cost PruCare Plus* Dental Cost
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Up to $25,000 Employee $5 $15 $4
Dependent $10 $30 $6
- --------------------------------------------------------------------------------
$25,001 - $35,000 Employee $16.51 $26.51 $8
Dependent $23.63 $53.63 $12
- --------------------------------------------------------------------------------
$35,001 - $50,000 Employee $21.51 $36.51 $10
Dependent $33.63 $73.63 $14
- --------------------------------------------------------------------------------
$50,001 - $70,000 Employee $26.51 $41.51 $13
Dependent $43.63 $103.63 $18
- --------------------------------------------------------------------------------
$70,001 AND UP Employee $31.51 $51.51 $15
Dependent $73.63 $133.63 $23
- --------------------------------------------------------------------------------
</TABLE>
*All Health Options Include Vision Coverage through VSP
<PAGE>
CATELLUS DEVELOPMENT CORPORATION
OPEN ENROLLMENT
MEDICAL CHOICES
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
HMO
Benefits PruCare
- --------------------------------------------------------------------------------
Services from or through your
Prudential Primary Care Physician
<S> <C>
Annual Deductible None
(amount you pay before plan pays)
- --------------------------------------------------------------------------------
Doctor Visits 100% after $10 copay
- --------------------------------------------------------------------------------
Hospital Stay 100%
- --------------------------------------------------------------------------------
Emergency Room Visit 100% after $25 copay*
- --------------------------------------------------------------------------------
Preventive Care 100% after $10 copay
(well baby care, physicals)
- --------------------------------------------------------------------------------
Prescription Drugs 100% after $5 copay**
- --------------------------------------------------------------------------------
Out-of-Pocket Maximum $2,000 per individual
- --------------------------------------------------------------------------------
</TABLE>
* In Dallas, the copay is $50
** In Dallas, the copay is $5 for generic and $10 for brand name drugs
<PAGE>
CATELLUS DEVELOPMENT CORPORATION
OPEN ENROLLMENT
MEDICAL CHOICES
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
Point-of-Service (POS)
Benefits PruCare Plus
- --------------------------------------------------------------------------------
Services from or Non-Network
through your Providers
Prudential Primary
Care Physician
- --------------------------------------------------------------------------------
<S> <C> <C>
Annual Deductible None $200 individual
(amount you pay before
plan pays) $500 family
- --------------------------------------------------------------------------------
Doctor Visits 100% after $10 copay 70% after deductible
- --------------------------------------------------------------------------------
Hospital Stay 90% 70% after deductible
- --------------------------------------------------------------------------------
Emergency Room Visit 100% after $25 copay 70% after deductible
- --------------------------------------------------------------------------------
Preventive Care 100% after $10 copay 70% after deductible
(well baby care, physicals) Well Child Care:
Maximum eligible
charges: $15/visit,
$10/immunizations,
$100/year
- --------------------------------------------------------------------------------
Prescription Drugs 100% after $5 copay
- --------------------------------------------------------------------------------
Out-of-Pocket Maximum $2,000 per individual
- --------------------------------------------------------------------------------
</TABLE>
<PAGE>
CATELLUS DEVELOPMENT CORPORATION
<TABLE>
<CAPTION>
DENTAL
PHOENIX HOME LIFE
- --------------------------------------------------------------------------------
In-Network Out-of-Network
Deductible $25 individual/$75 family
- --------------------------------------------------------------------------------
<S> <C> <C>
Preventive 100% deductible waived 100% deductible waived
Basic 90% 80%
Major 60% 50%
Orthodontia 50% 50%
</TABLE>
Calendar Year maximum $l,000 per individual
Orthodontia Lifetime Maximum $1,000 per individual
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
LONG TERM DISABILITY
CIGNA
- --------------------------------------------------------------------------------
<S> <C>
Elimination Period: 90 days
Monthly Benefit: 66.67% of basic monthly earnings to a maximum
monthly benefit of $10,000.
Definition of Disability You cannot perform each of the material duties of
your regular occupation; and after benefits have
been paid for 24 months you cannot perform each of
the material duties of any gainful occupation for
which you are reasonably fitted by training,
education or experience.
- --------------------------------------------------------------------------------
SHORT TERM DISABILITY
CIGNA
- --------------------------------------------------------------------------------
Elimination Period: 7 days accident
7 days illness
Monthly Benefit: 66.67% of basic monthly earnings to
a maximum of $2,037
Benefit Period: 13 weeks maximum (90 days).
</TABLE>
- --------------------------------------------------------------------------------
<PAGE>
CORE LIFE/AD&D
PHOENIX HOME LIFE
- --------------------------------------------------------------------------------
Employee: 1.5 times basic annual earnings to a maximum benefit of
$300,000
- --------------------------------------------------------------------------------
SUPPLEMENTAL LIFE/AD&D
PHOENIX HOME LIFE
- --------------------------------------------------------------------------------
Option 1: 1.5 times basic annual earnings to a maximum benefit of $300,000
Option 2: 2.5 times basic annual earnings to a maximum benefit of S300,000
Rates: 100% employee paid
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Rate per $1,000 Rate per $1,000
Age Bands per month Age Bands per month
<S> <C> <C> <C>
16-29 .11 50-54 .587
30-34 .135 55-59 .953
35-39 .154 60-64 1.411
40-44 .250 65-69 2.300
45-49 .364 70-74 3.433
- --------------------------------------------------------------------------------
</TABLE>
SUPPLEMENTAL LIFE/AD&D - FAMILY LIFE BENEFITS
PHOENIX HOME LIFE
- --------------------------------------------------------------------------------
Spouse: In $10,000 units to a maximum benefit of $100,000
- --------------------------------------------------------------------------------
Rates for Spousal Benefit - Spouses rates based on Employee's spouse age
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Rate per $1,000 Rate per $1,000
Age Bands per month Age Bands per month
<S> <C> <C> <C>
up to 20 .11 45-49 .364
20-24 .11 50-54 .587
25-29 .11 55-59 .953
30-34 .135 60-64 1.411
35-39 .154 65-69 2.30
40-44 .250 70-74 Terminates
- --------------------------------------------------------------------------------
</TABLE>
Child(ren) In $2,500 units to a maximum benefit of $10,000
- --------------------------------------------------------------------------------
Rates for Children(ren): $.60 per $2,500 per month
- --------------------------------------------------------------------------------
<PAGE>
CATELLUS DEVELOPMENT CORPORATION
FLEXIBLE SPENDING ACCOUNTS
Catellus Development Corporation will continue to offer the tax advantage of
Flexible Spending Arrangements in 1995. These benefits include:
. Pre-tax treatment of all employee contributions for health coverages.
. Pre-tax treatment of up to $1,500 in unreimbursed medical expenses.
. Pre-tax treatment of up to $5,000 in dependent care costs.
In 1995 Catellus Development Corporation will continue to use Lipman
Administrators of Fremont, California to administer its flexible spending
program.
. Reimbursement checks will continue to be paid twice monthly.
. Claims may be filed on a timely basis by fax machine.
Carefully determine your flexible spending account contributions for 1995.
Remember the use it or lose it provision governing these benefits.
. Complete the election form, sign it and return it with your other
enrollment forms.
This summary of benefits is a brief outline of your
insurance coverages. Please see the booklets for
the complete plan descriptions.
<PAGE>
EXHIBIT 10.49
CATELLUS DEVELOPMENT CORPORATION
November 16, 1996
Mr. Stephen P. Wallace
Chief Financial Officer
Catellus Development Corporation
201 Mission Street
San Francisco, CA 94105
Dear Steve:
The purpose of this letter is to amend that certain Employment
Agreement dated as of July 24, 1995 (the "Employment Agreement") between
Catellus Development Corporation (the "Company") and you as follows:
1. TERM OF AGREEMENT. The term of the Employment Agreement shall be
extended from June 30, 1998 to December 31, 2000.
2. BONUS. Section 1.4 of the Employment Agreement is hereby amended to read
in its entirety as follows:
"1.4 Bonuses.
(a) Executive shall be eligible to receive an annual
bonus (the "Base Bonus") equal to up to 100% of Base Salary commencing
with the year beginning January 1, 1996. The maximum Base Bonus shall
consist of two elements: (i) Subjective Goals -- 50% of the Base Bonus
shall be payable based upon the successful completion of goals which
require the subjective evaluation of the Chief Executive Officer of the
Company; and (ii) Objective Goals -- 50% of the Base Bonus shall be
payable based upon the successful completion of goals based upon
totally objective standards. The Base Bonus shall be payable each year
no later than March 31.
(b) Executive shall be eligible to receive an
additional bonus (the "Additional Bonus"). The maximum Additional Bonus
potential is 100% of base salary, but no greater than the amount of
Base Bonus awarded. The criteria for Additional Bonus awards shall be
objective goals, the accomplishment of which shall lead to results far
in excess of expected performance and add tangible value
1
<PAGE>
to the Company beyond that anticipated in the Company's Business Plan.
The Additional Bonus shall be payable each year no later than March 31.
(c) There may be numerous goals within each bonus
category. Achieving all the goals will lead to a 100% bonus award. It
will be possible to earn 100% of the bonus amount with the
accomplishment of a significant percentage of, but less than 100% of,
performance goals or with the accomplishment of the more difficult
goals and/or certain of the goals with far reaching consequences. The
determination of the achievement of goals will be made by the Chief
Executive Officer of the Company.
(d) All bonus payments shall be subject to appropriate
withholding paymentsdeducted therefrom."
3. TERMINATION PAYMENTS. The first paragraph of Section 1.8
of the Agreement is hereby amended to read as follows:
"1.8 Benefits Upon Termination.
--------------------------
(a) If, at any time during the term of this
Agreement, (i) Executive involuntarily ceases to be an employee of the
Company for any reason other than (A) Termination for Cause, (B)
disability at a time when Executive is receiving disability benefits
under a long-term disability plan or disability insurance provided by
the Company, (C) death, or (D) normal retirement under the Company's
pension plan or a qualified retirement plan of the Company or (ii)
Executive terminates employment with the Company for Good Reason (as
defined below), then the amount of benefits payable on account of such
termination shall be equal to the sum of (1) unpaid accrued salary as
of the Date of Termination, (2) unpaid salary with respect to any
vacation days accrued but not taken as of the Date of Termination, (3)
the number of full months remaining in this Agreement, but not to
exceed 24, multiplied by the average monthly Base Salary (determined
without regard to amounts payable under any bonus program, or other
forms of extraordinary compensation) for the immediately preceding 2-
year period or, if Executive has not served the Company for 24 months,
then the average monthly Base Salary (determined without regard to
amounts payable under any bonus program, or other forms of
extraordinary compensation) for such shorter period; and (4) the number
of full or partial months remaining in the period commencing on the
first day following the most recent period in respect of which the Base
Bonus has been paid and ending on December 31, 2000, but not to exceed
24, multiplied by the average monthly Base Bonus and Additional Bonus
for the immediately preceding 2-year period or, if Executive has not
served the Company for 24 months, then the average monthly Base Bonus
and Additional Bonus for such shorter period, provided, however,
--------- -------- that
the amount of such benefits shall be reduced by any other benefits
provided upon termination of
2
<PAGE>
employment to which Executive may be entitled under any severance
agreement with the Company.
Except as expressly set forth herein, all other terms and
provisions of the Employment Agreement shall remain in full force and effect and
in all other respects are hereby ratified and confirmed.
If you are in agreement with the foregoing, please sign and
return an enclosed counterpart of this letter.
Very truly yours,
CATELLUS DEVELOPMENT
CORPORATION
By:______________________
Title: President and Chief
Executive Officer
AGREED this _____ day of November, 1996:
/s/ Stephen P. Wallace
- ----------------------------
Stephen P. Wallace
3
<PAGE>
EXHIBIT 10.50
CATELLUS DEVELOPMENT CORPORATION
November 16, 1996
Mr. Timothy J. Beaudin
Senior Vice President Property Operations
Catellus Development Corporation
201 Mission Street
San Francisco, CA 94105
Dear Tim:
The purpose of this letter is to amend that certain Employment
Agreement dated as of February 10, 1995 (the "Employment Agreement") between
Catellus Development Corporation (the "Company") and you as follows:
1. TERM OF AGREEMENT. The term of the Employment Agreement shall be
extended from February 9, 1998 to December 31, 2000
2. BONUS. Section 1.4 of the Employment Agreement is hereby amended to
readin its entirety as follows:
"1.4 Bonuses.
(a) Executive shall be eligible to receive an annual
bonus (the "Base Bonus") equal to up to 100% of Base Salary commencing
with the year beginning January 1, 1996. The Base Bonus each year shall
be determined on the basis of the achievement of performance goals
negotiated in good faith annually in advance with Executive by the
Chief Executive Officer of the Company on or before February 28 of each
year. The Base Bonus shall be payable each year no later than March 31.
(b) Executive shall be eligible to receive an
additional bonus (the "Additional Bonus") equal to up to 100% of Base
Salary commencing with the year beginning January 1, 1996. The
Additional Bonus each year shall be determined on the basis of the
achievement of performance goals negotiated in good faith annually in
advance with Executive by the Chief Executive Officer of the Company on
or before February 28 of each year; provided that the Additional
1
<PAGE>
Bonus may not exceed the Base Bonus in any year. Such Additional Bonus
will be payable for the achievement of results far in excess of
expected performance and add tangible value to the Company beyond that
anticipated in the Company's Annual Business Plan. The Additional Bonus
shall be payable each year no later than March 31.
(c) All bonus payments shall be subject to appropriate
withholding payments deducted therefrom."
3. TERMINATION PAYMENTS. Section 1.8 of the Agreement is hereby
amended to read in its entirety as follows:
"1.8 Benefits Upon Termination.
--------------------------
(a) If, at any time during the term of this
Agreement, (i) Executive involuntarily ceases to be an employee of the
Company for any reason other than (A) termination for Cause, (B)
disability at a time when Executive is receiving disability benefits
under a long-term disability plan or disability insurance provided by
the Company, (C) death, or (D) normal retirement under the Company's
pension plan or a qualified retirement plan of the Company or (ii)
Executive terminates employment with the Company for Good Reason (as
defined below), then the amount of benefits payable on account of such
termination shall be equal to the sum of (1) unpaid accrued salary as
of the Date of Termination, (2) unpaid salary with respect to any
vacation days accrued but not taken as of the Date of Termination, (3)
the number of full months remaining in this Agreement, but not to
exceed 24, multiplied by the average monthly Base Salary (determined
without regard to amounts payable under any bonus program, or other
forms of extraordinary compensation) for the immediately preceding 2-
year period or, if Executive has not served the Company for 24 months,
then the average monthly Base Salary (determined without regard to
amounts payable under any bonus program, or other forms of
extraordinary compensation) for such shorter period; and (4) the number
of full or partial months remaining in the period commencing on the
first day following the most recent period in respect of which the Base
Bonus has been paid and ending on December 31, 2000, but not to exceed
24, multiplied by the average monthly Base Bonus and Additional Bonus
for the immediately preceding 2-year period or, if Executive has not
served the Company for 24 months, then the average monthly Base Bonus
and Additional Bonus for such shorter period,
provided, however,
------------------ that the amount of such benefits shall be reduced by
any other benefits provided upon termination of employment to which
Executive may be entitled under any severance agreement with the
Company.
Executive shall not be required to mitigate the
amount of any payment provided for in this Agreement by seeking other
employment or
2
<PAGE>
otherwise. The Company shall not be entitled to set off against the
amounts payable to Executive under this Agreement any amounts owed to
the Company by Executive, any amounts earned by Executive in other
employment after termination of his employment with the Company, or any
amounts which might have been earned by Executive in other employment
had he sought such other employment.
The Company shall pay Executive, no later than the
fifth day following the Date of Termination, a lump sum payment, in
cash, equal to the amount due under Section 1.8(a) hereof; provided,
however, Executive may elect any time prior to the Date of Termination
to receive the amounts due under Section 1.8(a) hereof on an
installment basis as may be mutually agreed by the Company and
Executive.
(b) If, at any time during the term of this
Agreement, Executive ceases to be an employee for any reason described
in Section 1.8(a) hereof, during the remainder of the term of this
Agreement, Executive shall continue to be treated as an employee for
purposes of the Company's group health and dental programs, but not for
purposes of life, dependent care reimbursement, health care
reimbursement, business travel accident insurance, or long- or
short-term disability programs (except to the extent Executive is
drawing benefits at the time of termination), tax-qualified retirement
plans, or any other employee benefit plan or program of the Company,
and shall receive benefits substantially comparable to those in effect
on the day before the Date of Termination subject to any reduction or
termination of such benefits similarly affecting all senior management
personnel of the Company.
(c) If, at any time during the term of this
Agreement, Executive ceases to be an employee for any other reason,
then Executive shall be entitled to the sum of (i) unpaid accrued
salary, (ii) unpaid salary with respect to any vacation days accrued
but not taken as of the Date of Termination and (iii) any bonus or
portion thereof to which Executive is entitled under any then effective
bonus plan or program."
Except as expressly set forth herein, all other terms and
provisions of the Employment Agreement shall remain in full force and effect and
in all other respects are hereby ratified and confirmed.
3
<PAGE>
If you are in agreement with the foregoing, please sign and
return an enclosed counterpart of this letter.
Very truly yours,
CATELLUS DEVELOPMENT
CORPORATION
By: /s/ Nelson C. Rising
______________________
Title: President and Chief
Executive Officer
AGREED this 18 day of November, 1996:
/s/ Timothy J. Beaudin
- ----------------------------
Timothy J. Beaudin
4
<PAGE>
EXHIBIT 10.51
OFFICE LEASE
BETWEEN
BRADBURY ASSOCIATES, L.P.,
a California limited Partnership
LANDLORD,
and
CATELLUS DEVELOPMENT CORPORATION,
a Delaware corporation
TENANT
<PAGE>
TABLE OF CONTENTS
-----------------
<TABLE>
<CAPTION>
Page
----
<S> <C>
ARTICLE 1: PREMISES................................................................... 1
1.1 Lease of Premises.......................................................... 1
1.2 Basic Terms................................................................ 1
1.3 Tenant's Acceptance of Premises............................................ 4
1.4 Rights Reserved to Landlord................................................ 4
1.5 BONA Method of Measurement................................................. 4
1.6 Access to Building and Parking............................................. 5
1.7 Additional Space........................................................... 5
ARTICLE 2: LEASE TERM................................................................. 5
2.1 Commencement Date.......................................................... 5
2.2 Expiration Date............................................................ 6
2.3 Possession................................................................. 6
2.4 Delays Caused By Tenant.................................................... 8
2.5 Renewal Option............................................................. 8
2.6 Right to Terminate......................................................... 11
ARTICLE 3: RENT....................................................................... 12
3.1 Base Rent.................................................................. 12
3.2 Intentionally Omitted...................................................... 13
3.3 Additional Rent............................................................ 13
3.4 Determination and Payment of Additional Rent............................... 13
3.5 Utilities.................................................................. 26
3.6 Common Areas............................................................... 26
3.7 Late Charges............................................................... 27
3.8 Interest on Past Due Obligations........................................... 27
3.9 Abatement of Rent When Tenant Is Prevented From Using Premises............. 27
ARTICLE 4: ARBITRATION................................................................ 29
ARTICLE 5: INDEMNITY; LEGAL COSTS..................................................... 31
5.1 Indemnity.................................................................. 32
5.2 Legal Proceedings.......................................................... 33
5.3 Landlord's Consent......................................................... 33
ARTICLE 6: USE OF PROPERTY............................................................ 33
6.1 Permitted Use.............................................................. 33
6.2 Restrictions on Use........................................................ 33
6.3 Compliance With Governmental and Insurance Regulations;
Assumption of Risk of Noncompliance........................................ 34
6.4 Landlord's Access.......................................................... 34
6.5 Hazardous Materials........................................................ 35
6.6 Compliance with Laws and Other Requirements................................ 36
6.7 Compliance by Other Tenants................................................ 38
ARTICLE 7: MAINTENANCE, REPAIRS, AND ALTERATIONS...................................... 39
7.1 Tenant's Obligations....................................................... 39
7.2 Landlord's Obligations..................................................... 39
</TABLE>
i
<PAGE>
<TABLE>
<S> <C>
7.3 Alterations, Additions, and Improvements................................... 41
7.4 Condition Upon Termination................................................. 42
7.5 Right to Repair............................................................ 43
ARTICLE 8: DAMAGE OR DESTRUCTION...................................................... 44
8.1 Damage to Premises......................................................... 44
8.2 Abatement of Rent.......................................................... 46
ARTICLE 9: CONDEMNATION............................................................... 47
ARTICLE 10: ASSIGNMENT AND SUBLETTING................................................. 48
10.1 Landlord's Consent Required............................................... 48
10.2 Tenant Affiliate.......................................................... 48
10.3 No Release of Tenant...................................................... 48
10.4 Landlords Consent......................................................... 48
10.5 Rent or Other Premiums.................................................... 48
10.6 Occupancy By Others....................................................... 49
10.7 Recognition Agreement..................................................... 49
ARTICLE 11: DEFAULTS AND REMEDIES..................................................... 50
11.1 Covenants and Conditions.................................................. 50
11.2 Defaults.................................................................. 50
11.3 Remedies.................................................................. 51
11.4 Landlord's Cure of Tenant's Default....................................... 52
ARTICLE 12: PROTECTION OF LENDERS..................................................... 53
12.1 Subordination............................................................. 53
12.2 Attornment................................................................ 53
12.3 Signing of Document....................................................... 53
12.4 Estoppel Certificates..................................................... 54
12.5 Tenant's Financial Condition.............................................. 55
12.6 Non-Disturbance Agreement................................................. 55
12.7 Notice to Lenders......................................................... 55
ARTICLE 13: INSURANCE; INDEMNITY; WAIVERS............................................. 56
13.1 Liability Insurance....................................................... 56
13.2 Other Insurance: Landlord................................................. 56
13.3 Other Insurance: Tenant................................................... 57
13.4 Insurance Policies........................................................ 57
13.5 Waiver of Subrocation..................................................... 58
13.6 Exemption of Landlord from Liability...................................... 58
ARTICLE 14: HISTORIC CHARACTER OF THE BRADBURY BUILDING............................... 58
ARTICLE 15: QUIET ENJOYMENT........................................................... 59
ARTICLE 16: BROKERS................................................................... 59
ARTICLE 17: MISCELLANEOUS PROVISIONS.................................................. 59
17.1 Successors................................................................ 59
17.2 When Payment Is Due....................................................... 60
17.3 Parking................................................................... 60
17.4 Severability.............................................................. 61
</TABLE>
ii
<PAGE>
<TABLE>
<S> <C>
17.5 Interpretation............................................................ 61
17.6 Incorporation of Prior Agreement; Modifications........................... 61
17.7 Notices................................................................... 61
17.8 Waivers................................................................... 61
17.9 No Recordation............................................................ 62
17.10 Binding Effect; Choice of Law............................................. 62
17.11 Corporate Authority; Partnership Authority................................ 62
17.12 Joint and Several Liability............................................... 62
17.13 Force Majeure............................................................. 62
17.14 Rules and Regulations..................................................... 62
17.15 Landlord's Lease Undertakings............................................. 63
17.16 Transfer of Landlord's Interest........................................... 63
17.17 Consent Provisions........................................................ 63
17.18 Commercial Photography and Filming........................................ 63
17.19 Signage................................................................... 64
17.20 Landlord Bankruptcy Proceeding............................................ 64
17.21 CPU Adjustments........................................................... 65
17.22 Addenda................................................................... 65
</TABLE>
EXHIBITS
A - Floor Plans
B - Work Letter
C - Rules and Regulations of the Building
D - Non-Disturbance Agreement
E - Estoppel Certificate
F - Intentionally Omitted
G - Right of First Offer
iii
<PAGE>
EXHIBIT G
OFFICE LEASE
THIS OFFICE LEASE ("Lease") is made and entered into as of November 22,
-----
1996, by and between BRADBURY ASSOCIATES, L.P., a California limited partnership
("Landlord") and CATELLUS DEVELOPMENT CORPORATION, a Delaware corporation
--------
("Tenant").
- --------
ARTICLE 1: PREMISES
-------------------
1.1 Lease of Premises. Landlord hereby leases to Tenant and Tenant
-----------------
hereby leases from Landlord those certain premises (the "Premises") which
--------
Premises are situated in that certain building (the "Building") located at 304
--------
South Broadway, City and County of Los Angeles, State of California 90013, upon
and subject to the terms, covenants and conditions set forth herein. Subject to
Section 1.5 below, the Premises consist of approximately fifteen thousand two
hundred thirty-nine (15,239) rentable square feet ("RSF") on the fourth (4th)
floor of the Building and approximately six thousand one hundred eighty-six
(6,186) RSF on the fifth (5th) floor of the Building which together constitute
approximately twenty-one thousand four hundred twenty-five (21,425) RSF of
office space designated as Suite Number 425. Floor plans showing the Premises
hatched in black are attached hereto as Exhibit A and incorporated herein by
---------
this reference.
1.2 Basic Terms.
-----------
(a) Tenant's Trade Name: CATELLUS DEVELOPMENT CORPORATION.
(b) Lease Term:
(i) Initial Lease Term: six (6) years.
(ii) Option Term: One (1) four (4) year renewal term commencing
upon that date which is the first (1st) day after the Expiration Date
(as defined in Section 2.2).
(c) Scheduled Commencement Date: February 1, 1997
(d) Scheduled Expiration Date: January 31, 2003.
(e) Permitted Use: General office purposes, and any other legally
permitted use which is in keeping with the character of the Building
(except with respect to any exclusive use (i) already granted by Landlord
to another tenant of the Building or (ii) then contained in a proposed
lease which is then under "active negotiation," as defined below permitted
by Landlord of comparable space on those floors in the Building other than
the ground floor by other
<PAGE>
than the ground floor by other occupants of the Building. Notwithstanding
the foregoing, Landlord agrees that Tenant may conduct from the Premises a
real estate development operation subject to the restrictions set forth in
Article 6. For the purposes of this Subsection (e), "active negotiation"
means that (a) a letter of intent has been signed by the parties, (b) a
draft (or drafts) of the proposed lease has been prepared and (c) the
parties are still discussing the remaining open issues.
(f) Base Rent: Tenant shall pay Landlord the following sums:
(i) Subject to adjustment pursuant to Section 1.5 below, from
the Commencement Date (as defined in Section 2.1) through the
Expiration Date (as defined in Section 2.2), Twenty-Seven Thousand
Six Hundred Thirty-Eight and 25/100 Dollars ($27,638.25) per month
($1.29 per rentable square foot), being Three Hundred Thirty-One
Thousand Six Hundred Fifty-Nine and 00/100 Dollars ($331,659.00) per
annum; and
(ii) Base Rent for the four (4) year renewal term shall be 90%
of the then prevailing Fair Market Rate.
(g) CPU: Los Angeles/Anaheim/Riverside; All Items Consumer Price
Index (1982-84=100); Urban Wage Earners and Clerical Workers issued by the
Bureau of Labor Statistics of the United States Department of Labor
("Bureau") (see Sections 3.4(j), 5.3 and 17.21 below).
(h) Tenant's Proportionate Share as agreed by Landlord and Tenant,
but subject to adjustment pursuant to Section 1.5 below:
(i) For those services and utilities which are provided only to
----
the office space tenants and/or are provided to the retail tenants on
a net basis and not included in Operating Expenses for the office
space tenants: From the Commencement Date through the Expiration Date
(and during the option term): thirty-five 07/100 percent (35.07%).
(ii) For those services and utilities which are provided to both
office space tenants and retail tenants and are included in Operating
Expenses for the office space tenants: From the Commencement Date
through the Expiration Date (and during the option term): twenty-
seven 28/100 percent (27.28%).
Tenant's Proportionate Share in (ii) above represents the ratio of RSF in the
Premises to the RSF in the Building which total is 78,527 RSF; Tenant's
Proportionate Share in (i) above represents the ratio of RSF in the Premises to
the total office space RSF in
2
<PAGE>
the Building, which total is 61,098 RSF. Landlord agrees that, for purposes of
calculating the amount of Additional Rent payable by Tenant during any calendar
year after the Base Year pursuant to Section 3.4 below, Landlord shall apply the
applicable Tenant's Proportionate Share set forth in either (i) or (ii) above-to
the different services and utilities provided to the tenants in the Building in
the same manner as was done in the Base Year and with no adverse effect on
Tenant.
(i) Security Deposit: None.
(j) Addresses for Notices:
Tenant: After Commencement Date:
Catellus Development Corporation
304 South Broadway
Suite 425
Los Angeles, California 90013
Attention: Ms. Jaime Gertmenian
Before Commencement Date:
Catellus Development Corporation
800 North Alameda Street
Suite 100
Los Angeles, California 90012
Attention: Ms. Jaime Gertmenian
with a copy in either case to:
Catellus Development Corporation
201 Mission Street
2nd Floor
San Francisco, California 94105
Attention: Mr. Nelson Rising
Copies of any notice of default, requests for estoppel certificates
and/or subordination agreements by Tenant are to be sent, in the same
manner and at the same time, to:
Pillsbury Madison & Sutro LLP
725 South Figueroa Street
Suite 1200
Los Angeles, CA 90017-5443
Attention: Michael E. Meyer, Esq.
Landlord: Bradbury Associates, L.P.
304 South Broadway
Suite 201
Los Angeles, CA 90013
Attention: Ms. Francine Lipsman
3
<PAGE>
with a copy to:
Rosenfeld, Meyer & Susman, LLP
9601 Wilshire Boulevard
Fourth Floor
Beverly Hills, CA 90210-5288
Attention: P. John Burke, Esq.
(k) Tenant's Guarantor: None.
(l) Landlord's Broker: None.
(m) Tenant's Broker: None.
1.3 Tenant's Acceptance of Premises. Except as otherwise provided in
-------------------------------
this Lease, Tenant acknowledges that neither Landlord nor any agent of Landlord
has made any representation or warranty with respect to the Premises or the
Building or with respect to the suitability of either for the conduct of
Tenant's business. The taking of possession of the Premises by Tenant shall
conclusively establish that the Premises and the Building were at such time in a
good and tenantable condition, except that Landlord shall repair or replace, as
necessary, (a) such defective items furnished or constructed by Landlord as
Landlord's Work (as defined in Exhibit B) of which items Tenant has advised
---------
Landlord in writing not later than thirty (30) days after Tenant commences
business operations in the Premises and (b) any latent defects; provided,
however, that Landlord's obligation to repair or replace latent defects shall
terminate on the later of (i) the one (1) year anniversary of the Commencement
Date, and (ii) to the extent that such latent defect is covered by any
applicable warranty, the date upon which such warranty expires. Tenant hereby
waives any claim or rights it may have on account of the condition of the
Premises as accepted except as set forth in the preceding sentence, and agrees
that, except as otherwise provided in Section 7.2, Landlord shall not be
required to make any improvements, alterations, changes or repairs in or to the
Premises, or the Building, other than as required by this Lease or by the Work
Letter set forth as Exhibit B and incorporated herein by this reference.
---------
1.4 Rights Reserved to Landlord. Landlord reserves the right to install
---------------------------
and to repair utilities and appurtenances necessary or convenient in connection
therewith in, over, upon, and through the Premises or any part thereof, and to
enter the Premises for any and all such purposes. Landlord shall conduct its
entry either during or after Business Hours (as defined in Section 7.2(b)), but
in either case, absent an emergency, upon reasonable notice and in such a manner
as to cause minimal interference with the conduct of Tenant's business or
operations in the Premises.
1.5 BONA Method of Measurement. The rentable and usable areas of the
--------------------------
Premises and the Building have been or will be
4
<PAGE>
determined in accordance with the standards set forth in ANSI Z65.1-1980, as
promulgated by the Building Owners and Managers Association ("BONA Standard").
-------------
Tenant shall have the right, exercisable within ninety (90) days after the later
of (a) the date Landlord gives Tenant written notice of the final field
measurements of the Premises and the Building, or (b) the date Tenant commences
business operations from the Premises (or, when appropriate, any additional
space leased by Tenant pursuant to the Lease), to have a qualified, licensed
surveyor remeasure the Premises and the Building within such ninety (90) day
period. Tenant agrees that it shall report the results of any such remeasurement
of the Premises and/or Building to Landlord. In the event that subsequent
remeasurement of the Premises and/or the Building by Tenant, within the time
period specified above, indicates that the square footage measurement prepared
by Landlord produces a square footage number in excess of or lower than the
square footage number which would have resulted had the BONA Standard been
properly utilized, any payments due to Landlord from Tenant based upon the
amount of square feet contained in the Premises shall be proportionally,-
retroactively and prospectively reduced or increased, as appropriate, to reflect
the actual number of square feet as properly remeasured under the BONA Standard.
If Landlord disagrees with Tenant's remeasurement and if a dispute occurs
regarding the final accuracy of the measurement of the Premises and the Building
in accordance with the BONA Standard, such dispute will be resolved pursuant to
binding arbitration pursuant to Article 4.
1.6 Access to Building and Parking. Tenant shall be granted access to the
------------------------------
Building, the Premises and the Center (as defined in Section 17.3 but only to
the extent that Landlord, who does not own the Center, can negotiate such access
rights) twenty-four (24) hours per day, seven (7) days per week, every day of
the year.
1.7 Additional Space. Tenant shall have the right to lease additional
----------------
spaces as set forth in Exhibit G attached hereto and made a part hereof by this
---------
reference.
ARTICLE 2: LEASE TERM
---------------------
2.1 Commencement Date. The term of this Lease ("Lease Term") and Tenant's
----------------- ----------
obligation to pay Rent (as defined in Section 3.3(a)) for the Premises shall
commence on the earlier of (a).the date Tenant first takes possession of the
Premises for the purpose of commencing its business operations therein, and (b)
that date which is one (1) week (which period is referred to as the "Move-In
-------
Period") after the earlier of (i) the date Landlord delivers to Tenant a
- ------
factually correct written notice stating that the Work in the Premises is
Substantially Complete, and (ii) the date Landlord delivers to Tenant a
factually correct written notice stating the date the Work in the Premises would
have been Substantially Complete were it not for any Tenant Delays
("Commencement Date"). The Commencement Date shall be delayed by
- -------------------
5
<PAGE>
one (1) day for each day of delay in Tenant~s move, into the Premises that is
caused by any Force Majeure Event (as such term is defined in Section 17.13) or
by any act or omission of Landlord or Landlord's agents, employees or
contractors ("Landlord Delay"); provided, however, that (i) Tenant shall use
commercially reasonable efforts to mitigate the effects of any Force Majeure
Event which affects Tenant's move into the Premises and (ii) the Commencement
Date shall not be delayed by more than twenty (20) days as a result of delays
encountered by Tenant in its move into the Premises which are caused solely by
Force Majeure Events. The terms "Work," "Substantially Complete" and "Tenant
Delays" are defined in the Work Letter Agreement attached hereto as Exhibit B.
---------
2.2 Expiration Date. If the Commencement Date is a date other than the
---------------
Scheduled Commencement Date, then the date upon which the Lease Term shall
expire (the "Expiration Date") shall be determined with reference to the length
of time described in Section 1.2(b)(i) of Article 1 hereof with respect to the
Premises; provided, however, should the Expiration Date as so determined occur
on a day other than the last day of a calendar month, then the Expiration Date
shall be extended to the last day of the calendar month in which the Expiration
Date would otherwise have occurred.
2.3 Possession.
----------
(a) (i) If Landlord fails to deliver possession of the Premises to
Tenant upon the Scheduled Commencement Date with all of Landlord's Work
Substantially Completed therein, then except as provided herein, Landlord
shall not be liable to Tenant for any loss or damage resulting therefrom.
However, notwithstanding anything to the contrary set forth in this Lease,
in the event that Landlord has not delivered the entire Premises to Tenant
with the Work Substantially Completed by March 1, 1997 (the "Outside
-------
Delivery Date"), Tenant shall have the right, at Tenant's sole option, to
-------------
elect to terminate this Lease by delivery to Landlord of a notice (the
"Termination Notice"), which termination shall be effective thirty (30)
-------------------
days after Tenant's delivery of the Termination Notice to Landlord, unless
within such thirty (30) day period Landlord shall deliver to Tenant the
entire Premises with the Work Substantially Completed therein. The Outside
Delivery Date shall be extended by one (l) day for each day of delay
attributable to any (A) Tenant Delay (as defined in Section 6 of the Work
Letter) or (B) Force Majeure Event (as defined in Section 17.13); provided,
however, that notwithstanding the foregoing, the Outside Delivery Date
shall in no event be extended by more than sixty (60) days for delays
attributable to Force Majeure Events. In the event Tenant shall elect to
terminate this Lease, Tenant must deliver to Landlord the Termination
Notice prior to the date the entire Premises are delivered to Tenant with
the Work Substantially Complete therein, and
6
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neither party shall have any further obligation to the other under this
Lease.
(ii) If the Lease Term with respect to the Premises commences on
a date other than the Scheduled Commencement Date pursuant to the
provisions herein, the parties agree to execute and acknowledge a
written statement setting forth the actual Commencement Date for the
Premises and the Expiration Date of this Lease; provided, however,
this Lease shall not be affected in any manner should either party
fail or refuse to execute such statement.
(b) Tenant may enter the Premises upon receipt of Landlord's consent
for the purpose of installing furniture, special flooring or carpeting,
trade fixtures, telephones, computers, photocopy equipment and other
business equipment ("Early Entry Work"); provided, however, that-in
performing such Early Entry Work, Tenant shall not interfere with
Landlord's Work (as defined in Section 1 of the Work Letter) in the
Premises. Such early entry shall not advance the Commencement Date,
provided Tenant does not commence business operations from any part of the
Premises. Any such early entry into and occupancy of the Premises by Tenant
or any person or entity working for or on behalf of Tenant shall be deemed
to be subject to all of the terms, covenants, conditions and provisions of
the Lease, and excluding only the covenant to pay Rent. In connection with
such early entry, including any early entry into any staging area pursuant
to Section 21 of the Work Letter, Landlord shall not be responsible for,
and Tenant is required to obtain insurance covering any loss caused by
Tenant or those entering the Premises on behalf of Tenant to perform such
Early Entry Work, including theft, damage or destruction to any work or
material installed or stored by Tenant or any contractor or individual
involved in the construction of the Work or Early Entry Work, or for any
injury to Tenant or Tenant's employees, agents, contractors, licensees,
directors, officers, partners, trustees, visitors or invitees
(collectively, "Tenant's Employees) or to any other person and provided
further that Landlord shall have the right to post the appropriate notices
of nonresponsibility and to require Tenant to provide Landlord with
evidence that Tenant has fulfilled its obligation to provide insurance
pursuant to Article 13 hereof. In the event that the performance of
Tenant's Early Entry Work causes extra costs to Landlord (other than those
permitted in Section 15 of the Work Letter) or requires the use of
elevators during hours other than the Business Hours, Tenant shall
reimburse Landlord for such extra cost and/or shall pay Landlord for such
elevator service or other Building services at Landlord's Actual Cost (as
such term is defined in Section 7.2(c)).
7
<PAGE>
(c) Tenant shall vacate the Premises upon the Expiration Date or
earlier termination of this Lease. Tenant shall reimburse Landlord for and
indemnify Landlord against all damage incurred by Landlord from any delay
by Tenant in vacating the Premises. If Tenant continues to occupy the
Premises after the Expiration Date or earlier termination of this Lease,
and Landlord thereafter accepts Rent from Tenant, then Tenant's occupancy
shall be a "month-to-month" tenancy, subject to all of the terms and
provisions of this Lease, except that the Base Rent then in effect shall be
increased to the greater of (A) one hundred thirty-five percent (135%) of
the Base Rent in effect at the Expiration Date or earlier termination of
this Lease and (B) one hundred thirty-five percent (135%) of the then
prevailing monthly rental rate for similar commercial space, as determined
by Landlord. This month-to-month tenancy may be terminated by Landlord or
Tenant upon five (5) days' prior notice to the nonterminating party.
2.4 Delays Caused By Tenant. Notwithstanding anything to the contrary
-----------------------
contained in this Lease, if Landlord's failure to deliver possession of the
Premises to Tenant upon the Scheduled Commencement Date is the result of any
Tenant Delays (as defined in Section 6 of the Work Letter), the Rent and all
other sums and charges payable hereunder shall commence on the date upon which
Landlord would have delivered possession of the Premises with all of Landlord's
Work Substantially Completed therein but for the occurrence of any such Tenant
Delays.
2.5 Renewal Option.
--------------
(a) Provided Tenant is not then in default under this Lease beyond
any applicable notice and cure period and is current in all payments due
hereunder, Tenant shall have the right to extend the term of this Lease
("Renewal Option") for one (1) additional four (4) year period, by written
--------------
notice to Landlord given no later than eight (8) months prior to the
Expiration Date, under the same terms and conditions as set forth in this
Lease, except that the Base Rent payable by Tenant during such option term
shall be ninety percent (90%) of the then prevailing Fair Market Rate as
determined in accordance with Section 2.5(b) below. When the rent for the
said option term has been determined, the parties shall execute a
modification of this Lease setting forth the Base Rent for such option
term. This Renewal Option is not personal to Catellus Development
Corporation, the Tenant herein named, and may be exercised by any assignee
of the Lease permitted under the terms of the Lease. However, no such
Renewal Option is assignable separate and apart from the Lease.
(b) For the purposes of this Section 2.5, the term "Fair Market Rate"
----------------
shall mean the annual amount per RSF that Landlord has accepted in current
transactions between non
8
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affiliated parties from new, non-expansion, non-renewal and non-equity
tenants of comparable credit-worthiness, for comparable space, for a
comparable use for a comparable period of time ("Comparable Transactions")
-----------------------
in the Building, or if there are not a sufficient number of Comparable
Transactions in the Building, what a comparable landlord of a Comparable
Building (as defined in Section 6.6(b)) with comparable vacancy factors
would accept in Comparable Transactions. In any determination of Comparable
Transactions appropriate consideration shall be given to the annual rental
rates per rentable square foot, the standard of measurement by which the
rentable square footage is measured, the ratio of rentable square feet to
usable square feet, the type of escalation clause (e.g., whether increases
in additional rent are determined on a net or gross basis, and if gross,
whether such increases are determined according to a base year or a base
dollar amount expense stop), the extent of Tenant's liability under the
Lease, abatement provisions reflecting free rent and/or no rent during the
period of construction or subsequent to the commencement date as to the
space in question, brokerage commissions, if any, which would be payable by
Landlord in similar transactions, length of the lease term, size and
location of premises being leased, building standard work letter and/or
tenant improvement allowances, if any, and other generally applicable
conditions of tenancy for such Comparable Transactions. The intent is that
Tenant will obtain the same rent and other economic benefits that Landlord
would otherwise give in Comparable Transactions and that Landlord will
make, and receive the same economic payments and concessions that Landlord
would otherwise make, and receive in Comparable Transactions.
Landlord shall determine the Fair Market Rate by using its good faith
judgment. Landlord shall provide written notice of such amount within
fifteen (15) days (but in no event later than twenty (20) days) after
Tenant provides the notice to Landlord exercising Tenant's option rights
which require a calculation of the Fair Market Rate. Tenant shall have
fifteen (15) days ("Tenant's Review Period") after receipt of Landlord's
----------------------
notice of the new rental within which to accept such rental or to
reasonably object thereto in writing. In the event Tenant objects, Landlord
and Tenant shall attempt to agree upon such Fair Market Rate, using their
best good faith efforts. If Landlord and Tenant fail to reach agreement by
that date which is six (6) months prior to the Expiration Date ("Outside
-------
Agreement Date"), then each party shall place in separate envelope their
--------------
final proposal as to Fair Market Rate and shall exchange such envelopes.
Tenant may, within three (3) business days after such exchange, rescind its
option to extend by written notice to Landlord within such three (3)
business day period. If Tenant does not so rescind its option within such
three (3) business day period, then Tenant's exercise of its
9
<PAGE>
option to extend will be irrevocable and the determination of Fair Market
Rate shall be submitted to arbitration in accordance with subsections (i)
through (v) below. Failure of Tenant to so accept such rental in writing
within Tenant's Review Period shall conclusively be deemed its disapproval
of the Fair Market-Rate determined by Landlord.
In the event that Landlord fails to timely generate the initial
written notice of Landlord's opinion of the Fair Market Rate which triggers
the negotiation period of this Section 2.5(b), then Tenant may commence
such negotiations by providing the initial notice, in which event Landlord
shall have fifteen (15) days ("Landlord's Review Period") after receipt of
------------------------
Tenant's notice of the new rental within which to accept such rental. In
the event Landlord fails to accept in writing such rental proposed by
Tenant, then such proposal shall be-deemed rejected, and Landlord and
Tenant shall attempt in good faith to agree upon such Fair Market Rate,
using their best good faith efforts. If Landlord and Tenant fail to reach
agreement by the Outside Agreement Date, then each party shall place in a
separate sealed envelope their final proposal as to Fair Market Rate and
shall exchange such envelopes. Tenant may, within three (3) business days
after such exchange, rescind its option to extend by written notice to
Landlord within such three (3) business day period. If Tenant does not so
rescind its option within such three (3) business day period, then Tenant's
exercise of its option to,extend will be irrevocable and the determination
of Fair Market Rate shall be submitted to arbitration in accordance with
subsections (i) through (v) below.
(i) Landlord and Tenant shall meet with each other within five (5)
business days of the Outside Agreement Date and exchange the sealed
envelopes and then open such envelopes in each other's presence. If
Landlord and Tenant do not mutually agree upon the Fair Market Rate within
one (1) business day of the exchange and opening of envelopes, then, within
ten (10) business days of the exchange and opening of envelopes Landlord
and Tenant shall agree upon and jointly appoint a single arbitrator who
shall by profession be a real estate lawyer or broker who shall have been
active over the-five (5) year period ending on the date of such appointment
in the leasing of comparable commercial properties in the vicinity of the
Building. Neither Landlord nor Tenant shall consult with such broker or
lawyer as to his or her opinion as to Fair Market Rate prior to the
appointment. The determination of the arbitrator shall be limited solely to
the issue of whether Landlord's or Tenant's submitted Fair Market Rate for
the Premises is the closer to the actual Fair Market Rate for the Premises
as determined by the arbitrator, taking into account the requirements of
this Section 2.5(b). Such arbitrator may hold such hearings and require
such briefs as the
10
<PAGE>
arbitrator, in his or her sole discretion, determines is necessary. In
addition, Landlord or Tenant may submit to the arbitrator with a copy to
the other party within five (5) business days after the appointment of the
arbitrator any market data and additional information that such party
deems-relevant to the determination of Fair Market Rate ("FMR Data") and
--------
the other party may submit a reply in writing within five (5) business days
after receipt of such FMR Data.
(ii) The arbitrator shall, within thirty (30) days of his or her
appointment, reach a decision as to whether the parties shall use
Landlord's or Tenant's submitted Fair Market-Rate, and shall notify
Landlord and Tenant of such determination.
(iii) The decision of the arbitrator shall be binding upon Landlord
and Tenant, and shall be treated the same as the decision of the
Arbitration Panel as provided in Section 4(d) below.
(iv) If Landlord and Tenant fail to agree upon and appoint an
arbitrator, then the appointment of the arbitrator shall be made by the
Presiding Judge of the Superior Court, or, if he or she refuses to act, by
any judge having jurisdiction over the parties.
(v) The cost of arbitration shall be paid by Landlord and Tenant
equally.
2.6 Right to Terminate.
------------------
(a) Notwithstanding anything in either Lease Sections 8 [Damage and
Destruction] or 9 [Condemnation] to the contrary, and except as expressly
set forth in Subsection (b) below and subject to Landlord's right to
provide Substitute Parking as described in Section 17.3, in the event that
Tenant is notified or becomes aware of the fact that:
(i) damage or destruction to the Premises, the Center and/or
the Building or any part thereof so as to interfere substantially with
Tenant's use of the Premises, the Center and/or the Building;
(ii) a taking by eminent domain or exercise of other
governmental authority of the Premises, the Center and for the Building or
any part thereof so as to interfere substantially with Tenant's use of the
Premises, the Center and/or the Building;
(iii) the inability of Landlord to provide services to the
Premises, the Center and/or the Building so
11
<PAGE>
as to interfere substantially with Tenant's use of the Premises, the Center
and/or the Building; or
(iv) any discovery of hazardous substances in, on or around the
Premises, the Building and/or the Project not placed in, on or around the
Premises, the Building and/or the Project by Tenant, that may, considering
the nature and amount of the substances involved, substantially interfere
with Tenant's use of the Premises or which present a health risk to any
occupants of the Premises (each of the items set forth in provision (a)(i),
(ii), (iii) and (iv) being referred to herein as a "Trigger Event"),
-------------
then if Tenant cannot, within nine (9) months ("Non-Use Period") of the
--------------
occurrence of the Trigger Event, be given reasonable use of, and access to,
a fully repaired, restored, safe and healthful Premises, the Center and
Building (except for minor "punch-list" items which will be repaired
promptly thereafter), and the utilities and services pertaining to the
Premises, the Center-and the Building, all suitable for the efficient
conduct of Tenant's business therefrom, then Tenant may elect to exercise
an ongoing right to terminate the Lease upon thirty (30) days' written
notice sent to Landlord within thirty (30) days following the expiration of
the Non-Use Period, but such termination shall be ineffective if the
condition entitling Tenant to terminate is corrected within thirty (30)
days ("Correction Period") of Landlord's receipt of such election. The nine
-----------------
(9) month Non-Use Period and the thirty (30) day Correction Period
specified in the prior sentence shall be extended, on a day for day basis,
by delays caused by Tenant in any required restoration or repair.
(b) In the event of any Trigger Event occurring during the last year
of the Lease Term or, if an applicable renewal option has been exercised,
during the last year of any renewal term, should the Non-Use Period
continue for thirty (30) days, Tenant may elect to exercise an ongoing
right to terminate the Lease upon ten (10) days' written notice sent to
Landlord at any time following the expiration of the Non-Use Period.
ARTICLE 3: RENT
---------------
3.1 Base Rent. Tenant shall pay to Landlord the Base Rent set forth in
---------
Article 1, payable in advance, in twelve equal monthly installments on the first
day of each calendar month during the Lease Term, except that Base Rent for the
first (1st) full~month of the Lease Term and any fractional month shall be paid
by Tenant to Landlord upon execution of this Lease. The Base Rent for any
fractional part of a month shall be prorated on the basis of the actual number
of days in such month. Base Rent shall be paid without prior notice or demand,
without deduction offset
12
<PAGE>
except as otherwise expressly set forth in this Lease, in lawful money of the
United States.
3.2 Intentionally Omitted.
---------------------
3.3 Additional Rent.
---------------
(a) All charges and sums payable by Tenant in addition to Base Rent
shall be deemed Additional Rent (whether or not so designated herein).
Landlord shall have such rights and remedies for Tenant's failure to pay
Additional Rent when required by the Lease as are provided herein or at law
or in equity for the failure to pay Base Rent. As used herein the term
"Rent" shall mean both Base Rent and Additional Rent.
(b) Tenant shall pay to Landlord in advance, in twelve equal monthly
installments on the first day of each calendar month during the Lease Term,
Additional Rent equal to Tenant's Proportionate Share (as set forth in
Section 1.2(h) and as defined below) of the increase, if any, in Direct
Costs, as defined herein, over the Base Year (as defined in Section 3.4(a)
below). Tenant's Proportionate Share as set forth in Section 1.2(h)(ii) is
calculated for those services and utilities which are provided to both
office space tenants and retail tenants and are included in Operating
Expenses for all tenants in the Building as a fraction, the numerator of
which is the number of rentable square feet comprising the Premises and the
denominator of which is the aggregate number of rentable square feet
comprising the Building. Tenant's Proportionate Shares as set forth in
Section 1.2(h)(i) is calculated for those services and utilities which are
provided only to the office space tenants and/or are provided to the retail
tenants on a net basis and not included in Operating Expenses for the
office space tenants as a fraction, the numerator of which is the number of
rentable square feet comprising the Premises and the denominator of which
is the aggregate number of rentable square feet of office space in the
Building.
3.4 Determination and Payment of Additional Rent.
--------------------------------------------
(a) Increase in Tax Costs. Commencing on January 1, 1998, if, in any
calendar year during the Lease Term (the "Comparison Year") Landlord's Tax
---------------
Costs shall be higher than the Tax Costs for the calendar year 1997 (the
"Base Year"), Tenant shall pay to Landlord, as Additional Rent for the
----------
Comparison Year, Tenant's Proportionate Share of such increase.
(b) Increase in Operating Costs. Commencing on January 1, 1998, if
Landlord's Operating Costs for any Comparison Year shall be higher than the
Operating Costs for
13
<PAGE>
the Base Year, the Additional Rent payable by Tenant hereunder for the
Comparison Year shall be Tenant's Proportionate Share of such increase.
(c) On the last day of January of the first Comparison Year and on
the last day of every January thereafter during the Lease Term, Landlord
shall furnish to Tenant a written statement showing in reasonable detail
Landlord's actual Tax Costs and Operating Costs for the Base Year and
Landlord's estimated Direct Costs for the then current Comparison Year and
the amount, if any,of estimated Additional Rent payable by Tenant for such
then current Comparison Year (the "Estimated Statement"). Such Estimated
Statement shall not exceed 105% of the previous year's actual Tax Costs and
Operating Costs unless evidenced by increases in existing rates or fees
with evidence of such increases provided to Tenant ("specifically
justified"). Following receipt of the Estimated Statement and a thirty (30)
day period from the receipt of the Estimated Statement within which Tenant
shall review the Estimated Statement, Tenant's next monthly Additional Rent
payment shall include the projected amount set forth therein, multiplied by
the number of rental payment dates which elapsed during the then current
Comparison Year. Thereafter, the monthly Additional Rent payments becoming
due hereunder shall be in the amount set forth in the Estimated Statement
from Landlord. Landlord's failure to deliver the Estimated Statement in a
timely manner shall neither constitute a default by Landlord hereunder nor
a waiver of Landlord's right to Additional Rent; provided, however, that
any delay by Landlord (or any successor to Landlord in the event the
Building is conveyed to a new owner during the Lease Term) in billing
Tenant for any Direct Costs of more than three (3) years (or two (2) years
if this Lease has terminated) from the date Landlord incurred such Direct
Costs shall be deemed a waiver of Landlord's right to require payment-of
Tenant's obligations for any such Direct Costs. The Additional Rent due
pursuant to this Section shall be in addition to the Base Rent due under
Section 3.1 or any other rental, sums or charges due under any other
provision of this Lease.
(d) Within six (6) months following the close of each calendar year,
Landlord shall furnish to Tenant a written statement of reconciliation
itemized on a line item by-line item basis (the "Revised Statement")
-----------------
setting forth (i) Landlord's actual Direct Costs for the Base Year and
relevant Comparison Year, and (ii) the amount of any adjusted sum to be
paid by or credited to Tenant in order to reconcile the sums paid by Tenant
as estimated Additional-Rent during such Comparison Year with the actual
Direct Costs paid by Landlord for such Comparison Year. If the Revised
Statement shows that additional sums are due from Tenant, Tenant shall pay
such sums to Landlord-with the next scheduled payment of Base Rent, or, at
Tenant's option, in
14
<PAGE>
no event later than thirty (30) days from receipt of the Revised Statement.
Alternatively, if a credit is due Tenant, such credit shall be deducted
from the next sums due from Tenant hereunder as Rent; however, if this
Lease has expired or been terminated, such sums shall be refunded to Tenant
within thirty (30) days of Tenant's receipt of the Revised Statement. In
the event this Lease has expired or otherwise has been terminated prior to
the end of a calendar year, Tenant's obligation to pay prorated Additional
Rent shall survive such expiration or termination.
(e) Notwithstanding anything otherwise set forth herein, under no
circumstances shall Tenant's Base Rent be reduced below the amount set
forth in Section 1.2(f). Any reference to Landlord's "actual" Direct Costs
in this Article 3 shall be deemed to include an allowance for an adjustment
to reflect the level of occupancy of the Building to the extent provided
for below.
(f) In the event that Tenant disputes the accuracy of the Revised
Statement, Tenant shall have the right, within the three (3)-year period
("Review Period") following Tenant's receipt of the Revised Statement,
-------------
after reasonable notice and at a reasonable time, to inspect Landlord's
accounting records at the location at which they are maintained and stored
by Landlord in the Los Angeles area. If, following such inspection Tenant
continues to dispute the amount of the Additional Rent, Tenant, or an agent
designated by Tenant, shall be entitled to audit and/or review Landlord's
records to determine the proper amount of its Proportionate Share of Direct
Costs. If such audit or review reveals that Landlord has overcharged
Tenant, then within five (5) days after the results of such audit are made
available to Landlord, Landlord shall reimburse Tenant the amount of such
overcharge plus interest at the Interest Rate (as defined in Section 3.8).
If the audit reveals that Tenant was undercharged, then within five (5)
days after the results of the audit are made available to Tenant, Tenant
shall reimburse Landlord the amount of such undercharge plus interest
thereon at the Interest Rate. If Landlord desires to contest such audit
results, Landlord may do so by submitting the results of the audit to
arbitration pursuant to Article 4 within five (5) days of receipt of the
results of the audit. Such arbitration shall be final and conclusive.
Tenant shall pay the cost of such audit unless Tenant's Proportionate Share
of the Direct Costs, as set forth in the Revised Statement, exceeds by more
than two percent (2%) the actual Direct Costs determined by the
arbitration. Landlord shall be required to maintain records of all Direct
Costs and other Additional Rent for the entirety of the Review Period. The
payment by Tenant of any amounts pursuant to this Article 3 shall not
preclude Tenant from questioning the correctness of any Revised Statement
provided by Landlord at any time during the Review Period,
15
<PAGE>
but the failure of Tenant to object thereto prior to the expiration of the
Review Period shall be conclusively deemed Tenant's approval of the Revised
Statement.
(g) "Direct Costs" shall include both Tax Costs and Operating Costs.
------------
Landlord may divide the Estimated Statement and/or the Revised Statement
into separate statements for Tax Costs and Operating Costs. Additionally,
Landlord may estimate Tax Costs or Operating Costs, or both, on a fiscal
year instead of a calendar year basis and all notices referred to herein
shall be adjusted accordingly. Provided, however, that notwithstanding
anything to the contrary set forth herein, any decreases in Tax Costs will
offset any increases in Operating Costs and any decreases in Operating
Costs will offset any increases in Tax Costs but in no event will Tenant's
Rent obligation under this Lease be less than the amount of the Base Rent
set forth in Section 1.2(f) above.
(h) "Tax Costs" shall mean the sum of the following: any and all real
---------
estate taxes, other similar charges on real property or improvements,
assessments, water and sewer charges, and all other charges assessed,
levied, imposed or becoming a lien upon the Premises, in whole or in part,
the real property upon which the Building is located, the Building or the
appurtenances thereto and the facilities including, without limitation,
hallways, common areas and landscaped areas. The Premises, the Building,
the real property, the appurtenances thereto and the facilities shall
collectively be referred to as the "Project." Tax costs shall include,
-------
without limitation, any charge imposed, levied or assessed on the rents,
issues, profits or income received or derived from the Project by the
United States, the state, county or city in which the Building is located,
or any other local governmental authority, agency or political subdivision.
If at any time any government authority shall impose (i) a tax, assessment,
levy, imposition or charge wholly or partially as a net income, capital or
franchise levy or otherwise on the rents, derived from the Project and/or
(ii) a tax, assessment, levy (including, but not limited to, any municipal,
state or federal levy), imposition or charge measured by or based in whole
or in part upon the Project and imposed upon Landlord and/or (iii) a
license fee measured by the Rent payable under this Lease, then all such
taxes, assessments, levies, impositions or charges shall be deemed to be
included in the Tax Costs. If the assessed valuation or Tax Costs of the
building for the Base Year or any other calendar year during the Lease Term
shall not be based upon a completed building at least ninety-five percent
(95%) occupied with all tenants paying full rent, then the Tax Costs during
such year or years shall be adjusted to reflect the taxes which would have
been payable for such year or years if the Building had been completed and
were ninety-five percent (95%) occupied
16
<PAGE>
with all tenants paying full rent. Tax Costs for each tax year shall be
appropriately prorated to determine the Tax Costs for the subject calendar
year. Notwithstanding anything to the contrary set forth in the Lease, the
amount of Tax Costs for the Base Year and any subsequent comparison year
shall be calculated without taking into account any decreases in real
estate taxes obtained in connection with Proposition 8 or the proposed
Mills Act, and, therefore, the Tax Costs in the Base Year and/or any
subsequent comparison year may be greater than those actually incurred by
Landlord, but shall, nonetheless, be the Tax Costs due under this Lease;
provided that (i) any costs and expenses incurred by Landlord in securing
any Proposition 8 or Mills Act reduction shall not be included in Building
Direct Costs for purposes of this Lease, and (ii) tax refunds under
Proposition 8 and/or the Mills Act shall not be deducted from Tax Costs,
but rather shall be the sole property of Landlord. Landlord and Tenant
acknowledge that this Section 3.4(h) is not intended to in any way affect
(A) the inclusion in Tax Costs of the statutory two percent (2.0%) annual
increase in Tax Costs (as such statutory increase may be modified by
subsequent legislation), or (B) the inclusion or exclusion of Tax Costs
pursuant to the terms of Proposition 13, which shall be governed pursuant
to the terms of Sections 3.4(i)(xxix) below. Notwithstanding anything to
the contrary contained herein, there shall be excluded from Tax Costs (i)
all excess profits taxes, franchise taxes, gift taxes, capital stock taxes,
inheritance and succession taxes, estate taxes, federal and state income
taxes, and other taxes to the extent applicable to Landlord's general or
net income (as opposed to rents, receipts or income attributable to
operations at the Project), (ii) any items included as Operating Costs, and
(iii) any items required to be paid directly by Tenant expressly pursuant
to this Lease.
(i) "Operating Costs" shall mean the sum of the following but subject
---------------
to the exclusions from Operating Costs listed below: any and all expenses,
costs and disbursements paid or incurred by Landlord in connection with the
management, maintenance, operation and repair of the Project, including,
but not limited to, salaries, wages, medical, surgical and general welfare
benefits, pension payments, payroll taxes, worker's compensation, uniforms
and dry cleaning thereof for employees engaged in the management,
operation, maintenance and/or repair of the Building; management and
professional fees for the management and operation of the Building, either
as charged to Landlord by independent management companies or an amount not
exceeding the amount typically charged by independent management companies
if Landlord or an affiliate of Landlord manages the Building but in no
event shall such management fees exceed five percent (5%) of office space
rental income, (it being agreed and understood that such management fee
17
<PAGE>
will be five percent (5%) during the Base Year); attorneys and consultants
retained to provide services relating to the management, maintenance,
operation and repair of the Building provided that the fees, costs and
disbursements for such attorneys and consultants are such that would
normally be-incurred in connection with the management, maintenance,
operation and repair of the Building; the cost of all charges to Landlord
for electricity, air conditioning, steam, water and other utilities
furnished to the Building, including any taxes thereon (provided, however,
that notwithstanding anything else contained in this Section 3.4(i) or in
this Lease to the contrary, all costs for materials, utilities, goods and
services (i) furnished by Landlord which are not required to be furnished
by Landlord and are furnished to less than all of the office tenants in the
Building, (ii) directly paid for by Tenant or other tenants to Landlord and
(iii) if Tenant directly and separately pays Landlord or the provider of
such electric power, then all electric power consumed on the Premises or in
any other tenant space in the Building, shall not be included in Operating
Costs); the cost of all charges for fire and extended coverage, liability,
rent loss and all other insurance for the Building; the cost of all
building and cleaning supplies and materials; the cost of all charges for
interior and exterior landscaping; the cost of all charges for security
services, cleaning, maintenance and service contracts and other services
with independent contractors, the cost of any janitorial, utility or other
services provided by Landlord, including the cost of any of the foregoing
as same relates to the Common Areas (as defined in Section 3.6); and any
other expenses (amortized over the useful life, if applicable) which, in
accordance with generally accepted accounting principles, consistently
applied, would normally be treated as Direct Costs by landlords of
Comparable Buildings. If, during the Base Year or any other calendar year,
the Building is less than ninety-five percent (95%) occupied with all
tenants paying full rent, the Operating Costs shall be adjusted to reflect
the Operating Costs of the Building as though ninety-five percent (95%)
occupied with all tenants paying full rent.
Notwithstanding anything in the definition of Operating Costs in the
Lease to the contrary, Operating Costs shall not include the following,
except to the extent specifically permitted by a specific exception to the
following:
(i) Any ground lease rental (provided, however, that Operating
Costs may include the annual ground lease payments for those areas
where the steps to the parking facility are located and the garbage
cans are kept in the alley so long as such payments are in the Base
Year and Tenant is liable only for its
18
<PAGE>
Proportionate Share of any increases in such payments over the Base
Year);
(ii) Costs of items considered capital repairs, replacements,
improvements and equipment under generally accepted accounting
principles consistently applied or otherwise ("Capital Items");
except for those Capital Items specifically permitted in Section 3.4
(j) below;
(iii) Rentals for items (except when needed in connection with
normal repairs and maintenance of permanent systems) which if
purchased, rather than rented, would constitute a Capital Item which
is specifically excluded in (ii) above (excluding, however, equipment
not affixed to the Building which is used in providing janitorial or
similar services);
(iv) Costs incurred by Landlord for the repair of damage to the
Building, to the extent that Landlord is reimbursed by insurance
proceeds;
(v) Costs, including permit, license and inspection costs,
incurred with respect to the installation of tenant or other
occupants' improvements in the Building or incurred in renovating or
otherwise improving, decorating, painting or redecorating vacant
space for tenants or other occupants of the Building;
(vi) Depreciation, amortization and interest payments, except
as provided herein and except on materials, tools, supplies and
vendor-type equipment purchased by Landlord to enable Landlord to
supply services Landlord might otherwise contract for with a third
party where such depreciation, amortization and interest payments
would otherwise have been included in the charge for such third
party's services, all as determined in accordance with generally
accepted accounting principles, consistently applied, and when
depreciation or amortization is permitted or required, the item shall
be amortized over its reasonably anticipated useful life;
(vii) Marketing costs, including without limitation, leasing
commissions, attorneys' fees in connection with the negotiation and
preparation of letters, deal memos, letters of intent, leases,
subleases and/or assignments, space planning costs, and other costs
and expenses incurred in connection with lease, sublease and/or
assignment negotiations and transactions with present or prospective
tenants or other occupants of the Building;
19
<PAGE>
(viii) Expenses in connection with services or other benefits
which are not offered to Tenant or for which Tenant is charged for
directly but which are provided to another tenant or occupant of the
Building;
(ix) Costs incurred by Landlord due to the violation by
Landlord or any tenant of the terms and conditions of any lease of
space in the Building;
(x) Overhead and profit increment paid to Landlord or to
subsidiaries or affiliates of Landlord for goods and/or services in
or to the Building to the extent the same exceeds the costs of such
goods and/or services rendered by unaffiliated third parties on a
competitive basis;
(xi) Interest, principal, points and fees on debts or
amortization on any mortgage or mortgages or any other debt
instrument encumbering the Building or the Site (except as permitted
in (ii) above);
(xii) Landlord's general corporate overhead and general and
administrative expenses;
(xiii) Any compensation paid to clerks, attendants or other
persons in commercial concessions operated by Landlord or wherever
Tenant is granted its parking privileges and/or all fees paid to any
parking facility operator (on or off Site) (provided, however, that
if Landlord provides such parking to Tenant free of charge or at a
reduced rate, to the extent that Tenant's Proportionate Share of such
expenses exceeds any amount paid by Tenant for such parking, these
expenses may be included as a part of Operating Costs);
(xiv) Rentals and other related expenses incurred in leasing
HVAC systems, elevators or other equipment ordinarily considered to
be Capital Items, except for (1) expenses in connection with making
minor repairs on or keeping Building Systems in operation while minor
repairs are being made and (2) costs of equipment not affixed to the
Building which is used in providing janitorial or similar services;
(xv) Advertising and promotional expenditures, and costs of
signs in or on the Building identifying the owner of the Building or
other tenants' signs;
(xvi) The cost of any electric power used by any tenant in the
Building in excess of the consumption levels applicable to Tenant
under Section 7.2(c), or
20
<PAGE>
electric power costs for which any tenant directly contracts with the
local public service company or of which any tenant is separately
metered or submetered and pays Landlord directly; provided, however,
that if any tenant in the Building contracts directly for electric
power service or is separately metered or submetered during any
portion of the relevant period, the total electric power costs for
the Building shall be "grossed up" to reflect what those costs would
have been had each tenant in the Building used the consumption levels
of electric power applicable to Tenant under Section 7.2(c);
(xvii) Services and utilities provided, taxes attributable to,
and costs incurred in connection with the operation of the retail and
restaurant operations in the Building, except to the extent the
square footage of such operations are included in the rentable square
feet of the Building and do not exceed the services, utility and tax
costs that would have been incurred had the retail and/or restaurant
space been used for general office purposes;
(xviii) Costs incurred in connection with upgrading the Building
to comply with life, fire and safety codes, ordinances, statutes or
other laws in effect prior to the date of this Lease, including,
without limitation, the ADA, including penalties or damages incurred
due to such non-compliance (provided, however, that n compliance"
shall include any "grandfathering" with respect to any such codes,
ordinances, statutes and laws or any waivers thereof legally in
effect as of the date of this Lease);
(xix) Provided that Tenant is not in default in its payment of
Rent, tax penalties incurred as a result of Landlord's failure to
make payments and/or to file any tax or informational returns when
due;
(xx) Costs for which Landlord has been compensated by a
management fee, and any management fees in excess of those management
fees which are normally and customarily charged by landlords of
Comparable Buildings;
(xxi) Costs arising from the gross negligence or willful
misconduct of other tenants or Landlord or its agents, or any
vendors, contractors, or providers of materials or services selected,
hired or engaged by Landlord or its agents including, without
limitation, the selection of Building materials;
(xxii) Notwithstanding any contrary provision of the Lease,
including, without limitation, any
21
<PAGE>
provision relating to capital expenditures, any and all costs arising
from the presence of hazardous materials or substances (as defined by
Applicable Laws (as defined in Section 6.6(a)) in effect on the date
of this Lease) in or about the Premises, the Building or the Project
including, without limitation, hazardous substances in the ground
water or soil, not placed in the Premises, the Building or the
Project by Tenant;
(xxiii) Costs arising from Landlord's charitable or political
contributions;
(xxiv) Costs arising from latent defects in the base, shell or
core of the Building or improvements installed by Landlord or repair
thereof;
(xxv) Costs arising from any mandatory or voluntary special
assessment on the Building or the Site by any transit district
authority or any other governmental entity having the authority to
impose such assessment provided, however, that the Metro Rail
assessment may be included in Direct Costs if at least $15,000.00 for
such assessment is included in the Base Year;
(xxvi) Costs for acquiring sculpture, paintings or other objects
of art;
(xxvii) Costs (including in connection therewith all attorneys'
fees and costs of settlement judgments and payments in lieu thereof)
arising from claims, disputes or potential disputes in connection
with potential or actual claims litigation or arbitrations pertaining
to Landlord and/or the Building and/or the Project, except to the
extent related to other Direct Costs;
(xxviii) Costs associated with the operation of the business of
the partnership or entity which constitutes Landlord as the same are
distinguished from the costs of operation of the Building, including
partnership accounting and legal matters, costs of defending any
lawsuits with any mortgagee (except as the actions of Tenant may be
in issue), costs of selling, syndicating, financing, mortgaging or
hypothecating any of Landlord's interest in the Building, costs of
any disputes between Landlord and its employees (if any) not engaged
in Building operation, disputes of Landlord with Building management,
or outside fees paid in connection with disputes with other tenants;
22
<PAGE>
(xxix) Any increase of, or reassessment in, real property taxes
and assessments in excess of two percent (2%) of the taxes for the
previous year, resulting from any of the following events if they
occur during the first three (3) years of the Term of this Lease: (1)
any sale, transfer, or other change in ownership of the Building or
the Site during the Lease Term or from major alterations,
improvements, modifications or renovations to the Building or the
Site (collectively, "Transfers"), or (2) any action, including,
without limitation, judicial action or action by initiative, which
serves to repeal, modify and/or limit the application of Article
XIIIA of the California Constitution (otherwise known as Proposition
13);
(xxx) Costs of any "tap fees" or any sewer or water connection
fees for the benefit of any particular tenant in the Building;
(xxxi) Costs incurred in connection with any environmental
clean-up, response action, or remediation on, in, under or about the
Premises or the Building, including but not limited to, costs and
expenses associated with the defense, administration, settlement,
monitoring or management thereof;
(xxxii) Any expenses incurred by Landlord for use of any portions
of the Building to accommodate events including, but not limited to
shows, promotions, kiosks, displays, filming, photography, private
events or parties, ceremonies, and advertising beyond the normal
expenses otherwise attributable to providing Building services, such
as lighting and HVAC to such public portions of the Building in
normal Building operations during standard Building hours of
operation;
(xxxiii) Any entertainment, dining or travel expenses for any
purpose;
(xxxiv) Any flowers, gifts, balloons, etc. provided to Tenant
and other tenants (unless given generally to all tenants), employees,
vendors, and prospective tenants;
(xxxv) Any "validated" parking for any other tenant or such
tenant's employees or invitees;
(xxxvi) Any "finders fees" in connection with prospective
tenants or brokerage commissions;
(xxxvii) Any "above-standard cleaning, including, but not
limited to construction cleanup or special
23
<PAGE>
cleanings associated with parties/events and specific tenant
requirements in excess of service provided to Tenant, including
related trash collection, removal, hauling and dumping;
(xxxviii) The cost of any magazine, newspaper, trade or other
subscriptions;
(xxxix) The cost of any training or incentive programs, other
than for tenant life safety information services;
(xl) The cost of any "tenant relations" parties, events or
promotion unless available to all tenants;
(xli) "In-house" legal fees; and
(xlii) Insurance deductibles in excess of (1) any commercially
reasonable amount with respect to any coverage other than earthquake
and (2) $25,000 for the Building in any calendar year for earthquake
coverage, it being agreed and understood that any earthquake
deductible amount shall be amortized over the useful life of the
repairs made subsequent to the earthquake in question.
(j) If, after the Commencement Date, Landlord is required, by any new
or change in rule, regulation or law enacted after the date of this Lease
by any governmental authority ("Building Regulations"), to make any
--------------------
changes, alterations or improvements to the Project (including, without
limitation, electrical, mechanical or other systems or components)
("Required Alterations") (but excluding Required Alterations attributable
----------------------
to (1) Tenant's particular manner of use and occupancy of the Premises for
other than normal general office purposes, and (2) Required Alterations
which would otherwise be "grandfathered" but which are triggered by the
Work performed by Landlord in the Premises or by alterations performed by
Tenant in the Premises, which alterations shall be Tenant's sole
responsibility subject to Section 6.6) all costs relating to such Required
Alterations (including all planning, legal, architectural, engineering,
construction, financing and other costs) fairly characterized as "expenses"
under generally accepted accounting principles, to the extent installed or
paid for by Landlord, shall be fully included in Landlord's Operating
Costs; provided, however, that all of such costs relating to Required
Alterations must be amortized over the useful life of the applicable
Required Alteration. The capital costs described above and below in this
Section 3.4(j) shall include all costs relating to the financing of any
such Required Alterations. Landlord's Operating Costs shall also include
(i) the costs of capital improvements and the related financing costs, if
any, of any equipment, device or
24
<PAGE>
capital improvement purchased or incurred as a labor-saving measure or to
affect other economies in the operation or maintenance of the Building
(provided any such costs are amortized over the useful life and the annual
amortized cost does not exceed the actual cost savings realized and such
savings do not redound primarily to the benefit of any particular tenant)
and (ii) the costs of minor capital improvements, tools or expenditures to
the extent the total cost of same are not in excess of Fifteen Thousand
Dollars ($15,000) in any twelve (12) month period, which Fifteen Thousand
Dollars ($15,000) shall be subject to a CPU adjustment on each anniversary
of the Commencement Date (each, an "Adjustment Date") in accordance with
---------------
Section 17.21 hereof. If Landlord internally finances any such capital
costs specified in this Section 3.4(j), interest shall be added to such
costs at an annual rate equal to the Prime Rate in effect at the start of
the work plus two (2) percentage points. "Prime Rate" as referred to in
----------
this Lease shall be the rate of interest announced, from time-to-time, by
Bank of America National Trust and Savings Association at San Francisco,
California as its prime (or reference) rate; provided, however, if Bank of
America shall cease to announce such a rate, then the Prime Rate shall be
the average rate of interest announced by the three (3) largest banks in
the continental United States as their prime rate.
(k) Notwithstanding anything herein to the contrary, Landlord shall
not recover as Direct Costs more than 100% of the Direct Costs actually
paid by Landlord plus interest imputed as specified in Section 3.4(j).
Direct Costs shall be computed according to the cash or accrual basis of
accounting, as Landlord may elect in accordance with standard and
reasonable accounting principles employed by Landlord.
(l) It is understood that Operating Costs shall be reduced by all
cash discounts, trade discounts, or quantity discounts received by Landlord
or Landlord's managing agent in the purchase of any goods, utilities, or
services in connection with the operation of the Building. Landlord shall
make payments for goods, utilities, or services in a timely manner to
obtain the maximum possible discount consistent with customary business
practices. If Capital Items which are customarily purchased by landlords of
Comparable Buildings are leased by Landlord, rather than purchased, the
decision by Landlord to lease the item in question shall not serve to
increase Tenant's Proportionate Share of Operating Costs beyond that which
would have applied had the item in question been purchased. Tenant's
Proportionate Share of Operating Costs shall be adjusted to reflect any (i)
repair or maintenance costs which are covered by a warranty or service
contract in the Base Year and (ii) extraordinary repair costs in the Base
Year.
25
<PAGE>
(m) In the event any facilities, services or utilities used in
connection with the Building are provided from another building owned or
operated by Landlord or vice versa, the costs incurred by-Landlord in
connection therewith shall be allocated to Operating Costs by Landlord on a
reasonably equitable basis.
(n) In the event Tenant ceases to occupy (but still leases) the
entire Premises or one or more floors of the Premises, Tenant shall receive
a credit against Rent equal to the cost of electricity, janitorial service,
water, HVAC and any other variable expenses not incurred as a result of
such vacancy.
3.5 Utilities.
---------
(a) Tenant shall pay directly for all sewer, water, gas, heat, light,
power, air conditioning, telephone and other utilities and services
supplied to the Premises, which are separately metered, together with any
taxes thereon and any connection fees, and Tenant shall indemnify Landlord
against any liability for the charges therefor. In the event any such
charges are not separately metered to Tenant, such charges shall be
included in the Operating Costs. In the event any such charges are
separately metered to Tenant and not to the other tenants of the Building,
such charges for Tenant and for all other space in the Building except the
Common Areas shall be excluded from Tenant's Proportionate Share of the
Operating Costs.
(b) Tenant shall comply with all rules and regulations which any
governmental agencies or authorities or any utility company may establish
for the use and protection of any such utility and shall comply with
Landlord's reasonable rules and regulations related thereto in accordance
with Section 17.14.
3.6 Common Areas. Landlord hereby grants to Tenant for the common use of
------------
Tenant, its customers, employees, agents and invitees together with other
tenants of the Building, their customers, employees, agents and invitees
throughout the Lease Term, the right to use the common areas within the
Building. The term "Common Area," as used herein, shall refer to all portions of
-----------
the Building (except for the areas specifically leased to Tenants), including,
but not limited to, all aisles, corridors, stairways, entrances, sidewalks,
roofs, atriums, elevators, and all utility, mechanical, services, systems,
fixtures and facilities used in common by the tenants of the Building and
situated within or servicing the Building. The Common Areas shall be subject to
the exclusive control and management of Landlord and Landlord shall have the
right to establish reasonable rules and regulations with respect to the Common
Areas, to modify, change and rescind the same, from time to time, provided such
rules and regulations shall not be established or enforced in a
26
<PAGE>
manner that unreasonably diminishes Tenant's rights to the Common Area or
materially adversely affects Tenant's access to the Premises or to the parking
facilities, and to enforce-the same under the terms of this Lease, and Tenant
covenants and agrees to abide by and conform with, and Tenant shall use
reasonable efforts to cause its employees, agents, tenants, sublessees,
assignees, representatives, guests, licensees and invitees to abide by and
conform with, such rules and regulations subject to Section 17.14. Landlord
shall have the right to use the Common Areas for charitable or commercial events
at reasonable times without obligation or compensation to Tenant provided such
uses do not materially interfere with Tenant's access to or use of the Premises
or its quiet enjoyment thereof. Landlord shall not alter the Common Area in such
a manner as to materially interfere with the conduct of Tenant's business on the
Premises or Tenant's access to the Premises or to the parking facilities without
Tenant's consent which Tenant may withhold in its sole discretion.
3.7 Late Charges. Landlord and Tenant agree that (a) Tenant's failure to
------------
pay Rent promptly shall cause Landlord to incur unanticipated costs in the
nature of processing and accounting charges and penalties on mortgage or trust
deed payments (b) the late payment by Landlord of amounts owed to Tenant under
this Lease will cause Tenant to incur damages, including administrative costs,
loss of,use of the overdue funds and other costs. The exact amount of such costs
are impractical or extremely difficult to ascertain. Accordingly, if the party
who was entitled to receive a payment ("Payee") does not receive any such
-----
payment within five (5) days following the delivery by Payee of notice to the
other party ("Payor") that such payment is overdue, Payor shall pay Payee a late
-----
charge ("Late Charge") equal-to five percent (5%) of the overdue amount. The
-----------
parties agree that such Late Charge represents a fair and reasonable estimate of
the costs Payee will incur by reason of such late payment.
3.8 Interest on Past Due Obligations. Any amount owed by one party to the
--------------------------------
other which is not paid when due shall bear interest from the date such amount
was due until the date such amount is paid in an amount equal to the Prime Rate
in effect at the time plus two (2) percentage points, but in no event to exceed
the maximum legal rate from the due date of such payment (the "Interest Rate").
-------------
Interest shall not be payable on Late Charges. A payment of interest on such
past due obligations shall not excuse or cure any default by either party under
this Lease.
3.9 Abatement of Rent When Tenant Is Prevented From Using Premises. In
--------------------------------------------------------------
the event that Tenant is prevented from using, and does not use, the Premises or
any substantial portion thereof, for five (5) consecutive business days or
fifteen (15) business days in any twelve (12) month period (the "Eligibility
-----------
Period") as a result of (i) any damage or destruction to the Premises and/or the
- ------
Building, (ii) any repair, maintenance or alteration
27
<PAGE>
performed by Landlord after the Commencement Date and required or permitted by
the Lease or any use of the Building or Common Areas for Filming (as described
in Section 17.18), which substantially interferes with Tenant's use of the
Premises, the Center (subject to Landlord's right to provide Substitute Parking
as described in Section 17.3) and/or the Building, (iii) any failure by Landlord
to provide Tenant with services or access to the Premises, the Center (subject
to Landlord's right to provide Substitute Parking as described in Section 17.3)
and/or the Building, (iv) because of an eminent domain proceeding or (v) because
of the presence of hazardous substances in, on or around the Premises, the
Building or the Project which poses a health risk to occupants of the Premises,
then Tenant's Rent shall be abated or reduced, as the case may be, after
expiration of the Eligibility Period for such time that Tenant continues to be
so prevented from using, and does not use, the Premises or a portion thereof, in
the proportion that the rentable area of the portion of the Premises that Tenant
is prevented from using, and does not use, bears to the total rentable area of
the Premises. However, in the event that Tenant is prevented from conducting,
and does not conduct, its business in any substantial portion of the Premises
for a period of time in excess of the Eligibility Period, and the remaining
portion of the Premises is not sufficient to allow Tenant to effectively conduct
its business therein, and if Tenant does not conduct its business from such
remaining portion, then for such time after expiration of the Eligibility
Period during which Tenant is so prevented from effectively conducting its
business therein, the Rent for the entire Premises shall be abated; provided,
however, if Tenant reoccupies and conducts its business from any portion of the
Premises during such period, the Rent allocable to such reoccupied portion,
based on the proportion that the rentable area of such reoccupied portion of the
Premises bears to the total rentable area of the Premises, shall be payable by
Tenant from the date such business operations commence. If Tenant's right to
abatement occurs because of an eminent domain taking and/or because of damage or
destruction to the Premises, the Building and/or Tenant's property, Tenant's
abatement period shall continue until Tenant has been given sufficient time, and
sufficient access to the Premises and/or the Building, to rebuild such portion
it is required to rebuild, to install its property, furniture, fixtures, and
equipment to the extent the same shall have been removed and/or damaged as a
result of such damage or destruction and/or eminent domain taking and to move in
over a weekend.
In the event that Rent is abated pursuant to this Section 3.9 for longer
than a period of one hundred eighty (180) consecutive days (the "180 Day
-------
Period"), Landlord shall have the right, exercisable by written notice to Tenant
given within thirty (30) days after the end of the 180 Day Period ("Landlord's
----------
Termination Notice") to terminate the Lease upon that date which is thirty (30)
- ------------------
days after Tenant receives Landlord's Termination Notice; provided, however,
that if at least ten (10) days prior to the scheduled termination date Tenant
provides Landlord with
28
<PAGE>
written notice waiving Tenant's right to further rent abatement on account of
the specific event which initially triggered the; rent a basement, then this
Lease shall not terminate but shall continue in full force and effect. To the
extent Tenant is entitled to abatement without regard to the Eligibility Period,
because of an event covered by Articles 8 [Damage or Destruction] and 9
[Condemnation] of the Lease, then the Eligibility Period shall not be
applicable.
ARTICLE 4: ARBITRATION.
----------------------
With the exception of the arbitration provisions which shall specifically
apply to the determination of the Fair Market Rate, as set forth in the
provisions of Section 2.5, and the right of either party to obtain temporary or
preliminary injunctive relief, this Article 4 contain the sole and exclusive
method, means and procedure to resolve any and all disputes or disagreements,
including whether any particular matter constitutes, or with the passage of time
would constitute, an event of default ("Event of Default"). The parties hereby
----------------
irrevocably waive any and all rights to the contrary and shall at all times
conduct themselves in strict, full, complete and timely accordance with the
provisions of this Article 4. Any and all attempts to circumvent the provisions
of this Article 4 shall be absolutely null and void and of no force or effect
whatsoever. As to any matter submitted to arbitration to determine whether it
would, with the passage of time, constitute an Event of Default, such passage of
time shall not commence to run until any such affirmative determination, so long
as it is simultaneously determined that the challenge of such matter as a
potential Event of Default was made in good faith, except with respect to the
payment of money. With respect to the payment of money, such passage of time
shall not commence to run only if the party which is obligated to make the
payment does in fact make the payment to the other party. Such payment can be
made "under protest," which shall occur when such payment is accompanied by a
good-faith notice stating why the party has elected to make a payment under
protest. Such protest will be deemed waived unless the subject matter identified
in the protest is submitted to arbitration, within sixty (60) days of the date
on which the parties agree that there is a dispute or disagreement or reach an
impasse with respect thereto, as set forth in the following:
(a) Arbitration Panel. Within ninety (90) days after delivery of
-----------------
written notice ("Notice of Dispute") of the existence and nature of any
-----------------
dispute given by any party to the other party, and unless otherwise
provided herein in any specific instance, the parties shall each: (i)
appoint one (1) lawyer actively engaged in the licensed and full-time
practice of law, specializing in real estate, in the County of Los Angeles
for a continuous period immediately preceding the date of delivery
("Dispute Date") of the Notice of Dispute of not less than ten (10) years,
--------------
but who has at no time ever represented or acted on behalf of any of the
29
<PAGE>
parties, and (ii) deliver written notice of the identity of such lawyer and
a copy of his or her written acceptance of such appointment and
acknowledgment of and agreement to be bound by the time constraints and
other provisions of this Article 4 ("Acceptance") to the other parties
----------
hereto. In the event that any party fails to so act, such arbitrator shall
be appointed pursuant to the same procedure that is followed when agreement
cannot be reached as to the third arbitrator. Within ten (10) days after
such appointment and notice such lawyers shall appoint a third lawyer
(together with the first two (2) lawyers, "Arbitration Panel") of the same
-----------------
qualification and background and shall deliver written notice of the
identity of such lawyer and a copy of his or her written Acceptance of such
appointment to each of the parties. Neither Landlord nor Tenant may consult
with the third lawyer, directly or indirectly, to determine the third
lawyer's position on the issue which is the subject of the dispute. In the
event that agreement cannot be reached on the appointment of a third lawyer
within such period, such appointment and notification shall be made as
quickly as possible by any court of competent jurisdiction, by any
licensing authority, agency or organization having jurisdiction over such
lawyers, by,any professional association of lawyers in existence for not
less than ten (10) years at the time of such dispute or disagreement and
the geographical membership boundaries of which extend to the County of Los
Angeles or by any arbitration association or organization in existence for
not less than ten (10) years at the time of such dispute or disagreement
and the geographical boundaries of which extend to the County of Los
Angeles, as determined by the party giving such Notice of Dispute and
simultaneously confirmed in writing delivered by such party to the other
party; Any such court, authority, agency, association or organization shall
be entitled either to directly select such third lawyer or to designate in
writing, delivered to each of the parties, an individual who shall do so.
In the event of any subsequent vacancies or inabilities to perform among
the Arbitration Panel, the lawyer or lawyers involved shall be replaced in
accordance with the provisions of this Article 4 as if such replacement was
an initial appointment to be made under this Article 4 within the time
constraints set forth in this Article 4, measured from the date of notice
of such vacancy or inability, to the person or persons required to make
such appointment, with all the attendant consequences of failure to act
timely if such appointed person is a party hereto.
(b) Duty. Consistent with the provisions of this Article 4, the
----
members of the Arbitration Panel shall utilize their utmost skill and shall
apply themselves diligently so as to hear and decide, by majority vote, the
outcome and resolution of any dispute or disagreement submitted to the
Arbitration Panel as promptly as possible, but in any event on or before
the expiration of thirty (30)
30
<PAGE>
days after the appointment of the members of the Arbitration Panel. None of
the members of the Arbitration Panel shall have any liability whatsoever
for any acts or omissions performed or omitted in good faith pursuant to
the provisions of this Article 4.
(c) Authority. The Arbitration Panel shall (i) enforce and interpret
---------
the rights and obligations set forth in the Lease, (ii) fix and establish
any and all rules as it shall consider appropriate in its sole and absolute
discretion to govern the proceedings before it, including any and all rules
of discovery, procedure and/or evidence (Section 1283.05 of the California
Code of Civil Procedure being deemed applicable to any such proceedings),
and (iii) make and issue any and all orders, final or otherwise, and any
and all awards, as a court of competent jurisdiction sitting at law or in
equity could make and issue, and as it shall consider appropriate in its
sole and absolute discretion, including the awarding of monetary damages,
the awarding of reasonable attorneys' fees and costs to the prevailing
party as determined by the Arbitration Panel and the issuance of injunctive
relief. If the party against whom the award is issued complies with the
award, within the time period established by the Arbitration Panel, then no
Event of Default will be deemed to have occurred, unless the Event of
Default pertained to the non-payment of money by Tenant or Landlord, and
Tenant or Landlord failed to make such payment under protest.
(d) Appeal. The decision of the Arbitration Panel shall be final and
------
binding, may be confirmed and entered by any court of competent
jurisdiction at the request of any party and may not be appealed to any
court of competent jurisdiction or otherwise except upon a claim of fraud
on the part of the Arbitration Panel. The Arbitration Panel shall retain
jurisdiction over any dispute until its award has been implemented, and
judgment on any such award may be entered in any court having appropriate
jurisdiction.
(e) Compensation. Each member of the Arbitration Panel (i) shall be
------------
compensated for any and all services rendered under this Article 4 at a
rate of compensation equal to the sum of (i) Two Hundred Fifty Dollars
($250.00) per hour and (ii) the sum of Ten Dollars ($10.00) per hour
multiplied by the number of full years of the expired Lease Term, plus
reimbursement for any and all expenses incurred in connection with the
rendering of such services, payable in full promptly upon conclusion of the
proceedings before the Arbitration Panel. Such compensation and
reimbursement shall be borne by the nonprevailing party as determined by
the Arbitration Panel in its sole and absolute discretion.
ARTICLE 5: INDEMNITY; LEGAL COSTS
---------------------------------
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5.1 Indemnity. Tenant shall indemnify and hold Landlord, Landlord's agents,
---------
and employees harmless from any and all costs, claims or liabilities to the
extent arising from: (a) Tenant's use of the Premises; (b) the conduct of
Tenant's business or any conduct done or permitted by Tenant to be done in or
about the Premises; (c) all liens and claims of lien arising by reason of any
alteration or improvement of the Premises by Tenant or arising from any other
cause related to the Premises, the Building or Tenant's use thereof; (d) any
breach or default in the performance of Tenant's obligations under this Lease;
(e) any misrepresentation or breach of warranty by Tenant under the Lease; or
(f) other acts or omissions which relate to the Premises or the Building and
which amount to gross negligence or willful misconduct of Tenant, or any of its
agents, employees, invitees or licensees. Tenant shall defend Landlord against
any such cost, attorneys' fees, claim or liability at Tenant's expense with
counsel reasonably acceptable to Landlord or, at Landlord's election, Tenant
shall reimburse Landlord for any legal fees or costs incurred by Landlord in
connection with any such claim. As a material part of the consideration to
Landlord, Tenant hereby assumes all risk of damage to property or injury to
persons in or about the Premises arising from any cause, and Tenant hereby
waives all claims in respect thereof against Landlord, except for any claim
arising out of Landlord's gross negligence or willful misconduct.
Notwithstanding any provisions of Articles 5 and 13 to the contrary, Tenant
shall not be required to indemnify and hold Landlord harmless from any loss,
cost, liability, damage or expense, including, but not limited to, penalties,
fines, attorneys' fees or costs (collectively, "Claims"), to any person,
------
property or entity to the extent resulting from the acts or omissions or willful
misconduct of Landlord or its agents, contractors, servants, employees or
licensees, in connection with Landlord's activities in the Building or the
Project (except for damage to the Work and Tenant's personal property, fixtures,
furniture and equipment in the Premises or in the Building), and Landlord hereby
so indemnifies and holds Tenant harmless from any such Claims, including but not
limited to Claims arising from any noncompliance of the Building and/or the
Project with any laws relating to disabled access, or Claims arising from the
presence in the Premises and/or the Building of hazardous substances, except to
the extent such hazardous substances were placed in or on the Premises, the
Building and/or the Project by Tenant or its agents, contractors, servants,
employees, licensees or invitees. Landlord's and Tenant's respective indemnity
hereunder will survive the expiration of the Term of, or any termination of the
Lease. Provided, further, to the extent any damage or repair obligation is
covered by insurance obtained by Landlord as part of Operating Costs, but is not
covered by insurance obtained by Tenant, then Tenant shall be relieved of its
indemnity obligation up to the amount of the insurance proceeds which Landlord
is entitled to receive.The provisions of this Lease are not intended to and
shall not relieve any insurance carrier of its obligations under policies
required to be carried by Landlord or Tenant,
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respectively, pursuant to the Lease. If Landlord or Tenant has been or at any
time hereafter is granted the right to self insure or if either party breaches
this agreement by its failure to carry required insurance, such failure shall
automatically be deemed to be a covenant and agreement by Landlord or Tenant,
respectively, to self-insure to the full extent of such required coverage, with
full waiver of subrogation. All of the provisions set forth herein are subject
to the provisions of Section 13.5.
5.2 Legal Proceedings. Landlord and Tenant agree that if any action or
-----------------
arbitration for breach of or to enforce the provisions of this Lease is
commenced, the court or arbitrator in such action shall award to the party in
whose favor a judgment is entered, a reasonable sum as attorneys' fees and
costs. Such attorneys, fees and costs shall be paid by the losing party in such
action or arbitration. Each party (the "First party") also shall indemnify the
-----------
other party (the "Other party") against and hold such Other party harmless from
-----------
all reasonable costs and expenses, demands and liability incurred by such Other
party if such Other party becomes or is made a party to any claim or action (a)
instituted by the First party, or by license of or agreement with the First
party; (b) for foreclosure of any lien for labor or material furnished to or for
the First party; (c) otherwise arising out of or resulting from any act or
transaction of the First party or such other person; or (d) necessary to protect
the Other party's interest under this Lease in a bankruptcy proceeding, or other
proceeding under Title 11 of the United States Code, as amended. This provision
shall survive the termination of the Lease.
5.3 Landlord's Consent. In the event that Landlord shall consent to an
------------------
assignment or sublease pursuant to Article 10 (Assignment and Subletting),
Tenant shall pay Landlord's reasonable attorneys' fees incurred in connection
with Tenant's request for Landlord's consent, the aggregate of which fees shall
in no event exceed Five Hundred Dollars ($500.00) per each assignment or
sublease provided, however, that such amount shall be subject to a CPU
adjustment on each anniversary of the Commencement Date (each an "Adjustment
Date") in accordance with Section 17.21 hereof.
ARTICLE 6: USE OF PROPERTY
--------------------------
6.1 Permitted Use. Tenant shall use the Premises for the Permitted Use
-------------
set forth in Article 1 and shall not use or permit the Premises to be used for
any other purpose.
6.2 Restrictions on Use.
-------------------
Tenant shall not do or permit anything to anyone which will in any way
unreasonably obstruct or interfere with the rights of other tenants or occupants
of the Building or injure them. Tenant shall not use or allow the Premises to be
used for any unlawful purpose, nor shall Tenant cause or maintain or permit any
33
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nuisance in, on or about the Premises. Tenant shall not bring or keep anything
in, on or about the Premises which will increase the existing rate of or affect
any fire or other insurance upon the Building or any of its contents. Tenant
shall not use or allow any part of the Premises to be used for the manufacturing
or sale of food or beverages or for the manufacture or retail or auction of
merchandise or goods or property of any kind, or as a school or a classroom.
Tenant shall not use or allow any part of the Premises to be used for storage of
any of the foregoing, except for storage of minor amounts for Tenant's own use
on the Premises. Tenant shall not commit or allow to be committed any waste in,
on or about the Premises. Tenant shall not place any signs on the Building
without Landlord's prior written consent. Tenant shall not conduct business or
any other activity on or about the Premises of such a nature as to place an
unreasonable and excessive burden upon the public or common areas of the
Building.
6.3 Compliance With Governmental and Insurance Regulations; Assumption of
---------------------------------------------------------------------
Risk of Noncompliance. Tenant shall not use or occupy the Premises in violation
- ---------------------
of the Certificate of Occupancy of the Building or the Premises or of any law,
ordinance or regulation or other directive of any governmental authority having
or exercising jurisdiction over the Building. If any governmental license or
permit shall be required for the proper and lawful conduct of Tenant's business
in the Premises, Tenant shall, at its sole cost and expense and except as
otherwise provided in this Lease, procure and at all times maintain such license
or permit and shall at all times comply with the terms and conditions thereof.
6.4 Landlord's Access. Landlord may enter the Premises at reasonable
-----------------
times to show the Premises to potential buyers, investors or tenants or other
parties, or for any other reasonable purpose Landlord deems necessary. Landlord
shall give reasonable prior notice of such entry, except in the case of' an
emergency. Landlord may place customary "For Sale" or "For Lease" signs on the
Premises or the Building; provided, however, that Landlord may only place such
signs on the Premises upon receipt of Tenant's consent, which shall not be
unreasonably withheld. Landlord shall at all times have and retain a master key
which will unlock all doors in, upon and about the Premises excluding vaults and
safes). Landlord shall conduct its entry in such a manner as to cause minimal
interference with the conduct of Tenant's business or operations in the
Premises. Notwithstanding the foregoing, Tenant may designate certain areas of
the Premises as "Secured Areas" should Tenant require such areas for the purpose
of securing certain valuable property or confidential information. Landlord may
not enter such Secured Areas except in the case of emergency or in the event of
a Landlord inspection, in which case Landlord shall provide Tenant with ten (10)
days' prior written notice of the specific date and time of such Landlord
inspection.
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6.5 Hazardous Materials.
-------------------
(a) Landlord represents and warrants that to Landlord's knowledge as
of the date hereof, no Hazardous Materials (as hereinafter defined) are
being Handled (as hereinafter defined) upon, about, above or beneath the
Premises or any portion of the Building, except as has been disclosed in
writing to Tenant as of the date hereof and to the extent that any such
Hazardous Materials are discovered to exist, Landlord will, at its sole
cost and expense (and without any deduction from any applicable tenant
improvement allowance if done as part of Landlord's initial tenant
improvement work in the Premises), promptly take all actions required by
any federal, state or local governmental agency or political subdivision,
which requirements arise from the Handling of Hazardous Materials upon,
about, above or beneath the Premises or any portion of the Building.
Notwithstanding the foregoing, if Landlord in good faith determines that
the cost to Landlord of complying with the prior sentence would cost more
than twenty-five percent (25%) of the functional replacement cost of the
Building, then provided that Landlord concurrently terminates its leases
with all of the other tenants in the Building, Landlord may terminate this
Lease by providing Tenant with written notice of its election to so
terminate, which notice shall be given within thirty (30) days after
becoming aware of the anticipated amount of the cost of the compliance, and
such termination shall be effective thirty (30) days after Tenant's receipt
of Landlord's written notice. No Hazardous Materials shall be Handled upon,
about, above or beneath the Premises or any portion of the Building by or
on behalf of Landlord or Tenant (or Tenant's subtenants or assignees), or
their respective contractors, clients, officers, directors, employees,
agents, or invitees. Any such Hazardous Materials so Handled by Tenant
shall be known as Tenant's Hazardous Materials. "Notwithstanding the
foregoing, normal quantities of those Hazardous Materials customarily used
in the conduct of general administrative and executive office activities
(e.g., copier fluids and cleaning supplies) may be used and stored at the
Premises or elsewhere at the Building, but only in compliance with all
applicable Environmental Laws, as defined herein.
(b) Notwithstanding the obligation of Tenant to indemnify Landlord
pursuant to this Lease, Tenant shall, at its sole cost and expense,
promptly take all actions required by any federal, state or local
governmental agency or political subdivision, which requirements or
necessity arises from the Handling of Tenant's Hazardous Materials up-on,
about, above or beneath the Premises or any portion of the Building. Such
actions shall include, but not be limited to, as such specifically relate
to Tenant's Handling of Tenant's Hazardous Materials, the investigation of
the environmental condition of the Premises or any portion of
35
<PAGE>
the Building, the preparation of any feasibility studies or reports and the
performance of any cleanup, remedial, removal or restoration work. Tenant
shall take all actions necessary to restore the Premises or any portion of
the Building to the condition existing prior to the introduction of
Tenant's Hazardous Materials, notwithstanding any less stringent standards
or remediation allowable under applicable Environmental Laws except as
otherwise provided in this Lease. Tenant shall nevertheless obtain
Landlord's written approval prior to undertaking any actions required by
this Section, which approval shall not be unreasonably withheld so long as
such actions would not potentially have a material adverse long-term or
short-term effect on the Premises or any portion of the Building.
(c) "Environmental Laws" means and includes all now and hereafter
existing statutes, laws, ordinances, codes, regulations, rules, rulings,
orders, decrees, directives, policies and requirements by any federal,
state or local governmental authority regulating, relating to, or imposing
liability or standards of conduct concerning public health and safety or
the environment.
(d) "Hazardous Materials" means: (a) any material or substance: (i)
which is defined or becomes defined as a "hazardous substance," "hazardous
waste", "infectious waste", "chemical mixture or substance," or "air
pollutant." under Environmental Laws; (ii) containing petroleum, crude oil
or any fraction thereof which is liquid at standard conditions of
temperature and pressure; (iii) containing polychlorinated biphenyls
(PCBs); (iv) containing asbestos; (v) which is radioactive; or (b) any
other pollutant or contaminant or hazardous, toxic, flammable or dangerous
chemical, waste, material or substance, as all such terms are used in their
broadest sense, and defined, regulated or become regulated by Environmental
Laws, or which cause a nuisance upon or waste to the Premises or any
portion of the Building.
(e) "Handle", "Handled", or "Handling" shall mean any installation,
handling, generation, storage, treatment, use, disposal, discharge,
release, manufacture, refinement, presence, migration, emission, abatement,
removal, transportation, or any other activity of any type in connection
with or involving Hazardous Materials.
6.6 Compliance with Laws and Other Requirements. Tenant shall comply with
-------------------------------------------
the following laws and other requirements:
(a) Except as otherwise provided herein, Tenant shall cause the
Premises to comply in all material respects with all laws, ordinances,
regulations and directives of any governmental authority having
jurisdiction including without limitation any certificate of occupancy and
any law,
36
<PAGE>
ordinance, regulation, covenant, condition or restriction affecting the
Building or the Premises which in the future may become applicable to the
Premises (collectively, "Applicable Laws").
---------------
(b) Tenant shall not use the Premises, or knowingly permit the
Premises to be used, in any manner which: (i) violates any Applicable Law;
(ii) causes or is reasonably likely to cause damage to the Building or the
Premises; (iii) violates a requirement or condition of any fire and
extended insurance policy covering the Building and/or the Premises; or
increases the cost of such policy; (iv) constitutes or is reasonably likely
to constitute a material nuisance, annoyance or inconvenience to other
tenants or occupants of the Building or its equipment, facilities or
systems; (v) unreasonably or unduly interferes with, or is reasonably
likely to unreasonably or unduly interfere with the transmission or
reception of microwave, television, radio, telephone, or other
communication signals by antennae or other facilities located in the
Building; or (vi) violates the Rules and Regulations of the Building, as
defined in Section 17.14.
Landlord hereby warrants to Tenant that (i) the Building and (ii)
that portion of the Premises already constructed and to be constructed by
Landlord or Landlord's contractor, have been or will be constructed and
operated in a-first-class manner, free of all asbestos containing materials
("ACM") and in full compliance with all Applicable Laws existing at the
later of the time of construction or the date of this Lease, in order to
make the Premises, the Building and the site upon which the Building is
situated (the "Site") suitable for business offices. For the purposes of
this Section 6.6, Landlord shall be deemed to be in full compliance with
all Applicable Laws even if such compliance includes any n grandfathering"
or waivers applicable to the Premises and/or the Building with respect to
any Applicable Law. The term "Applicable Laws" will be deemed to include
any Environmental Laws. Notwithstanding anything contained in the Lease to
the contrary, Landlord will be fully responsible for making all alterations
and repairs to the Premises and the Building at its cost, which shall not
be included as Operating Costs, (1) required in order to comply with the
Americans with Disabilities Act of 1990, 42 U.S.C. 12101 et seq., as
amended as of the date of this Lease (the "ADA"), (2) required to remove
any and all ACM discovered at any time to have existed in the Premises as
of the Commencement Date, or (3) resulting from or necessitated by the
failure by Landlord and/or Landlord is contractor to comply with the
Applicable Laws as of the date of this Lease, or from Landlord's and/or
Landlord's contractor's utilization of Hazardous Materials as defined by
Applicable Laws as of the date of this Lease in violation of such
Applicable Laws or which could pose a health risk to
37
<PAGE>
occupants of the Premises. Notwithstanding the foregoing, if Landlord in
good faith determines that the cost to Landlord of complying with the prior
sentence would cost more than twenty-five percent (25%) of the functional
replacement cost of the Building, then provided that Landlord concurrently
terminates its leases with all of the other tenants in the Building,
Landlord may terminate this Lease by providing Tenant with written notice
of its election to so terminate which notice shall be given within thirty
(30) days after becoming aware of the anticipated amount of the cost of the
compliance, and such termination shall be effective thirty (30) days after
Tenant's receipt of Landlord's written notice. With respect to any costs
that Tenant incurs in connection with the construction of the Work or any
Alterations (as defined in Section 7.3), which Tenant would not have had to
incur if the Building and Premises, to the extent already constructed by
Landlord, were constructed in full compliance with Applicable Laws in
existence on the date of this Lease, then Landlord shall reimburse Tenant
for such increased costs; provided, however, that to the extent any such
compliance work would not have been required but for the tenant improvement
work to be performed in the Premises, then the cost of such compliance work
shall be paid by Tenant. Otherwise, Landlord shall, subject to Tenant's
repair obligations set forth in the Lease, maintain and operate the
Building in a first class manner, keep the Building Structure and the
Building Systems (as such terms are defined in Section 7.2(a)) in first
class condition and repair, maintain a safe and healthful environment in
the Building, and operate, maintain, and provide services and security to,
the Building in a manner comparable to other comparable office buildings in
the vicinity of the Building ("Comparable Building"), the cost of which
(except for certain specified capital improvements and repairs, as more
specifically set forth in Section 3.4(i) above) shall be included in
Operating Costs, or paid for directly by Tenant (for maintenance and repair
of the Premises only to the extent required by the Lease) if not normally
included in Operating Costs.
6.7 Compliance by Other Tenants. Landlord shall use commercially
---------------------------
reasonable efforts (including, without limitation, unlawful detainer proceedings
where commercially reasonable efforts would require such) at least comparable to
those that would be used by other landlords of Comparable Buildings, to secure
the compliance by other tenants of the Building with all use restrictions
affecting the Building if the non-compliance with such use restrictions by other
tenants could materially and adversely affect Tenant; provided, however, that
Landlord shall not, so long as Landlord is using-commercially reasonable
efforts, be liable to Tenant for any other occupant's or tenant's failure to
conduct itself in accordance with the provisions of this Article 6, and Tenant
shall not be released or excused from
38
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the performance of any of its obligations under the Lease solely because of any
such failure.
ARTICLE 7: MAINTENANCE, REPAIRS, AND ALTERATIONS
------------------------------------------------
7.1 Tenant's Obligations.
--------------------
(a) Tenant, at its sole cost and expense, shall keep the Premises
other than the Building Structure and Building Systems (as those terms are
hereinafter defined) in good order, condition and repair including, without
limitation (i) decorations, fixtures, interior walls and interior surfaces
of exterior walls, (ii) ceilings, interior windows, doors, plate glass and
entrances within the Premises and (iii) any plumbing, heating, air
conditioning and electrical facilities within the Premises which are not
part of the Building Systems and are intended solely for the use of Tenant.
Tenant shall keep the Premises at all times in a sanitary condition,
reasonably free from waste or debris. Subject to the provisions of Section
13.5 and to the extent not covered by the insurance on the Building
required to be carried by Landlord hereunder and paid for by Tenant as part
of Direct Expenses, all damage or injury to the Premises or the Building
caused by the acts or negligence of Tenant, its agents or employees, shall-
be promptly repaired by Tenant, at Tenant's sole cost and expense, to the
reasonable satisfaction of Landlord.
(b) All of Tenant's obligations to maintain and repair shall be
accomplished at Tenant's sole expense except to the extent reimbursed by
Landlord's insurance proceeds. If Tenant fails to maintain and repair the
Premises, then Landlord, on ten (10) days' prior notice (except in the case
of emergency whereupon no notice shall be required) may enter the Premises
and perform such repair and maintenance and Tenant shall reimburse Landlord
for all actual and reasonable costs incurred immediately upon demand
therefor as Additional Rent.
(c) Tenant hereby waives any and all rights under Sections 1941
through 1942, inclusive, of the California Civil Code and hereby waives, to
the extent permissible, any rights under other statutes or laws now or
hereafter in effect which are contrary to the obligations of Tenant under
this Lease, or which place obligations upon Landlord in addition to those
provided in this Lease.
7.2 Landlord's Obligations.
----------------------
(a) Landlord shall repair and maintain in first-class condition the
structural portions of the Building including the foundation, floor/ceiling
slabs, roof, curtain wall, exterior glass and mullions, columns, beams,
shafts (including elevator shafts), stairs, parking garage,
39
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stairwells, escalators, elevator cabs, plazas, art work, sculptures,
washrooms, mechanical, electrical and telephone closets, and all Common
Areas and public areas (collectively, "Building Structure"), and the HVAC
(including primary and secondary loops connected to the core), mechanical,
electrical, life safety, plumbing, sprinkler systems (connected to the
core) and sanitary systems ("Building Systems") except to the extent such
maintenance or repairs are caused in whole or in part by the act, neglect,
fault or omission of Tenant, its agents, servants, employees or invitees
(except to the extent the cost of any such maintenance or repair is covered
by the insurance required to be carried by Landlord hereunder and paid for
by Tenant as part of Direct Expenses) or by Tenant's use of the Premises
for other than normal and customary business operations in which event
Tenant shall pay to Landlord the cost of such maintenance or repairs upon
demand. Landlord shall also repair and maintain the Common Areas of the
Building the costs for which shall be considered Operating Costs to the
extent permitted in Article 3, unless such maintenance or repairs are
caused in whole, or in part, (i) by the act, neglect, fault or omission of
Tenant, its agents, servants, employees or invitees, in which event Tenant
shall pay to Landlord the cost of such maintenance or repairs upon demand
(except to the extent the cost of any such maintenance or repair is covered
by the insurance required to be carried by Landlord hereunder and paid for
by Tenant as part of Direct Expenses), or (ii) by Tenant's use of the
Premises for other than normal and customary business operations. Except as
otherwise provided in this Lease, if the need for repair is not reasonably
apparent, Landlord shall not be liable for failure to make any such repairs
or to perform any maintenance unless such failure shall persist for an
unreasonable time after written notice of the need of such repairs or
maintenance is given to Landlord by Tenant or any other tenant or occupant
of the Building. Except as provided in Section 7.5, Tenant waives the
right to make repairs at Landlord's expense under any law or regulation now
or hereafter in effect.
(b) Landlord agrees to furnish to the Premises, (i) during the hours
of 7:00 A.M. to 6:00 P.M. Monday through Friday and 8:00 A.M. to 1:00 P.M.
on Saturday ("Business Hours") except for recognized national holidays,
heat, ventilation and air conditioning ("HVAC") sufficient for the
comfortable occupancy of the Premises, (ii) twenty four (24) hours a day,
seven (7) days a week, every day of the year, elevator service, electric
current sufficient for typical general office use for normal lighting and
office machines, and water for lavatory and drinking purposes, all in such
reasonable quantities as in the judgment of Landlord is necessary for the
comfortable occupancy of the Premises, and (iii) janitorial services at
least comparable to that
40
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provided in Comparable Buildings five (5) days per week. Landlord shall not
be liable for any stoppage or interruption of any such services caused by
riot, strike, labor disputes, breakdowns, accidents, necessary repairs or
other cause. Except as specifically provided herein, Tenant agrees to pay
for all utilities and other services utilized by Tenant for all overtime or
additional building services furnished to Tenant not uniformly furnished to
all tenants of the Building in accordance with Section 7.2(c) below.
(c) In the event Tenant requires utilities (other than electricity),
HVAC and/or services in excess of what Landlord is required to provide
during Business Hours (as defined in Section 7.2(b)) or at times other than
during Business Hours, Landlord agrees to provide such extra utilities and
services, and Tenant agrees to reimburse to Landlord its actual costs of
providing such extra utilities and services, without a profit to.Landlord
but with, if applicable, a reasonable overhead and administration charge
(which may include a depreciation factor if appropriate) by Landlord
("Actual Costs").
(d) Landlord shall provide, twenty-four (24) hours per day, seven (7)
days per week, every day of the year, onsite Building security equipment,
personnel, procedures and systems. Subject to Landlord's reasonable
approval, Tenant shall be entitled, at its sole cost, to install its own
security systems for the Premises, which shall be located within the
Premises and which shall not interfere with the Building Systems. Upon
request, Landlord's security guards will, after normal business hours,
accompany any employee or visitor of Tenant from the Building to the on-
site garage and to the surface parking lots within one (1) block of the
Building.
7.3 Alterations, Additions, and Improvements.
----------------------------------------
Following the date on which Tenant first occupies the Premises, Tenant
shall have the right to make alterations, additions, or improvements
("Alterations") to the Premises upon receipt of Landlord's prior written
consent, which will not be withheld unless the making or installation of the
Alterations (i) adversely affects the Building Structure, (ii) adversely affects
the Building Systems, (iii) affects the appearance of any part of the Building
visible from outside the Premises, (iv) does not comply with Applicable Laws, or
(v) unreasonably interferes with the normal and customary business operations of
the other tenants in the Building (individually and collectively, a "Design
Problem"). Landlord may, as a condition to the installation thereof and if such
request is made concurrently with the approval of the plans and specifications
therefor, require Tenant to remove any such Alterations at its sole cost and
expense, it being agreed and understood that in no event will Tenant have any
obligation to remove any such Alterations unless, in Landlord's
41
<PAGE>
reasonable judgment, they do not qualify as standard office-type tenant
improvements. Notwithstanding anything to the contrary set forth herein, Tenant
shall not be required to obtain Landlord's prior consent with respect to any
strictly cosmetic work performed within the Premises by Tenant, such as the
installation of wall coverings or floor coverings or non-structural alterations
which do not exceed Twenty-Five Thousand Dollars ($25,000), which are not
visible from the outside of the Premises and which comply with all Rules and
Regulations, Building Regulations and Landlord's structural, engineering and
design requirements for the Building. Tenant shall give Landlord at least ten
(10) days' prior written notice of the commencement of any work on the Premises.
In no event shall Tenant be required to provide payment and performance bonds in
connection with any such Alteration work so long as the financial condition of
Tenant is satisfactory. Landlord may elect to record and post notices of non-
responsibility on the Premises or the Building. Upon Landlord's written request
Tenant shall promptly remove any Alterations constructed in violation of this
Section. All Alterations shall be accomplished at Tenant's sole cost and expense
in a good and workmanlike manner, in conformity with all applicable laws and
regulations, by a contractor and subcontractors chosen by Tenant and reasonably
approved by Landlord and shall be the property of Landlord. As soon as
reasonably practicable, Tenant shall provide Landlord with copies of all
construction contracts, and proof of payment for all labor and materials.
Promptly upon completion of any such work, Tenant shall provide Landlord with
any "as built. plans. Tenant shall promptly pay when due all claims for labor
and materials furnished to the Premises.
7.4 Condition Upon Termination. Upon termination of this Lease, Tenant
--------------------------
shall surrender the Premises to Landlord, broom clean and in the same condition
as received except for ordinary wear and tear which Tenant was not otherwise
obligated to remedy under any provisions of this Lease and except for the
Alterations (subject to Section 7.3) and Work in the Premises and except for any
casualty damage, if any, for which Tenant is not responsible. In addition,
Landlord may require Tenant to remove any Alterations (whether or not made with
Landlord's consent) upon the termination of the Lease Term and may, subject to
Section 7.3. require Tenant to restore the Premises to its original condition at
Tenant's expense; provided, however, that Landlord must elect to have Tenant
remove such Alterations by written notice to Tenant at the time Tenant requests
Landlord's consent to such Alterations for which Landlord's prior consent is
required and Tenant shall have no obligation to remove (a) any Alterations to
the extent the same are customary and typical for general business offices; and
(b) any Work installed in the Premises. Tenant may remove Tenant's machinery,
trade fixtures or equipment ("Personal Property") which can be removed without
leaving the Premises or the Building in a materially damaged condition. Tenant
shall repair, at Tenant's sole expense, any damage to the Premises caused by the
installation or removal of
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any such Personal Property. Any of Tenant's Personal Property not so removed
shall, at the option of Landlord, upon five (5) business days' notice to Tenant
(unless Tenant effectuates the removal within such five (5) business day period)
automatically become the property of Landlord upon the expiration or termination
of the Lease. Thereafter, Landlord may retain or dispose of in any manner the
Personal Property not so removed, without any liability whatsoever to Tenant.
7.5 Right to Repair. Notwithstanding any provision set forth in this
---------------
Lease to the contrary, if Tenant provides written or oral notice to Landlord of
an event or circumstance which requires the action of Landlord with respect to
repair and/or maintenance and which, in Tenant's reasonable judgment,
constitutes an emergency, and Landlord fails to provide such action within a
reasonable period of time, given the circumstances, after the receipt of such
notice, but in any event not later than twenty-one (21) days after receipt of
such notice, then Tenant may proceed to take the required action upon delivery
of an additional ten (10) business days' notice to Landlord specifying that
Tenant is taking such required action (provided, however, that neither of the
notices shall be required in the event of an emergency which threatens life or
where there is imminent danger to property and provided, further, that Tenant
shall use its good faith efforts to take only those actions which, in Tenant's
reasonable judgment, are required to resolve the emergency), and if such action
was required under the terms of the Lease to be taken by Landlord and was not
taken by Landlord within such ten (10) day period, then Tenant shall be entitled
to prompt reimbursement by Landlord of Tenant's reasonable costs and expenses in
taking such action plus interest thereon at the Interest Rate as defined in
Section 3.8. In the event Tenant takes such action, and such work will affect
the Building Structure and/or the Building Systems, Tenant shall use only those
contractors used by Landlord in the Building for work on such Building Structure
or Building Systems unless such contractors are unwilling or unable to perform;
or timely and competitively perform, such work, in which event Tenant may
utilize the services of any other qualified contractor which normally and
regularly performs similar work in Comparable Buildings. Furthermore, if
Landlord does not deliver a detailed written objection to Tenant within thirty
(30) days after receipt of an invoice by Tenant of its costs of taking action
which Tenant claims should have been taken by Landlord, and if such invoice from
Tenant sets forth a reasonably particularized breakdown of its costs and
expenses in connection with taking such action on behalf of Landlord, then
Tenant shall be entitled to deduct from Rent payable by Tenant under the Lease,
the amount set forth in such invoice. If, however, Landlord delivers to Tenant,
within thirty (30) days after receipt of Tenant's invoice, a written objection
to the payment of such invoice, setting forth with reasonable particularity
Landlord's reasons for its claim that such action did not have to be taken by
Landlord pursuant to the terms of the Lease or that the charges
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are excessive (in which case Landlord shall pay the amount it contends would not
have been excessive), then Tenant shall not then be entitled to such deduction
from Rent, but as Tenant's sole remedy, Tenant may proceed to claim a default by
Landlord or, if elected by either Landlord or Tenant, the matter shall proceed
to resolution by the selection of an arbitrator to resolve the dispute, which
arbitrator shall be selected and qualified pursuant to the procedures set forth
in Article 4, and whose costs shall be paid for by the losing party, unless it
is not clear that there is a "losing party", in which event the costs of
arbitration shall be shared equally. If Tenant prevails in the arbitration, the
amount of the award which shall include interest at the Interest Rate (from the
time of each expenditure by Tenant until the date Tenant receives such amount by
payment or offset and attorneys' fees and related costs) may be deducted by
Tenant from the rents next due and owing under the Lease.
ARTICLE 8: DAMAGE OR DESTRUCTION
--------------------------------
8.1 Damage to Premises.
------------------
(a) If the Premises or the Building are wholly or partially damaged
or destroyed by an insured casualty or a casualty required to be insured
against by Landlord pursuant to this Lease, occurring more than twelve (12)
months prior to the Expiration Date which casualty renders the Premises
totally or partially inaccessible or unusable by Tenant in the ordinary
conduct of Tenant's business, then:
(i) Repairs Which Can Be Completed Within Nine (9) Months. Within
-----------------------------------------------------
twenty (20) days of notice to Landlord of such damage or destruction,
Landlord shall provide Tenant with notice of its determination of whether
the damage or destruction can be repaired within nine (9) months of such
damage or destruction without the payment of overtime or other premiums. If
all repairs to such Premises or Building can, in Landlord's judgment, be
completed within nine (9) months following the date of such damage or
destruction without the payment of overtime or other premiums, Landlord
shall, at Landlord's expense, repair the same and this Lease shall remain
in full force and effect and a proportionate reduction of the Rent shall be
allowed Tenant for such portion of the Premises as shall be rendered
inaccessible or unusable to Tenant, and which is not used by Tenant, during
the period of time that such portion is unusable or inaccessible and not
used by Tenant; provided, however, that if any such repair is not commenced
by Landlord within ninety (90) days after the occurrence of such damage or
destruction or is not substantially completed by Landlord within twelve
(12) months after the occurrence of such damage or destruction, then in
either such event Tenant may, at its option, upon written notice to
Landlord, given within the thirty (30) day period after the expiration of
the ninety (90) day period or twelve (12) month period, as the
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case may be, elect to terminate this Lease as of the date of the occurrence
of such damage or destruction. Notwithstanding the foregoing, in the event
that (A) the damage or destruction to the Premises or the Building is
greater than or equal to twenty-five percent (25%) of the functional
replacement cost of the Building, and (B) Landlord cancels its leases with
all other tenants in the Building, then Landlord shall have the right to
terminate this Lease upon written notice to Tenant, given within thirty
(30) days after the date of the occurrence of such damage or destruction.
(ii) Repairs Which Cannot Be Completed Within Nine (9) Months. If
--------------------------------------------------------
all such repairs to the Building and Premises cannot, in Landlord's
judgment, be completed within nine (9) months following the date of notice
to Landlord of such damage or destruction without the payment of overtime
or other premiums, Landlord shall notify Tenant of such determination
within forty-five (45) days of notice to Landlord of such damage or
destruction and either Landlord or Tenant may, at its option, upon written
notice-to the other party given within sixty (60) days after the occurrence
of such damage or destruction, elect to terminate this Lease as of the date
of the occurrence of such damage or destruction. In the event that neither
Landlord nor Tenant elect to terminate the Lease in accordance with the
foregoing provisions, then Landlord shall, at Landlord's expense, repair
such damage or destruction, and in such event, this Lease shall continue in
full force and effect but the Rent shall be proportionately reduced as
hereinabove provided in Section 8.1(a)(i); provided, however, that if any
such repair is not commenced by Landlord within ninety (90) days after the
occurrence of such damage or destruction or is not substantially completed
by Landlord within twelve (12) months after the occurrence of such damage
or destruction, then in either such event Tenant may, at its option, upon
written notice to Landlord, given within the thirty (30) day period after
the expiration of the ninety (90) day period or twelve (12) month period,
as the case may be, elect to terminate this Lease as of the date of the
occurrence of such damage or destruction.
(b) If, at any time prior to the expiration or termination of this
Lease, the Premises or the Building is totally or partially damaged or
destroyed from a casualty, the loss to Landlord from which is not fully
covered by insurance maintained by Landlord or for Landlord's benefit (or
required to be maintained by Landlord pursuant to Article 13), which damage
renders the Premises inaccessible or unusable to Tenant in the ordinary
course of its business, Landlord may, at its option, upon written notice to
Tenant within sixty (60) days after notice to Landlord of the occurrence of
such damage or destruction, elect to repair or restore such damage or
destruction, or Landlord
45
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may elect to terminate this Lease so long as (a) the uninsured portion of
the damage or destruction is equal to or greater than ten percent (10%) of
the functional replacement cost of the Building, (b) Landlord makes a
decision not to commence such repairs within two (2) years of the
occurrence of such damage and destruction, and (c) Landlord terminates
every other lease in the Building which was affected by the casualty. If
Landlord elects to repair or restore such damage or destruction, this Lease
shall continue in full force and effect but the Rent shall be
proportionately reduced as provided in Section 8.1(a)(i). If Landlord does
not elect by notice to Tenant to repair such damage the Lease shall
terminate. Notwithstanding the foregoing, if all repairs to the Premises or
the Building cannot, in Landlord's reasonable judgment, be completed within
nine (9) months following the date of such damage or destruction without
the payment of overtime or other expenses; then either Landlord or Tenant
may at its option, upon written notice to the other party given within
sixty (60) days after the occurrence of such damage or destruction, elect
to terminate this lease as of the date of the occurrence of such damage or
destruction.
(c) Notwithstanding anything to the contrary contained in Sections
8.1(a) and (b) above, if the Premises or the Building is wholly or
partially damaged or destroyed within the final twelve (12) months of the
Term of this Lease, or, if an applicable renewal option has been exercised,
during the last year of any renewal term, so that Tenant shall be prevented
from using the Premises for thirty (30) consecutive days due to such damage
or destruction, then either Landlord or Tenant may, at its option, by
notice to the other party within sixty (60) days after the occurrence of
such damage or destruction, elect to terminate the Lease.
(d) Notwithstanding any contrary provision herein, and regardless of
whether caused by casualty, Landlord shall not be required to repair any
damage to property with respect to which Tenant is required to maintain
property insurance pursuant to Section 13.3 below. Tenant hereby waives the
provisions of Section 1932, subdivision 2, and Section 1933, subdivision 4,
of the Civil Code of California, and any similar law, statute or ordinance
now or hereafter in effect.
8.2 Abatement of Rent. In the event of damage or destruction to the
-----------------
Premises or Building, Rent payable hereunder shall be abated in accordance with
Section 8.1(a)(i) above. Except for abatement of rent and except as otherwise
provided in this Lease, if any, Tenant shall have no claim against Landlord for
any damage suffered by reason of (i) any damage to the Premises, (ii) such
repairs, or (iii) any inconvenience, interruption or annoyance caused by such
damage or repair.
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ARTICLE 9: CONDEMNATION
-----------------------
If all or any portion of the Premises is taken under the power of eminent
domain or sold under the threat of that power (all of which are called
"Condemnation"), this Lease shall terminate as to the part taken or sold on the
------------
date the condemning authority takes title or possession, whichever occurs first.
If the remaining portion of the Premises is not reasonably usable for the
conduct of Tenant's business, either Landlord or Tenant may-terminate this
Lease, and if more than twenty percent (20%) of rentable floor area of the
Building excluding the Premises is taken, Landlord may terminate this Lease, in
either event as of the date the condemning authority takes title or possession,
by delivering written notice to the other within ten (10) days after receipt of
written notice of such taking. If neither Landlord nor Tenant terminates this
Lease, this Lease shall remain in effect as to the portion of the Premises not
taken, except that the Base Rent shall be reduced in proportion to the reduction
in the rentable floor area of the Premises. Any Condemnation award or payment
shall be distributed in the following order; (a) first, to any mortgagee or
beneficiary under a deed of trust encumbering the Premises, the amount of its
interest in the Premises; (b) second, to Tenant, only the amount of any award
specifically designated for loss of or damage to Tenant's trade fixtures or
removable personal property; and (c) third, to Landlord, the remainder of such
award, whether as compensation for reduction in the value of the leasehold, the
taking of the fee, or otherwise; provided, however, that nothing contained in
this Article 9 shall be deemed to give Landlord any interest in or to require
Tenant to assign to Landlord any award made to Tenant for (a) the taking of
Tenant's Personal Property, (b) interruption of or damage to Tenant's business,
or (c) Tenant's unamortized cost of the Work to the extent paid for by Tenant.
Furthermore, Tenant is granted the right to recover from the condemning
authority fifty percent (50%) of the "Bonus Value" of the leasehold estate which
shall be equal to the difference between the rental rate payable under the Lease
and the rate established by the condemning authority as an award for
compensation purposes, together with any amount Tenant is able to obtain from
the condemning authority attributable to Tenant's relocation expenses. If this
Lease is not terminated, Landlord shall repair any damage to the Premises caused
by the Condemnation, except that Landlord shall not be obligated to repair any
damage for which Tenant has been reimbursed by the condemning authority. If the
severance damages received by Landlord are not sufficient to pay for such repair
and the amount of such deficiency is in excess of ten percent (10%) of the
functional replacement value of the Building, then Landlord shall have the right
to either (i) terminate this Lease (provided, however, that Landlord terminate
all other leases in the Building) upon written notice to Tenant given within
thirty days after the date that Landlord determines, or should have able to
determine, that the severance damages received by Landlord would be insufficient
to the degree set forth above, (ii) make such repair at Landlord's expense.
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ARTICLE 10: ASSIGNMENT AND SUBLETTING
-------------------------------------
10.1 Landlord's Consent Required. No portion of the Premises or of
---------------------------
Tenant's interest in this Lease may be acquired by any other person or entity,
whether by assignment, mortgage, sublease, transfer, operation of law, or act of
Tenant, without Landlord's prior written consent, except as provided in Sections
10.2 and 10.6. Landlord shall grant or withhold its consent as provided in
Section 10.4. Any attempted transfer without consent shall be void. If Tenant is
a partnership, any cumulative transfer of fifty percent (50%) or more of the
limited partnership interests or any transfer of a general partners interest
shall require Landlord's consent.
10.2 Tenant Affiliate. Tenant may assign this Lease or sublease the
----------------
Premises, without Landlord's consent, upon notice to Landlord, to any entity
which controls, is controlled by or is under common control with Tenant, or to
any entity resulting from the acquisition of, merger of or consolidation with
Tenant ("Tenant's Affiliate"). In the case of an assignment to a Tenant's
------------------
Affiliate, any Tenant's Affiliate shall assume in writing all of Tenant's
obligations under this Lease.
10.3 No Release of Tenant. No transfer permitted by this Article 10
--------------------
whether with or without Landlord's consent, shall release Tenant or change
Tenant's primary liability to pay Rent and to perform all other obligations of
Tenant under this Lease. Landlord's acceptance of Rent from any other person is
not a waiver of any provision of this Article 10. Consent to one transfer is not
a consent to any subsequent transfer. If Tenant's transferee defaults under this
Lease, Landlord may proceed directly against Tenant without pursuing remedies
against the transferee.
10.4 Landlords Consent. Tenant's request for Landlord's consent to any
-----------------
transfer described in Section 10.1 shall be accompanied by a written statement
setting forth the details of the proposed transfer, including the name, business
and financial condition of the prospective transferee, the nature of the
proposed transferees business to be carried on in the Premises, financial
details of the proposed transfer (e.g., the term of and rent and security
deposit payable under any assignment or sublease), and any other information
Landlord reasonably deems relevant. Landlord shall have the right to reasonably
withhold consent; it shall not be deemed unreasonable for Landlord to withhold
consent to any proposed transfer if the proposed transferee is not sufficiently
credit-worthy to discharge the obligations of Tenant under this Lease, intends
to occupy the Premises for purposes other than the Permitted Use, or is unable
to fully and completely comply with all of the terms and provisions of this
Lease.
10.5 Rent or Other Premiums. As a condition to Landlord's consent to any
----------------------
subletting, assignment or other transfer of
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Tenant's interest in this Lease, Landlord shall be entitled to receive fifty
percent (50%) of any Profits (as defined below) actually received by Tenant
pursuant to such approved assignment or sublease. Whenever Landlord is entitled
to share in any excess income resulting from an assignment or sublease of the
Premises, the following shall constitute the definition of "Profits": the gross
-------
revenue received from the assignee or sublessee during the sublease term or
during the assignment, with respect to the space covered by the sublease or the
assignment ("Transferred Space") less: (a) the gross revenue paid to Landlord
-----------------
by Tenant during the period of the sublease term or during the assignment with
respect to the Transferred Space; (b) the gross revenue as to the Transferred
Space paid to Landlord by Tenant for all days the Transferred Space was vacated
from the date that Tenant first vacated the Transferred Space until the date the
assignee or sublessee was to pay Rent; (c) any improvement allowance or other
economic concession (planning allowance, moving expenses, etc.), paid by Tenant
to sublessee or assignee; (d) brokers' commissions paid by Tenant; (e)
attorneys' fees paid by Tenant; (f) lease takeover payments paid by Tenant; (g)
costs of advertising the space for sublease or assignment paid by Tenant; (h)
unamortized cost of initial and subsequent improvements to the Premises by
Tenant; and (i) any other costs actually paid by Tenant in assigning or
subletting the Transferred Space; provided, however, under no circumstance shall
Landlord be paid any Profits until Tenant has recovered all the items set forth
in subparts (a) through (i) for such Transferred Space, it being understood that
if in any year the gross revenues, less the deductions set forth in subparts (a)
through (i) above (the "Net Revenues"), are less than any and all costs actually
------------
paid in assigning or subletting the affected space (collectively, "Transaction
-----------
Costs"), the amount of the excess Transaction Costs shall be carried over to the
- -----
next year and then deducted from net Revenues with the procedure repeated until
a Profit is achieved. Landlord's consent to any such assignment or sublease
shall be effected on forms approved by Landlord and its counsel.
10.6 Occupancy By Others. Tenant may allow any person or company which is
-------------------
a client or customer of Tenant or which is providing service to Tenant or one of
Tenant's clients to occupy certain portions of the Premises without such
occupancy being deemed an assignment or subleasing as long as no new demising
walls are constructed to accomplish such occupancy and as long as such
relationship was not created as a subterfuge to avoid the obligations set forth
in this Article 10.
10.7 Recognition Agreement. To the extent that Tenant enters into an
---------------------
assignment of the Lease, Landlord, if it grants its consent to such assignment
as provided in this Article 10, shall also simultaneously execute and deliver a
recognition agreement pursuant to which Landlord shall agree that in the event
Tenant defaults under the Lease, the assignment shall be recognized as a direct
lease between Landlord and the assignee on the terms and conditions of the
assignment.
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ARTICLE 11: DEFAULTS AND REMEDIES
---------------------------------
11.1 Covenants and Conditions. Time is of the essence in the performance
------------------------
of all covenants and conditions contained in this Lease.
11.2 Defaults. Tenant shall be in default under this Lease upon the
--------
occurrence of any of the following:
(a) If Tenant fails to pay Rent or other charges required to be paid
by Tenant, when such failure continues for five (5) business days following
notice to Tenant from Landlord. Any such notice shall be in addition to,
and not in lieu of, any notice required under Section 1161 of the
California Code of Civil Procedure.
(b) If Tenant fails to perform any of Tenant's nonmonetary
obligations under this Lease for a period of twenty (20) days after written
notice from Landlord; provided that if more than twenty (20) days are
required to complete such performance, Tenant shall not be in default if
Tenant commences such performance within the twenty (20) day period and
thereafter diligently pursues its completion. Tenant and Landlord each
shall have, and under no circumstances shall Tenant or Landlord be deemed
to have waived, the rights set forth in Sections 1174 and 1179 of the
California Civil Code of Procedure except that Tenant's rights with respect
to personal property shall be limited to those provided in Section 7.4 of
this Lease and Landlord shall have all rights specified in said Section
7.4.
(c) If Tenant makes a general assignment or general arrangement for
the benefit of creditors; (ii) if a petition for adjudication of bankruptcy
or for reorganization or rearrangement is filed by or against Tenant and is
not dismissed within sixty (60) days; (iii) if a trustee or receiver is
appointed to take possession of substantially all of Tenant's assets
located at the Premises or of Tenant's interest in this Lease and
possession is not restored to Tenant within sixty (60) days; or (iv) if
substantially all of Tenant's assets located at the Premises or of Tenant's
interest in this Lease is subjected to attachment, execution or other
judicial seizure which is not discharged within sixty (60) days. If a court
of competent jurisdiction determines that any of the acts described in this
subsection (e) is not a default under this Lease, and a trustee is
appointed to take possession (or if Tenant remains a debtor in possession)
and such trustee or Tenant transfers Tenant's interest hereunder, then
Landlord shall receive, as Additional Rent, the difference between the rent
(or any other consideration) paid in connection with such assignment or
sublease and the rent payable by Tenant hereunder.
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11.3 Remedies. Upon the occurrence of any default by Tenant, Landlord
--------
shall have the following rights and remedies at any time thereafter, with or
without notice or demand and without limiting Landlord in the exercise of any
right or remedy which Landlord may have:
(a) The right to declare this Lease ended and terminated, to reenter
the Premises, to remove and eject all persons therefrom, to take possession
thereof, and to enjoy the Premises together with all additions, alterations
and improvements thereto, and Tenant shall thereupon have no further claim
thereon or thereunder;
(b) The right, even though Landlord may have reentered the Premises
without having declared this Lease ended and terminated, to thereafter
elect to terminate this Lease and all of the rights of Tenant in and to the
Premises;
(c) The rights available to Landlord under Section 1951.4 of the
California Civil Code, which Section is incorporated herein by this
reference as though set forth in full;
(d) In the event Landlord elects its rights and remedies under
Section 1951.4, Landlord may relet the Premises, or any part thereof, for
the account of Tenant for the remainder of the Lease Term and any extension
terms (if such extension was properly exercised by Tenant), at such rental,
and upon such other provisions as Landlord, in its reasonable discretion,
may deem advisable. Landlord shall have the right, in reletting the
Premises, to make reasonable alterations and repairs to the Premises, at
Tenant's expense. In the event of any such reletting, Tenant shall pay to
Landlord any unpaid Rent and all other amounts payable hereunder to the
date of such reletting, and shall also pay upon demand all of the costs and
expenses of recently, alterations, repairs, and reletting, including, but
not limited to, attorneys' fees and leasing commissions. Thereafter, upon
the first day of each calendar month during the remainder of the Lease
Term, Tenant shall pay to Landlord an amount equal to the excess, if any,
of the Base Rent and Additional Rent over the amount received by Landlord.
In the event Landlord, upon such reletting, receives amounts in excess of
the Rent hereunder, such excess shall be held by Landlord and applied in
payment of future Rent, as the same may become due and payable hereunder,
or applied to other obligations due to the Landlord from Tenant;
(e) Should Landlord elect to terminate this Lease under the
provisions of Sections 11.3(a) or (b) hereof, Landlord shall have all of
the rights and remedies of a landlord provided in Section 1951.2 of the
California Civil
51
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Code, which Section is incorporated herein by this reference as though set
forth in full. In computing Landlord's damages pursuant to Sections
1951.2(1) and (2) of the Civil Code, the "worth at the time of award" shall
be computed by allowing interest at the Interest Rate (as defined in
Section 3.8). The amount of damages which Landlord may recover in the event
of such termination shall include the worth at the time of award of the
amount by which the unpaid rent for the balance of the Lease Term after the
time of award exceeds the amount of rental loss that Tenant proves could be
reasonably avoided, computed in accordance with Civil Code Section
1951.2(b), plus reasonable attorneys' fees and leasing commissions;;
(f) In the event of default, all of Tenant's fixtures, furniture,
equipment, improvements, additions, alterations and other personal property
shall remain on the Premises, and Landlord shall have the right to remove
and store such property at Tenant's sole cost and expense, or take
exclusive possession of same and to use same, rent or charge free, until
all defaults are cured, or at its option, to require Tenant to forthwith
remove same;
(g) Tenant hereby waives all claims and demands against Landlord for
damages or loss arising out of or in connection with any reentering and
taking possession of the Premises as provided in this Article;
(h) In the event of the exercise by Landlord of any one or more of
its rights and remedies under this Article, Tenant hereby expressly waives
any and all rights of redemption or relief from forfeiture under California
Code of Civil Procedure Section 1174 or 1179, or granted by or under any
present or future laws, and further releases Landlord, from any and all
claims, demands and liabilities by reason of such exercise by Landlord; and
(i) The various rights, options, elections, powers and remedies
reserved to Landlord herein shall be-cumulative and, except as otherwise
provided by statute, Landlord may pursue any or all such rights and
remedies, whether at the same time or otherwise, and no single right shall
be deemed to be exclusive of any of the others or of any right or priority
allowed by law or in equity. No delay or omission of Landlord to exercise
any right or remedy shall be construed as a waiver of any such right or
remedy or waiver of any default by Tenant. In addition to the foregoing,
Landlord may exercise any other remedy now or hereafter available to a
landlord against a defaulting tenant under the laws of the State of
California.
11.4 Landlord's Cure of Tenant's Default. If at any time during the Lease
-----------------------------------
Term, Tenant fails, refuses or neglects to perform any of its obligations under
this Lease beyond the
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applicable notice and such period provided in Section 11.2 above, Landlord shall
have the right, but not the obligation, to perform such obligation at the
expense and for the account of Tenant. The amount of any monies so expended or
obligations so incurred by Landlord, together with interest thereon at the
Interest Rate (as defined in Section 3.8), shall be repaid to Landlord within
five (5) days of Tenant's receipt of Landlord's statement.
ARTICLE 12: PROTECTION OF LENDERS
---------------------------------
12.1 Subordination. The provisions of this Section 12.1 and the
-------------
obligations created herein are expressly subject to and conditioned upon
Landlord performing all of Landlord's obligations pursuant to Section 12.6 below
and Tenant's receipt of a commercially reasonable non-disturbance agreement as
described therein and in accordance with the terms thereof where required
thereunder. Landlord shall have the right to subordinate this Lease to any
ground lease, deed of trust or mortgage encumbering the Premises, any advances
made on the security thereof and any renewals, modifications, consolidations,
replacements or extensions thereof, whenever made or recorded. However, Tenant's
right to quiet possession of the Premises during the Lease Term shall not be
disturbed if Tenant pays the Rent and performs all of Tenant's obligations under
this Lease and is not otherwise in default. If any ground lessor, beneficiary or
mortgagee elects to have this Lease prior to the lien of its deed of trust or
mortgage and gives written notice thereof to Tenant, this Lease shall be deemed
prior to such deed of trust or mortgage whether this Lease is dated prior or
subsequent to the date of such deed of trust or mortgage or the date of
recording thereof. Landlord represents and warrants that, as of the execution
and delivery of this Lease, there is no ground lease, deed of trust or mortgage
encumbering the Premises or the Building.
12.2 Attornment. The provisions of this Section 12.2 and the obligations
----------
created herein are expressly subject to and conditioned upon Landlord performing
all of Landlord's obligations pursuant to Section 12.6 below and Tenant's
receipt of a commercially reasonable non-disturbance agreement as described
therein and in accordance with the terms thereof where required thereunder. If
Landlord's interest in the Premises is acquired by any ground lessor,
beneficiary under a deed of trust, mortgagee, or purchaser at a foreclosure
sale, Tenant shall attorn to the transferee of or successor to Landlord's
interest in the Premises and recognize such transferee or successor as Landlord
under this Lease. Tenant waives the protection of any statute or rule of law
which gives or purports to give Tenant any right to terminate this Lease or
surrender possession of the Premises upon the transfer of Landlord's interest.
12.3 Signing of Document. Each party hereunder shall sign and deliver any
-------------------
instrument or documents necessary or appropriate to evidence any such non-
disturbance, attornment or subordination
53
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or agreement to do so requested in accordance with this Article 12. Each party
agrees to do so within a reasonable period of time after written request
therefor. Tenant shall not be required to sign or deliver any such instrument or
document providing for such attornment or subordination unless such instrument
or document includes non-disturbance protection consistent with Section 12.1
above and 12.6.
12.4 Estoppel Certificates.
---------------------
(a) Upon the written request of either party hereunder ("Requesting
----------
Party"), the other party hereunder ("Certifying Party") shall execute,
----- ----------------
acknowledge and deliver to the Requesting Party a written statement
substantially in the form of Exhibit E attached hereto and incorporated
---------
herein by this reference ("Estoppel Certificate") certifying: (i) that
--------------------
none of the terms or provisions of this Lease have been changed (or if they
have been changed, stating how they have been changed); (ii) that this
Lease has not been canceled or terminated; (iii) the last date of payment
of the Base Rent and other charges and the time period covered by such
payment; (iv) that the Requesting Party is not in default under this Lease
(or, if the Requesting Party is claimed to be in default, stating why); and
(v) such other matters as may be reasonably requested. The Certifying Party
shall deliver such Estoppel Certificate to the Requesting Party within
twenty (20) days after the Requesting Party's request therefor. For
purposes of this Section 12.4, an Estoppel Certificate shall not be deemed
to be commercially reasonable if it amends or modifies any of the
provisions of this Lease or attempts to clarify them. Any such Estoppel
Certificate may be given to any prospective purchaser or encumbrancer of
the Premises or any prospective assignee or sublessee of the Premises
(collectively, "Third Parties"); provided, however, Tenant may not request
-------------
an Estoppel Certificate until Landlord has approved the subletting or
assignment giving rise to the request, to the extent Landlord's approval is
required. Such Third Parties may rely conclusively upon such statement as
true and correct, subject to the provisions and time frames set forth in
Section 12.4(b) below.
(b) If the Certifying Party does not deliver such Estoppel
Certificate to the Requesting Party within three (3) business days after
the Certifying Party's receipt of notice from the Requesting Party given
after such twenty (20) day period, the Requesting Party, and any Third
Party, may conclusively presume and rely upon the following facts: (i) that
the terms and provisions of this Lease have not been changed except as
otherwise represented by the Requesting Party; (ii) that this Lease has not
been canceled or terminated except as otherwise represented by the
Requesting Party; (iii) that not more than one month's Base Rent or other
charges have been paid in advance; and (iv)
54
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that the Requesting Party is not in default under the Lease. In such event,
the Certifying Party shall be estopped from denying the truth of such
facts.
12.5 Tenant's Financial Condition. Tenant shall deliver to any lender or
----------------------------
prospective purchaser designated by Landlord any financial statements reasonably
required by such lender or purchaser to the extent that Tenant has any such
requested financial statements to facilitate the financing or refinancing or
sale of the Premises. Tenant represents, warrants and covenants to Landlord that
each such financial statement is a true and accurate statement as of the date of
such statement. All financial statements shall be confidential and shall be used
only for the purposes set forth herein.
12.6 Non-Disturbance Agreement.
-------------------------
Landlord agrees to provide Tenant with commercially reasonable non-
disturbance, subordination and attornment agreement(s) ("non-disturbance
---------------
agreement(s)") substantially in the form of Exhibit D attached to this Lease and
- ------------ ---------
made a part hereof, in favor of Tenant from any ground lessors, mortgage holders
or lien holders (each, a "Superior Mortgagee") of Landlord who later come(s)
------------------
into existence at any time prior to the expiration of the Term of the Lease, as
it may be extended, in consideration of, and as a condition precedent to,
Tenant's agreement to be bound by Lease Sections 12.1 and 12.2. Said non-
disturbance agreements shall be in recordable form and may recorded at Tenant's
election and expense.
All non-disturbance agreements shall acknowledge that, and Landlord hereby
independently agrees that, to the extent Landlord has failed to fulfill its
obligations with respect to the payment of any (i) Allowance for initial
construction, or the cost incurred by Tenant of constructing or completing the
Work which was required to be constructed or completed by Landlord at Landlord's
expense, or (ii) unpaid arbitration or court award, ("Key Obligations"), Tenant
---------------
may deduct the amount of the Key Obligation which Landlord has not paid,
together with interest thereon at the Interest Rate, from the Rent next coming
due and payable, from time to time, under the Lease.
In addition to the foregoing, Landlord agrees that in the event Landlord
has failed to pay its Key Obligations, Tenant may deduct the amount of the Key
Obligations which Landlord has not paid, together with interest at the Interest
Rate, from the Rent next coming due and payable, from time to time, under the
Lease.
12.7 Notice to Lenders. Tenant shall have no rights as a result of any
-----------------
default by Landlord until Tenant gives any Superior Mortgagee for which Tenant
has been given an address, a copy of any default notice sent to Landlord. Such
Superior Mortgagee shall then have the right to cure such default, and Landlord
shall not be deemed in default if such Superior Mortgagee cures
55
<PAGE>
such default within ten (10) days after the later of (i) Superior Mortgagee's
receipt of such notice of default, or (ii) the expiration of Landlord's cure
period under the Lease, or such longer period as may be reasonably required for
the Superior Mortgagee to cure such default so long as such Superior Mortgagee
commences such cure within such ten (10) day period and thereafter diligently
prosecutes the same to completion.
ARTICLE 13: INSURANCE; INDEMNITY; WAIVERS
-----------------------------------------
13.1 Liability Insurance.
-------------------
(a) Tenant at all times during the Lease Term, at its sole cost and
expense, shall maintain in effect workers' compensation insurance, as well
as a policy of commercial general liability insurance with a combined
single limit of Three Million Dollars ($3,000,000) per occurrence. Such
policy shall specifically include, without limitation, personal injury,
broad form property damage, and contractual liability coverage, the last of
which shall cover the insuring provisions of this Lease and the performance
by Tenant of the indemnity agreements herein. Such insurance shall provide
coverage on an occurrence basis. In no event shall the coverage limits
under these policies limit the liability of Tenant under this Lease.
(b) Landlord shall obtain and keep in force during the Lease Term a
policy of commercial general liability insurance, insuring Landlord against
any liability arising out of the ownership, use, occupancy or maintenance
of the Building in an amount not less than Three Million Dollars
($3,000,000). The cost of such insurance shall be included in the Operating
Costs.
13.2 Other Insurance: Landlord. Landlord, at all times during the Lease
-------------------------
Term, shall maintain a policy of "all risk" property insurance ("AR Insurance")
------------
covering one hundred percent (100%) of the full functional replacement cost
valuation of the Building, the Alterations, Landlord's personal property
(including its business papers, furniture, fixtures and equipment), the Premises
and Landlord's Work, protecting against (a) any peril included within the
classification "Standard Fire and Extended Coverage", (b) vandalism and
malicious mischief and (c) all other risks normally covered by "all risk"
policies carried by landlords of Comparable Buildings. Except as otherwise
provided by the provisions of Article 8, the proceeds of these policies shall be
used to repair the insured property. The cost of such AR Insurance shall be
included in the Operating Costs. Notwithstanding any contrary provision herein,
Landlord shall not be required to carry insurance covering the property
described in Section 13.3 below or covering earthquake or flood.
Landlord shall also obtain and keep in full force (i) loss of rent insurance and
(ii) workers' compensation insurance, all such
56
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insurance being in amounts and with deductibles comparable to the insurance
being carried by landlords of Comparable Buildings.
13.3 Other Insurance: Tenant.
-----------------------
(a) Tenant, at all times and at its sole cost and expense, shall
maintain in effect a policy or policies of AR Insurance against fire,
vandalism, malicious mischief and any peril included within the
classification "Standard Fire and Extended Coverage" covering its trade
fixtures, equipment and other personal property, including coverage for
earthquake sprinkler leakage in an amount not less than the replacement
cost thereof from time to time. Such AR Insurance shall name Tenant as the
insured and, to the extent of any of their interests in such property,
shall name Landlord's Agents as additional insureds.
(b) The proceeds of such AR Insurance shall be used to repair or
replace the insured property, during the Lease Term unless the Lease is
terminated, in which case Tenant may retain such proceeds.
(c) Notwithstanding the foregoing, all of the insurance requirements
set forth herein-on the part of Tenant to be observed shall be deemed
satisfied if the Premises are covered by a blanket insurance policy
insuring all or most of Tenant's facilities in Southern California so long
as the coverage required to be carried by Tenant under this Lease is not
reduced or otherwise adversely affected.
13.4 Insurance Policies. Any insurance required hereunder shall be written
------------------
by companies which have a "General Policyholder's Rating "A-VII" or-better, as
set forth in Best's Insurance Guide and qualified to do business in California.
Tenant shall provide to Landlord copies of policies of all such insurance, or
certificates of insurance, showing Landlord, its lenders and agents as
additional insureds thereunder. All public liability policies shall contain a
provision that Landlord shall be entitled to recovery under the policies for any
loss to Landlord, or Landlord's servants, agents, partners or employees by
reason of the acts or omissions of Tenant, including but not limited to
negligence. All policies of insurance to be obtained by Tenant must: (a) contain
a provision that the company writing such policy will give Landlord thirty (30)
days' notice in writing in advance of any cancellation or lapse of the coverage
thereunder, or of any reduction in the amounts or types of coverage of
insurance; and (b) be primary with respect to, and noncontributory with, any
other insurance available to Landlord. Landlord shall have the right to
periodically review Tenant's insurance hereunder and require Tenant to obtain
and maintain in effect additional or modified insurance which provides coverage
comparable to that carried by tenants in Comparable Buildings provided that such
insurance is then available at commercially reasonable rates; provided, further,
that Landlord shall not have
57
<PAGE>
the right to require Tenant to so obtain additional or modified insurance more
frequently than once in any three (3) year period.
13.5 Waiver of Subrocation. Each party hereto hereby releases the other
---------------------
party hereto from any claims, and waives any and all rights to recover against
the other party, or against the officers, directors, employees, shareholders or
principals thereof, for loss or damage arising from any peril to the extent
insured against under any property or workers' compensation insurance policy
carried by such waiving party. Each such policy shall be endorsed to reflect the
foregoing. Neither Landlord nor Tenant shall be liable to the other for any
damage caused by fire or any of the risks insured against under any insurance
policy required by the Lease. If an insurance policy cannot be obtained with a
waiver of subrogation, or is obtainable only by the payment of an additional
premium charge above that charged by insurance companies issuing policies
without waiver of subrogation, the party undertaking to obtain the insurance
shall notify the other party of this fact. The other party shall have a period
of ten (10) days after receiving the notice either to place the insurance with a
company that is reasonably satisfactory to the other party and that will carry
the insurance with a waiver of subrogation at no additional cost, or to agree to
pay the additional premium if such a policy is obtainable at additional cost. If
the insurance cannot be obtained or the party in whose favor a waiver of
subrogation is desired refuses to pay the additional premium charged, the other
party is relieved of the obligation to obtain a waiver of subrogation with
respect to the particular insurance involved.
13.6 Exemption of Landlord from Liability. Except as otherwise provided in
------------------------------------
this Lease, Tenant hereby agrees that Landlord shall not be liable for injury to
Tenant's business or any loss of income therefrom or for damage to the property
of Tenant, Tenant's employees, invitees, or any other person in or about the
Premises or the Building, nor shall Landlord be liable for injury to the person
of Tenant's employees, agents or "invitees, whether such damages or injury is
caused by or results from fire, steam, electricity, gas, water or rain, or from
the breakage, leakage, obstruction or other defects of pipes, sprinklers,wires,
appliances, plumbing, air conditioning or lighting fixtures, or from any other
cause, whether said damage or injury results from conditions arising upon the
Premises or upon other portions of the Building, or from other sources or places
and regardless of whether the cause of such damage or injury or the means of
repairing the same is inaccessible to Tenant. Except as otherwise provided in
this Lease, Landlord shall not be liable for any damages arising from any act or
neglect of any other lessee, occupant or user of the Building, nor from the
failure of Landlord to enforce the provisions of any other lease of the
Building.
ARTICLE 14: HISTORIC CHARACTER OF THE BRADBURY BUILDING
-------------------------------------------------------
58
<PAGE>
Tenant acknowledges that the Building is a National Historical Landmark.
Therefore, all work and improvements in the Building must comply with all
criteria established from time to time for National Historical Landmark
buildings and as otherwise established for the Building by Landlord These
standards and criteria shall be observed by Tenant in discharging its obligation
to repair and maintain the Premises and in making any modifications to the
Premises; provided, however, if because of such historical designation Tenant
incurs increased design or construction costs, or increased costs relating to
obtaining permits and approvals, then fifty percent (50%) of such costs shall be
reimbursed by Landlord within ten (10) days after receipt by Landlord from
Tenant of an invoice documenting and evidencing such increased costs. Any delay
in the design or construction of the Work as a result of the Building being
declared an historical landmark shall constitute a Landlord Delay.
ARTICLE 15: QUIET ENJOYMENT
---------------------------
Landlord covenants that if, and so long as, Tenant pays all of the Base
Rent and Additional Rent hereunder, and keeps and performs each and every
covenant, agreement, term, provision and condition on the part of Tenant to be
kept and performed, Tenant shall quietly enjoy the Premises without hindrance or
molestation by Landlord or by any other person lawfully claiming the same,
subject to the covenants, agreements, terms, provisions and conditions of this
Lease and to any mortgages or deeds of trust and covenants, restrictions,
easements and agreements of record to which this Lease is subordinate.
ARTICLE 16: BROKERS
-------------------
Landlord and Tenant each warrant to the other that neither has had any
dealings with any real estate broker, agent, or finder in connection with this
Lease. Each party hereto agrees to defend, indemnify and hold the other harmless
from any claim for any compensation, commission, fee or other charge by any real
estate broker or agent or finder claiming through the indemnifying party.
ARTICLE 17: MISCELLANEOUS PROVISIONS
------------------------------------
17.1 Successors.
----------
(a) As used in this Lease, the term "Landlord" means only the current
owner(s) of the fee title to the Building and all successors thereto, as
such successors become the fee owners of the Building. Each Landlord is
obligated to perform the obligations of Landlord under this Lease only
during the time such Landlord owns such interest or title. Any Landlord who
transfers its title or interest is relieved of all liability with respect
to the obligations of Landlord under this Lease to be performed on or after
the date of
59
<PAGE>
transfer. However, each Landlord shall deliver to its transferee all funds
previously paid by Tenant if such funds have not yet been applied under the
terms of this Lease.
(b) Tenant shall give written notice of any failure by Landlord to
perform any of its obligations under this Lease to Landlord and to any
mortgagee or beneficiary under any deed of trust encumbering the Premises
whose name and address have been furnished to Tenant in writing. Landlord
shall not be in default under this Lease unless Landlord (or such mortgagee
or beneficiary) fails to cure such nonperformance within thirty (30) days
after receipt of Tenant's notice. However, if such non-performance
reasonably requires more than thirty (30) days to cure, Landlord shall not
be in default if such cure is commenced within such thirty (30) day period
and thereafter diligently pursued to completion.
17.2 When Payment Is Due. Whenever in this Lease a payment is required to
-------------------
be made by one party to the other, but a specific date for payment is not set
forth or a specific number of days within which payment is to be made is not set
forth, or the words "immediately", "promptly" and/or "on demand", or the
equivalent, are used to specify when such payment is due, then such payment
shall be due *thirty (30)* days after the party which is entitled to such
payment sends written notice to the other party demanding payment.
17.3 Parking. Tenant acknowledges that there are no parking facilities in
-------
the Building. Landlord has made arrangements with Broadway/Spring Center Parking
Facility ("Center") to make available parking spaces to tenants of the Building
------
upon terms and conditions to be established from time to time by Center or the
operator of such parking facility. Landlord does not warrant or represent that
such parking will continue to be available to Tenant during the Lease Term;
provided, however, that Landlord acknowledges and agrees that Landlord is
obligated to provide Tenant with the ability to lease Sixty-four (64) parking
spaces (based on three (3) spaces per one thousand (1,000) RSF in the Premises)
(the "Required Parking Spaces") during the Term of this Lease (including any
-----------------------
extension thereof), and to the extent that at any time during the Term (or any
extension thereof) such Required Parking Spaces become unavailable at the
Center, Landlord shall provide Tenant with the ability to lease (at reasonable
rates comparable to those rates charged by parking facilities comparable to the
Center) the Required Parking Spaces in a parking facility (which may be surface
parking) located within one (1) block of the Building. In the event that
Landlord fails to provide Tenant with the Required Parking Spaces as provided in
this Section 17.3, Tenant shall have the right to terminate this Lease upon
thirty (30) days' prior written notice to Landlord.
60
<PAGE>
17.4 Severability. A determination by a court of competent jurisdiction
------------
that any provision of this Lease or any part hereof is illegal or unenforceable
shall not cancel or invalidate the remainder of such provision or provisions of
this Lease, which shall remain in full force and effect.
17.5 Interpretation. The captions of the Articles or Sections of this
--------------
Lease are to assist the parties in reading this Lease and are not a part of the
terms or provisions of this Lease. Whenever required by the context of this
Lease, the singular shall include the plural and the plural shall include the
singular. The masculine, feminine and neuter genders shall each include the
other. In any provision relating to the conduct, acts or omissions of Tenant,
the term "Tenant" shall include Tenant's agents, employees, contractors,
invitees, successors or others using the Premises with Tenant's express or
implied permission. All references to "days" involving less than five (5) days
shall mean business days, and all references to "notice" shall mean written
notice given in compliance with Section 17.7 of the Lease.
17.6 Incorporation of Prior Agreement; Modifications. This Lease is the
-----------------------------------------------
only agreement between the parties pertaining to the lease of the Premises and
no other agreements are effective. All amendments to this Lease shall be in
writing and signed by all parties. Any other attempted amendment shall be void.
17.7 Notices. All notices required or permitted under this Lease shall be
-------
in writing and shall be personally delivered or sent by certified mail, return
receipt requested, postage prepaid. Notices to Tenant shall be delivered to the
address specified in Article 1, except that upon Tenant's taking possession of
the Premises, the Premises shall be one of Tenant's addresses for notice
purposes in addition to any addresses specified in Article 1. Notices to
Landlord shall be delivered to the address specified in Article 1. All notices
shall be deemed effective upon the earlier of the date of actual receipt or
forty eight (48) hours after mailing, except that all notices of change of
address shall be deemed given as of the date of receipt thereof. Either party
may change its notice address upon written notice to the other party.
17.8 Waivers. All waivers must be in writing and signed by the waiving
-------
party. Landlord's failure to enforce any provision of this Lease or its
acceptance of rent shall not be a waiver and shall not prevent Landlord from
enforcing that provision of this Lease in the future. No statement on a payment
check from Tenant or in a letter accompanying a payment check shall be binding
on Landlord. Landlord may, with or without notice to Tenant, negotiate such
check without being bound to the conditions of such statement.
61
<PAGE>
17.9 No Recordation. This Lease shall not be recorded. No memorandum or
--------------
short form hereof shall be recorded without Landlord's prior written consent.
17.10 Binding Effect; Choice of Law. This Lease binds any party who legally
-----------------------------
acquires any rights or interest in this Lease from Landlord or Tenant. However,
Landlord shall have no obligation to Tenant's successor unless the rights or
interests of Tenant's successor are acquired in accordance with the terms of
this Lease. The laws of the State of California shall govern this Lease.
17.11 Corporate Authority; Partnership Authority. If either party hereunder
------------------------------------------
("Representing Party") is a corporation, each person signing this Lease on
------------------
behalf of the Representing Party represents and warrants that he or she has full
authority to do so and that this Lease binds the corporation, and within thirty
(30) days after this Lease is signed, the Representing Party shall deliver to
the other party hereunder ("Receiving Party"), within thirty (30) days after
---------------
Receiving Party's written request therefor, a certified copy of a resolution of
Representing Partys Board of Directors authorizing the execution of this Lease
or other evidence of such authority reasonably acceptable to Receiving Party. If
the Representing Party is a partnership, each person signing this Lease for
Representing Party represents and warrants that he or she is a general partner
of the partnership, that he or she has full authority to sign for the
partnership and that this Lease binds the partnership and all general partners
of the partnership and within thirty (30) days after this Lease is signed,
Representing Party shall deliver to Receiving Party a copy of Representing
Party's recorded Statement of Partnership or Certificate of Limited Partnership.
17.12 Joint and Several Liability. All parties signing this Lease as Tenant
---------------------------
shall be jointly and severally liable for all obligations of Tenant.
17.13 Force Majeure. Except as otherwise expressly provided in this Lease,
-------------
if either party hereunder is delayed, prevented or stopped from performing any
of its obligations due to Force Majeure Events (as hereinafter defined), the
time provided for performing such obligations shall be extended by a period of
time equal to the duration of such Force Majeure Events. "Force Majeure Events"
--------------------
include acts of God, war, civil commotion, labor disputes, strikes, fire, flood
or other casualty, shortages of labor or material, government regulation or
restriction and weather conditions; provided, however, in no event shall
financial incapability excuse the performance of either party.
17.14 Rules and Regulations. Tenant shall comply with all Rules and
---------------------
Regulations applicable to tenants of the Building established by Landlord for
use of the Building attached hereto as Exhibit C, incorporated herein by this
---------
reference, as reasonably amended from time to time, provided Landlord has given
62
<PAGE>
Tenant ten (10) days' prior notice of any modifications and additions to the
Rules and Regulations from time to time put into effect by Landlord; provided,
however, that no modifications or additions to the Rules and Regulations shall
unreasonably interfere with Tenant's permitted use of the Premises as set forth
in Section 6.1. Landlord shall not be liable to Tenant for the failure of any
tenant or occupant of the Building to observe the Rules and Regulations and all
amendments and additions thereto.
17.15 Landlord's Lease Undertakings. Notwithstanding anything to the
-----------------------------
contrary contained in this Lease or in any exhibits or addenda hereto attached
(collectively, the "Lease Documents"), it is expressly understood and agreed by
---------------
and between the parties hereto to that: (a) the recourse of Tenant or its
successors or assigns against Landlord with respect to the alleged breach by or
on the part of Landlord of any representation, warranty, covenant, undertaking
or agreement contained in any of the Lease Documents (collectively, "Landlord's
----------
Lease Undertakings") shall extend only to Landlord's interest in the real estate
- ------------------
of which the Premises demised under the ease Documents are a part ("Landlord's
----------
Real Estate") and not to any other assets of Landlord or its officers, directors
- -----------
or shareholders; (b) except to the extent of Landlord's interest in Landlord's
Real Estate, no personal liability or personal responsibility of any sort with
respect to any of Landlord's Lease Undertakings or any alleged breach thereof is
assumed by, or shall at any time be asserted or enforceable against, Landlord,
or The Yellin Company, or against any of their respective constituent partners,
trustees, representatives, officers, directors or agents.
17.16 Transfer of Landlord's Interest. Landlord and each successor to
-------------------------------
Landlord shall be fully released from the performance of Landlord's obligations
accruing or to be performed subsequent to their transfer of Landlord's interest
in the Building. Landlord shall not be liable for any obligation hereunder
accruing or to be performed after a transfer of its interest in the Building.
17.17 Consent Provisions. Whenever consent shall be required by either
------------------
Landlord or Tenant under this Lease, neither party shall unreasonably withhold,
condition or delay the giving of such consent except (a) as otherwise set forth
in this Lease, and (b) with respect to consent required in connection with any
alterations, additions or improvements to the Premises visible from outside the
Premises or affecting (i) the structure or the mechanical, electrical or other
systems of the Building or, (ii) the historic character of the Building,
whereupon in each such case each party's duty is to act in good faith and in
compliance with the Lease.
17.18 Commercial Photography and Filming. Tenant agrees that Landlord may
----------------------------------
authorize the use of the Premises, the Building
63
<PAGE>
and/or Common Areas, or any part or parts thereof (excluding the Premises), for
filming of motion pictures, television tapes or films, commercials, videos,
documentaries, commentaries, and any and all other still, electronic, and for
other motion picture filming purposes ("Filming"), if Landlord deems such
-------
Filming to be beneficial to the Building for purpose of promotion, advertising,
publicity, or for civic, cultural, or historical purposes; provided, however,
that if such Filming is to take place during Business Hours, Landlord shall
provide Tenant with at least forty eight hours' prior written notice thereof.
Tenant agrees that any such filming may be performed during, before, or after
the Building's Business Hours or on days the Building is not open to the public
for business, as Landlord may determine provided that Landlord shall use its
best efforts to minimize the impact of such filming activities on Tenant's
business. Tenant acknowledges that certain inconveniences may result from such
Filming (by way of example only: noises, lights, heat, temporary blockage,
closure, or re-routing of aisles, corridors, or doors, and temporary re-routing
of pedestrian traffic), and Tenant agrees that except as otherwise provided in
this Lease, including without limitation Section 3.9 and this Section 17.18,
Landlord shall not be liable for any losses or damages and that there shall be
no reduction or abatement in any Rent or other charges payable hereunder.
Landlord, in its reasonable discretion, may elect to permit such filming without
any fee or other form of compensation or benefits or may elect to charge a fee
or other form of compensation or benefits for such Filming; any such fee,
compensation, or benefits may, in Landlord's reasonable discretion, be retained
by Landlord for its sole use, be disbursed to one or more tenants of the
Building, or be applied to certain operating or promotional expenses of the
Building. Notwithstanding anything to the contrary contained in this Section
17.18, Landlord covenants that such Filming shall not interfere with Tenant's
use of or access to the Premises, the Center or the Common Areas during Business
Hours, and to the extent such Filming does substantially interfere with Tenant's
use of or access to the Premises, the Center or the Common Areas during Business
Hours, Landlord shall be required to compensate Tenant for the inconvenience of
such interference.
17.19 Signage. Tenant, at Tenant's sole cost and expense shall be entitled
-------
to install appropriate signage, including Tenant's corporate name and logo, in
the Building, including (a) on or adjacent to the entrance doors to Tenant's
Premises, and (b) on the directory board located in the main entrance to the
Building. Any such signage installed by Tenant shall be consistent or compatible
with the Building's design, signage and graphics program and subject to
Landlord's reasonable approval. Tenant shall be responsible for the removal of
its signs, and the cost of repairing any resulting damage to the Building and/or
Premises upon the termination or assignment of the Lease.
17.20 Landlord Bankruptcy Proceeding. In the event that the obligations of
------------------------------
Landlord under the Lease are not performed during
64
<PAGE>
the pendency of a bankruptcy or insolvency proceeding involving the Landlord as
the debtor, or following the rejection of this Lease in accordance with Section
365 of the United States Bankruptcy Code, then notwithstanding any provision of
this Lease to the contrary, Tenant shall have the right to set off against Rents
next due and owing under this Lease (i) any and all damages caused by such non-
performance of Landlord's obligations under the Lease by Landlord, debtor-in-
possession, or the bankruptcy trustee, and (ii) any and all damages caused by
the nonperformance of Landlord's obligations under the Lease following any
rejection of the Lease in accordance with Section 365 of the United States
Bankruptcy Code.
17.21 CPU Adjustments. As of any applicable Adjustment Date (as defined in
---------------
Sections 3.4(j) and 5.3) the applicable amount shall be increased to an amount
equal to the original applicable amount as increased by the percentage by which
the New CPI exceeds the Old CPU. As used herein, the term "New CPI" means the
-------
CPI (as defined in Section 1.2(g)) as published for the month which is three (3)
months prior to the applicable Adjustment Date. "Old CPI" means the CPI as
published for the month which is three (3) months prior to the Commencement
Date. In no event shall the applicable amount be less than the applicable amount
for the immediately preceding calendar year. Should the Bureau (as such term is
defined in Section 1.2(g)) discontinue the publication of the CPU, or publish
the same less frequently, or alter the same in some other manner, then Landlord
shall adopt a substitute index or substitute procedure which most closely
approximates the discontinued CPU.
17.22 Addenda. Additional provisions may be set forth in an addendum or
-------
addenda attached hereto. All such addenda and all exhibits referred to in this
Lease or which are executed concurrently herewith and attached hereto, are
incorporated by this reference as though fully set forth herein. Therefore,
references to "this Lease" (or similar language) shall be deemed to refer to the
entire Lease, including all addenda and exhibits, and the inclusion of phrases
such as "in this Lease and the Work Letter" in particular places shall not be
used to derogate from the generality of the foregoing.
IN WITNESS WHEREOF, the parties hereto have executed this Lease as of the
date first hereinabove set forth.
"LANDLORD"
BRADBURY ASSOCIATES, L.P.,
a California limited partnership
By: AY Associates,
a California limited partnership
General Partner
65
<PAGE>
By: The Yellin Company,
a California corporation
General Partner
By: /s/ Anne Mueller
------------------------
Anne Mueller
Vice President
"TENANT"
CATELLUS DEVELOPMENT CORPORATION,
a Delaware corporation
By: /s/ Nelson C. Rising
----------------------------
Its:
----------------------------
66
<PAGE>
EXHIBIT A
---------
FLOOR PLANS
-----------
EXHIBIT A-1
<PAGE>
CATELLUS DEVELOPMENT
THE BRADBURY BUILDING
304 South Broadway
Los Angeles, California
4TH FLOOR
[FLOOR PLAN APPEARS HERE]
EXHIBIT "A"
1 of 2
<PAGE>
CATELLUS DEVELOPMENT
THE BRADBURY BUILDING
304 South Broadway
Los Angeles, California
5TH FLOOR
[FLOOR PLAN APPEARS HERE]
EXHIBIT "A"
2 of 2
<PAGE>
EXHIBIT B
---------
WORK LETTER AGREEMENT
---------------------
[Landlord Performs Work]
[Allowance]
This Work Letter Agreement ("Work Letter") is executed simultaneously with
-----------
that certain Office Lease (the "Lease") between Catellus Development
-----
Corporation, as "Tenant," and Bradbury Associates, L.P., as "Landlord," relating
to demised premises ("Premises") at the building commonly known as The Bradbury
--------
Building, 304 South Broadway, Los Angeles, California 90013 (the "Building"),
--------
which Premises are more fully identified in the Lease. Capitalized terms used
herein, unless otherwise defined in this Work Letter, shall have the respective
meanings ascribed to them in the Lease.
For and in consideration of the agreement to lease the Premises and the
mutual covenants contained herein and in the Lease, Landlord and Tenant hereby
agree as follows:
1. TENANT'S INITIAL PLANS; THE WORK. Tenant desires Landlord to perform
--------------------------------
and Landlord agrees to perform certain leasehold improvement work in the
Premises in substantial accordance with the plan or plans (collectively, the
"Initial Plan") prepared by Sonnenleiter Associates dated 8-22-96 and last
- -------------
revised 11-15-96, copies of which are attached hereto as Schedule 1. Such work,
----------
as shown in the Initial Plan and as more fully detailed in the Working Drawings
(as defined and described in Paragraph 2 below) shall be hereinafter
collectively referred to as the "Work." Not later than twenty (20) days after
Landlord's request therefor, Tenant shall furnish to Landlord such additional
plans, drawings, specifications and finish details as Landlord may reasonably
request to enable Landlord's architects and engineers to prepare mechanical,
electrical and plumbing plans and to prepare the Working Drawings, including a
final telephone layout and special electrical connection requirements, if any.
All plans, drawings, specifications and other details describing the Work which
have been or are hereafter furnished by or on behalf of Tenant shall be subject
to Landlord's approval, which Landlord agrees shall not be unreasonably
withheld. Landlord shall not be deemed to have acted unreasonably if it
withholds its approval of any plans, specifications, drawings or other details
or of any Additional Work (as defined in Paragraph 7 below) because, in
Landlord's reasonable opinion, the Work, as described in any such item, or the
Additional Work, as the case may be: (a) adversely affects Building Systems (as
defined in Section 7.2(a) of the Lease), the Building Structure (as defined in
Section 7.2(a) of the Lease) or the safety of the Building and/or its occupants;
(b) might impair Landlord's ability to furnish required services to Tenant or
other tenants in the Building; (c) would increase the cost of operating the
Building,
EXHIBIT B-1
<PAGE>
in Landlord's reasonable judgment, more than a "de minimis" amount; (d) would
violate any Applicable Laws; (e) contains or uses Hazardous Materials in
violation of Applicable Laws; (f) would adversely affect the appearance of the
Building; (g) would, in Landlord's reasonable judgment, adversely affect the
normal and customary business operations of another tenant's premises; (h) is
prohibited by any ground lease affecting the Building or any mortgage, trust
deed or other instrument encumbering the Building; or (i) is likely to be
substantially delayed because of unavailability or shortage of labor or
materials necessary to perform such Work or the difficulties of such Work (each,
a "Design Problem"). The foregoing reasons shall be the only reasons for which
--------------
Landlord may withhold its approval. Neither the approval by Landlord of the Work
or the Initial Plan or any other plans, drawings, specifications or other items
associated with the Work nor Landlord's performance, supervision or monitoring
of the Work shall constitute any warranty by Landlord to Tenant of the adequacy
of the design for Tenant's intended use of the Premises.
2. WORKING DRAWING. If necessary for the performance of the Work and
---------------
not included as part of the Initial Plan attached hereto, Landlord shall prepare
or cause to be prepared final working drawings and specifications for the Work
(the "Working Drawings") based on and consistent with the Initial Plan and the
----------------
other plans, drawings, specifications, finish details and other information
furnished by Tenant to Landlord and approved by Landlord pursuant to Paragraph 1
above. So long as the Working Drawings are consistent with the Initial Plan and
otherwise reasonably acceptable to Tenant, Tenant shall approve the Working
Drawings within seven (7) business days after receipt of same from Landlord by
initialing and returning to Landlord each sheet of the Working Drawings or by
executing Landlord's approval form then in use, whichever method of approval
Landlord may designate.
3. PERFORMANCE OF THE WORK: ALLOWANCE.
----------------------------------
(a) Selection of Contractor. Landlord's contractor, Krismar
-----------------------
Construction Company, Inc. ("Contractor") shall enter into a construction
----------
contract with Landlord to construct the Work ("Construction Contract"). The
---------------------
Construction Contract shall not, unless Tenant otherwise directs, require the
Contractor to post a completion bond or contain any provision penalizing the
Contractor for not completing the Work within a specific period of time.
(b) Use of Building Standards. Except as hereinafter provided to the
-------------------------
contrary, Landlord shall cause the performance of the Work using (except as may
be stated or shown otherwise in the Working Drawings) building standard
materials, quantities and procedures then in use by Landlord as listed in
Schedule 2 attached hereto ("Building Standards").
------------------
EXHIBIT B-2
<PAGE>
(c) Cost of the Work; Tenants Contribution. Landlord shall pay for the
--------------------------------------
"Cost of the Work" (as defined below); provided, however, that Tenant shall pay
Landlord the sum of Two Hundred Thousand Dollars ($200,000.00) as its
contribution ("Tenant's Contribution") toward the Cost of the Work, which amount
---------------------
shall be payable after Landlord has expended Three Hundred Eighty Thousand
Dollars ($380,000.00) toward the Cost of the Work. For purposes of this Work
Letter, the term "Cost of the Work" shall, except as otherwise expressly set
----------------
forth in this Work Letter, mean and include any and all costs and expenses of
the design and construction of the Work, including, without limitation, the cost
of the Working Drawings and of all labor (including overtime) and materials
constituting the Work.
(d) Base Building. Landlord hereby agrees that the Base Building of
-------------
the Building has been, or is to be, constructed by Landlord at Landlord's sole
cost and expense. To the extent that any work which would, in accordance with
industry standards, be considered Base Building work is required in connection
with or as a part of the Work, then any such Base Building work shall be
performed at Landlord's sole cost and expense without any contribution thereto
from Tenant and the cost thereof shall not count toward the Three Hundred Eighty
Thousand Dollars ($380,000.00) referenced above.
4. PAYMENT.
-------
(a) Cost of Work. Prior to commencing the Work, Landlord shall submit
------------
to Tenant a written statement of the total Cost of the Work (which shall include
the amount of any overtime projected as necessary to substantially complete the
Work by the Scheduled Commencement Dates specified in Section 1.2(c) of the
-------
Lease as then known by Landlord. Tenant agrees, within three (3) days after
submission to it of such statement, to execute and deliver to Landlord, in the
form then in use by Landlord, an authorization to proceed with the Work. No Work
shall be commenced until Tenant has signed the authorization to proceed in
compliance with the preceding provisions of this Paragraph 4.
(b) Chance Orders. In the event that Tenant requests any changes to
-------------
the Working Drawings, Landlord shall not unreasonably withhold its consent to
any such changes, and shall notify Tenant if Landlord's consent is granted to
such changes within two (2) business days after Landlord's receipt of same,
provided the changes do not create a Design Problem. In the event, and each
time, that any such change order which is initiated by Tenant and is not
necessitated by any act or omission by Landlord or Landlord's agents, employees
or contractors or any Tenant Delay or any other event or circumstance caused by
Tenant (collectively, "Tenant-Caused Changes") causes the Cost of the Work to be
---------------------
increased after the time that Landlord delivers to Tenant the aforesaid initial
statement of the Cost of the Work, Landlord shall deliver to
EXHIBIT B-3
<PAGE>
Tenant a revised statement of the total Cost of the Work, indicating the amount
of the increased cost, accompanied by invoices documenting and evidencing such
increased costs. Tenant shall, but only to the extent that the Cost of the Work
actually exceeds or is reasonably estimated to exceed, Five Hundred Eighty
Thousand Dollars ($580,000.00) solely as a result of Tenant Caused Changes, pay
to Landlord an amount equal to such increased costs, as shown in such revised
statement within ten (10) days after Tenant's receipt of an invoice therefor and
any supporting documentation reasonably requested by Tenant, and Landlord shall
not be required to proceed further with the Work if Tenant has not paid such
amount within such ten (10) day period unless a good faith dispute exists with
respect to Tenant's obligation to pay all or any portion of such increased cost,
it being agreed that Tenant will be obligated to pay any undisputed amount of
such increased cost. Delays in the performance of the Work resulting from the
failure of Tenant to comply with the provisions of this Paragraph 4 shall be
deemed to be delays caused by Tenant, subject to Paragraph 6 below. Any costs
charged by Landlord to Tenant pursuant to this Section 4(b) shall in no event be
greater than the amount equal to the actual costs incurred by Landlord to review
the requested changes and revise the Final Plans, including reasonable charges
for Landlords general administrative and overhead costs not to exceed seven
percent (7%) of the Differential ("Actual Costs"), plus the amount required to
------------
cause the Work, as reflected by revised Working Drawings, to be constructed
above the costs that Landlord would have had to pay to cause the Work to be
constructed if such changes had not been made ("Differential"). Except as
expressly provided in this Paragraph 4(b), Tenant shall not be required to pay
more than the amount of Tenant's Contribution set forth above for the Work.
5. SUBSTANTIAL COMPLETION.
----------------------
(a) Definition of Substantial Completion. Landlord shall cause the
------------------------------------
Work for the Premises to be "substantially completed" on or before the scheduled
date of commencement of the term of the Lease with respect thereto as specified
in Section 1.2(c) of the Lease, subject to delays caused by strikes, lockouts,
boycotts or other labor problems, casualties, discontinuance of any utility or
other service required for performance of the Work, unavailability or shortages
of materials or other problems in obtaining materials necessary for performance
of the Work (other than Building Standards) or any other matter beyond the
reasonable control of Landlord (or beyond the reasonable control of Landlord's
contractors or subcontractors performing the Work) and also subject to "Tenant
Delays" (as defined and described in Paragraph 6 of this Work Letter). The Work
for the Premises shall be deemed to be "Substantially Completed" for all
purposes under this Work Letter and the Lease if and when: (i) the shell and
core of the Building are substantially complete and in compliance with all
EXHIBIT B-4
<PAGE>
Applicable laws to the extent necessary to enable Landlord to obtain a
certificate of occupancy for the Premises, and all of the Building Systems are
operational to the extent necessary to service the Premises; (ii) Landlord's
architect issues a written certificate to Landlord and Tenant, certifying that
the Work has been substantially completed (i.e., completed except for
"punchlist" items listed in such architect's certificate) in substantial
compliance with the Working Drawings; (iii) Landlord as obtained a certificate
of occupancy or its equivalent for the Premises (except to the extent delayed by
any Tenant Delay); and (iv) Tenant has been delivered access to the Premises
(and other required portions of the Building and the Site), sufficient to allow
Tenant to install its freestanding work stations, fixtures, furniture,
equipment, and telecommunication and computer cabling systems and to move into
the Premises over the Move-In Period. If the Work for the Premises is not deemed
to be Substantially Completed on or before the scheduled date of the
commencement of the term of the Lease with respect thereto as specified in
Section 1.2(c) of the Lease, (a) Landlord agrees to use reasonable efforts to
complete the Work as soon as practicable thereafter, (b) except as otherwise
provided in the Lease, the Lease shall remain in full force and effect, (c)
except as otherwise provided in the Lease, Landlord shall not be deemed to be in
breach or default of the Lease as a result thereof and Landlord shall have no
liability to Tenant as a result of any delay in occupancy (whether for damages,
abatement of Rent or otherwise), and (d) the Commencement Date of the Lease Term
for the Premises shall be determined as specified in Article 2 of the Lease. At
the request of either Landlord or Tenant in the event the Commencement Date of
the term of the Lease is other than the Scheduled Commencement Date therefor,
Tenant and Landlord shall execute and deliver an amendment to the Lease
reflecting the actual Commencement Date therefor. Landlord agrees to use
reasonable diligence to complete all punchlist work listed in the aforesaid
architect's certificate promptly after Substantial Completion.
(b) Delivery of Premises to Tenant and Notice of Substantial
--------------------------------------------------------
Completion. Landlord shall deliver possession of the Premises to Tenant when the
- ----------
Work therein has been constructed so that Tenant will have access to the
Premises during the Move-In Period in accordance with Section 5(a)(iv) of this
Work Letter. Landlord shall deliver to Tenant at least two (2) weeks' prior
written notice stating the date that the Premises is expected to be
Substantially Complete, or would be Substantially Complete were it not for any
Tenant Delay. Delay of the Commencement Date, to the extent not caused by a
Tenant Delay, and Tenant's right to cancel pursuant to Section 2.3(a)(i) of the
Lease shall be Tenant's sole remedy for any delay in the construction by
Landlord of the Work or making the Premises Substantially Complete.
6. TENANT DELAYS. The term "Tenant Delays" shall mean:
------------- -------------
EXHIBIT B-5
<PAGE>
(i) the failure of Tenant to furnish all or any plans, drawings,
specifications, finish details or the other information required by this
Work Letter on or before the time periods specified in this Work Letter;
(ii) the failure of Tenant to grant authorizations or approvals
within the time periods required by this Work Letter;
(iii) the failure of Tenant to comply with the requirements of
Paragraph 4 above;
(iv) Tenant's changes or additions to the Working Drawings or to the
Work requested by Tenant which are not necessitated by any act or omission
of Landlord or Landlord's agents, employees or contractors, including
changes or additions concerning requirements for special work or materials,
finishes, or installations other than the Building Standards or Tenant's
requirement for special construction staging or phasing provided that
Landlord provides Tenant with notice of such delay within reasonable
promptness after Landlord becomes aware thereof;
(v) the performance of any Additional Work (as defined in Paragraph
7 below) required by Tenant or the performance of any work in the Premises
by any person, firm or corporation employed by or on behalf of Tenant, or
any failure to complete or delay in completion of such work; or
(vi) any other act or omission of Tenant or its agents or
contractors which causes Landlord to be delayed in the performance of its
obligations under this Work Letter.
Notwithstanding anything contained in the Lease or in this Work Letter to
the contrary, no Tenant Delay shall be deemed to have occurred unless and until
Landlord has provided written notice to Tenant specifying the action or inaction
that Landlord contends constitutes a Tenant Delay. Once such notice is sent, no
further notice need be sent by Landlord during the continuance of the same
action or inaction. A Tenant Delay, as set forth in such notice, shall be deemed
to have occurred commencing as of the date such notice is received and
continuing for the number of days the design and/or construction of the Work was
in fact delayed as a direct result of such action or inaction.
7. ADDITIONAL WORK. Upon Tenant's request and submission by Tenant (at
---------------
Tenant's sole cost and expense) of the necessary information and/or plans and
specifications for work other than the Work described in the Working Drawings
("Additional Work") and the approval by Landlord of such Additional Work, which
- -------------------
approval Landlord agrees shall not be unreasonably withheld, Landlord shall
perform such Additional Work, at Tenant's sole cost--and expense, subject,
however, to the following provisions
EXHIBIT B-6
<PAGE>
of this Paragraph 7. Prior to commencing any Additional Work requested by
Tenant, Landlord shall submit to Tenant a written statement of the cost of such
Additional Work, which cost shall be competitive with the cost that other
general contractors would charge for the same work and which shall include (i) a
fee payable to Landlord in an amount to be agreed upon at the time by Landlord
and Tenant as compensation to Landlord for monitoring the Additional Work and
for administration, overhead and field supervision associated with the
Additional Work and (ii) an additional charge payable to Landlord in an amount
to be agreed upon at the time by Landlord and Tenant as compensation for
Landlord's general conditions (such fee and additional charge being hereinafter
referred to collectively as "Landlord's Additional Compensation"), and,
----------------------------------
concurrently with such statement of cost, Landlord shall also submit to Tenant a
proposed tenant extra order (the "TEO") for the Additional Work in the standard
---
form then in use by Landlord. Tenant shall execute and deliver to Landlord such
TEO and shall pay to Landlord the entire cost of the Additional Work within ten
(10) days after Landlords submission of such statement and TEO to Tenant. If
Tenant fails to execute or deliver such TEO or pay the entire cost of the
Additional Work within such 10-day period, then Landlord shall not be obligated
to do any of the Additional Work and may proceed to do only the Work, as
specified in the Working Drawings.
8. INTENTIONALLY OMITTED.
---------------------
9. LEASE PROVISIONS. The terms and provisions of the Lease, insofar as
----------------
they are applicable to this Work Letter, are hereby incorporated herein by
reference. All amounts payable by Tenant to Landlord hereunder shall be deemed
to be additional Rent under the Lease and, upon any default in the payment of
same beyond any applicable notice and cure periods provided for in the Lease,
Landlord shall have all of the rights and remedies provided for in the Lease.
10. MISCELLANEOUS.
-------------
(a) This Work Letter shall be governed by the laws of the state of
California.
(b) This Work Letter may not be amended except by a written
instrument signed by the party or parties to be bound thereby.
(c) Any person signing this Work Letter on behalf of Landlord or
Tenant warrants and represents he/she has authority to sign and deliver
this Work Letter and bind Landlord or Tenant, as appropriate.
(d) Notices under this Work Letter shall be given in the same manner
as under the Lease.
EXHIBIT B-7
<PAGE>
(e) The headings set forth herein are for convenience only.
(f) This work Letter sets forth the entire agreement of Tenant and
Landlord regarding the Work.
(g) In the event that the final working drawings and specifications
are included as part of the Initial Plan attached hereto, or in the event
Landlord performs the Work without the necessity of preparing working
drawings and specifications, then whenever the term "Working Drawings" is
used in this Agreement, such term shall be deemed to refer to the Initial
Plan and all supplemental plans and specifications approved by Landlord.
11. EXCULPATION OF LANDLORD. Notwithstanding anything to the contrary
-----------------------
contained in this Work Letter, it is expressly understood and agreed by and
between the parties hereto that:
(a) The recourse of Tenant or its successors or assigns against
Landlord with respect to the alleged breach by or on the part of Landlord
of any representation, warranty, covenant, undertaking or agreement
contained in this Work Letter or the Lease (collectively, "Landlord's Work
---------------
Letter Undertakings") shall extend only to Landlord's interest in the real
-------------------
estate, of which the Premises demised under the Lease Documents are a part
(hereinafter, "Landlord's Real Estate") and not to any other assets of
----------------------
Landlord or its beneficiar(y)(ies); and
(b) Except to the extent of Landlord's interest in Landlord's Real
Estate, no personal liability or personal responsibility of any sort with
respect to any of Landlord's Work Letter Undertakings or any alleged breach
thereof is assumed by, or shall at any time be asserted or enforceable
against, Landlord, its beneficiar(y)(ies), or against any of their
respective directors, officers, employees, agents, constituent partners,
beneficiaries, trustees or representatives.
12. INSPECTION. After the Work is Substantially Completed (excepting
----------
punch list items) and prior to Tenant's move-in into the Premises ("First
-----
Time"), and within thirty (30) days after the expiration of the Move-In Period
- -----
("Second Time"), in each case following two (2) days' advance written notice
-----------
from Tenant to Landlord, Landlord shall cause the Contractor to inspect the
Premises with a representative of Tenant and complete a punch list of unfinished
items of the Work. Authorized representatives for Landlord and Tenant shall
execute said punch list to indicate their approval thereof. The items listed on
such punch list shall be completed by the Contractor within thirty (30) days
after the approval of such punch list or as soon thereafter as reasonably
practicable.
EXHIBIT B-8
<PAGE>
13. NO FEE TO LANDLORD. Except as otherwise provided in the Lease,
------------------
Landlord shall receive no fee for supervision, profit, overhead or general
conditions in connection with the Work.
14. CLEAN-UP EXPENSES. Landlord shall clean the Premises (a) prior to the
-----------------
commencement of the Move-In Period and (b) following Tenant's move-in into the
Premises, including removal of all rubbish and debris. The cleaning referenced
in (b) shall leave the Premises in a manner consistent with the commencement of
business from comparable premises in Comparable Buildings, such that Tenant may
commence its business operations from the Premises immediately after Landlord
completes such clean-up. The costs of the cleaning provided by Landlord pursuant
to this Paragraph 14 shall not be included in Operating Costs for the Building
prior to Tenant's occupancy of the Premises.
15. NO MISCELLANEOUS CHARGES. Tenant shall note charged for, and
------------------------
Landlord shall provide for Tenant's architects, designers, contractors and
subcontractors (including those people working on the Work) the use of
electricity, water, toilet facilities, HVAC, security and elevators during the
Move-In Period. All such equipment, areas, elevators and utilities shall be made
reasonably available to Tenant during the Move-In Period.
16. BONDING. Notwithstanding anything to the contrary set forth in the
-------
Lease, Tenant shall not be required to obtain or provide any completion or
performance bond in connection with the initial tenant improvement work in the
Premises.
17. DEMOLITION. In the event that the Premises have been previously built
----------
out, Tenant shall not be required to pay for any costs of demolition of the
existing tenant improvements in the Premises.
18. PRESENCE OF HAZARDOUS SUBSTANCES. In the event that at any point in
--------------------------------
time the Premises and/or the Common Areas of the Building are determined to
contain hazardous substances (as defined by Applicable Laws), Tenant shall have
the right, by notice to Landlord, to require Landlord to remove, at Landlord's
sole cost and expense, all such hazardous substances in accordance with the
provisions of the Lease. Any delay incurred by Tenant in the design of its Work
or its move-in into the Premises because of the presence of hazardous substances
shall constitute a Landlord Delay.
19. LIFE-FIRE SAFETY CODES/DISABLED ACCESS CODES/ EARTHQUAKE SAFETY
---------------------------------------------------------------
CODES. In the event that, because the Premises and/or the Building as initially
constructed do not comply with current life-fire safety codes, disabled access
codes (including, without limitation, the ADA), and/or earthquake safety codes
(it being agreed and understood that any applicable current waivers of such
codes and/or "grandfathering," with respect thereto shall be considered
compliance), Tenant incurs increased design or
EXHIBIT B-9
<PAGE>
construction costs that it would not have incurred had the Premises and/or the
Building already been in compliance with the applicable life-fire safety codes,
disabled access codes (including, without limitation, the ADA), and/or
earthquake safety codes, applicable to new construction, then such costs shall
be reimbursed by Landlord to Tenant within ten (10) days after receipt by
Landlord from Tenant of an invoice documenting and evidencing such increased
costs. Any delay in Tenant's move-in into the Premises because of the non-
compliance of the Building and/or Premises with the applicable life-fire safety
codes-and-disabled access codes (including, without limitation, the ADA), and/or
earthquake safety codes shall constitute a Landlord Delay.
20. INTENTIONALLY OMITTED.
---------------------
21. STAGING AREA. During the period prior to the Commencement Date,
------------
Tenant shall have the right, without the obligation to pay Rent, to use empty
space in the basement of the Building designated by Landlord for the purposes of
storing and staging its furniture and equipment only. With respect to this free
storage space, Tenant shall be responsible for providing all insurance and for
providing any necessary fencing or other protective facilities. Tenant shall
hold Landlord harmless and shall indemnify Landlord from and against any and all
loss, liability or cost arising out of or in connection with use of such storage
space by Tenant. Tenant shall be obligated to remove all of the stored materials
and its fencing and other facilities within ten (10) days after Tenant's receipt
of written notice from Landlord that such staging area is needed by Landlord, in
which event comparable space, to the extent available, shall be made available
to Tenant as a substitute staging area.
22. MOVE-IN PRIORITY. Provided that Tenant moves into the Building during
----------------
the Move-In Period, or, in the event Tenant moves into the Building at some time
other than the Move-In Period, and provided that Tenant has provided Landlord at
least two (2) weeks' prior written notice of Tenant's move into the Building,
Tenant shall have the right to use the passenger elevators and the exclusive
right to use the freight elevator during the weekend that it moves into the
Building, but, with respect to Tenant's exclusive use of the freight elevator,
only to the extent such exclusive use is necessary for Tenant to complete its
move into the Building over one (1) weekend in an orderly and efficient manner.
EXHIBIT B-10
<PAGE>
IN WITNESS WHEREOF, this Work Letter Agreement is executed as of November
22, 1996.
TENANT: LANDLORD:
- ------ --------
BRADBURY ASSOCIATES, L.P.,
CATELLUS DEVELOPMENT a California limited partnership
CORPORATION,
a Delaware corporation
By: AY Bradbury Associates, a
California limited
By: /s/ Nelson Rising partnership General Partner
-----------------------
Title: By: The Yellin Company, a
--------------------- California
corporation (Its
General Partner)
By: /s/ Anne Mueller
----------------
Anne Mueller
Vice President
EXHIBIT B-11
<PAGE>
SCHEDULE 1 TO EXHIBIT B
-----------------------
INITIAL PLAN
------------
SCHEDULE 1 TO EXHIBIT B - 1
<PAGE>
CATTELUS DEVELOPMENT
5TH FLOOR
[FLOOR PLAN APPEARS HERE]
SCHEDULE 1 TO EXHIBIT "B" 1 OF 2
<PAGE>
CATTELUS DEVELOPMENT
4TH FLOOR
[FLOOR PLAN APPEARS HERE]
SCHEDULE 1 TO EXHIBIT "B" 2 OF 2
<PAGE>
SCHEDULE 2 TO EXHIBIT B
-----------------------
BUILDING STANDARDS
------------------
A. DRYWALL PARTITIONS
------------------
1. Interior Partitions (1 LF of partition / 12 SF): 2-1/2" metal stud,
25 GA @ 24" on center with 5/8" gyp. board each side from floor to
hung ceiling, partition taped smooth to receive paint or wall
covering.
B. DOORS, FRAMES AND HARDWARE
--------------------------
1. Interior Door Assembly (1 Door /300 SF): 3'-0" x 7'-7" x 1-3/4"
solid core, rift cut, red oak, veneer door set in Western Integrated,
medium bronze anodized frame. Each door to receive two (2) pairs of
4-1/2" butt Hinges. Hardware to be Schlage "L" series, lever type
latchset with quality #432 floor stop. Finish to be oil rubbed
bronze.
2. Corridor Assembly: All are existing, to be re-used in existing
locations.
C. ELECTRICAL/TELEPHONE/DATA
-------------------------
1. Electrical Wall Outlets (1 outlet / 100 SF): Leviton "Decora"
series, 2 pole, 3 wire, duplex outlet. Outlets are to be mounted
vertically. Color: White.
2. Telephone / Data Outlets (1 outlet / 150 SF): Single gang outlet box
on interior walls with 1/2" metal conduit from the outlet box to
above ceiling line. outlets are to be mounted vertically. Color:
white.
D. LIGHTING / SWITCHES
-------------------
1. Lighting (1 Fixture / 80 SF): 2' X 4', recessed, fluorescent, 3 tube
light fixture with 4 8 cell parabolic lens, warm white light bulbs.
2. Switches (per code): Leviton "Decora" series rocker type switch,
double switched as required for Title 24 Regulations.
3. Exit Signs: Self illuminated, per code
SCHEDULE 2 TO EXHIBIT B - 1
<PAGE>
SCHEDULE 2 TO EXHIBIT B
-----------------------
BUILDING STANDARDS
------------------
E. SUSPENDED CEILING
-----------------
1. Ceiling Grid: 2' x 2' suspended grid, white finish Chicago Metallic
3500 Series, Fine Line.
2. Ceiling Tile: Celotex Cashmere 2' x 2' lay-in-tile.
3. Perimeter and atrium curtain pocket with approximately 9' ceiling
heights (standard).
F. SPRINKLERS
----------
1. Sprinkler heads to be semi-recessed chrome heads, fitted with white,
domed escutcheon plates.
G. HEATING AND AIR CONDITIONING
----------------------------
1. Zones (1 Zone / 600 SF): Water cooled heat pump unit located in the
tenant plenum with low pressure, distribution ductwork and zones as
required.
2. Supply Air Grilles: Directional louvers connected to low pressure
duct work. Color: White.
3. Return Air Grilles: Directional louvers to return air plenum.
4. Thermostats: Carrier model#MP-10
H. FINISHES
--------
1. Floor Covering ($14.0/0)Yard installed, with pad):
Carpet: Shaw Industries "Bay-Hill 32" over pad
2. Floor base:
Existing Historic Base: Patched and repaired as required
New Base: 4" Burke or 5" x 1/2" Oak stained base.
3. Wall Finish: "Sinclair" paint throughout lease area
SCHEDULE 2 TO EXHIBIT B - 2
<PAGE>
SCHEDULE 2 TO EXHIBIT B
-----------------------
BUILDING STANDARDS
------------------
4. Window Covering: M & B, 1", horizontal mini-blinds to fit within
each window on exterior and atrium windows. Color: Alibaster
SCHEDULE 2 TO EXHIBIT B - 3
<PAGE>
EXHIBIT C
---------
RULES AND REGULATIONS OF THE BUILDING
-------------------------------------
1. Tenant and Tenant's employees shall not loiter in the entrance of
corridors of the Building or in any way obstruct the sidewalks, entry passages,
halls, stairways and elevators in and around the building, and shall use the
same only as passageways, and means of passage, to and from their respective
offices.
2. The doors, sashes, windows, glass doors, lights and skylights that
reflect or admit light into the halls or other places of the Building shall not
be covered or obstructed, and doors leading into the corridors shall not be
suffered to remain open. The water closets and urinals shall not be used for any
purposes other than those for which they were constructed, and no rubbish,
newspapers or other substances of any kind shall be thrown into them. Subject to
Section 7.3 of the Lease, Tenant shall not mark, drive nails, screw or drill
into, paint, or in any way deface the walls, ceilings, partitions, floors, wood,
stone or iron work of the Building. The expense of any breakage, stoppage or
damage resulting from a violation of this rule shall be borne by Tenant.
3. Subject to Section 17.19 of the Lease, no awning, shade, sign,
advertisement or notice shall be inscribed, painted or affixed on or to any part
of the outside or inside of the Building, except by the written consent of
Landlord and unless it be of such color, size and style and in such place upon
or in the Building as may be designated by Landlord. If Tenant desires window
curtains [in addition to those already in the Premises and owned by Landlord],
the same must be of such uniform shape, color, material and make as may be
prescribed by Landlord and must be put up in the manner directed by Landlord,
and paid for by Tenant. Tenant shall cooperate with Landlord in order to
preserve the efficiency of the heating and [air conditioning] systems in the
Building.
4. Electric wiring of every kind shall be introduced and connected as
directed by Landlord, and no boring or cutting for wires shall be allowed except
with the consent of Landlord.
5. Tenant shall not use any machinery in the Premises which may cause
any excessive noise, as determined by Landlord in its sole judgment, reasonably
exercised, or may cause any jar or tremor to the floors or walls, or which by
its weight may injure the floors of the building.
6. Landlord may limit the weight, size and position of all safes and
concentrations of files used in the Building and such safes and concentrations
of files shall in all cases stand on wood or metal of such size as shall be
designated by Landlord. All damage done to the Building by putting in, taking
out or
EXHIBIT C-1
<PAGE>
maintaining a safe or a concentration of files shall be repaired at the expense
of Tenant. Landlord may likewise limit the weight, size and position of any
equipment and machinery of every kind used in the Building. No machinery of any
kind, whether manually or electrically operated, including, without limitation,
IBM or other forms of electronic business machines, heating or air conditioning
machines, and air or water cooling machines but excluding electrically operated
typewriters and adding or calculating machines) will be allowed in the Building
without the prior written consent of Landlord, which consent shall not be
unreasonably withheld or delayed.
7. Tenant and Tenant's officers, agents and employees shall neither make
nor permit any sound to be made in the Premises or the Building which would
disrupt or interfere with the other tenants of the Building, nor make nor permit
any other improper noises in the Building, nor interfere in any other way with
other tenants or those having business in the Building, nor bring into nor keep
within the Building any animal, bird or bicycle. Tenant and Tenant's officers,
agents and employees shall not throw cigar or cigarette butts or other items of
any kind out the windows or doors or down the passageways or skylights of the
Building, or sit on or place anything upon the window sills or outside ledges.
8. All freight must be moved into, within and out of the Building must
be coordinated with, and under the supervision of, Landlord, and according to
such regulations as may be posted in the Building, and shall be moved only
between the hours of 9:00 a.m. and 11:00 a.m., and 2:00 p.m. and 4:00 p.m. of
days other than Saturdays, Sundays and holidays (no moving being permitted on
Saturdays, Sundays or holidays without Landlord's permission), but Landlord
shall not be responsible for the loss of or damage to such freight from any
cause.
9. All keys shall be obtained from Landlord and all keys shall be
returned to Landlord upon the termination of this Lease. Tenant shall not change
the locks or install other locks on the doors. Neither Tenant, his agents nor
employees shall have any duplicate key made.
10. Use of the Premises before 8:00 a.m. or after 6:00 p.m., Monday
through Friday, before 9:00 a.m. or after 2:00 p.m. on Saturdays, or at any time
during Sundays and legal holidays, shall be subject to such reasonable rules and
requirements as Landlord may from time to time prescribe.
11. The bulletin board or directory of the Building will be provided
exclusively for the display of the name and location of Tenant only, and
Landlord reserves the right to exclude all other names therefrom and to make a
reasonable charge for each and every name other than the name of Tenant which
Tenant may
EXHIBIT C-2
<PAGE>
desire to be placed upon such bulletin board and to which Landlord may consent.
12. No person shall be employed by Tenant to do janitorial work in any
part of the Building without the prior written consent of Landlord.
13. Landlord reserves the right to exclude or expel from the Building any
person who, in the judgment of Landlord: is intoxicated or under the influence
of liquor, drugs or any unlawful substance; displays boisterous, violent or
reckless behavior; does not conduct themselves in a manner reasonably
appropriate for an office building; presents themselves in a condition that
could reasonably be considered offensive to others; or shall in any manner do
any act in violation of the rules and regulations of the Building.
14. Subject to Tenant's right of access to the Premises twenty-four hours
a day, seven days a week, Landlord reserves the right to close and keep locked
all entrance and exit doors of the Building and gates or doors closing the
stairways thereof during such hours as Landlord may deem to be advisable for the
adequate protection of the Building.
15. Tenant, Tenant's employees, agents or associates, or other persons
entering or leaving the Building when it is so locked may be required to sign
the Building register when so doing, and the watchman in charge may refuse to
admit Tenant or any of Tenant's employees, agents or associates or any other
person to the Building while it is so locked, without a pass previously arranged
or other satisfactory identification, showing such person's right to access to
the Building at such time However, Landlord assumes no responsibility whatsoever
in connection therewith and shall not be liable for any damage resulting from
any error in regard to any such pass or identification or from the admission of
any unauthorized person to the Building.
16. Landlord reserves the right to require issuance of a permit or pass
authorizing removal by Tenant or its employees, agents or associates of any
furniture, parcel, crate, typewriter or other sizable or valuable item of
personal property from the Building.
17. Neither Tenant nor its servants, employees, agents, visitors or
licensees shall at any time bring or keep upon the Premises any flammable,
combustible or explosive fluid, chemical or substance, except for a reasonable
quantity of such material reasonably necessary for the conduct of Tenant's trade
or business.
18. Tenant agrees that at no time will it permit any equipment, machinery
or device of any kind to be extended out of
EXHIBIT C-3
<PAGE>
any window of the Premises or on any ledge outside of any such window,
specifically including any air conditioner or air conditioning equipment.
19. Landlord reserves the right at any time to change or rescind any one
or more of these rules or regulations or to make such other further reasonable
rules and regulations applicable to all tenants of the Building as in Landlord's
reasonable judgment may from time to time be necessary for the management,
safety, care and cleanliness of the Premises and the Building, and for the
preservation of good order therein as well as for the convenience of other
occupants and tenants therein. Subject to Section 6.7 of the Lease, Landlord
shall not be responsible to Tenant herein or to any other person for the
nonobservance or violation of the rules and regulations by any other tenant or
other person. Tenant shall be deemed to have read these rules and regulations
and to have agreed to abide by them as a condition to Tenant's occupancy of the
Premises.
20. Tenant at all times agrees to abide by any additional rules or
regulations which are ordered or requested by any governmental or military
authority.
In the event of a conflict between one of the rules and regulations and a
provision in the Lease, the provisions of the Lease shall control.
EXHIBIT C-4
<PAGE>
EXHIBIT D
---------
FORM OF NON-DISTURBANCE AND ATTORNMENT AGREEMENT
------------------------------------------------
This Agreement is made on ____________, between _______________________
("Superior Mortgagee"), whose address is ________________, ____________________
__________ ("Landlord"), whose address is ______________________________, and
________________, a _________________ corporation ("Tenant"), whose address is
_________________________________, who agree as follows:
1. Recitals. This Agreement is made with reference to the following
--------
facts and objectives:
(a) Superior Mortgagee is, or it is anticipated that Superior
Mortgagee will become, the beneficiary under a certain deed of trust
("Trust Deed") on improved property located at 304 South Broadway, City and
County of Los Angeles, State of California, 90013 ("Property"). Superior
Mortgagee shall also be deemed to include any lender who executes this
Agreement and subsequently acquires title to the Building pursuant to a
bankruptcy proceeding involving Landlord.
(b) On or about August __, 1996, Landlord leased to Tenant, and
Tenant leased from Landlord, a portion of the Property. A copy of the lease
between Landlord and Tenant ("Lease") is attached hereto as Schedule "1"
and made a part hereof by this reference.
(c) The parties desire, under the provisions set forth in this
Agreement, to assure Tenant that in the event of the foreclosure of the
Trust Deed, or in the event of a sale in lieu of such foreclosure, or in
the event that Superior Mortgagee directly or indirectly becomes the new
landlord of the Building because of its providing financing to Landlord,
the terms of the Lease shall not be terminated, disturbed, or adversely
affected, provided an Event of Default has not occurred under Section 11.2
of the Lease and subject to the cure rights set forth in Section 11.2 of
the Lease ("Tenant Default").
2. Attornment. If Landlord is in default under the Trust Deed after
----------
expiration of the applicable period that Landlord has in which to cure its
default, and if a foreclosure sale takes place due to such default, or if
Superior Mortgagee shall notify Tenant of such transfer of title to the Property
or if Superior Mortgagee becomes the new Landlord of the Building, after receipt
of such notice, upon the effective date of such transfer of title, and after
Tenant has received written notice of such transfer of title, Tenant shall
attorn to Superior Mortgagee and shall recognize Superior Mortgagee as Tenant's
landlord under the
EXHIBIT D-1
<PAGE>
Lease, and Tenant agrees to execute any instruments reasonably requested to
evidence such attornment. Upon attornment, the Lease shall continue in full
force and effect, so long as a Tenant Default has not occurred, and Tenant shall
perform all Tenant's obligations under the Lease directly to Superior Mortgagee,
as if Superior Mortgagee were the landlord under the Lease. Tenant agrees to
make any modifications of the Lease requested by Superior Mortgagee hereunder,
provided that such modifications do not adversely affect any right of Tenant
under the Lease or increase any of Tenant's monetary obligations under the
Lease.
3. Non-Disturbance by Superior Mortgagee. If a Tenant Default is not in
-------------------------------------
existence at the time of the transfer of title as provided in the above
paragraph, the Lease shall continue with the same force and effect as if
Superior Mortgagee and Tenant had entered into a lease with the same provisions
as those contained in the Lease, and the terms of the Lease and Tenant's
leasehold estate in the Property shall not be terminated, disturbed, or
adversely affected, except according to the terms of the Lease.
4. Conditions of Superior Mortgagee's Recognition. Until a Tenant
----------------------------------------------
Default occurs, Superior Mortgagee or such other purchaser shall recognize the
leasehold estate of Tenant under all of the terms, covenants and conditions of
the Lease for the remaining balance of the term and any renewals thereof with
the same force and effect as if Superior Mortgagee or such other purchaser were
the landlord under the Lease, and Superior Mortgagee and Tenant shall
immediately enter into a written agreement with the same provisions as those in
the Lease, except for any technical changes that are necessary because of the
substitution of Superior Mortgagee in place of Landlord; provided, however, that
Superior Mortgagee, or such other purchaser, shall not be (i) liable for any act
or omission of Landlord or any other prior lessor which occurred prior to the
time the Superior Mortgagee purchased or acquired its interest under the Lease,
except with respect to Tenant's right to deduct from rents next due under the
Lease, together with interest thereon at the Interest Rate, as defined in the
Lease, any (a) unpaid tenant improvement allowance (including allowances for
initial construction), or the cost incurred by Tenant in constructing or
completing the tenant improvements which were required to be constructed or
completed by Landlord at Landlord's expense, or (b) unpaid arbitration or court
award, (ii) except as provided in (i) to the contrary, obligated to cure any
defaults of Landlord or any other prior lessor under the Lease which occurred
prior to the time that Superior Mortgagee purchased or acquired its interest
under the Lease (except to the extent that the default is not monetary and
remains in existence at the time the Superior Mortgagee purchased or acquired
its interest under the Lease), (iii) except as provided in (i) to the contrary,
subject to any offsets or defenses which Tenant may be entitled to assert
against Landlord or any other prior lessor; (iv) bound by any payment of rent or
additional rent by Tenant to Landlord
EXHIBIT D-2
<PAGE>
or any other prior lessor for more than one month in advance, bound by any
amendment or modification of the Lease which would adversely affect any right of
Landlord under the Lease made without the written consent of Superior Mortgagee
or such other purchaser who has first, in writing, notified Tenant of its
interest, which consent cannot be unreasonably withheld, or (vi) except as
provided in (i) to the contrary, liable or responsible for or with respect to
the retention, application and/or return to Tenant of any security deposit paid
to Landlord or any other prior lessor, whether or not still held by Landlord,
unless and until Superior Mortgagee or such other purchaser has actually
received for its own account as landlord the full amount of such security
deposit, or any portion thereof (such liability and responsibility being limited
to the amount received, if any).
5. Special Payment. Notwithstanding anything to the contrary set forth
---------------
in this Agreement or in the Lease, in the event that the Landlord fails to pay
to Tenant (a) any tenant improvement allowance, or (b) unpaid final arbitration
award or court judgment, Superior Mortgagee or such other successor to the
interests of Landlord and/or the Superior Mortgagee shall pay to the Tenant,
together with interest at the Interest Rate, such unpaid amounts. With respect
to all such payments, interest shall be computed from the date such amounts are
in fact paid.
In the event Landlord, Superior Mortgagee or such other successor to the
interests of Landlord and/or Superior Mortgagee shall fail to pay to Tenant such
unpaid amounts, Tenant may deduct such amounts, together with interest thereon
at the Interest Rate and computed as set forth above, from the rent next
becoming due and payable under the Lease.
6. Covenants of Superior Mortgagee.
-------------------------------
(a) Superior Mortgagee shall, at the request of Tenant, oppose any
rejection of this Lease in the event a bankruptcy proceeding is instituted
involving Landlord as the debtor.
(b) Superior Mortgagee shall serve Tenant, in the same manner and at
the same time, with a copy of all notices it serves on Landlord with
respect to any default by Landlord on any obligation of Landlord to
Superior Mortgagee.
7. Miscellaneous.
-------------
(a) No Effect on Trust Deed. Nothing in this Agreement shall be
-----------------------
deemed to change in any manner the provisions of the Trust Deed as between
Superior Mortgagee and Landlord, to waive any right that Superior Mortgagee
may now have or later acquire against Landlord by reason of the Trust Deed.
EXHIBIT D-3
<PAGE>
(b) Attorneys' Fees. If any party commences an action against any of the
---------------
other parties arising out of or in connection with this Agreement, the
prevailing party shall be entitled to recover from the losing party
reasonable attorneys' fees and costs of such action.
(c) Notice. Any notice, demand, request, consent, approval, or
------
communication that any party desires or is required to give to another
party or any other person shall be in writing and either served personally
or sent by prepaid, first-class mail. Any notice, demand, request, consent,
approval, or communication that any party desires or is required to give to
the other party shall be addressed to the other party at the address set
forth in the introductory paragraph of this Agreement. Any party may change
its address by notifying the other parties of the change of address. Notice
shall be deemed communicated within two (2) business days from the time of
mailing, if mailed as provided in this paragraph.
(d) Successors. This Agreement shall be binding on and inure to the
----------
benefit of the parties and their successors.
(e) Governing Law. This Agreement shall be governed by, and construed
-------------
in accordance with, the laws of the State of California.
(f) No Modifications Unless in Writing. This Agreement contains all
----------------------------------
of the agreements and understandings between the parties regarding this
Agreement relating to the leasing of the Premises and the obligations of
Landlord and Tenant in connection with such Lease. This Agreement
supersedes any and all prior agreements and understandings between
Landlord, Tenant and Superior Mortgagee and alone expresses the agreement
of the parties. This Agreement shall not be amended, changed or modified in
any way unless in writing executed by Landlord, Tenant and Superior
Mortgagee. Landlord, Tenant and Superior Mortgagee shall not have waived or
released any of their rights hereunder unless in writing and executed by
Landlord, Tenant and Superior Mortgagee.
EXHIBIT D-4
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
first above written.
LANDLORD:
_______________________________,
a _____________________________
By: ___________________________
Its: __________________________
TENANT:
_______________________________,
a _________________________
By: ___________________________
Its: __________________________
SUPERIOR MORTGAGEE:
------------------
_______________________________,
a _____________________________
By: ___________________________
Its: __________________________
EXHIBIT D-5
<PAGE>
SCHEDULE 1 TO EXHIBIT D
-----------------------
LEASE
[* TO BE ATTACHED *]
EXHIBIT D-6
<PAGE>
EXHIBIT E
---------
FORM OF ESTOPPEL CERTIFICATE
----------------------------
TO: _________________________________________________
FROM: _________________________________________________
RE: _________________________________________________
[*LANDLORD/TENANT*] hereby certifies the information set forth below
with respect to the Lease as of the date of this certificate.
1. The Lease is unmodified and in full force and effect [or "The
Lease, as modified by the above-referenced amendment(s), is in full force and
effect" except as noted herein].
2. Tenant made its latest payments of Base Rent and Additional Rent
(in respect to Tax Costs and Operating Costs) under the Lease on the following
dates, in the following amounts:
Date Amount
---- ------
Base Rent: _____________, 19__ $_______________
Additional
Rent _____________, 19__ $_______________
3. To the best knowledge of [*LANDLORD/TENANT*], [except as set
forth below,] [*TENANT/LANDLORD*] is not in default under the Lease.
Date: _________ ______________________________,
a ____________________________
By: __________________________
Title: _______________________
EXHIBIT E-1
<PAGE>
EXHIBIT F
---------
INTENTIONALLY OMITTED
EXHIBIT F-1
<PAGE>
EXHIBIT G
---------
RIGHT OF FIRST OFFER
--------------------
A. Tenant shall have the right to send to Landlord a notice (the
"Request Notice") advising Landlord that Tenant is interested in possibly
- ---------------
leasing additional space in the Building. Within ten (10) days of receipt of a
Request Notice, Landlord shall promptly notify Tenant of when and what space in
the Building is or will be so available within the next six (6) months (the
"Available Space"). Tenant thereupon shall have the right (the "ROFO") to lease
- ---------------- ----
all or any part of such Available Space at the Fair Market Rate for the
remaining term of the Lease, except that Tenant shall have no such right:
1. if Tenant is in default pursuant to Section 11.2 of the Lease; or
2. if the portion of the Available Space not leased by Tenant is not in
a rentable configuration or size; or
3. after that date which is the five (5) year anniversary of the
Commencement Date; provided, however, that if Tenant exercises its Renewal
Option (as set forth in Section 2.5 of the Lease), then Tenant's rights pursuant
to this Exhibit G shall resume commencing on the first (1st) day of the renewal
---------
term (the "Renewal Term Commencement Date") and terminating on that date which
------------------------------
is the two (2) year anniversary of the Renewal Term Commencement Date.
B. The ROFO shall be exercised by Tenant's notifying Landlord, within
ten (10) days after Tenant's receipt of the notice of availability of the
Available Space, of Tenant's exercise of its right to lease such Available Space
(or such portion of such Available Space identified by Tenant in such notice
which thereupon shall be deemed the Available Space) upon the terms of this
Exhibit G. If Tenant so notifies Landlord, Landlord shall deliver the Available
- ---------
Space to Tenant upon the date such space is available and shall prepare an
amendment to the Lease adding the Available Space to the Premises on the date of
delivery on the terms set forth in this Exhibit G, which amendment shall be
---------
delivered to Tenant promptly after exercise and executed by Tenant within thirty
(30) days after Tenant's receipt of same from Landlord. The privileges for
parking which Tenant receives in connection with the Available Space shall be
within one (1) block of the Building and shall be at the higher of three (3)
privileges per 1,000 RSF or the parking rights determined in accordance with the
definition of Fair Market Rate.
C. Tenant may not send a Request Notice until six (6) months have
elapsed since the day Tenant previously sent a Request Notice to Landlord
following the execution by Tenant of rejection of the right to lease the
Available Space.
EXHIBIT G-1
<PAGE>
D. If Landlord and Tenant are unable to agree as to the Fair Market Rate
within thirty (30) days following Tenant's exercise of each such ROFO, then
Landlord must lease such Available Space to Tenant at the Fair Market Rate
determined in accordance with Section 2.5(b) of the Lease. To the extent Tenant
is granted other concessions in accordance with the determination of Fair Market
Rate such as any allowance, etc., such concessions shall be provided to Tenant
with Landlord incorporating the appropriate provisions of the Lease in the
amendment to reflect any allowance, Build-Out Period (as defined in Paragraph E
below), disbursement procedures, etc., to reflect the implementation of the Fair
Market Rate determination.
E. Rent for the Available Space shall commence upon the earlier of (i)
the date Tenant commences business operations from such Available Space and (ii)
the date determined in accordance with the definition of Fair Market Rate for
the build out of the Available Space (the "Build-Out Period"), which Build-Out
----------------
Period shall be extended one (1) day for each day Tenant is delayed in designing
or constructing its tenant improvements because of any delay caused by Landlord
or Landlord's agents employees or contractors or Force Majeure Events (as
defined in Section 17.13 of the Lease).
EXHIBIT G-2
<PAGE>
EXHIBIT 21.1
SUBSIDIARIES AND JOINT VENTURES OF CATELLUS DEVELOPMENT CORPORATION
<TABLE>
<CAPTION>
JURISDICTION OF
PERCENTAGE PARTNERSHIP OR
OWNED BY STATE OF
CATELLUS INCORPORATION
--------- ---------------
<S> <C> <C>
Sante Fe Towers Land Company 100% Delaware
Santa Fe Towers Land Company 100% California
Torrance Investment Company 66.66%(1) California
Seabridge Properties, Inc. 100% Delaware
JMB/Santa Fe Bayfront Venture 50%(2) California
Harbor Drive Company 100% Delaware
Pacific Market Investment Company 50%(3) California
SF Pacific Properties Inc. 100% Delaware
Golden Empire Investment Corporation 100%(4) Delaware
Sequoia Pacific Realco 95.33%(5) California
Pacific Design Center 75%(6) California
Design Center Services 75%(6) California
Westada Corporation 100% Delaware
North Stockton K&B - S.F. Venture No. 1 50%(7) California
Catellus Management Corporation 100% Delaware
Collinsville Property Corporation 100% Delaware
The Montezuma Wetlands Project 50%(8) California
Catellus Construction Corporation 100%(9) Delaware
Catellus Union Station, Inc. 100% Delaware
Union Station Partners 50%(10) California
Catellus Residential Group, Inc. 100% California
Catellus Residential Financial Corp. 100%(13) California
Catellus Residential Eagle Crest, Inc. 100%(16) California
Catellus Residential Communities, Inc. 100%(16) California
Catellus Residential Homes Corp. I 100%(16) California
Catellus Residential Ridgemoor, Inc. 100%(16) California
Catellus Residential Marbella, Inc. 100%(16) California
Catellus Residential Ridgemoor Homes Corp. 100%(16) California
I
Catellus Residential & Associates, Inc. 100%(13) California
Catellus Residential Partners Limited 100%(17) California
Partnership
Catellus Residential Westchester, L.L.C. 50%(14) Delaware
Koll/Akins L.L.C. 50%(15) Delaware
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C>
Akins-Seyen general partnership 50%(14) California
Catellus Residential Ocean Ridge, Inc. 100%(16) Delaware
Catellus Residential Oxnard, Inc. 100%(16) Delaware
Catellus Residential Vista Ladera L.L.C. 50%(14) Delaware
Catellus Residential Construction, Inc. 100%(13) Delaware
Dallas International, Ltd. 25.21%(11) Texas
New Orleans International Hotel 14.15%(18) Louisiana
New Orleans Rivercenter 22.5%(12) Louisiana
International Rivercenter 25.16% Louisiana
New Orleans Rivercenter 38.75% Louisiana
Desman Road Partners 37.82% California
Gilman Property Corporation 100% Delaware
</TABLE>
(1) Partnership Interest owned directly by Santa Fe Towers Land Company.
(2) Partnership Interest owned directly by Seabridge Properties, Inc.
(3) Partnership Interest owned directly by Harbor Drive Company.
(4) Owned directlyby SF Pacific Properties, Inc.
(5) Partnership Interest owned directly by Golden Empire InvestmentCorporation.
(6) Partnership Interest owned directly by Sequoia Pacific Realco.
(7) Partnership Interest owned directly by Westada Corporation.
(8) Partnership Interest owned directly by Collinsville Property Corporation.
(9) California State Contractor License No. 695604; to perform construction
services for a fee.
(10) Partnership Interest owned directly by Catellus Union Station, Inc.
(11) Catellus owns 25.21% of capital, 24.19% of profit and loss.
(12) Partnership Interest owned by New Orleans International Hotel.
(13) Owned directly by Catellus Residential Group, Inc.
(14) Partnership Interest owned directly by Catellus Residential Homes Corp. I.
(15) Partnership Interest owned directly by Catellus Residential Partners
Limited Partnership.
(16) Owned directly by Catellus Residential Financial Corporation.
(17) 1% general partnership interest owned by Catellus Residential Associates,
Inc. and 99% limited partnership interest owned by Catellus Residential
Financial Corporation.
(18) Limited partnership interest.
2
<PAGE>
EXHIBIT 23.1
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in the Prospectus
constituting part of the Registration Statement on Form S-8 of the Catellus
Development Corporation Amended and Restated Executive Stock Option Plan and the
Stock Option Agreement (Joseph R. Seiger), the Registration Statement on Form
S-8 of the Catellus Development Corporation Profit Sharing & Savings Plan and
Trust, the Registration Statement on Form S-8 of the Catellus Development
Corporation Long Term Incentive Compensation Plan, Stock Purchase Program,
Incentive Stock Compensation Plan and Stock Option Plan, the Registration
Statement on Form S-8 of the Catellus Development Corporation 1995 Stock Option
Plan, the Registration Statement on Form S-8 of the Catellus Development
Corporation 1995 Stock Option Plan and the Registration Statement on Form S-8 of
the Catellus Development Corporation 1996 Performance Award Plan (Nos. 33-58143,
33-38827, 33-42124, 333-01215 and 333-04293, respectively) of our report dated
February 12, 1997, appearing on page F-2 of this Form 10-K. We also consent to
the incorporation by reference of our report on the Financial Statement
Schedules, which appears on page S-1 of this Form 10-K.
Price Waterhouse LLP
San Francisco, California
March 31, 1997
<PAGE>
EXHIBIT 24.1
POWER OF ATTORNEY
The undersigned hereby authorizes Nelson C. Rising, Stephen P. Wallace and
Paul A. Lockie, or any of them, with full power of substitution, to sign on his
or her behalf, in the capacity stated below, the Annual Report on Form 10-K
(the "10-K") of Catellus Development Corporation and to file the 10-K, together
with exhibits thereto, and any amendment to the 10-K, and other documents in
connection therewith, with the Securities and Exchange Commission.
Dated: March 26, 1997 /s/ Joseph Alibrandi
-------------------------
Joseph Alibrandi
Director
<PAGE>
POWER OF ATTORNEY
The undersigned hereby authorizes Nelson C. Rising, Stephen P. Wallace and
Paul A. Lockie, or any of them, with full power of substitution, to sign on his
or her behalf, in the capacity stated below, the Annual Report on Form 10-K
(the "10-K") of Catellus Development Corporation and to file the 10-K, together
with exhibits thereto, and any amendment to the 10-K, and other documents in
connection therewith, with the Securities and Exchange Commission.
Dated: March 26, 1997 /s/ Daryl J. Carter
-------------------------
Daryl J. Carter
Director
<PAGE>
POWER OF ATTORNEY
The undersigned hereby authorizes Nelson C. Rising, Stephen P. Wallace and
Paul A. Lockie, or any of them, with full power of substitution, to sign on his
or her behalf, in the capacity stated below, the Annual Report on Form 10-K
(the "10-K") of Catellus Development Corporation and to file the 10-K, together
with exhibits thereto, and any amendment to the 10-K, and other documents in
connection therewith, with the Securities and Exchange Commission.
Dated: March 26, 1997 /s/ Christine Garvey
-------------------------
Christine Garvey
Director
<PAGE>
POWER OF ATTORNEY
The undersigned hereby authorizes Nelson C. Rising, Stephen P. Wallace and
Paul A. Lockie, or any of them, with full power of substitution, to sign on his
or her behalf, in the capacity stated below, the Annual Report on Form 10-K
(the "10-K") of Catellus Development Corporation and to file the 10-K, together
with exhibits thereto, and any amendment to the 10-K, and other documents in
connection therewith, with the Securities and Exchange Commission.
Dated: March 26, 1997 /s/ Nelson C. Rising
-------------------------
Neslson C. Rising
Director
<PAGE>
POWER OF ATTORNEY
The undersigned hereby authorizes Nelson C. Rising, Stephen P. Wallace and
Paul A. Lockie, or any of them, with full power of substitution, to sign on his
or her behalf, in the capacity stated below, the Annual Report on Form 10-K
(the "10-K") of Catellus Development Corporation and to file the 10-K, together
with exhibits thereto, and any amendment to the 10-K, and other documents in
connection therewith, with the Securities and Exchange Commission.
Dated: March 26, 1997 /s/ Joseph R. Seiger
-------------------------
Joseph R. Seiger
Director
<PAGE>
POWER OF ATTORNEY
The undersigned hereby authorizes Nelson C. Rising, Stephen P. Wallace and
Paul A. Lockie, or any of them, with full power of substitution, to sign on his
or her behalf, in the capacity stated below, the Annual Report on Form 10-K
(the "10-K") of Catellus Development Corporation and to file the 10-K, together
with exhibits thereto, and any amendment to the 10-K, and other documents in
connection therewith, with the Securities and Exchange Commission.
Dated: March 26, 1997 /s/ Jacqueline R. Slater
-------------------------
Jacqueline R. Slater
Director
<PAGE>
POWER OF ATTORNEY
The undersigned hereby authorizes Nelson C. Rising, Stephen P. Wallace and
Paul A. Lockie, or any of them, with full power of substitution, to sign on his
or her behalf, in the capacity stated below, the Annual Report on Form 10-K
(the "10-K") of Catellus Development Corporation and to file the 10-K, together
with exhibits thereto, and any amendment to the 10-K, and other documents in
connection therewith, with the Securities and Exchange Commission.
Dated: March 26, 1997 /s/ Thomas M. Steinberg
-------------------------
Thomas M. Steinberg
Director
<PAGE>
POWER OF ATTORNEY
The undersigned hereby authorizes Nelson C. Rising, Stephen P. Wallace and
Paul A. Lockie, or any of them, with full power of substitution, to sign on his
or her behalf, in the capacity stated below, the Annual Report on Form 10-K
(the "10-K") of Catellus Development Corporation and to file the 10-K, together
with exhibits thereto, and any amendment to the 10-K, and other documents in
connection therewith, with the Securities and Exchange Commission.
Dated: March 26, 1997 /s/ Beverly Benedict Thomas
---------------------------
Beverly Benedict Thomas
Director
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED BALANCE SHEET AND THE CONSOLIDATED STATEMENT OF OPERATIONS AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> DEC-31-1996
<CASH> 23,580
<SECURITIES> 0
<RECEIVABLES> 27,242
<ALLOWANCES> 2,553
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 1,235,440
<DEPRECIATION> 211,338
<TOTAL-ASSETS> 1,123,118
<CURRENT-LIABILITIES> 0
<BONDS> 496,742
0
274,428
<COMMON> 770
<OTHER-SE> 147,255
<TOTAL-LIABILITY-AND-EQUITY> 1,123,118
<SALES> 148,148
<TOTAL-REVENUES> 288,697
<CGS> 108,120
<TOTAL-COSTS> 203,238
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 1,053
<INTEREST-EXPENSE> 42,521
<INCOME-PRETAX> 42,938
<INCOME-TAX> 17,537
<INCOME-CONTINUING> 25,401
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 25,401
<EPS-PRIMARY> .03
<EPS-DILUTED> .03
</TABLE>
