SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934 (NO FEE REQUIRED)
For the fiscal year ended December 31, 1996
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES ACT OF 1934 (NO FEE REQUIRED)
Commission File No. 1-12926
BEACON PROPERTIES CORPORATION
(Exact name of registrant as specified in its charter)
Incorporated in Maryland 04-3224258
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
50 Rowes Wharf, Boston, Massachusetts 02110
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code 617-330-1400
Securities registered pursuant to Section 12(b) of the Act:
Name of each exchange on
Title of each class which registered
Common Stock, $.01 par value New York Stock Exchange
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 [checkmark] No __
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K ((S.)229.405 of this chapter) is not contained herein,
and will not be contained to the best of registrant's knowledge, in
definitive proxy or information statements incorporated by reference in Part
III of this Form 10-K or any amendment to this Form 10-K [ ].
The aggregate market value of the shares of common stock held by
non-affiliates as of March 24, 1997 was approximately $1,669.6 million.
The number of shares of common stock outstanding as of March 24, 1997 was
48,233,236.
DOCUMENTS INCORPORATED BY REFERENCE
Certain portions of the following documents have been incorporated by
reference into the 10-K Parts indicated:
Documents 10-K Parts
1. The 1997 Proxy Statement (The "1997 Proxy Statement") Part III
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page No.
<S> <C> <C>
Item 1. Business 1
Item 2. Properties 6
Item 3. Legal Proceedings 8
Item 4. Submission of Matters to a Vote of Security Holders 9
Item 5. Market for Registrant's Common Equity and Related Stockholder Matters 9
Item 6. Selected Financial Data 11
Item 7. Management's Discussion and Analysis of Financial Condition and Results of
Operations 12
Item 8. Financial Statements and Supplementary Data 18
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure 18
Item 10. Directors and Executive Officers of the Registrant 18
Item 11. Executive Compensation 18
Item 12. Security Ownership of Certain Beneficial Owners and Management 18
Item 13. Certain Relationships and Related Transactions 18
Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K 18
</TABLE>
<PAGE>
Item 1. Business
General
Beacon Properties Corporation was incorporated on March 4, 1994 as a
Maryland corporation, and commenced operations effective with the completion
of its initial public offering (the "Initial Offering") on May 26, 1994.
Beacon Properties Corporation, together with Beacon Properties, L.P. (the
"Operating Partnership") and their subsidiaries (the "Company"), was formed
to succeed to the office and commercial real estate business of The Beacon
Group (the "Predecessor"). The Predecessor was founded in 1946 by Norman
Leventhal and Robert Leventhal. Starting in the 1940's, the Predecessor
developed commercial building construction expertise by providing general
contracting services to projects in 20 states. The Predecessor began
developing for its own account in the 1960's. Also in the 1960's, the
Predecessor began to develop its property management business.
The Company's business is conducted principally through the Operating
Partnership, two subsidiary corporations and two subsidiary limited
partnerships. The Company conducts third-party management operations through
Beacon Property Management Corporation, a Delaware corporation (the
"Management Company") and conducts third-party tenant space design services
through Beacon Design Corporation, a Massachusetts corporation (the "Design
Company"). Beacon conducts management operations for wholly-owned properties
through Beacon Property Management, L.P. a Delaware limited partnership (the
"Management Partnership") and conducts tenant space design services for
wholly-owned properties through Beacon Design, L.P., a Delaware limited
partnership (the "Design Partnership").
At December 31, 1996, the Company owned or had an interest in a portfolio
of 104 Class A office properties and other commercial properties (each, a
"Property" and collectively, the "Properties") located in Atlanta, Boston,
Chicago, Los Angeles, San Francisco and Washington D.C., as well as
commercial real estate development, acquisition, leasing and management
businesses. Class A office properties generally are considered to be those
which have excellent locations and access, attract high quality tenants, are
well maintained and professionally managed, and achieve among the highest
rent, occupancy and tenant retention rates within their markets. The
Properties are comprised of approximately 15.8 million rentable square feet
in the aggregate and, as of December 31, 1996, were 96% leased with over
1,100 tenants. Through the Management Company, the Company manages
approximately 2.9 million square feet of commercial and office space owned by
third parties in various locations including Boston and Springfield,
Massachusetts and Chicago, Illinois. The Management Company employs
approximately 375 persons.
Recent Property Acquisitions
At December 31, 1996, the Company's portfolio consisted of 104 properties
totaling 15.8 million square feet compared to 26 properties totaling 6.7
million square feet at December 31, 1995 and 21 properties totaling 5.3
million square feet at December 31, 1994. Property acquisitions in 1996
included the following transactions:
On February 15, 1996, the Company acquired a 3.3 million square foot, 32
building portfolio located in suburban Atlanta, Georgia (the "Perimeter
Center Portfolio") for approximately $322.2 million in cash and approximately
$13.8 million of units of limited partnership interest in the Operating
Partnership ("Units").
During the second quarter of 1996, the Company and Equitable Life
Assurance Society of the United States, on behalf of its Prime Property Fund
("Equitable"), the Operating Partnership's partner in the Rowes Wharf
Property, acquired the remaining outstanding first mortgage indebtedness on
the Rowes Wharf Property for $16.7 million. The mortgage debt was acquired at
market value which was approximately 50% of face value.
On August 16, 1996, the Company acquired a portfolio of office properties,
comprised of seven properties, from New York Life Insurance Company (the "New
York Life Portfolio") for approximately $150 million. The New York Life
Portfolio consists of the AT&T Plaza located in Oak Brook, Illinois, the
five-building Tri-State International office park located in Lincolnshire,
Illinois and a property located at 1333 H Street in Washington, D.C.
1
<PAGE>
On September 5, 1996, the Company acquired a portfolio of three office
buildings and a parcel of land suitable for development located in Fairfax
County, Virginia (the "Fairfax County Portfolio") for aggregate consideration
of $77 million consisting of assumption of approximately $55.5 million of
mortgage debt and the issuance of approximately $21.5 million of Units. The
Fairfax County Portfolio consists of the John Marshall I building, the E.J.
Randolph building, the Northridge I building and the John Marshall III parcel
of land.
On October 18, 1996, the Company acquired a portfolio of two office
buildings located in Rosslyn, Virginia (the "Rosslyn, Virginia Portfolio")
for aggregate consideration of approximately $99 million. The Rosslyn,
Virginia Portfolio consists of office buildings located at 1616 North Fort
Myer Drive and 1300 North 17th Street.
On November 15, 1996, the Company acquired a portfolio of nine office
properties located in Burlington (suburban Boston), Massachusetts (the "New
England Executive Park Portfolio") for aggregate consideration of
approximately $75 million. An additional $17 million is payable on November
30, 1998, contingent upon meeting conditions regarding occupancy or rental
income levels at the Property in 1998.
On November 21, 1996, the Company acquired the 10960 Wilshire Boulevard
Property located in Westwood, California for aggregate consideration of
approximately $133 million.
On November 21, 1996, the Company acquired The Riverview Building Property
located in Cambridge, Massachusetts for aggregate consideration of
approximately $45 million.
On December 20, 1996, the Company acquired the Shoreline Technology Park
and Lake Marriott Business Park located in suburban San Francisco for
aggregate consideration of approximately $183 million.
On December 27, 1996, the Company acquired the Presidents Plaza Property
located in Chicago, Illinois for aggregate consideration of approximately $38
million in cash and the issuance of approximately $39 million of Units.
Sale of Beacon Construction Company
In 1996, Beacon Construction Company, Inc. (the "Construction Company")
sold substantially all of its assets. The Construction Company's new business
plan involves the completion of certain contracts not transferred to the
purchaser and the liquidation of its remaining assets. The Company's decision
to effect the sale of the Construction Company was based upon the
determination that the general construction business was no longer an
integral part of its business.
Recent Financing Activities
Conversion of Credit Facility to Permanent Mortgage Debt: In January 1996,
the Company converted $55 million of its floating-rate credit facility (the
"Credit Facility") to permanent mortgage debt secured by the Wellesley Office
Park Properties. Additionally, in February 1996, the Company converted an
additional $60 million of the Credit Facility to permanent mortgage debt
secured by the Center Plaza Property. Both mortgages were provided by
Connecticut General Life Insurance Company ("CIGNA"). These mortgages are for
terms of seven years, bear interest at annual rates of 7.23%, and require
monthly installments of interest only during years one through three and
principal and interest during years four through seven based on a 27-year
amortization schedule.
Financing of Perimeter Center Portfolio Acquisition: The Company financed
the acquisition of the Perimeter Center Portfolio, in part, through a $260
million mortgage loan (the "PaineWebber Acquisition Loan") provided by
PaineWebber Real Estate Securities, Inc. and an approximately $13.8 million
private placement of Units. In March 1996, Metropolitan Life Insurance
Company ("Met Life") provided $218 million of mortgage financing on the
Perimeter Center Portfolio (the "Met Life Loan") to the Company. The Met Life
Loan bears interest at a rate of 7.08% fixed over the ten year term of the
loan. The Company used the proceeds of the Met Life Loan to repay, in part,
the PaineWebber Acquisition Loan and balances outstanding on the Credit
Facility.
Additional Offerings by the Company: In March 1996, the Company sold
7,036,000 shares of common stock, $.01 par value per share (the "Common
Stock") at an offering price of $26.25 per share and contributed the net
proceeds of approximately $173.8 million to the Operating Partnership in
exchange for a like number of Units. In August 1996, the Company sold
5,750,000 shares of Common Stock at an offering price of $25.75 per share and
contributed the net proceeds of approximately $139.4 million to the Operating
Partnership in exchange for a like number of Units. In November 1996, the
Company sold 13,723,000 shares of Common Stock at an offering
2
<PAGE>
price of $30.75 per share. In addition, in December 1996, the Company sold an
additional 1,132,400 shares of Common Stock at an offering price of $33.465
per share to the underwriters of the November 1996 offering to cover a
portion of their short position resulting from over-allotments. The Company
contributed the net proceeds of approximately $436.7 million from the
November 1996 and December 1996 offerings to the Operating Partnership in
exchange for an aggregate of 14,855,400 Units. The Operating Partnership used
the net proceeds of these contributions to fund the acquisition of
properties.
Financing of Fairfax County Portfolio: On December 23, 1996, the Company
refinanced the $16.5 million mortgage loan on the Northridge I Property to a
$13.6 million mortgage loan with a 10-year term bearing interest at an annual
rate of 8.19%. This mortgage loan requires monthly installments of interest
only during years one and two and principal and interest during years three
through ten based on a 25-year amortization schedule.
On December 23, 1996, the Company also closed on a $15 million mortgage
loan on the E.J. Randolph Property, and used the net proceeds to pay down the
Credit Facility. On September 5, 1996, in connection with the acquisition of
the Property, the Company paid off a $18 million mortgage loan it assumed
using a draw on the Credit Facility.
Business Objectives
The Company pursues business objectives that emphasize (i) a property
management program focused on maintaining the quality of and demand for its
properties at a level that will support high occupancy rates and increasing
rental rates; (ii) the acquisition of high-quality commercial properties;
(iii) the development of new properties, as warranted by market conditions;
and (iv) the provision of real estate management services to third parties.
Acquisitions: The Company will seek to acquire additional properties that
it believes will produce favorable returns, either as acquired or after
value-added activities (such as improved management and leasing services and
renovations) by the Company. The Company intends to obtain capital for new
acquisitions through the use of the Credit Facility, as well as the issuance
of additional equity or corporate debt securities. The Company believes that
its commercial property development experience, its extensive business
relationships and its market research capabilities enable it to identify,
analyze and implement acquisition opportunities more effectively than
competitors without such capabilities. In addition, as part of its ongoing
business the Company periodically engages in discussions with public and
private real estate entities regarding possible portfolio or asset
acquisitions or business combinations.
Development: While current conditions in the Company's primary markets
favor the acquisition rather than the development of new properties, as
opportunities arise in the future, the Company intends to grow through the
development of new properties. In 1996, the Company commenced the expansion
of a building in the Wellesley Office Park Property and completed the
redevelopment of Crosby Corporate Center. The Company currently owns
developable land adjacent to the Crosby Corporate Center and the Fairfax
County Portfolio and has an option to purchase developable land adjacent to
the Perimeter Center Portfolio.
Management of the Properties: The Company seeks to maintain quality
standards for its properties that promote high occupancy rates and permit
increases in rental rates while reducing tenant turnover and controlling
operating expenses. The Company emphasizes high quality property management,
comprehensive energy-savings and cost control programs and comprehensive
preventive maintenance programs.
Third-Party Management: The Company manages approximately 2.9 million
square feet of commercial and office space owned by third parties in various
locations. The Company intends to selectively enter into management contracts
for office and commercial properties that are compatible with the Company's
objectives, portfolio, and reputation. The Company will conduct its
third-party management activities through the Management Company.
Environmental Matters
Some of the Properties are located in urban areas where fill or current or
historic industrial uses of the areas may have caused site contamination at
the Properties. Nonetheless, at this time, the Company does not anticipate
that regulatory authorities will require remediation of the Properties,
except as specified below.
Crosby Corporate Center: Site assessments have identified the presence of
petroleum in the groundwater near the former location of an underground
storage tank installed and used by a previous tenant. The state environmental
agency responsible for overseeing remediation of such contamination notified
the former tenant of the property that it is responsible for such
contamination. The former tenant has agreed to perform the necessary
investigation and
3
<PAGE>
cleanup actions regarding such contamination, bear all costs associated with
such cleanup activities, and indemnify the Company for any costs or damages
it incurs in connection with such contamination. As the owner of the
Property, however, the Company could be held liable for the costs of such
activities if the former tenant fails to undertake such actions, although the
Company believes that such costs would have no material adverse effect on its
financial condition, results of operation and liquidity. The tenant has
received from the state regulatory agency and agreed to the conditions of a
Waiver Application Disposition which allows the tenant to assess and
remediate the contamination without having to obtain interim approvals from
the state agency during such activities.
South Station: Site assessments of South Station have identified the
presence of contaminants in the soil and groundwater in the train yard
adjacent to the South Station Property and the South Station Property is
assumed to be similarly contaminated. Under agreements between the Company
and the Massachusetts Bay Transportation Authority ("MBTA"), the MBTA, which
is the owner of the South Station Property, is obligated to bear the
liabilities associated with such environmental conditions on the Property and
to defend and indemnify the Operating Partnership for its costs arising from
such conditions. This indemnity does not alter the Company's liability as an
operator of the Property to parties other than the MBTA, although the Company
believes that such liability would have no material adverse effect on its
financial condition, results of operations and liquidity.
Fairfax County Portfolio: Chlorinated solvents, primarily trichloroethane
("TCE"), have been detected in groundwater samples collected from monitoring
wells located at the John Marshall III land (the "JM III Parcel"). Subsequent
investigations of the JM III Parcel by an environmental consultant retained
by the sellers of the Fairfax County Portfolio (the "Consultant") confirmed
the presence of chlorinated solvents in groundwater at the JM III Parcel and
on property adjacent to the JM III Parcel where an auto body repair shop is
located.
The sellers of the Fairfax County Portfolio reported the findings of
chlorinated solvent contamination on the JM III Parcel to the Virginia
Department of Environmental Quality. The Consultant has concluded that the
auto body repair shop is the probable source for the chlorinated solvent
contamination, has collected additional soil and groundwater samples and is
preparing a remediation plan for the site. Units valued at approximately $1
million were escrowed from the purchase price paid for the Fairfax County
Portfolio upon the closing of the acquisition. Under the terms of the escrow,
these Units will be released to the seller of the JM III Parcel periodically
upon performance of remediation pursuant to a remediation plan approved by
the Company. The escrow further provides that the Company may receive some or
all of the remaining escrowed Units upon certain conditions, including (i) if
remediation is required by law, in the event of an emergency threatened by
the contamination, (ii) if the seller defaults under the remediation
agreement or fails to obtain access to the likely source site or governmental
approvals, (iii) if the Company enters into a lease for space in a building
to be constructed on the JM III Parcel or (iv) if the seller fails to obtain
a closure certification from the Virginia Department of Environmental Quality
upon completion of remediation.
New England Executive Park Portfolio: Site assessments at the New England
Executive Park Portfolio have identified the presence of trichloroethylene in
the groundwater at one monitoring well on the northern perimeter of the
Property. The groundwater beneath the Property flows into an aquifer, which
supplies drinking water to the Town of Burlington. The concentrations that
have been discovered at the Property to date are slightly above the standards
established for trichloroethylene in areas contributing to drinking water
supplies and, as a result, must be reported to the Massachusetts Department
of Environmental Protection (the "DEP"). The owner of the property to the
north of the New England Executive Park Portfolio, which is upgradient of the
New England Executive Park Portfolio, has filed with the DEP indicating the
presence of trichloroethylene in the groundwater of such property. The former
owner of the New England Executive Park Portfolio filed with the DEP to
establish the Property's "Downgradient Property Status" under applicable
regulations, indicating that the Property is not a source of the
trichloroethylene contamination that has been identified. The DEP has stated
that this policy is not to require downgradient property owners to perform
remediation under these circumstances. In addition, the Town of Burlington
has allocated funds for, and is in the process of constructing, a groundwater
treatment facility at its drinking water supply that draws from the subject
aquifer. The Company has been advised that such treatment facility has the
capacity to treat any contaminants which may be derived from the groundwater
passing beneath the New England Executive Park Portfolio. The Town's water
treatment facility and the present policy of the DEP with respect to
downgradient property owners do not relieve the Company of potential
liability for the presence of the identified trichloroethylene, although the
Company does not believe that any such liability would have a material
adverse effect.
4
<PAGE>
The Riverview Building: Site assessments performed at The Riverview
Building have identified the presence of oil in one soil sample taken at the
Property in an amount that slightly exceeds the concentration that requires
reporting to the DEP. Based on these site assessments, however, an
environmental consultant has advised the Company that applicable regulatory
requirements can be satisfied without the need to perform any remediation at
the Property. As the owner of the Property, the Company could be held liable
for costs associated with the contamination that has been identified,
although the Company does not believe that such costs would have a material
adverse effect.
5
<PAGE>
Item 2. Properties
<TABLE>
<CAPTION>
THE PROPERTIES
(dollars in thousands)
Mortgage
Percent Notes
Rentable Leased Cost at Payable at
Year Built/ Ownership Property Area in December 31, December 31, December 31,
Property Renovated Interest(1) Location Square Feet 1996 1996 1996
- ------------------ ------------ ----------- ------------ ------------ ------------- ---------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Downtown Boston
Office Market
75-101 Federal
Street 1985-1988 51.6% Boston, MA 812,000 92% $ (2) $ (2)
One Post Office
Square 1981 50% Boston, MA 764,000 99% (2) (2)
Center Plaza 1966-1969 (3) Boston, MA 649,000 93% 81,823 60,000
150 Federal Street 1988 100% Boston, MA 530,000 99% 113,871 56,920(4)
Rowes Wharf 1987 45% Boston, MA 344,000 100% (2) (2)
Russia Wharf 1978-1982 100% Boston, MA 315,000 98% 18,089 (5)
Two Oliver
Street-147 Milk
Street 1982-1988 100% Boston, MA 271,000 97% 19,338 (5)
175 Federal Street 1977 100% Boston, MA 203,000 94% 29,105 12,970
South Station (6) 1988 100% Boston, MA 149,000 100% 22,348 --
------------ -------------
4,037,000 96%
------------ -------------
Greater Boston
Suburban Office
Market
Wellesley Office
Park (7) 1963-1984 100% Wellesley, MA 623,000 100% 97,805 55,000
Crosby Corporate
Center (8) 1996 100% Bedford, MA 336,000 88% 27,841 (5)
Westwood Business
Centre 1985 100% Westwood, MA 160,000 100% 12,331 (5)
New England
Executive Park
Portfolio (9) 1970-1985 100% Burlington, MA 817,000 98% 75,390 (5)
------------ -------------
1,936,000 97%
------------ -------------
Cambridge Office
Market
One Canal Park 1987 100% Cambridge, MA 100,000 100% 9,514 (5)
Ten Canal Park 1987 100% Cambridge, MA 110,000 92% 11,923 (5)
The Riverview
Building (10) 1985-1986 100% Cambridge, MA 263,000 100% 45,183 --
------------ -------------
473,000 98%
------------ -------------
North Central
Atlanta Office
Market
Perimeter Center
Portfolio (11). 1970-1989 100% Atlanta, GA 3,302,000 98% 343,014 218,000
------------ -------------
Arlington County,
Virginia Office
Market
The Polk and
Taylor Buildings 1970 10% Arlington, VA 890,000 100% (2) (2)
1300 North 17th
Street 1980 100% Rosslyn, VA 373,000 98% 54,776 (5)
1616 North Fort
Myer Drive 1974 100% Rosslyn, VA 293,000 99% 44,894 (5)
------------ -------------
1,556,000 99%
------------ -------------
Fairfax County,
Virginia Office
Market
John Marshall I 1981 100% McLean, VA 261,000 100% 34,134 20,722
E.J. Randolph 1983 100% McLean, VA 165,000 97% 23,146 15,000
Northridge I 1988 100% Herndon, VA 124,000 100% 21,216 13,600
------------ -------------
550,000 99%
------------ -------------
Washington, D.C.
Office Market
1333 H Street, Washington,
N.W. 1984(12) 100% D.C. 239,000 90% 53,438 (5)
------------ -------------
Suburban Chicago
Office Market
AT&T Plaza 1984 100% Oak Brook, IL 225,000 100% 35,115 (5)
Tri-State
International
(13) 1986 100% Lincolnshire, IL 548,000 74% 63,171 (5)
Presidents Plaza
(14) 1980-1982 100% Chicago, IL 791,000 90% 77,533
------------ -------------
1,564,000 86%
------------ -------------
</TABLE>
6
<PAGE>
<TABLE>
<CAPTION>
The Properties
(dollars in thousands)
Mortgage
Percent Notes
Rentable Leased Cost at Payable at
Year Built/ Ownership Property Area in December 31, December 31, December 31,
Property Renovated Interest(1) Location Square Feet 1996 1996 1996
- ------------------ ------------ ----------- ------------ ------------ ------------- ---------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
West Los Angeles
Office Market
10960 Wilshire
Boulevard 1971-1992 100% Westwood, CA 544,000 89% $ 133,307 $ --
------------ -------------
Suburban
Philadelphia
Office Market
Westlakes Office
Park (15) 1988-1990 100% Berwyn, PA 444,000 98% 59,018 (5)
------------ -------------
San Francisco
Office Market
Shoreline
Technology Park Mountain
(16) 1985-1991 100% View, CA 727,000 100% 141,040 --
Lake Marriott
Business Park Santa Clara,
(17) 1981 100% CA 400,000 100% 43,167 --
------------ -------------
1,127,000 100%
------------ ------------- ---------------------------
Total Weighted
Average 15,772,000 96% $1,691,530 $452,212
============ ============= ===========================
</TABLE>
(1) The Company holds, directly or indirectly, a general partner interest in
One Post Office Square, a general partner and limited partner interest
in Center Plaza and the Polk and Taylor Buildings and a limited partner
interest in Rowes Wharf Associates. The Company holds approximately 52%
of the common stock of BeaMetFed, Inc. ("BeaMetFed"), the entity that
holds the fee title to the 75-101 Federal Street Property. The Company
owns a 100% fee interest in the remaining Properties, with the exception
of South Station, in which it holds a ground leasehold interest.
(2) The Company uses the equity method of accounting for its investments in
the joint ventures or corporations which own these Properties.
(3) The Company holds a 1% general partner interest, a 75% limited partner
interest and an option to purchase the remaining 24% limited partner
interest in the partnership that owns the Center Plaza Property.
(4) This Property is comprised of two units. Unit A is collateral for a note
payable under the Credit Facility. Unit B is collateral for a mortgage
note payable in the amount of $56,920.
(5) These Properties are collateral for a note payable under the Credit
Facility.
(6) The Company owns a ground leasehold interest in the South Station
Property which expires in 2024 but may be extended, at the Company's
option, for two additional 15-year terms. Fee title to this Property is
owned by an unaffiliated third party. This Property was originally built
in the early 1900s and was fully rehabilitated in 1988. This Property
includes a significant retail component.
(7) The Wellesley Office Park consists of eight office buildings.
(8) The Crosby Corporate Center is a Property which consists of six office
buildings.
(9) The New England Executive Park Portfolio consists of nine of the
thirteen office buildings located in the New England Executive Park, the
remaining four of which are owner-occupied.
(10) The Riverview Building Property consists of two attached structures
connected by a four-story atrium. Riverview I, a six-story office
building, was constructed in 1909 and renovated in 1986. Riverview II,
an eighteen-story structure with parking on the first nine floors, was
constructed in 1985.
(11) The Perimeter Center Portfolio consists of 32 buildings and six ground
leases.
(12) Approximately 205,000 square feet of the 1333 H Street Property was
built in 1982. The remaining approximately 34,000 square feet was
renovated in 1982.
(13) The Tri-State International complex consists of five office buildings.
(14) Presidents Plaza consists of four office buildings.
(15) The Westlakes Office Park consists of four office buildings.
(16) Shoreline Technology Park consists of twelve office buildings.
(17) Lake Marriott Business Park consists of seven office buildings.
7
<PAGE>
Item 3. Legal Proceedings
The following is a description of any material pending legal proceedings
to which the Company, the Operating Partnership or any of their subsidiaries
is a party or of which any of their properties is the subject. The Company
does not believe that the proceedings, individually, or in the aggregate will
have a material adverse effect on the Company's financial condition, results
of operations and liquidity.
Blaesing Granite: On January 11, 1989, Blaesing Granite Company, a
subcontractor, commenced a proceeding in the U.S. District Court for the
District of Massachusetts against the partnership which is the owner of the
75 State Street building in Boston, Massachusetts, and Turner Construction
Company, the general contractor for the construction of that project, for $14
million in compensation for additional work performed on the project. The
Construction Company has been named as an additional defendant in its
capacity as the construction representative for the owner. The owner, Turner
Construction Company, and the Construction Company have vigorously defended
this suit. The Company believes that this case is without merit, and that, in
the event of an adverse outcome, liability would rest with parties other than
the Construction Company.
Property Partnership Matters: A limited partner in the partnerships which
owned or had interests in One Post Office Square, Wellesley Office Park
Building Five and Wellesley Office Park Building Six rejected an offer of the
Company to enter into an option agreement under which he would sell his
interests in connection with the formation of the Operating Partnership for
Units and cash. On April 20, 1994, the partner commenced a lawsuit in Norfolk
Superior Court in Massachusetts against the Company and certain of its
affiliates, individually and in their capacity as general partners of those
partnerships, alleging that the general partners of the partnerships
mismanaged the Wellesley Office Park Building Five and Wellesley Office Park
Building Six properties and that the general partners and the Company acted
wrongfully in transferring the partnerships' interests to the Company at a
price less than their fair value. The lawsuit is brought by the partner
individually and as a derivative claim on behalf of the partnerships. The
allegations in the lawsuit includes claims of breach of fiduciary duty,
misrepresentation, conspiracy, and violation of a Massachusetts statute
prohibiting unfair and deceptive practices in trade or business. In addition
to compensatory damages, the partner seeks an accounting of profits and/or
rescission of the partnerships' agreement to transfer their interests in
these properties to the Company. By its nature, the rescission claim cannot be
quantified.
On September 20, 1994, the Superior Court granted the defendants' motion
to dismiss the claim brought for violation of the Massachusetts statute
prohibiting unfair and deceptive practices in trade or business. Thereafter,
the defendants moved to strike the claim for rescission asserted by the
partner. On January 27, 1995, the Court denied the defendants' Motion to
Strike. As a result, the rescission claims remain for adjudication by summary
judgment and/or at trial. Fact discovery has been completed in this matter
and a trial is anticipated in April 1997.
Rowes Wharf: On or about June 2, 1995, certain present or former employees
of a former tenant at 40 Rowes Wharf, Boston, Massachusetts commenced a suit
in the Massachusetts Superior Court for Suffolk County alleging that they
sustained injuries as a result of alleged exposure to indoor air pollutants
during the course of their employment by a tenant at 40 Rowes Wharf.
Plaintiffs claim that the Company negligently constructed the building and
that Rowes Wharf Associates negligently permitted the allegedly harmful
condition to exist. The Company and Rowes Wharf Associates filed an Answer to
plaintiffs' Complaint denying liability. In October, 1996, the claims of two
of the plaintiffs were dismissed pursuant to an agreement for judgment for no
monetary award. The Company is unable to quantify the claims of the plaintiffs.
Ruggles Center Joint Venture: Ruggles Center Joint Venture ("RCJV"), the
owner of the Registry of Motor Vehicles building (the "RMV Building") located
at Ruggles Center, Boston, Massachusetts (the "Ruggles Center Property"),
filed a Complaint in the Massachusetts Superior Court for Suffolk County on
February 5, 1996, against the Construction Company and its surety, Aetna
Casualty and Surety Company, alleging that the Construction Company is
responsible for certain alleged deficiencies in the fireproofing material in
the RMV Building and claiming damages for the costs of investigating and
correcting the deficiencies, lost rental income and other consequential
damages. That Complaint was not served. On April 22, 1996, an Amended
Complaint was served on the Construction Company. That Complaint names
Ruggles Center, LLC, the purported assignee of RCJV, as plaintiff and asserts
breach of contract, breach of warranty and negligence claims against the
Construction Company. Although neither the Complaint nor the Amended
Complaint quantify the claimed damages, RCJV had previously alleged in
correspondence that the alleged corrective work on the fireproofing would
cost approximately $1.7 Million, certain corrective work on the HVAC system
would cost an additional $1.3 Million, and RCJV had already spent
approximately $2.25 Million in investigation and planning the corrective
work.
8
<PAGE>
The Construction Company filed its Answer denying the claims of Ruggles
Center, LLC on May 31, 1996. On the same date, the Construction Company filed
a Counterclaim and Third-Party Claim against RCJV and Ruggles Center, LLC to
recover in excess of $1.5 Million. On the same date, the Construction Company
filed Third-Party Complaints against the manufacturer of the fireproofing
material at the RMV Building, United States Mineral Products Company, d/b/a
Isolatek International ("Isolatek"), and the installer of the fireproofing
material at the RMV Building, H. Carr & Sons, Inc. ("Carr"). On August 26,
1996, Isolatek filed a Cross-Claim against the Construction Company asserting
claims of indemnity and contribution. The Construction Company filed an
Answer to Isolatek's Cross-Claim denying liability on September 9, 1996. On
September 19, 1996, Carr filed Counterclaims against the Construction Company
asserting claims of indemnity and contribution. The Construction Company
filed an Answer to Carr's Counterclaims denying liability on October 15,
1996.
In November 1996, the Bank of Boston foreclosed upon the Ruggles Center
property and purchased the property at the foreclosure auction for
approximately $15 Million.
Item 4. Submission of Matters to a Vote of Security Holders
No matters were submitted to a vote of Stockholders during the fourth
quarter of the year ended December 31, 1996.
Item 5. Market for Registrant's Common Equity and Related Stockholder Matters
The Company's Common Stock trades on the NYSE under the symbol "BCN." On
March 24, 1997, the reported closing sale price per share of Common Stock on
the NYSE was $35-1/4 and there were approximately 410 holders of record of the
Company's Common Stock. The following table sets forth the quarterly high and
low closing sales prices per share of the Common Stock reported on the NYSE
and the distributions paid by the Company with respect to each such period.
<TABLE>
<CAPTION>
Quarter Ended High Low Distributions
------------- ---- --- -------------
<S> <C> <C> <C>
June 30, 1994 (from May 20, 1994) $18 1/4 $17 1/8 $ .16(a)
September 30, 1994 $19 1/2 $17 3/4 $ .40
December 31, 1994 $19 $17 $ .40
March 31, 1995 $20 $17 1/2 $ .40
June 30, 1995 $21 1/8 $19 1/4 $ .42
September 30, 1995 $21 3/4 $19 7/8 $ .42
December 31, 1995 $23 $20 1/8 $ .42
March 31, 1996 $26 5/8 $22 5/8 $ .42
June 30, 1996 $26 1/4 $24 1/2 $.4625
September 30, 1996 $29 $24 3/4 $.4625
December 31, 1996 $36 5/8 $29 1/8 $.4625(b)
</TABLE>
(a) The Company paid a distribution of $.16 per share of Common Stock on
August 25, 1994, for the period May 26, 1994 (the closing of the Initial
Offering) through June 30, 1994, which would be equivalent to a quarterly
distribution of $.40 and an annual distribution of $1.60 per share of
Common Stock.
(b) Paid February 28, 1997 to stockholders of record as of February 10, 1997.
Distributions for Federal Income Tax purposes totaled $1.24 and $1.765 in
1995 and 1996, respectively. The return of capital portion of these
distributions was $.17 and $.16 in 1995 and 1996, respectively.
In 1996, the Operating Partnership has issued Units in private placements
in reliance on an exemption from registration under Section 4(2) of the
Securities Act of 1933, as amended (the "Securities Act") in the amounts and
for the consideration set forth below:
(bullet) In February 1996, the Operating Partnership issued 540,059 Units
(valued at approximately $13.8 million at the time of the
acquisition) to the sellers of the Perimeter Center Portfolio in
consideration of their interests in the Property.
9
<PAGE>
(bullet) In connection with a public offering of the Company in March 1996
(the "March 1996 Offering"), the Operating Partnership issued
7,036,000 Units to the Company in exchange for the contribution
of the net proceeds (approximately $173.8 million) from the
Company's March 1996 Offering.
(bullet) In connection with a public offering of the Company in August
1996 (the "August 1996 Offering"), the Operating Partnership
issued 5,750,000 Units to the Company in exchange for the
contribution of the net proceeds (approximately $139.4 million)
from the Company's August 1996 Offering.
(bullet) In September 1996, the Operating Partnership issued an aggregate
of 833,820 Units (valued at approximately $21.5 million at the
time of acquisition) to the sellers of the Fairfax County
Portfolio in consideration for their interests in such
Properties.
(bullet) In connection with a public offering of the Company in November
1996 (the "November 1996 Offering"), the Operating Partnership
issued 13,723,000 Units to the Company in exchange for the
contribution of the net proceeds (approximately $398.9 million)
from the Company's November 1996 Offering.
(bullet) In connection with a public offering of the Company in December
1996 (the "December 1996 Offering"), the Operating Partnership
issued 1,132,400 Units to the Company in exchange for the
contribution of the net proceeds (approximately $37.8 million)
from the Company's December 1996 Offering.
(bullet) In December 1996, the Operating Partnership issued 1,171,500
Units (valued at approximately $39.0 million at the time of
acquisition) to Metropolitan Life Insurance Company in
consideration for its interest in the Presidents Plaza Property.
(bullet) From time to time, the Company has issued pursuant to an effective
registration statement an aggregate of 101,431 shares of Common
Stock pursuant to its Dividend Reinvestment Plan. The Company has
contributed the proceeds (approximately $2.6 million) of these
sales to the Operating Partnership in consideration of an aggregate
of 101,431 Units.
(bullet) From time to time, the Company has issued pursuant to an effective
registration statement an aggregate of 97,827 shares of Common
Stock upon the exercise of stock options. The Company has
contributed the proceeds (approximately $1.7 million) of these
sales to the Operating Partnership in consideration of an aggregate
of 97,827 Units.
10
<PAGE>
Item 6. Selected Financial Data
<TABLE>
<CAPTION>
Predecessor
-----------------------------------------
Jan. 1,
(dollars in 1994
thousands, May 26, 1994 to
except per share Year Ended Year Ended to May 25, Year Ended Year Ended
amounts) Dec. 31, 1996 Dec. 31, 1995 Dec. 31, 1994 1994 Dec. 31, 1993 Dec. 31, 1992
- ------------------ -------------- -------------- -------------- ----------- -------------- --------------
<S> <C> <C> <C> <C> <C> <C>
Operating
Information:
Revenues:
Rental income $ 147,825 $ 71,050 $ 25,144 $ 5,776 $ 14,315 $ 11,406
Management fees 3,005 2,203 -- 1,521 3,533 3,331
Recoveries from
tenants 16,719 9,742 4,488 1,040 2,349 1,989
Mortgage interest
income 4,970 2,546 -- -- -- --
Other income 11,272 5,502 2,301 675 2,176 2,003
-------------- -------------- -------------- ----------- -------------- --------------
Total revenues 183,791 91,043 31,933 9,012 22,373 18,729
-------------- -------------- -------------- ----------- -------------- --------------
Expenses:
Property expenses 37,211 18,090 7,034 2,086 4,580 4,522
Real estate taxes 18,124 10,217 3,325 595 1,354 1,204
General and
administrative 19,331 9,755 3,122 1,399 4,357 4,658
Mortgage interest
expense 30,300 15,226 4,992 2,798 7,650 7,203
Interest--amortization
of financing
costs 2,084 1,370 617 373 192 138
Depreciation and
amortization 33,184 17,428 6,924 2,385 5,577 5,505
-------------- -------------- -------------- ----------- -------------- --------------
Total expenses 140,234 72,086 26,014 9,636 23,710 23,230
-------------- -------------- -------------- ----------- -------------- --------------
Income (loss) from
operations 43,557 18,957 5,919 (624) (1,337) (4,501)
Equity (loss) in
joint ventures and
corporations (1) 4,989 3,234 929 198 (5,953) (1,544)
-------------- -------------- -------------- ----------- -------------- --------------
Income (loss) from
continuing
operations 48,546 22,191 6,848 (426) (7,290) (6,045)
Discontinued
operations--
Construction
Company:
Income (loss)
from operations (2,609) (12) 477 102 440 136
Loss on sale (249) -- -- -- -- --
-------------- -------------- -------------- ----------- -------------- --------------
Income (loss)
before minority
interest 45,688 22,179 7,325 (324) (6,850) (5,909)
Minority interest
in loss of
combined
partnerships -- -- -- 931 1,539 2,656
Minority interest
in Operating
Partnership (5,988) (4,119) (1,670) -- -- --
-------------- -------------- -------------- ----------- -------------- --------------
Income (loss)
before
extraordinary
items 39,700 18,060 5,655 607 (5,311) (3,253)
Extraordinary
items, net of
minority interest (3,368) -- -- 8,898 1,554 --
-------------- -------------- -------------- ----------- -------------- --------------
Net income (loss)
(2) $ 36,332 $ 18,060 $ 5,655 $ 9,505 $ (3,757) $ (3,253)
============== ============== ============== =========== ============== ==============
Per share of
Common Stock data:
Income from
continuing
operations $ 1.41 $ 1.09 $ 0.45 -- --
Discontinued
operations--
Construction
Company:
Income (loss)
from operations (0.08) (0.00) 0.03 -- -- --
Loss on sale (0.01) -- -- -- -- --
Income before
extraordinary
items 1.32 1.09 0.48 -- -- --
Extraordinary
items (0.11) -- -- -- -- --
-------------- -------------- -------------- ----------- -------------- --------------
Net income $ 1.21 $ 1.09 $ 0.48 -- -- --
============== ============== ============== =========== ============== ==============
Cash dividends
declared $ 1.765 $ 1.24 $ 0.96 -- --
Cash dividends
paid $ 1.765 $ 1.64 $ 0.56 -- --
Weighted average
common shares
outstanding 29,932,327 16,525,245 11,816,380 -- --
Balance Sheet
Information:
Real estate before
accumulated
depreciation $ 1,691,530 $ 471,142 $ 400,419 $ 82,198 $ 81,220 $ 78,580
Total assets 1,779,412 534,797 400,861 77,470 85,497 93,327
Mortgage debt 452,212 70,536 90,936 69,240 87,091 86,610
Note Payable,
Credit Facility 153,000 130,500 130,300 -- -- --
Total liabilities 671,711 239,013 261,100 129,836 143,451 142,015
Total equity
(deficit) 999,150 258,822 102,038 (52,366) (57,954) (48,688)
(1) Including
deductions for
depreciation
and
amortization $ 4,033 $ 2,306 $ 3,013
(2) Company share
of Operating
Partnership 86.89% 81.31% 77.20%
</TABLE>
11
<PAGE>
Item 7. Management's Discussion and Analysis of Financial Condition and Results
of Operations
Overview
The following discussion should be read in conjunction with Beacon
Properties Corporation's (collectively with its subsidiaries, the "Company")
Consolidated Financial Statements and Notes thereto included elsewhere
herein. This Annual Report contains forward-looking statements within the
meaning of Section 27A of the Securities Act of 1933, as amended, and Section
21E of the Securities Exchange Act of 1934, as amended. The Company's actual
results could differ materially from those set forth in the forward-looking
statements. Factors that could cause actual results to differ materially from
those set forth in the forward-looking statements include general economic
conditions, local real estate conditions, timely releasing of occupied square
footage upon expiration, interest rates, availability of equity and debt
financing and other risks detailed from time to time in the Company's filings
with the Securities and Exchange Commission.
The Company continued its growth and expansion in 1996 by investing
approximately $1.2 billion in real estate. The Company increased its
portfolio to 104 office properties and other commercial properties (each, a
"Property" and collectively, the "Properties") totaling 15.8 million square
feet while moving for the first time into Atlanta, Georgia; Chicago,
Illinois; Los Angeles and San Francisco, California and reinforcing its
presence in Boston, Massachusetts and Washington, D.C.
The 1996 acquisitions were facilitated by three successful public
offerings of the Company's common stock, $.01 par value per share (the
"Common Stock"). In all, the Company issued 27.6 million shares of Common
Stock in 1996 and raised nearly $800 million in gross proceeds. The Company
contributed the net proceeds of these offerings to Beacon Properties, L.P.
(the "Operating Partnership") in exchange for units of limited partnership
interest in the Operating Partnership ("Units"). The Operating Partnership
also issued approximately 2.6 million Units in connection with the
acquisition of the following: a 3.3 million square foot, 32 building
portfolio located in suburban Atlanta, Georgia (the "Perimeter Center
Portfolio"), a portfolio of three office buildings and a parcel of land
suitable for development located in Fairfax County, Virginia (the "Fairfax
County Portfolio") and the Presidents Plaza Property located in Chicago,
Illinois.
In 1996, Beacon Construction Company, Inc. (the "Construction Company")
sold substantially all of its assets. The Construction Company's new business
plan involves the completion of certain contracts not transferred to the
purchaser and the liquidation of its remaining assets. The Company's decision
to affect the sale of the Construction Company was based upon the
determination that the general construction business was no longer an
integral part of its business. Construction contracts on Properties owned by
the Company represented only 6%, 8% and 7% of the Construction Company's
total revenues in 1996, 1995 and 1994, respectively.
As a result of the significant acquisitions by the Company and its use of
the equity method of accounting for the Construction Company, Beacon Property
Management Corporation (the "Management Company") and Beacon Design
Corporation, the operating results of the Company and The Beacon Group (the
"Predecessor") are not directly comparable.
Results of Operations
For discussion purposes, the results of operations for the year ended
December 31, 1994 combine the operating results of the Predecessor for the
period January 1, 1994 to May 25, 1994 and the operating results of the
Company for the period May 26, 1994 to December 31, 1994.
The Company's gross revenues increased by 102% from 1995 to 1996 and 122%
from 1994 to 1995. The growth in gross revenues was primarily the result of
the acquisition of 78 Properties comprising 9.1 million square feet in 1996,
5 Properties comprising 1.4 million square feet in 1995, and 6 Properties
comprising 0.9 million square feet in 1994.
The acquisition properties increased revenues from rental operations,
which includes rental income, recoveries from tenants and other income, by
$81.7 million from 1995 to 1996 and $47.2 million from 1994 to 1995. The
remaining balance of the increase was primarily due to increases in occupancy
and rental rates, completion of the
12
<PAGE>
redevelopment and achievement of 88% occupancy at the Crosby Corporate Center
in 1996 and interest income earned on cash reserves.
The impact of the straight-line rent adjustment increased consolidated
revenues for the Company by $6.6 million in 1996, $3.7 million in 1995 and
$1.9 million for the period May 26, 1994 to December 31, 1994. The impact of
the straight-line rent adjustment increased the Company's equity in net
income of property joint ventures and corporations by $0.1 million in 1996,
$0.2 million in 1995 and $0.3 million for the period May 26, 1994 to December
31, 1994.
Management fees were $3.0 million in 1996, $2.2 million in 1995 and $1.5
million in 1994. The increase from 1995 to 1996 of $0.8 million was the
result of the management contract for 75-101 Federal Street, a Property in
the which the Company purchased an approximate 52% interest in September
1995. The increase from 1994 to 1995 of $0.7 million was the result of Beacon
Property Management, L.P., a fully consolidated entity, managing the joint
venture properties effective January 1, 1995. In 1994, the Management
Company, an entity accounted for under the equity method, managed the joint
venture and unrelated third-party properties. The Predecessor reported the
results of operations of the management of joint venture and unrelated
third-party properties in revenues and expenses in its combined financial
statements.
Mortgage interest income for 1996 was $5.0 million and $2.5 million for
1995. The increase of $2.5 million was the result of the Company's
acquisition of the remaining portions of the outstanding first mortgage
indebtedness on the Rowes Wharf Property in 1996 and a full year of interest
income in 1996 from those portions of the Rowes Wharf debt purchased in 1995.
If the Company had owned all of its share of the Rowes Wharf debt for the
full year in 1996, mortgage interest income would have been $5.6 million.
The acquisition properties increased property expenses, real estate taxes
and depreciation and amortization by $37.2 million from 1995 to 1996 and
$24.0 million from 1994 to 1995. The remaining balance of the increase in
these line items was primarily due to additional operating expenses as a
result of an increase in occupancy and the completion of the redevelopment
and achievement of 88% occupancy at the Crosby Corporate Center in 1996.
General and administrative expenses were $19.3 million in 1996, $9.8
million in 1995 and $4.5 million in 1994. The acquisition properties
increased general and administrative expenses by $3.7 million from 1995 to
1996 and $3.8 million from 1994 to 1995. The remaining balance of the
increase was primarily due to an increase in corporate management and
administrative costs with the largest increase in payroll expense of $2.2
million and rent expense of $1.0 million. The increase in corporate
management and administrative costs was the result of the growth of the
Company's portfolio of properties and the opening of the first regional
office in Atlanta in 1996. General and administrative expenses as a
percentage of total revenue were 10.5% in 1996, 10.7% in 1995 and 11.0% in
1994.
Mortgage interest expense was $30.3 million in 1996, $15.2 million in 1995
and $7.8 million in 1994. The increase of $15.1 million from 1995 to 1996 was
primarily the result of debt incurred or assumed in connection with the
acquisition of the Perimeter Center Portfolio and the Fairfax County
Portfolio. Interest expense associated with the mortgage debt placed on the
Wellesley Office Park and Center Plaza Properties in 1996 was offset by a
reduction of interest expense on the Company's floating-rate credit facility
(the "Credit Facility") as a result of the mortgage proceeds being used to
pay down the balance of the Credit Facility. The increase of $7.4 million
from 1994 to 1995 was primarily due to the interest on the Credit Facility
and debt assumed in connection with the acquisition of the 150 Federal Street
Property and the remaining joint venture interest in the 175 Federal Street
Property offset by the decrease in interest expense as a result of the
discharge of mortgage debt in connection with the formation of the Company.
The weighted average balance outstanding on the Credit Facility was $42.3
million for 1996, $99.7 million for 1995 and $50.4 million for the period May
26, 1994 to December 31, 1994.
Interest-amortization of financing costs was $2.1 million in 1996, $1.4
million in 1995 and $1.0 million in 1994. The increase of $0.7 million from
1995 to 1996 was primarily the result of the amortization of financing costs
associated with the Credit Facility and the mortgage debt on the Wellesley
Office Park Properties, the Center Plaza Property and the Perimeter Center
Portfolio. The increase of $0.4 million from 1994 to 1995 was primarily the
result of the amortization of financing costs associated with the Credit
Facility offset by the write-off of financing costs by the Predecessor as a
result of the discharge of mortgage debt in connection with the formation of
the Company.
13
<PAGE>
Equity in net income of joint ventures and corporations was $5.0 million
in 1996, $3.2 million in 1995 and $1.1 million in 1994. The increase of $1.8
million from 1995 to 1996 was primarily the result of the acquisition of the
equity investment in 75-101 Federal Street in September 1995. The increase of
$2.1 million from 1994 to 1995 was primarily attributable to the Company
acquiring the Center Plaza Property's debt, a controlling interest and fully
consolidating the Property effective December 1, 1994. Increases in equity in
net income of One Post Office Square and Polk and Taylor, as well as a new
equity investment in 75-101 Federal Street, were offset by the decrease in
equity in net income from Wellesley Office Park Building Six, 175 Federal
Street and the Management Company.
Discontinued operations from the Construction Company resulted in a $2.6
million loss in 1996, a $0.1 million loss in 1995 and $0.6 million income in
1994. The increase in loss of $2.5 million from 1995 to 1996 was primarily
the result of several significant subcontractors working on construction
contracts in Atlanta seeking bankruptcy and not completing their work. As a
result, the Construction Company was forced to complete the projects using
additional contractors which increased the total costs of the projects.
In December 1996, substantially all of the assets of the Construction
Company were sold to Skanska AB, a Swedish construction firm. In connection
with the sale, the Company recorded its share of the loss of $0.2 million.
As a result of transactions resulting in the formation of the Company (the
"Formation Transactions"), no minority interest in the combined partnerships
was recorded after May 25, 1994, resulting in a decrease compared to 1994 in
minority interest in loss of combined partnerships.
Extraordinary items, net of minority interest, were a $3.4 million loss in
1996 and an $8.9 million gain in 1994. In 1996, an extraordinary item, net of
minority interest, of $1.9 million was recorded in connection with the
write-off of fees and costs to acquire a $260 million mortgage loan provided
by Paine Webber Real Estate Securities, Inc. used to acquire the Perimeter
Center Portfolio (the "Paine Webber Acquisition Loan"). The Paine Webber
Acquisition Loan was repaid in March 1996 approximately three years prior to
its maturity. Also in 1996, an extraordinary item, net of minority interest,
of $1.5 million was recorded in connection with the write-off of fees and
costs of the Credit Facility which was substantially modified in June 1996.
The extraordinary gain in 1994 related to the settlement of mortgage debt by
the Predecessor on the Wellesley Office Park Buildings One to Five and Seven
as a condition of transfer prior to the Formation Transactions.
Liquidity and Capital Resources
Net cash provided by operating activities totaled $91.7 million in 1996,
$32.5 million in 1995 and $12.6 million in 1994. The increase in the periods
was primarily attributable to the incremental increase in cash flow from
operations provided by the acquisition properties as well as an increase in
security deposits and prepaid rents.
Net cash used by investing activities totaled $1,097.8 million in 1996,
$145.8 million in 1995 and $235.8 million in 1994. The increase from 1995 to
1996 was the result of the acquisition of Properties and the redevelopment of
the Crosby Corporate Center and Wellesley Office Park Building Eight in 1996.
The decrease from 1994 to 1995 was primarily a result of the Company's May
1994 initial public offering (the "Initial Offering") whereby the Company
acquired its initial portfolio of 15 Properties totaling 4.4 million square
feet.
Net cash provided by financing activities totaled $1,037.7 million in
1996, $102.6 million in 1995 and $236.7 million in 1994. The increase from
1995 to 1996 was primarily due to an increase in proceeds from public stock
offerings of the Company and the closing of mortgage debt on certain
Properties. The decrease from 1994 to 1995 was primarily attributable to
repayments on the Credit Facility in 1995.
Cash and cash equivalents were $36.1 million at December 31, 1996 compared
to $4.5 million at December 31, 1995. The increase was primarily the result
of proceeds from 1996 public stock offerings of the Company in excess of the
funds utilized for the 1996 acquisitions and the redevelopment of the Crosby
Corporate Center and Wellesley Office Park Building Eight.
Investing Activities
On February 15, 1996, the Company acquired the Perimeter Center Portfolio
for approximately $322.2 million in cash and approximately $13.8 million of
Units.
14
<PAGE>
During the second quarter of 1996, the Company and Equitable Life
Assurance Society of the United States, on behalf of its Prime Property Fund
("Equitable"), the Company's partner in the Rowes Wharf Property, acquired
the remaining portion of the outstanding first mortgage indebtedness on the
Rowes Wharf Property that had been held by a bank lending group for $16.7
million. The mortgage debt was acquired at market value which was
approximately 50% of the face value.
On August 16, 1996, the Company acquired a portfolio of office properties,
comprised of seven properties, from New York Life Insurance Company (the "New
York Life Portfolio") for approximately $150 million. The New York Life
Portfolio consists of the AT&T Plaza located in Oak Brook, Illinois, the
five-building Tri-State International office park located in Lincolnshire,
Illinois and a property located at 1333 H Street in Washington, D.C.
On September 5, 1996, the Company acquired the Fairfax County Portfolio
for aggregate consideration of $77 million consisting of assumption of
mortgage debt of approximately $55.5 million and the issuance of
approximately $21.5 million of Units. The Fairfax County Portfolio consists
of the John Marshall I building, the E.J. Randolph building, the Northridge I
building and the JM III Parcel.
On October 18, 1996, the Company acquired a portfolio of two office
buildings located in Rosslyn, Virginia (the "Rosslyn, Virginia Portfolio")
for aggregate consideration of approximately $99 million. The Rosslyn,
Virginia Portfolio consists of office buildings located at 1616 North Fort
Myer Drive and 1300 North 17th Street.
On November 15, 1996, the Company acquired a portfolio of nine office
properties located in Burlington (suburban Boston), Massachusetts (the "New
England Executive Park Portfolio") for aggregate consideration of
approximately $75 million. An additional $17 million payment is payable on
November 30, 1998, contingent upon meeting conditions regarding occupancy or
rental income levels at the Property in 1998.
On November 21, 1996, the Company acquired the 10960 Wilshire Boulevard
Property located in Westwood, California for aggregate consideration of
approximately $133 million.
On November 21, 1996, the Company acquired The Riverview Building located
in Cambridge, Massachusetts for aggregate consideration of approximately $45
million.
On December 20, 1996, the Company acquired the Shoreline Technology Park
and Lake Marriott Business Park located in suburban San Francisco for
aggregate consideration of approximately $183.0 million.
On December 27, 1996, the Company acquired the Presidents Plaza Property
located in Chicago, Illinois for aggregate consideration of approximately
$38.0 million in cash and the issuance of approximately $39.0 million of
Units.
Financing Activities
On January 9, 1996, the Company converted $55 million of the Credit
Facility to permanent mortgage debt secured by the Wellesley Office Park
Properties.
On February 9, 1996, the Company converted $60 million of the Credit
Facility to permanent mortgage debt secured by the Center Plaza Property.
On February 15, 1996, the Company acquired the Perimeter Center Portfolio
using the proceeds of the $260 million Paine Webber Acquisition Loan and the
issuance of approximately $13.8 million of Units, with the balance funded
from the Credit Facility.
In March 1996, the Company sold 7,036,000 shares of Common Stock to the
public at $26.25 per share and contributed the approximately $173.8 million
net proceeds to the Operating Partnership in exchange for 7,036,000 Units.
The net proceeds of the offering were used to repay a portion of the Paine
Webber Acquisition Loan.
On March 15, 1996, the Company closed on a $218 mortgage loan (the
"MetLife Loan") provided by Metropolitan Life Insurance Company ("Met Life").
The proceeds of the MetLife Loan were used to repay the remaining portion of
the Paine Webber Acquisition Loan and the outstanding balance of the Credit
Facility.
In August 1996, the Company sold 5,750,000 shares of Common Stock to the
public at $25.75 per share and contributed the approximately $139.4 million
net proceeds to the Operating Partnership in exchange for 5,750,000 Units.
The net proceeds of the offering were used to purchase the New York Life
Portfolio.
15
<PAGE>
In November 1996, the Company sold 13,723,000 shares of Common Stock to
the public at $30.75 per share. In addition, in December 1996, the Company
sold an additional 1,132,400 shares of Common Stock at an offering price of
$33.465 per share to the underwriters of the November 1996 offering to cover
a portion of their short position resulting from over-allotments. The Company
contributed the approximately $436.7 million net proceeds to the Operating
Partnership in exchange for 14,855,400 Units. The net proceeds of these
offerings were used to purchase the various fourth quarter acquisitions with
the balance added to cash reserves.
On December 23, 1996, the Company refinanced the $16.5 million mortgage
loan on the Northridge I Property to a $13.6 million mortgage loan with a
10-year term bearing interest at an annual rate of 8.19%. This mortgage loan
requires monthly installments of interest only in years one and two and
principal and interest during years three through ten based on a 25-year
amortization schedule.
On December 23, 1996, the Company also closed on a $15.0 million mortgage
loan on the E.J. Randolph Property, and used the net proceeds to pay down the
Credit Facility. On September 5, 1996, the Company paid off an $18.0 mortgage
loan it assumed in connection with the acquisition of this Property using a
draw on the Credit Facility.
On January 28, 1997, the Company declared a dividend of $.4625 per common
share payable on February 28, 1997 to stockholders of record on February 10,
1997.
Capitalization
At December 31, 1996, the Company's total consolidated debt was
approximately $605.2 million, and its total consolidated debt plus its
proportionate share of total unconsolidated debt (other than the Rowes Wharf
Property debt in which the Company is a limited partner) was approximately
$698.8 million. At December 31, 1996, the Company's outstanding consolidated
debt consisted of approximately $153.0 million under the Credit Facility and
approximately $452.2 million of fixed rate mortgage indebtedness with a
weighted average rate of 7.22%, collateralized by Properties owned 100% by
the Company. The Company's proportionate share of its current total
unconsolidated debt (excluding the Rowes Wharf Property debt) consists of
approximately $46.6 million on the One Post Office Square Property (in which
the Company has a 50% general partner interest) and approximately $46.4
million on the 75-101 Federal Street Property (in which the Company owns
approximately 52% of the common stock of a private REIT that owns the
Property). The weighted average rate of the Company's unconsolidated fixed
rate mortgage indebtedness is 7.47%. The weighted average rate of the
Company's consolidated and unconsolidated fixed rate mortgage indebtedness is
7.27% and the weighted average maturity is nearly 7 years.
Based on the Company's total market capitalization of $2,690.3 million at
December 31, 1996 (at the December 31, 1996 closing stock price of $36.625
and including the 6,273,928 Units of minority interest in the Operating
Partnership and the Company's consolidated and proportionate share of total
unconsolidated debt), the Company's consolidated debt plus its proportionate
share of total unconsolidated debt (other than the Rowes Wharf Property debt)
represented approximately 26% of its total market capitalization.
In June 1996, the Company substantially modified the terms of the Credit
Facility. Additionally, in July 1996, the maximum loan amount available under
the Credit Facility was increased to $300 million. The new Credit Facility
matures in June 1999. The Company has an interest rate protection agreement
through May 1997 with respect to $135 million of the Credit Facility, which
provides for offsetting payments to the Company in the event that 90-day
LIBOR exceeds 9.47% per annum. Effective May 1997 through May 1999, the
Company has an interest rate protection agreement with respect to $137.5
million of the Credit Facility, which provides for offsetting payments to the
Company in the event that 90-day LIBOR exceeds 8.75% per annum. This interest
rate protection arrangement may be applied during any four quarters in the
period from May 1997 to May 1999.
The Company utilizes the Credit Facility primarily to finance acquisitions
of additional properties, although up to $30 million may be used for working
capital purposes and $2.5 million is reserved under certain circumstances for
capital expenditures. The Credit Facility is a recourse obligation of the
Operating Partnership, is guaranteed by Company and is secured by
cross-collateralized mortgages and assignments of rents on 29 of the
Properties. The Company's ability to borrow under the Credit Facility is
subject to the Company's compliance with a number of customary financial and
other covenants on an ongoing basis, including loan-to-value ratio against
the secured borrowing base not to exceed 60%, debt service coverage ratio of
1.5x for the secured borrowing base and 2.0x
16
<PAGE>
for the Company as a whole, a leverage ratio not to exceed 55%, with the
ability to increase leverage to 66.67% for up to six months at a time,
limitations on additional indebtedness and stockholders distributions, and a
minimum net worth requirement. At December 31, 1996, the Company had the
ability to borrow an additional $127.5 million under the Credit Facility.
The Company has considered its short-term (up to 12 months) liquidity
needs and the adequacy of expected liquidity sources to meet these needs. The
Company believes that its principal short-term liquidity needs are to fund
normal recurring expenses, debt service requirements and the minimum
distribution required to maintain the Company's REIT qualifications under the
Internal Revenue Code of 1986, as amended. The Company believes that these
needs will be fully funded from cash flows provided by operating activities.
The Company expects to meet long-term (greater than 12 months) liquidity
requirements for the costs of development, property acquisitions, scheduled
debt maturities, major renovations, expansions and other non- recurring
capital improvements through long-term secured and unsecured indebtedness and
the issuance of additional Units and equity securities. The Company may
finance the redevelopment or acquisition of additional properties by using
its Credit Facility.
Rental revenues, operating expense reimbursement income from tenants, and
income from the management and design companies are the Company's principal
sources to pay its operating expenses, debt service and recurring capital
expenditures. The Company seeks to increase income from existing Properties
by maintaining quality standards for its Properties that promote high
occupancy rates and permit increases in rental rates while reducing tenant
turnover and controlling operating expenses. Consequently, the Company
believes its revenues will continue to provide the necessary funds for its
operating expenses, debt service and recurring capital expenditures.
During the year ended December 31, 1996, the Company paid quarterly
dividends totaling $1.765 per common share, and intends to continue paying
dividends quarterly. The Company expects to use cash flows from operating
activities to fund dividends to stockholders.
Principal sources of funds for acquisitions are expected to include income
from operations, proceeds of offerings, amounts available under the Credit
Facility, long-term secured and unsecured indebtedness and sale of real
estate. In addition to funds from the above sources, properties or interests
therein may also be acquired by the issuance of Units.
Environmental Matters
The Company believes, based on their internal reviews, environmental site
assessments performed by consultants, existing plans to mitigate and monitor the
sites and financial commitments of certain prior owners and tenants, that the
future costs relating to environmental remediation and compliance will not have
a material adverse effect on the Company's financial condition, results of
operations, or liquidity.
Inflation
Most of the Company's leases require tenants to pay increases in operating
expenses, including common area charges and real estate taxes, thereby
reducing the risk to the Company of the adverse effects of inflation. Leases
also vary in term from three years to 15 years, further reducing the risk to
the Company of the adverse effects of inflation.
17
<PAGE>
Item 8. Financial Statements and Supplementary Information
See "Index to Financial Statements" on page F-1 of this Form 10-K.
Item 9. Change in and Disagreements with Accountants on Accounting and
Financial Disclosure
None
Item 10. Directors and Officers
The information required by this item is hereby incorporated by reference
to the material appearing in the Proxy Statement under the captions
"Information Regarding Nominees and Directors."
Item 11. Executive Compensation
The information required by this item is hereby incorporated by reference
to the material appearing in the Proxy Statement under the caption "Executive
Compensation."
Item 12. Security Ownership of Certain Beneficial Owners and Management
The information required by this item is hereby incorporated by reference
to the material appearing in the Proxy Statement under the caption "Principal
and Management Stockholders."
Item 13. Certain Relationships and Related Transactions
The information required by this item is hereby incorporated by reference
to the material appearing in the Proxy Statement under the caption "Certain
Relationships and Related Transactions."
Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K
(a) Financial Statements and Financial Statement Schedules
See "Index to Financial Statements" on page F-1 of this Form 10-K.
(b) Exhibits
<TABLE>
<CAPTION>
Exhibit No. Description
- ----------- -----------
<S> <C>
3.1(1) Articles of Incorporation of the Company, as amended.
3.2(2) Amended and Restated Bylaws of the Company.
3.3(2) First Amendment to Amended and Restated Bylaws of the Company.
9.1(3) Voting Trust Agreement between Edwin N. Sidman and Paula L. Sidman.
10.1 Amended and Restated Agreement of Limited Partnership of Beacon Properties, L.P.,
as amended.
10.2(4) Amended and Restated 1994 Stock Option and Incentive Plan.
10.3(1) Employment and Non-Competition Agreement between the Company and Alan M.
Leventhal.
10.4(1) Form of Employment and Non-Competition Agreement between the Company and each of
Edwin N. Sidman and Norman B. Leventhal.
10.5(1) Form of Indemnification Agreement between the Company and each of its directors
and executive officers.
10.6(1) Registration Rights Agreement among the Company, Richard L. Friedman and John L.
Hall, II dated May 26, 1994.
10.7(1) Registration Rights Agreement Among the Company and certain partners of Beacon
Properties, L.P. dated May 26, 1994.
10.8(5) Registration Rights Agreement Among the Company, Wellesley Office Realty Corp. and
Federal 175 Realty Corp. dated October 27, 1994.
10.9(7) Registration Rights Agreement between the Company and TMPC, L.P. dated February
15, 1996.
10.10 Registration Rights Agreement among the Company and the Fairfax County Portfolio
contributors dated September 5, 1996.
18
<PAGE>
Exhibit No. Description
- ----------- -----------
10.11 Registration Rights Agreement between the Company and Metropolitan Life Insurance
Company dated December 27, 1996.
10.12(3) Office/Retail Unit Lease, dated as of July 25, 1985 between Boston Redevelopment
Authority as Landlord and Rowes Wharf Associates as Tenant for the Office/Retail
Unit in the Condominium at Rowes Wharf, Boston, Massachusetts, as amended by a
First Amendment to Ground Lease, dated as of June 11, 1987.
10.13(3) Lease Agreement, dated as of January 28, 1988, between Massachusetts Bay
Transportation Authority, as Landlord and Beacon South Station Associates, L.P. as
Tenant, as amended by a Lease Modification Agreement dated as of September 30,
1988, and a Second Amendment to Lease dated as of August 1, 1989.
10.14(6) Option Agreement (Second Tier Noteholders Loan) by and between CP Holding Corp. as
Trustee of the Note Holding Trust under Indenture of Trust dated as of November
30, 1994 and Beacon Properties, L.P.
10.15(6) Option Agreement (Limited Partnership Interest) by and between CP Holding Corp. as
Trustee of the Partnership Holding Trust under Indenture of Trust dated November
30, 1994 and Beacon Properties, L.P.
10.16(7) Agreement of Purchase and Sale by and between Metropolitan Life Insurance Company
and Beacon Properties, L.P. dated December 19, 1995.
10.17(7) Contribution Agreement by and among Taylor & Mathis Enterprises, L.P., Taylor &
Mathis LTD., Taylor & Mathis/South Terraces, LTD. and Beacon Properties, L.P.
dated December 19, 1995.
10.18(7) Addendum to Contribution Agreement by and among Taylor & Mathis Enterprises, L.P.,
Taylor & Mathis, LTD., Taylor & Mathis/South Terraces, LTD and Beacon Properties,
L.P. dated December 19, 1995.
10.19(8) Option Agreement dated March 18, 1996 among John Marshall Associates Limited
Partnership, Greensboro Associates Limited Partnership, Woodland-Northridge I
Limited Partnership, Pimpernell Estates Limited Partnership, Goodridge Drive
Associates Limited Partnership and Beacon Properties, L.P.
10.20(8) First Amendment to Option Agreement dated May 17, 1996 among John Marshall
Associates Limited Partnership, Greensboro Associates Limited Partnership,
Woodland-Northridge I Limited Partnership, Pimpernell Estates Limited Partnership,
Goodridge Drive Associates Limited Partnership and Beacon Properties, L.P.
10.21(8) Second Amendment to Option Agreement dated May 31, 1996 among John Marshall
Associates Limited Partnership, Greensboro Associates Limited Partnership,
Woodland-Northridge I Limited Partnership, Pimpernell Estates Limited Partnership,
Goodridge Drive Associates Limited Partnership and Beacon Properties, L.P.
10.22(8) Third Amendment to Option Agreement dated June 21, 1996 among John Marshall
Associates Limited Partnership, Greensboro Associates Limited Partnership,
Woodland-Northridge I Limited Partnership, Pimpernell Estates Limited Partnership,
Goodridge Drive Associates Limited Partnership and Beacon Properties, L.P.
10.23(8) Sale and Purchase Agreement between New York Life Insurance Company and Beacon
Properties, L.P., dated as of July 19, 1996.
10.24(9) Purchase and Sale Agreement between LaSalle Fund II and Beacon Properties, L.P.
dated as of September 20, 1996.
10.25(9) First Amendment to Purchase and Sale Agreement between LaSalle Fund II and Beacon
Properties, L.P., dated as of October 2, 1996.
10.26(9) Purchase and Sale Contract between New England Executive Park Limited Partnership,
et al and Beacon Properties, L.P. dated as of November 1, 1996.
10.27(9) Agreement of Purchase and Sale and Joint Escrow Instructions between 10960
Property Corporation and Beacon Properties, L.P. dated October 3, 1996.
10.28(10) Contract of Sale between WRC Properties, Inc. and Beacon Properties, L.P. dated as
of December 19, 1996.
19
<PAGE>
Exhibit No. Description
- ----------- -----------
10.29(10) Sale and Contribution Agreement between Metropolitan Life Insurance Company and
Beacon Properties, L.P., dated as of November 20, 1996, including Exhibit T to
Sales and Contribution Agreement.
10.30(11) Restated Revolving Credit Agreement among Beacon Properties, L.P., Beacon
Properties Corporation and the First National Bank of Boston, dated June 27, 1996.
10.31(11) Amendment No. 1 to the Restated Revolving Credit Agreement among Beacon
Properties, L.P., Beacon Properties Corporation and the First National Bank of
Boston, dated July 18, 1996.
10.32 Loan Agreement between Beacon Properties, L.P. and Metropolitan Life Insurance
Company, dated March 15, 1996.
10.33 Mortgage, Security Agreement and Fixture Filing by Wellesley Holding, L.P., Wellesley Holding II,
L.P. and Beacon Properties, L.P. to Connecticut General Life Insurance Company, dated January 8, 1996.
10.34 Mortgage, Security Agreement and Fixture Filing by Center Plaza Associates Limited Partnership to
Connecticut General Life Insurance Company, dated February 9, 1996.
21.1 Subsidiaries of the Registrant
23.1 Consent of Coopers & Lybrand L.L.P.
27.1 Financial Data Schedule
</TABLE>
- ---------------
(1) Filed as part of the Company's Quarterly Report on Form 10-Q for the
period ended June 30, 1994 and incorporated herein by reference.
(2) Filed as part of the Company's Registration Statement on Form S-3 (File
No. 333-17237) and incorporated herein by reference.
(3) Filed as part of the Company's Registration Statement on Form S-11 (File
No. 33-76316) and incorporated herein by reference.
(4) Filed as part of the Company's Registration Statement on Form S-8 (File
No. 333-10417) and incorporated herein by reference.
(5) Filed as part of the Company's Registration Statement on Form S-11 (File
No. 33-88606) and incorporated herein by reference.
(6) Filed as part of the Company's Current Report on Form 8-K dated December
1, 1994 and incorporated herein by reference.
(7) Filed as part of the Company's Current Report on Form 8-K dated February
15, 1996 and incorporated herein by reference.
(8) Filed as part of the Company's Current Report on Form 8-K dated July 23,
1996 and incorporated herein by reference.
(9) Filed as part of the Company's Current Report on Form 8-K dated October
18, 1996 and incorporated herein by reference.
(10) Filed as part of the Company's Current Report on Form 8-K dated December
20, 1996 and incorporated herein by reference.
(11) Filed as part of the Company's Quarterly Report on Form 10-Q for the
period ended June 30, 1996 and incorporated herein by reference.
(c) Reports on Form 8-K
A Report on Form 8-K dated October 18, 1996 (as amended by Form 8-K/A-1,
8-K/A-2 and 8-K/A-3) was filed which included information regarding Items 2,
5 and 7. Included in Item 7 were financial statements, pro forma information
and exhibits. The Form 8-K was filed in connection with the Company's
acquisitions of the Rosslyn, Virginia Portfolio, New England Executive Park
Portfolio, The Riverview Building and 10960 Wilshire Boulevard.
A Report on Form 8-K dated December 18, 1996 was filed which included
information regarding Item 5. The Form 8-K was filed in connection with the
execution of an Underwriting Agreement of 1,132,400 shares of common stock in
December 1996.
20
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed
on its behalf by the undersigned, thereunto duly authorized.
Beacon Properties Corporation
By: /s/ Robert J. Perriello
------------------------------------------
Robert J. Perriello, Senior Vice President
and Chief Financial Officer
Dated: March 21, 1997
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the date indicated.
<TABLE>
<CAPTION>
Signature Title Date
---------------------------------------------------------------------- --------------
<S> <C> <C>
/s/ Alan M. Leventhal
Alan M. Leventhal President, Chief Executive Officer, and
Director (Principal Executive Officer) March 21, 1997
/s/ Edwin N. Sidman
Edwin N. Sidman Chairman of the Board of Directors March 21, 1997
/s/ Lionel P. Fortin
Lionel P. Fortin Executive Vice President, Chief Operating
Officer and Director March 21, 1997
/s/ Robert J. Perriello
Robert J. Perriello Senior Vice President and Chief Financial
Officer (Principal Financial Officer and
Principal Accounting Officer) March 21, 1997
/s/ Norman B. Leventhal
Norman B. Leventhal Director March 21, 1997
/s/ Graham O. Harrison
Graham O. Harrison Director March 21, 1997
/s/ William F. McCall, Jr.
William F. McCall, Jr. Director March 21, 1997
Steven Shulman Director March 21, 1997
/s/ Scott M. Sperling
Scott M. Sperling Director March 21, 1997
/s/ Dale F. Frey
Dale F. Frey Director March 21, 1997
</TABLE>
21
<PAGE>
BEACON PROPERTIES CORPORATION
CONSOLIDATED FINANCIAL STATEMENTS
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page(s)
<S> <C>
Report of Independent Accountants F-2
Consolidated Financial Statements:
Consolidated Balance Sheets as of December 31, 1996 and 1995 F-3
Consolidated Statements of Operations for the years ended
December 31, 1996 and 1995 and the period May 26, 1994 to
December 31, 1994 and for the Predecessor for the period
January 1, 1994 to May 25, 1994 F-4
Consolidated Statements of Stockholders' Equity for the years ended
December 31, 1996 and 1995 and the period May 26, 1994 to
December 31, 1994 and for the Predecessor for the period
January 1, 1994 to May 25, 1994 F-5
Consolidated Statements of Cash Flows for the years ended
December 31, 1996 and 1995 and the period May 26, 1994 to
December 31, 1994 and for the Predecessor for the period
January 1, 1994 to May 25, 1994 F-6 to F-7
Notes to Consolidated Financial Statements F-8 to F-23
Report of Independent Accountants on Financial Statement Schedules F-24 to F-29
</TABLE>
F-1
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Stockholders of
Beacon Properties Corporation:
We have audited the consolidated balance sheets of Beacon Properties
Corporation as of December 31, 1996 and 1995, and the related consolidated
statements of operations, partners' capital and cash flows for the years
ended December 31, 1996 and 1995 and the period May 26, 1994 to December 31,
1994. We have also audited the combined statement of operations, owners'
equity and cash flows of the Predecessor, more fully described in Note 1, for
the period January 1, 1994 to May 25, 1994. These consolidated financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these consolidated financial
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements.
An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the consolidated financial position
of Beacon Properties Corporation as of December 31, 1996 and 1995 and the
consolidated results of its operations and its cash flows for the years ended
December 31, 1996 and 1995 and the period May 26, 1994 to December 31, 1994,
and the combined results of operations and cash flows of the Predecessor for
the period January 1, 1994 to May 25, 1994 in conformity with generally
accepted accounting principles.
Boston, Massachusetts /s/ Coopers & Lybrand L.L.P.
January 28, 1997
F-2
<PAGE>
BEACON PROPERTIES CORPORATION
CONSOLIDATED BALANCE SHEETS
(dollars in thousands, except per share amounts)
<TABLE>
<CAPTION>
December 31,
-------------------------
1996 1995
------------- -----------
<S> <C> <C>
ASSETS
Real estate:
Land $ 213,858 $ 43,077
Buildings, improvements and equipment 1,477,672 428,065
------------- -----------
1,691,530 471,142
Less accumulated depreciation 97,535 66,571
------------- -----------
1,593,995 404,571
Deferred financing and leasing costs, net of accumulated amortization of $16,370
and $14,509 17,321 9,486
Cash and cash equivalents 36,086 4,501
Restricted cash 2,599 2,764
Accounts receivable 11,609 6,128
Accrued rent 13,065 6,493
Prepaid expenses and other assets 1,093 8,060
Mortgage notes receivable 51,491 34,778
Investments in and advance to joint ventures and corporations 52,153 58,016
------------- -----------
Total assets $1,779,412 $534,797
============= ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
Mortgage notes payable 452,212 70,536
Note payable, Credit Facility 153,000 130,500
Accounts payable, accrued expenses and other liabilities 41,764 14,022
Investment in joint venture 24,735 23,955
------------- -----------
Total liabilities 671,711 239,013
------------- -----------
Commitments and contingencies -- --
Minority interest in Operating Partnership 108,551 36,962
------------- -----------
Stockholders' equity:
Common stock, $.01 par value, authorized 100,000,000 shares, issued and
outstanding 48,116,480 and 20,215,822 shares 481 202
Additional paid-in capital 1,022,110 267,727
Cumulative net income 60,047 23,715
Cumulative dividends (83,488) (32,822)
------------- -----------
Total stockholders' equity 999,150 258,822
------------- -----------
Total liabilities and stockholders' equity $1,779,412 $534,797
============= ===========
</TABLE>
The accompanying notes are an integral part of these consolidated
financial statements.
F-3
<PAGE>
BEACON PROPERTIES CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
(dollars in thousands, except per share amounts)
<TABLE>
<CAPTION>
Predecessor
----------------
For the Period For the Period
Year Ended Year Ended May 26, 1994 to January 1, 1994
Dec. 31, 1996 Dec. 31, 1995 December 31, 1994 to May 25, 1994
---------------- ---------------- ------------------ ----------------
<S> <C> <C> <C> <C>
Revenues:
Rental income $ 147,825 $ 71,050 $ 25,144 $5,776
Management fees 3,005 2,203 -- 1,521
Recoveries from tenants 16,719 9,742 4,488 1,040
Mortgage interest income 4,970 2,546 -- --
Other income 11,272 5,502 2,301 675
---------------- ---------------- ------------------ ----------------
Total revenues 183,791 91,043 31,933 9,012
---------------- ---------------- ------------------ ----------------
Expenses:
Property expenses 37,211 18,090 7,034 2,086
Real estate taxes 18,124 10,217 3,325 595
General and administrative 19,331 9,755 3,122 1,399
Mortgage interest expense 30,300 15,226 4,992 2,798
Interest--amortization of financing
costs 2,084 1,370 617 373
Depreciation and amortization 33,184 17,428 6,924 2,385
---------------- ---------------- ------------------ ----------------
Total expenses 140,234 72,086 26,014 9,636
---------------- ---------------- ------------------ ----------------
Income (loss) from operations 43,557 18,957 5,919 (624)
Equity in net income of joint
ventures and corporations 4,989 3,234 929 198
---------------- ---------------- ------------------ ----------------
Income (loss) from continuing
operations 48,546 22,191 6,848 (426)
Discontinued
operations--Construction Company:
Income (loss) from operations (2,609) (12) 477 102
Loss on sale (249) -- -- --
---------------- ---------------- ------------------ ----------------
Income (loss) before minority
interest 45,688 22,179 7,325 (324)
Minority interest in loss of
combined partnerships -- -- -- 931
Minority interest in Operating
Partnership (5,988) (4,119) (1,670) --
---------------- ---------------- ------------------ ----------------
Income before extraordinary items 39,700 18,060 5,655 607
Extraordinary items, net of minority
interest (3,368) -- -- 8,898
---------------- ---------------- ------------------ ----------------
Net income $ 36,332 $ 18,060 $ 5,655 $9,505
================ ================ ================== ================
Income before extraordinary items
per common share $ 1.32 $ 1.09 $ .48 --
Extraordinary items per common share (0.11) -- -- --
---------------- ---------------- ------------------ ----------------
Net income per common share $ 1.21 $ 1.09 $ .48 --
================ ================ ================== ================
Weighted average common shares
outstanding 29,932,327 16,525,245 11,816,380 --
================ ================ ================== ================
</TABLE>
The accompanying notes are an integral part of these consolidated
financial statements.
F-4
<PAGE>
BEACON PROPERTIES CORPORATION
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(dollars in thousands, except per share amounts)
<TABLE>
<CAPTION>
Stockholders' Equity Predecessor
--------------------------------------------------------------- ------------
Common Stock
----------------------
Additional Owners'
Shares Paid-in Cumulative Cumulative Equity
Issued Amount Capital Net Income Dividends (Deficit)
------------- --------------------- ------------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Balance at December 31, 1993 $(57,954)
Net income from January 1, 1994
to May 25, 1994 9,505
Contributions and other, net of
distributions from January 1,
1994 to May 25, 1994 1,083
Issuance of stock for cash--
May 26, 1994--Initial Offering 11,117,850 $111 $ 173,341 --
Issuance of stock in connection
with purchase of minority
interests 698,530 7 11,868 --
Charge to reflect carryover of
historical basis of accounting
and recognition of minority
interest in Operating
Partnership for continuing
investors -- -- (77,600) 47,366
Net income from May 26, 1994 to
December 31, 1994 -- -- -- $ 5,655 --
Dividends declared ($0.96 per
share) -- -- -- -- $(11,344) --
------------- --------------------- ------------- ------------ ------------
Balance at December 31, 1994 11,816,380 118 107,609 5,655 (11,344) --
Issuance of stock 8,341,050 84 159,236 -- -- --
Issuance of stock under dividend
reinvestment and share purchase
plan 25,437 -- 492 -- -- --
Issuance of stock by exercise of
options 12,367 -- 216 -- -- --
Issuance of stock in exchange
for Operating Partnership unit
redemptions 20,588 -- 174 -- -- --
Net income -- -- -- 18,060 -- --
Dividends declared ($1.24 per
share) -- -- -- -- (21,478) --
------------- --------------------- ------------- ------------ ------------
Balance at December 31, 1995 20,215,822 202 267,727 23,715 (32,822) --
Issuance of stock 27,641,400 276 749,589 -- -- --
Issuance of stock under dividend
reinvestment and share purchase
plan 101,431 1 2,647 -- -- --
Issuance of stock by exercise of
options 97,827 1 1,662 -- -- --
Issuance of stock in exchange
for Operating Partnership unit
redemptions 60,000 1 485 -- -- --
Net income -- -- -- 36,332 -- --
Dividends declared ($1.765 per
share) -- -- -- -- (50,666) --
------------- --------------------- ------------- ------------ ------------
Balance at December 31, 1996 48,116,480 $481 $1,022,110 $ 60,047 $(83,488) $ --
============= ===================== ============= ============ ============
</TABLE>
The accompanying notes are an integral part of these consolidated
financial statements.
F-5
<PAGE>
BEACON PROPERTIES CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(dollars in thousands, except per share amounts)
<TABLE>
<CAPTION>
Predecessor
----------------
For the Period For the Period
Year Ended Year Ended May 26, 1994 to January 1, 1994
Dec. 31, 1996 Dec. 31, 1995 December 31, 1994 to May 25, 1994
---------------- ---------------- ------------------ ----------------
<S> <C> <C> <C> <C>
Cash flows from operating
activities:
Net income $ 36,332 $ 18,060 $ 5,655 $ 9,505
---------------- ---------------- ------------------ ----------------
Adjustments to reconcile net income
to net cash provided by operating
activities:
Increase in accrued rent (6,572) (3,741) (915) (1,181)
Depreciation, amortization and
interest--
amortization of financing costs 35,268 18,798 7,541 2,848
Equity in net income of joint
ventures and corporations (2,131) (3,222) (469) (201)
Minority interest in loss of
combined partnerships -- -- -- (1,519)
Minority interest in Operating
Partnership 5,988 4,119 1,670 --
Extraordinary items 3,368 -- -- (8,898)
Deferred interest -- -- -- 367
Increase in accounts receivable (5,481) (1,746) (3,385) (376)
(Increase) decrease in prepaid
expenses and other assets (333) (82) 2,388 (1,940)
Increase (decrease) in accounts
payable, accrued expenses and
other liabilities 25,243 332 (107) 1,636
---------------- ---------------- ------------------ ----------------
Total adjustments 55,350 14,458 6,723 (9,264)
---------------- ---------------- ------------------ ----------------
Net cash provided by operating
activities 91,682 32,518 12,378 241
---------------- ---------------- ------------------ ----------------
Cash flows from investing
activities:
Property additions (1,088,775) (67,610) (204,582) (978)
Payment of deferred leasing costs (6,157) (2,646) (1,010) (124)
Decrease (increase) in prepaid
expenses and other assets 5,000 (5,000) -- --
Purchase of minority interests -- -- (11,688) --
Investments in joint ventures -- -- (15,802) --
Distributions from joint ventures 8,727 3,692 1,637 --
Investments in and advance to
corporations -- (41,471) (5,800) --
Cash from contributed assets -- -- 6,978 --
Restricted cash from contributed
assets -- -- 420 --
Purchase of mortgage notes
receivable (16,713) (34,778) -- --
Decrease (increase) in restricted
cash 165 2,063 (4,827) --
---------------- ---------------- ------------------ ----------------
Net cash used by investing
activities (1,097,753) (145,750) (234,674) (1,102)
---------------- ---------------- ------------------ ----------------
</TABLE>
The accompanying notes are an integral part of these consolidated
financial statements.
F-6
<PAGE>
BEACON PROPERTIES CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS--Continued
(dollars in thousands, except per share amounts)
<TABLE>
<CAPTION>
Predecessor
----------------
For the Period For the Period
Year Ended Year Ended May 26, 1994 to January 1, 1994
Dec. 31, 1996 Dec. 31, 1995 December 31, 1994 to May 25, 1994
---------------- ---------------- ------------------ ----------------
<S> <C> <C> <C> <C>
Cash flows from financing
activities:
Proceeds from offerings $ 754,778 $ 160,028 $173,452 $ --
Owners' contributions -- -- -- 412
Owners' distributions -- -- -- (4,329)
Borrowings on Credit Facility 468,000 124,700 130,300 --
Borrowings on mortgage notes 608,000 -- -- 874
Repayments on Credit Facility (445,500) (124,500) -- --
Repayments on mortgage notes (281,814) (20,400) (49,677) (460)
Advances (repayments of) amounts
due to affiliates -- -- (5,355) 2,800
Payment of deferred financing costs (9,811) (2,457) (2,852) (13)
Decrease (increase) in prepaid
expenses and other assets 2,300 (2,300) -- --
Distributions paid to minority
interests (7,631) (6,230) (1,858) --
Dividends paid to stockholders (50,666) (26,205) (6,617) --
---------------- ---------------- ------------------ ----------------
Net cash provided (used) by
financing activities 1,037,656 102,636 237,393 (716)
---------------- ---------------- ------------------ ----------------
Net increase (decrease) in cash and
cash equivalents 31,585 (10,596) 15,097 (1,577)
Cash and cash equivalents, beginning
of period 4,501 15,097 -- 6,150
---------------- ---------------- ------------------ ----------------
Cash and cash equivalents, end of
period $ 36,086 $ 4,501 $ 15,097 $ 4,573
================ ================ ================== ================
Supplemental disclosures:
Cash paid during the period for
interest $ 28,777 $ 14,738 $ 5,278 $ 2,811
Noncash activities:
Acquisition of interests in
properties -- -- 22,721 --
Increase in minority interest as a
result of acquisition of
interests in properties 74,226 -- 9,200 --
Liabilities assumed in connection
with contributions and
acquisitions of properties 55,529 861 93,518 --
Dividends declared to stockholders -- -- 4,727 --
Distributions declared to minority
interest -- -- 1,524 --
Receivable from equity investment 781 1,057 -- --
Redemption of Operating Partnership
units for common stock 486 174 -- --
Common stock issued in connection
with purchase of minority
interests -- -- 11,875 --
</TABLE>
The accompanying notes are an integral part of these consolidated
financial statements.
F-7
<PAGE>
BEACON PROPERTIES CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(dollars in thousands, except per share amounts)
1. Organization, Offerings and Acquisitions:
Beacon Properties Corporation (the "Company") was incorporated on March 4,
1994 as a Maryland corporation, and commenced operations effective with the
completion of its initial offering on May 26, 1994. The Company qualifies as
a real estate investment trust under the Internal Revenue Code of 1986, as
amended. Concurrent with the initial offering, the Company contributed its
interests in two properties and the net proceeds of the offering which
approximated $173.5 million in exchange for an approximate 78% interest in
Beacon Properties, L.P., (the "Operating Partnership"), which became the
successor entity to The Beacon Group (the "Predecessor").
The Company was formed to continue and expand the commercial real estate
development, construction, acquisition, leasing, design and management
business of the Predecessor. Prior to the initial offering, the Predecessor
was comprised of interests in 13 office properties and entities which
provided design, leasing, development and construction services to each of
the properties and unrelated third parties.
During 1995, the Company completed three offerings totaling 8,341,050 shares
of common stock. The net proceeds from these offerings totaling $159.3
million were used primarily to retire indebtedness incurred to acquire new
properties and to acquire additional properties.
During 1996, the Company completed three offerings totaling 27,641,400 shares
of common stock. The net proceeds from these offerings totaling $749.9
million were used primarily to acquire additional properties.
The following schedule summarizes the Company's interest in the properties as
a result of its initial and subsequent offerings, and the related acquisition
of properties and partnership interests. All properties have been
consolidated by the Company and its Predecessor unless otherwise indicated in
the notes:
<TABLE>
<CAPTION>
Date Rentable Ownership
Acquired by Area in Interest at Accounting
the Company Square Feet 12/31/96 Method Notes
------------- ------------- --------------------------
<S> <C> <C> <C> <C>
Properties:
Wellesley Office Park--Buildings 1-8, Wellesley, MA (A) 623,000 100% (E)
Crosby Corporate Center, Bedford, MA (B) 336,000 100%
South Station, Boston, MA (B) 149,000 100%
175 Federal Street, Boston, MA (B) 203,000 100% (E)
One Post Office Square, Boston, MA (B) 764,000 50% (D)
Center Plaza, Boston, MA (B) 649,000 100%
Rowes Wharf, Boston, MA (B) 344,000 45% (F)
150 Federal Street, Boston, MA (B) 530,000 100%
Polk and Taylor Buildings, Arlington, VA (B) 890,000 10% (G)
One Canal Park, Cambridge, MA 6/10/94 100,000 100%
Westwood Business Centre, Westwood, MA 6/10/94 160,000 100%
Russia Wharf, Boston, MA 8/10/94 315,000 100%
Westlakes Office Park--Buildings 1-3 and 5, Berwyn,
PA (C) 444,000 100%
75-101 Federal Street, Boston, MA 9/29/95 812,000 52% (H)
Two Oliver Street and 147 Milk Street, Boston, MA 10/6/95 271,000 100%
Ten Canal Park, Cambridge, MA 12/21/95 110,000 100%
Perimeter Center, Atlanta, GA 2/15/96 3,302,000 100%
1333 H Street, N.W., Washington, D.C. 8/16/96 239,000 100%
AT&T Plaza, Oak Brook, IL 8/16/96 225,000 100%
Tri-State International, Lincolnshire, IL 8/16/96 548,000 100%
John Marshall I, McLean, VA 9/5/96 261,000 100%
E.J. Randolph, McLean, VA 9/5/96 165,000 100%
Continued
F-8
<PAGE>
BEACON PROPERTIES CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--Continued
(dollars in thousands, except per share amounts)
Date Rentable Ownership
Acquired by Area in Interest at Accounting
the Company Square Feet 12/31/96 Method Notes
------------- ------------- --------------------------
Northridge I, Herndon, VA 9/5/96 124,000 100%
1300 North 17th Street, Rosslyn, VA 10/18/96 373,000 100%
1616 North Fort Myer Drive, Rosslyn, VA 10/18/96 293,000 100%
New England Executive Park, Burlington, MA 11/15/96 817,000 100%
The Riverview Building, Cambridge, MA 11/21/96 263,000 100%
10960 Wilshire Boulevard, Westwood, CA 11/21/96 544,000 100%
Shoreline Technology Park, Mountain View, CA 12/20/96 727,000 100%
Lake Marriott Business Park, Santa Clara, CA 12/20/96 400,000 100%
Presidents Plaza, Chicago, IL 12/27/96 791,000 100%
-------------
15,772,000
=============
Service Entities:
Beacon Construction Company, Inc. (B) 99% (I)
Beacon Property Management, L.P. (B) 100%
Beacon Property Management Corporation (B) 99% (I)
Beacon Design Corporation (B) 99% (I)
Beacon Design, L.P. (B) 100%
</TABLE>
(A) Wellesley Building 8 was acquired May 4, 1995. Interests in the remaining
Wellesley Buildings were contributed as part of the initial public
offering.
(B) Interests in this property or company were contributed or acquired as
part of the initial public offering.
(C) Westlakes Buildings 1, 3 and 5 were acquired October 21, 1994. Westlakes
Building 2 was acquired July 26, 1995.
(D) The Company is a general partner in the joint venture which owns the
property and utilizes the equity method of accounting for its investment.
(E) On October 28, 1994, the Company acquired the remaining interest in the
175 Federal Street and Wellesley 6 Joint Ventures which owned these
properties. Prior to the acquisition of the remaining interest, the
Company and its Predecessor used the equity method of accounting for its
investments.
(F) The Company owns an indirect limited partner interest and utilizes the
equity method of accounting for its investment.
(G) The Company owns a 1% general partner interest and a 9% limited partner
interest and utilizes the equity method of accounting for its investment.
(H) The Company is a shareholder in the corporation (private REIT) which owns
the property and utilizes the equity method of accounting for its
investment.
(I) The Company used the cost method of accounting for its investments in
these subsidiaries prior to 1995. The Company currently uses the equity
method of accounting for its investments. (See Note 2).
2. Summary of Significant Accounting Policies:
Business
The Company is a self-managed and self-administered real estate investment
trust (a "REIT") which currently has interests in a portfolio of 104 Class A
office properties and other commercial properties containing approximately
15.8 million rentable square feet located in Boston, Atlanta, Chicago, Los
Angeles, Philadelphia, San Francisco, and Washington, D.C.
The Company also owns and operates commercial real estate development,
acquisition, leasing, design and management businesses. The Company manages
approximately 2.9 million square feet of commercial and office space owned by
third parties in various locations, including Boston, Waltham, and
Springfield, Massachusetts and Chicago, Illinois.
F-9
<PAGE>
BEACON PROPERTIES CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--Continued
(dollars in thousands, except per share amounts)
Principles of Consolidation
The accompanying financial statements of the Company have been prepared on
a consolidated basis which include all the accounts of the Company, its
majority owned Operating Partnership and its subsidiaries. All significant
intercompany balances and transactions have been eliminated. The Company's
consolidated financial statements reflect the properties acquired at their
historical basis of accounting to the extent of the acquisition of interests
from the Predecessors' owners who continued on as investors. The remaining
interests acquired from the Predecessors' owners have been accounted for as a
purchase and the excess of the purchase price over the related historical
cost basis was allocated to real estate. The consolidated financial
statements of the Company include, along with the contributed properties of
the Predecessor, significant acquisitions of properties and ownership
interests subsequent to the initial public offering; consequently, the
operating results of the Company are not directly comparable to the
Predecessor.
The accompanying financial statements of the Predecessor have been
presented on a combined basis which include all of the contributed properties
and the management, leasing, and design entities.
Real Estate
Buildings and improvements are recorded at cost and are depreciated on the
straight-line and declining balance methods over their estimated useful lives
of nineteen to forty years and fifteen to twenty years, respectively. The
cost of buildings and improvements includes the purchase price of the
property or interests in property, legal fees, acquisition costs, interest,
property taxes and other costs incurred during the period of construction.
The Company capitalized interest costs of $1.0 million in 1996, $0.1 million
in 1995, and $0 in 1994. In accordance with Statement of Financial Accounting
Standards No. 121, Accounting for the Impairment of Long-Lived Assets and for
Long-Lived Assets to Be Disposed Of, the Company periodically reviews its
properties to determine if its carrying costs will be recovered from future
operating cash flows. In cases where the Company does not expect to recover
its carrying costs, the Company would recognize an impairment loss. No such
losses have been recognized to date.
Tenant improvements are depreciated over the terms of the related leases.
Furniture, fixtures and equipment are depreciated using straight-line and
declining balance methods over their expected useful lives of five to seven
years.
Expenditures for maintenance and repairs are charged to operations as
incurred. Significant renovations or betterments which extend the economic
useful life of the assets are capitalized.
Deferred Financing and Leasing Costs
Deferred financing costs include fees and costs incurred to obtain
long-term financings, and are amortized over the terms of the respective
loans on a basis which approximates the interest method. Deferred leasing
costs incurred in the successful negotiation of leases, including brokerage,
legal and other costs, have been deferred and are being amortized on a
straight-line basis over the terms of the respective leases.
Cash and Cash Equivalents
Cash and cash equivalents consist of highly liquid assets with original
maturities of three months or less from the date of purchase. The majority of
the Company's cash and cash equivalents are held at major commercial banks.
The Company has not experienced any losses to date on its invested cash. The
carrying value of the cash and cash equivalents approximate market.
Restricted Cash
Restricted cash consists of cash held in escrow as required by lenders to
satisfy real estate taxes and tenant improvement costs.
F-10
<PAGE>
BEACON PROPERTIES CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--Continued
(dollars in thousands, except per share amounts)
Investments in and Advance to Joint Ventures and Corporations
The Company and Predecessor use the equity method of accounting for their
earnings in property joint ventures and corporations which it does not
control. Losses in excess of investments are not recorded where the Company
or the Predecessor is a limited partner and has not guaranteed nor intends to
provide any future financial support to the respective properties.
The Company utilized the cost method in 1994 for its earnings from service
corporations. In 1995, the Company adopted the accounting prescribed in
Emerging Issues Task Force Issue 95-6 "Accounting by a Real Estate Investment
Trust for an Investment in a Service Corporation" and utilized the equity
method for its investment in and earnings of service corporations. The effect
of this change on 1994 results was not material and such amounts have been
reclassified to conform to the 1995 presentation.
Mortgage Notes Receivable
Discounts from the principal balance on mortgage notes receivable, net of
acquisition costs, are amortized as interest income over the term of the
related notes using the effective yield method, based on management's
evaluation of the current facts and circumstances and the ultimate ability to
collect the principal balance of such notes.
Offering Costs
Underwriting commissions and offering costs incurred in connection with
the initial and subsequent offerings have been reflected as a reduction of
additional paid-in capital.
Revenue Recognition
Base rental income is reported on a straight-line basis over the terms of
the respective leases. The impact of the straight-line rent adjustment
increased revenues for the Company by $6.6 million, $3.7 million and $0.9
million and increased the Company's equity in net income of property joint
ventures and corporations by $0.1 million, $0.2 million and $0.3 million for
the years ended December 31, 1996 and 1995 and the period May 26, 1994 to
December 31, 1994, respectively. Construction income of the Predecessor was
recognized on the percentage-of-completion method on the basis of costs
incurred and expected to be incurred. Management fees are recognized when
they are earned.
Income Taxes
The Company has elected to be taxed as a REIT under the Internal Revenue
Code commencing with its taxable period ended December 31, 1994. As a result,
the Company will generally not be subject to federal income tax on its
taxable income at corporate rates to the extent it distributes annually at
least 95% of its taxable income to its shareholders and complies with certain
other requirements. Accordingly, no provision has been made for federal
income taxes in the accompanying consolidated financial statements. Certain
subsidiaries are subject to federal and state income tax on their taxable
income at regular corporate rates.
The Predecessor was not a legal entity subject to income taxes. No federal
or state income taxes were applicable to the entities that managed and owned
the properties; accordingly, none have been provided in the accompanying
combined financial statements.
Interest Rate Protection Agreements
The Company has entered into interest rate protection agreements to reduce
the impact of certain changes in interest rates on its variable rate debt.
These agreements are accounted for as a hedge. Amounts paid for the
agreements are amortized over the lives of the agreements on a basis which
approximates the interest method.
F-11
<PAGE>
BEACON PROPERTIES CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--Continued
(dollars in thousands, except per share amounts)
Payments under interest rate swap agreements are recognized as adjustments to
interest expense when incurred. The Company's policy is to write-off
unamortized amounts paid under interest rate protection agreements, when the
related debt is paid off or there is a termination of the agreements prior to
their maturity. The Company is exposed to credit loss in the event of
nonperformance by the other parties to the interest rate protection
agreements. However, the Company does not anticipate nonperformance by the
counterparties.
Per Share Data
The assumed exercise of outstanding share options, using the treasury
stock method, is not dilutive and, therefore, such amounts are not presented
(see Note 9). The income tax status of dividends declared during the years
ended December 31, 1996 and 1995 and the period May 26, 1994 to December 31,
1994 are as follows:
1996 1995 1994
---- ---- ----
Ordinary income 91% 87% 66%
Return of capital 9% 13% 34%
Risks and Uncertainties
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amount of assets and liabilities and
disclosure of contingent assets and liabilities. Actual results could differ
from those estimates.
Reclassifications
Certain prior year balances have been reclassed to conform with current
year presentation.
3. Accounts Receivable:
December 31,
--------------------
1996 1995
--------- ---------
Tenants $ 5,072 $2,137
Other 4,228 1,006
Affiliates 3,683 3,322
Allowance for uncollectible amounts (1,374) (337)
--------- ---------
Total $11,609 $6,128
========= =========
4. Mortgage Notes Receivable:
The Company acquired a fifty percent interest in certain mortgage notes
collateralized by property owned by a joint venture in which the Company has
an indirect interest. The terms of the notes require interest-only payments
at 8.71% quarterly on a principal balance of approximately $63.0 million and
are due on April 1, 1999. The term may be extended for up to three years
under certain conditions. The Company also has an option to purchase from an
affiliate other mortgages collateralized by the same property.
F-12
<PAGE>
BEACON PROPERTIES CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--Continued
(dollars in thousands, except per share amounts)
5. Investments in and Advance to Joint Ventures and Corporations:
The following is summarized financial information for the property joint
ventures and corporation:
December 31,
-------------------------
1996 1995
------------ ------------
Balance sheets:
Real estate, net $ 410,207 $ 419,096
Other assets 51,669 55,714
------------ ------------
Total assets $461,876 $474,810
============ ============
Mortgage notes payable 377,754 380,827
Loans and notes payable 72,136 68,606
Other liabilities 13,040 14,072
Partners' and shareholders' equity (deficiency) (1,054) 11,305
------------ ------------
Total liabilities and equity (deficiency) $461,876 $474,810
============ ============
<TABLE>
<CAPTION>
Predecessor
---------------
May 26, 1994 to Jan. 1, 1994 to
1996 1995 Dec. 31, 1994 May 25, 1994
----------- -------------------------- ---------------
<S> <C> <C> <C> <C>
Summary of operations:
Rentals $117,283 $ 91,048 $ 59,983 $ 38,386
Other income 3,453 3,861 5,717 2,941
Operating expenses (61,086) (49,472) (34,688) (22,632)
Mortgage interest expense (28,712) (23,232) (16,261) (13,432)
Depreciation and amortization (18,592) (14,537) (11,427) (8,228)
----------- -------------------------- ---------------
Net income (loss) $ 12,346 $ 7,668 $ 3,324 $ (2,965)
=========== ========================== ===============
</TABLE>
A reconciliation of interests in the underlying net assets to the
Company's carrying value of property investments in joint ventures and
corporation is as follows:
<TABLE>
<CAPTION>
December 31,
----------------------
1996 1995
----------- ----------
<S> <C> <C>
Partners' and shareholders' equity (deficiency), as above $(1,054) $11,305
Deficits of other partners and shareholders 23,532 13,259
----------- ----------
Company's share of equity 22,478 24,564
Excess of cost of investments over the net book value of underlying net
assets, net of amortization and accumulated amortization of $122 and
$75, respectively 1,310 1,357
----------- ----------
Carrying value of property investments in joint ventures and corporation $23,788 $25,921
=========== ==========
</TABLE>
F-13
<PAGE>
BEACON PROPERTIES CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--Continued
(dollars in thousands, except per share amounts)
The following is summarized financial information for the service
corporations:
<TABLE>
<CAPTION>
December 31,
---------------------
1996 1995
-------------------
<S> <C> <C>
Balance sheets:
Equipment, net $ 1,806 $ 715
Other assets 34,155 29,560
-------------------
Total assets $35,961 $30,275
===================
Other liabilities 37,360 27,124
Shareholders' equity (deficiency) (1,399) 3,151
-------------------
Total liabilities and equity (deficiency) $35,961 $30,275
===================
</TABLE>
<TABLE>
<CAPTION>
May 26, 1994 to
1996 1995 Dec. 31, 1994
------------ ------------ ---------------
<S> <C> <C> <C>
Summary of operations:
Construction income $ 140,903 $ 108,913 $ 52,429
Consulting and management fees 2,537 7,576 4,848
Interest and other income 266 383 184
Construction, consulting and management fee costs (141,167) (110,835) (52,388)
General and administrative expense (5,121) (4,880) (3,564)
Depreciation and amortization (584) (336) (186)
Minority interest in net income of joint venture (52) (130) (90)
Interest expense to stockholder -- (650) --
------------ ------------ ---------------
Net income (loss) $ (3,218) $ 41 $ 1,233
============ ============ ===============
</TABLE>
A reconciliation of the underlying net assets to the Company's carrying
value of investments in and advance to service corporations is as follows:
<TABLE>
<CAPTION>
December 31,
-----------------------
1996 1995
----------- -----------
<S> <C> <C>
Shareholders' equity (deficiency), as above $ (1,399) $ 3,151
Less equity (deficiency) of other shareholders (29) 11
----------- -----------
Company's share of equity (deficiency) (1,370) 3,140
Advance 5,000 5,000
----------- -----------
Carrying value of investments in and advance to service corporations 3,630 8,140
Carrying value of property investments in joint ventures and corporation,
as above 23,788 25,921
----------- -----------
Total $ 27,418 $ 34,061
=========== ===========
Per consolidated balance sheet:
Investments in and advance to joint ventures and corporations $ 52,153 $ 58,016
Investment in joint venture (24,735) (23,955)
----------- -----------
Total $ 27,418 $ 34,061
=========== ===========
</TABLE>
F-14
<PAGE>
BEACON PROPERTIES CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--Continued
(dollars in thousands, except per share amounts)
6. Mortgage Notes Payable:
The mortgage notes payable, collateralized by the certain properties and
assignment of leases, are as follows:
<TABLE>
<CAPTION>
December 31,
----------------------
1996 1995
----------- ----------
<S> <C> <C>
Mortgage notes with fixed interest at:
8.00% maturing July 1, 1998 $ 12,970 $13,236
6.67% maturing November 1, 1998 56,920 57,300
7.23% maturing February 1, 2003 55,000 --
7.23% maturing March 1, 2003 60,000 --
7.08% maturing March 31, 2006 218,000 --
8.19% maturing January 1, 2007 15,000 --
8.19% maturing January 1, 2007 13,600 --
8.38% maturing December 1, 2008 20,722 --
----------- ----------
Total mortgage notes payable $452,212 $70,536
=========== ==========
</TABLE>
The Company's restricted cash consists of cash required by these mortgages
to be held in escrow for capital expenditures and/or real estate taxes.
Scheduled maturities of mortgage notes payable are as follows:
1997 $ 2,127
1998 72,611
1999 6,602
2000 7,608
2001 8,171
Thereafter 355,093
--------
Total $452,212
========
The Company computes the fair value of its mortgage notes payable based
upon the discounted cash flows at a discount rate that approximates the
Company's effective borrowing rate and the Company has determined that the
fair value of its mortgage notes approximates their carrying value.
In March 1996, the Company repaid a debt and recorded an extraordinary
item of $1.9 million, net of minority interest, in connection with the
write-off of fees and costs to acquire the debt. The extraordinary item
during the period January 1, 1994 through May 25, 1994 represents the gains
resulting from the settlement of certain mortgage notes payable. As the
prepayments were a condition to transfering the assets to the Company, these
items were recorded by the Predecessor entity.
7. Note Payable, Credit Facility:
The Company has a three-year, $300 million revolving credit facility (the
"Credit Facility"). The Credit Facility matures in June 1999 and is secured
by cross-collateralized mortgages and assignment of rents on certain
properties.
Outstanding balances under the Credit Facility bear interest, at the
Company's option, at either (i) the higher of (x) Bank of Boston's base
interest rate and (y) one-half of one percent (1/2%) above the overnight
federal funds effective rate or (ii) the Eurodollar rate plus 175 basis
points. The Company has an interest rate protection agreement through May
1997 with respect to $135 million of the Credit Facility, which provides for
offsetting payments to the Company in the event that 90-day LIBOR exceeds
9.47% per annum. Effective May 1997 through May 1999, the Company has an
interest rate protection agreement with respect to $137.5 million of the
Credit Facility, which provides for offsetting
F-15
<PAGE>
BEACON PROPERTIES CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--Continued
(dollars in thousands, except per share amounts)
payments to the Company in the event that 90-day LIBOR exceeds 8.75% per
annum. This interest rate protection arrangement may be applied during any
four quarters in the period from May 1997 to May 1999.
The outstanding balance of the Credit Facility at December 31, 1996 was
$153.0 million. The weighted average amount outstanding during the years
ended December 31, 1996 and 1995 and the period May 26, 1994 to December 31,
1994 was $42.3 million, $99.7 million and $50.4 million, respectively. The
weighted average interest rate on amounts outstanding during the years ended
December 31, 1996 and 1995 and the period May 26, 1994 to December 31, 1994
was approximately 7.78%, 8.25% and 7.57%, respectively. The applicable
interest rate under the Credit Facility at December 31, 1996 was 8.25%.
Based upon the Credit Facility's variable interest rate and the Company's
determination of the fair value of its interest rate agreement based upon the
quoted market prices of similar instruments, the Company has determined that
the fair value of these instruments approximate their carrying value.
As a result of the substantial modification of the terms of the Credit
Facility in June 1996, the Company recorded an extraordinary item of $1.5
million, net of minority interest, in connection with the write-off of fees
and costs relating to the prior Credit Facility.
8. Accounts Payable, Accrued Expenses and Other Liabilities:
<TABLE>
<CAPTION>
December 31,
--------------------
1996 1995
--------- ---------
<S> <C> <C>
Accounts payable and accrued expenses $29,904 $ 8,092
Deferred liability 4,912 1,164
Affiliates 1,258 2,952
Other liabilities 504 647
Security deposits 5,186 1,167
--------- ---------
Total $41,764 $14,022
========= =========
</TABLE>
9. Stockholders' Equity:
Stock Option Plans
During 1994, the Company adopted the 1994 Stock Option Plan, which
initially reserved 1,102,080 shares of common stock. In May, 1996 the 1994
Stock Option Plan was amended to reserve an additional 1,621,485 shares of
common stock. The 1994 Stock Option Plan is administered by the Compensation
Committee of the Board of Directors (the "Committee") and officers and
certain other employees of the Company are eligible to participate.
Non-employee Directors of the Company are eligible to receive stock options
under the 1994 Stock Option Plan on a limited basis.
The 1994 Stock Option Plan authorizes (i) the grant of stock options that
qualify as incentive stock options under Section 422 of the Code ("ISOs"),
(ii) the grant of stock options that do not so qualify ("NQSOs"), (iii) the
grant of stock options in lieu of cash for Directors' fees and employee
bonuses, (iv) grants of shares of common stock contingent on the attainment
of performance goals or subject to other restrictions, and (v) grants of
shares of common stock in lieu of cash compensation. The exercise price of
stock options will be determined by the Committee, but may not be less than
100% of the fair market value of the shares of Common Stock on the date of
grant in the case of ISOs. However, in the case of grants of NQSOs granted in
lieu of cash for Directors' fees and employee bonuses, the exercise price may
not be less than 50% of the fair market value of the shares of common stock
on the date of grant. NQSOs granted under the 1994 Stock Option Plan may, if
approved by the Committee, accrue annually a dividend equivalent right which
will entitle the option-holder to receive additional shares of common stock
upon the exercise of the option. The Company has reserved 29,425 shares of
common stock for issuance under the 1994 Stock Option Plan. Options issued
vest at such time or times as determined by the
F-16
<PAGE>
BEACON PROPERTIES CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--Continued
(dollars in thousands, except per share amounts)
Committee except for options issued to independent directors which vest on
the date of grant. All options have a term of ten years from the grant date.
In October 1996, the Company adopted the 1996 Stock Option Plan (the "1996
Plan"), which provides for the granting of options to purchase up to an
aggregate of 750,000 shares of common stock to all employees other than the
senior executive officers of the Company. The Company has reserved 168,500
shares of common stock for issuance under the 1996 Option Plan. The term of
each option is fixed by the Committee. The Committee also determines at what
time or times each option becomes vested and exercisable and, subject to the
terms of the Plan, the period of time, if any, after death, disability, or
termination of employment during which options may be exercised. The
Committee may accelerate the exercisability of any option at any time.
Changes in options outstanding under the 1994 and 1996 plans during the
period were as follows:
<TABLE>
<CAPTION>
Option Price
---------------
Number
Of Shares Per Share
Under Option Average
--------------- ---------------
<S> <C> <C>
Granted at Initial Offering 630,250 $17.00
Granted May-December 1994 27,500 18.16
Canceled May-December 1994 (15,750) 17.00
--------------- ---------------
Shares under Option at December 31, 1994 642,000 17.05
Exercised--1995 (12,367) 17.46
Granted--1995 414,000 20.14
Canceled--1995 (9,662) 17.00
--------------- ---------------
Shares under Option at December 31, 1995 1,033,971 18.28
Exercised--1996 (97,827) 17.00
Granted--1996 2,236,550 28.72
Canceled--1996 (7,248) 19.16
--------------- ---------------
Shares under option at December 31, 1996 3,165,446 25.69
=============== ===============
Options available for grant at beginning of year 55,826 --
Options available for grant at end of year 197,925 --
</TABLE>
The Company applies Accounting Principles Board Opinion No. 25 and related
Interpretations in accounting for its plans. Financial Accounting Standards
Board Statement No. 123 "Accounting for Stock-Based Compensation" ("SFAS 123")
was issued in 1995 and, if fully adopted, changes the methods for recognition of
cost on plans similar to those of the Company. Adoption of SFAS 123 is optional;
however, had compensation cost for the Company's 1996 grants for stock-based
compensation plans been determined consistent with SFAS 123, the Company's net
income, net income applicable to common shareholders, and net income per common
share would approximate the pro forma amounts below:
<TABLE>
<CAPTION>
1996 1995
-------------------
<S> <C> <C>
Net income:
As reported $36,332 $18,060
Pro forma 35,530 18,007
Net income per common share:
As reported 1.21 1.09
Pro forma 1.19 1.09
</TABLE>
The effects of applying SFAS 123 in this pro forma disclosure are not
indicative of future amounts. SFAS 123 does not apply to awards prior to
1995, and additional awards in future years are anticipated.
F-17
<PAGE>
BEACON PROPERTIES CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--Continued
(dollars in thousands, except per share amounts)
The fair value of each option granted under SFAS 123, estimated on the
date of grant using the Black-Scholes option-pricing model, is $3.38 for 1996
and $2.04 for 1995. The following table presents the annualized weighted-
average values of the significant assumptions used to estimate the fair
values of the options:
<TABLE>
<CAPTION>
1996 1995
------- --------
<S> <C> <C>
Risk-free interest rate 6.22% 5.45%
Expected life in years 6.0 6.0
Expected volatility 16.6% 16.1%
Expected dividend yield 6.0% 6.0%
</TABLE>
The following table summarizes information about options outstanding at
December 31, 1996:
<TABLE>
<CAPTION>
Options Outstanding Options Exercisable
- ---------------------------------------------------- ---------------------------------------
Weighted Weighted Weighted
Number Average Average Number Average
Range of Outstanding Remaining Exercise Exercisable Exercise
Exercise Prices at 12/31/96 Contractual Life Price at 12/31/96 Price
------------------ -------------- ---------------------------- -------------- ------------
<S> <C> <C> <C> <C> <C>
$12.0625 - $15.0000 2,614 9.48 $13.4150 2,576 $ 13.4230
17.0000 - 17.0000 497,396 7.38 17.0000 300,998 17.0000
17.1875 - 18.3125 22,936 7.54 18.1680 20,437 18.1580
20.1250 - 20.1250 395,000 8.92 20.1250 136,685 20.1250
20.3750 - 25.8750 426,000 9.28 24.9049 26,000 22.4807
26.0000 - 26.7500 35,000 9.49 26.2142 15,000 26.0000
29.6250 - 29.6250 1,779,500 9.85 29.6250 0 0.0000
31.0000 - 31.0000 1,000 9.89 31.0000 0 0.0000
31.5000 - 31.5000 1,000 9.90 31.5000 0 0.0000
32.2500 - 32.2500 5,000 9.94 32.2500 0 0.0000
-------------- ---------------------------- -------------- ------------
12.0625 - 32.2500 3,165,446 9.25 $25.6915 501,696 $18.4333
============== ============================ ============== ============
</TABLE>
Stock Purchase Plan
In 1995, the Company instituted a dividend reinvestment and stock purchase
plan for holders of the Company's stock. The plan permits shareholders to
automatically reinvest their cash dividends or invest limited amounts of cash
payments in newly issued shares or open market purchases of the Company's
common stock. At December 31, 1996 and 1995, there were 373,132 and 474,563
shares reserved for issuance under the dividend reinvestment and stock
purchase plan.
10. Transactions with Affiliates:
<TABLE>
<CAPTION>
Predecessor
---------------
May 26, 1994 to Jan. 1, 1994 to
1996 1995 Dec. 31, 1994 May 25, 1994
-------- -------- --------------- ---------------
<S> <C> <C> <C> <C>
Management, design and construction fees and
interest income $9,176 $ 5,640 $1,809
Administrative salaries and expenses -- -- 469
Construction costs 8,352 11,108 $241 --
</TABLE>
In 1995, the Company entered into an agreement to lease its corporate
offices from a joint venture in which the Company has an indirect interest.
It previously subleased corporate office space from another affiliate. Rental
expense related to these arrangements was $1.3 million, $0.3 million and $0.1
million for the years ended December 31, 1996 and 1995 and the period from
May 26, 1994 to December 31, 1994, respectively.
F-18
<PAGE>
BEACON PROPERTIES CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--Continued
(dollars in thousands, except per share amounts)
Future minimum rental payments at December 31, 1996 for the Company's
corporate offices are $1.3 million for 1997, $1.4 million for 1998 through
2001, and $1.0 million for 2002.
11. Minority Interests:
Minority Interest in Operating Partnership
Minority interest in the Operating Partnership relates to the portion
which is not owned by the Company and, at December 31, 1996, amounted to
11.5%.
In conjunction with the formation of the Company persons contributing
interests in properties to the Operating Partnership elected to receive
either common stock of the Company or interests in the Operating Partnership
("Units"). Each Unit may be redeemed for either one share of common stock or,
at the option of the Company, cash equal to the fair market value of a share
of common stock at the time of the redemption. When a unitholder redeems a
Unit for a share of common stock or cash, minority interest is reduced and
the Company's investment in the Operating Partnership is increased. At
December 31, 1996 and 1995, 6,273,928 and 3,788,549 units were outstanding,
respectively.
Minority Interest in Combined Partnerships
This amount presented in the financial statements of the Predecessor
represents the losses of the properties in excess of capital of owners, who
will continue to hold their respective economic interest in the combined
partnerships, and are capable of funding their share of future capital calls.
12. Commitments and Contingencies:
Pension Plan
The Company participates in a defined-benefit pension plan with some of
its affiliates. This plan covers substantially all full-time non-union
employees. The Company's portion of pension expense for the years ended
December 31, 1996 and 1995 and the period May 26, 1994 to December 31, 1994
was $0.2 million, $0.1 million, and $0.1 million, respectively. The
Predecessor's comparable allocated portion of pension expense amounted to
$0.1 million for the period January 1, 1994 to May 25, 1994.
401K Plan
The eligible employees of the Company participate in a contributory
savings plan with some of its affiliates. Under the plan, the Company may
match contributions made by eligible employees based on a percentage of the
employee's salary. The Company matches 25% of contributions up to 3% of such
employee's salary (up to $30,000). The matching amount may be changed from
time to time by the Board of Directors. Expenses under this Plan for 1995,
1994 and 1993 were not material.
Contingencies
The Company is subject to various legal proceedings and claims that arose
in the ordinary course of business. These matters are generally covered by
insurance. Management believes that the final outcome of such matters will
not have a material adverse effect on the financial position, results of
operations or liquidity of the Company.
Lease
The South Station property is subject to a ground lease expiring in 2024.
The lease provides for two 15-year extension options. Under certain
conditions, the lessor reserves the right to terminate the lease at the end
of the initial term or at the end of the first extension period and pay the
lessee an amount based on a formula payment
F-19
<PAGE>
BEACON PROPERTIES CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--Continued
(dollars in thousands, except per share amounts)
of fair value. The minimum rents in connection with the lease are
substantially based on percentage rent until 1997. The Company is obligated
to provide loans to the lessor under certain conditions subject to a maximum
of $0.9 million. As of December 31, 1996, no such loans were outstanding.
Environmental
A former tenant of Crosby Corporate Center has agreed to perform the
necessary investigation and cleanup actions regarding remediation of possible
contamination, bear all costs associated with such cleanup activities and
indemnify the Company for any costs or damages it incurs in connection with
such contamination. As the owner of the property, however, the Company could
be held liable for the costs of such activities if the former tenant fails to
undertake such actions.
As a lessee of certain property, the Company has received an indemnity
from the owner to the extent the Company is assessed costs relating to
environmental cleanup.
Site assessments at the New England Executive Park have identified
contamination in the groundwater at a monitoring well which flows into an
aquifer, which supplies drinking water to the Town of Burlington. The Town of
Burlington has allocated funds for, and is in the process of constructing, a
groundwater treatment facility at its drinking water supply that draws from
the subject aquifer. The Company has been advised that such treatment
facility has the capacity to treat any contaminants which may be derived from
the groundwater passing beneath the New England Executive Park.
Based on site assessments performed at The Riverview Building which have
identified the presence of oil that slightly exceeds the concentration that
requires reporting to the Massachusetts Department of Environmental
Protection, an environmental consultant has advised the Company that
applicable regulatory requirements can be satisfied without the need to
perform any remediation at the property.
In connection with the acquisition of the John Marshall land, the sellers
have reported the findings of contamination to the Virginia Department of
Environmental Quality and have retained an environmental consultant to
prepare a remediation plan. Units valued at approximately $1.0 million were
escrowed from the purchase price to be released to the seller upon
performance of remediation pursuant to a remediation plan approved by the
Company. The escrow further provides that the Company may receive some or all
of the remaining escrowed Units upon certain conditions.
The Company does not believe that any costs, if incurred, in connection
with these environmental matters would have a material adverse effect on the
financial position, results of operations, or liquidity of the Company.
Other
The Company guarantees the surety bonds of an affiliate in an amount up to
$5.0 million.
The Company has an obligation to pay $17.0 million in connection with the
acquisition of real estate upon the achievement of conditions regarding
occupancy or rental income levels.
In connection with certain real estate acquired with Operating Partnership
Units the Company has agreed to maintain certain aspects of the related
financing and not to dispose of the real estate for 10 years. If the Company
should choose to modify the financing or dispose of the real estate within this
time period it may be required to make payments to the sellers.
13. Segment Information:
The Predecessor operated principally in three segments: rental operations,
property management, and construction. Revenues for the management segment
include management revenues earned from the rental operations segment which
are subsequently eliminated in consolidation.
Income (loss) from operations consists of total revenues less total
expenses excluding the effects of the following items: equity in net income
(loss) of joint ventures, minority interest in loss of combined partnerships
and extraordinary gain.
F-20
<PAGE>
BEACON PROPERTIES CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--Continued
(dollars in thousands, except per share amounts)
<TABLE>
<CAPTION>
Rental Management Construction Elimination Total
---------------------- --------------- -------------- ----------
January 1, 1994--May 25, 1994
<S> <C> <C> <C> <C> <C>
Revenues $ 7,610 $1,766 $24,238 $(364) $33,250
Income (Loss) from Operations (1,848) 1,260 102 (36) (522)
Identifiable Assets 63,335 283 14,141 (289) 77,470
Depreciation and Amortization 2,383 2 91 -- 2,476
Capital Expenditures 837 -- 141 -- 978
</TABLE>
14. Future Minimum Rents:
Future minimum rentals to be received under noncancelable tenant leases in
effect at December 31, 1996 are as follows:
<TABLE>
<CAPTION>
<S> <C>
1997 $ 188,032
1998 175,732
1999 170,086
2000 143,288
2001 113,718
Thereafter 370,698
----------
Total $1,161,554
==========
</TABLE>
15. Geographic Concentration:
The Company owns properties with a total cost at December 31, 1996 as
follows:
<TABLE>
<CAPTION>
<S> <C>
Downtown Boston $ 284,574
Suburban Boston 279,987
Suburban Atlanta 343,014
Suburban Philadelphia 59,018
Suburban Virginia 178,166
Suburban Los Angeles 133,307
Suburban San Francisco 184,207
Suburban Chicago 175,819
Downtown Washington 53,438
----------
Total $1,691,530
==========
</TABLE>
F-21
<PAGE>
BEACON PROPERTIES CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--Continued
(dollars in thousands, except per share amounts)
16. Selected Quarterly Financial Information: (unaudited)
The following schedule is a summary of the quarterly results of operations
for the years ended December 31, 1996 and 1995 and the period May 26, 1994 to
December 31, 1994:
<TABLE>
<CAPTION>
First Second Third Fourth
Quarter Quarter Quarter Quarter Total
--------- --------- --------- --------- -----------
Year Ended December 31, 1996
<S> <C> <C> <C> <C> <C>
Revenue $33,668 $41,438 $46,602 $62,082 $183,791
Income from continuing operations 6,899 10,053 11,603 15,002 43,557
Discontinued operations--Construction Company:
Loss from operations (407) (663) (841) (698) (2,609)
Loss on sale -- -- -- (249) (249)
Extraordinary items, net of minority interest (1,726) (1,642) -- -- (3,368)
Net income 4,994 7,550 10,524 13,265 36,332
Net income per common share 0.23 0.28 0.34 0.34 1.21
</TABLE>
<TABLE>
<CAPTION>
First Second Third Fourth
Quarter Quarter Quarter Quarter Total
--------- --------- --------- --------- ----------
Year Ended December 31, 1995
<S> <C> <C> <C> <C> <C>
Revenue $20,801 $22,124 $23,595 $24,523 $91,043
Income from continuing operations 3,498 4,620 5,510 5,329 18,957
Discontinued operations--Construction
Company:
Loss from operations -- -- (12) -- (12)
Net income 3,081 4,151 5,088 5,740 18,060
Net income per common share 0.25 0.26 0.29 0.28 1.09
</TABLE>
<TABLE>
<CAPTION>
Second Third Fourth
Period Quarter Quarter Total
-------- --------- --------- ----------
May 26, 1994--December 31, 1994
<S> <C> <C> <C> <C>
Revenue $3,997 $11,387 $16,549 $31,933
Income from continuing operations 784 1,578 3,557 5,919
Discontinued operations--Construction Company:
Income from operations 42 165 270 477
Net income 826 1,826 3,003 5,655
Net income per common share 0.07 0.15 0.26 0.48
</TABLE>
17. Pro Forma Results: (unaudited)
The following unaudited pro forma operating results for the Company have
been prepared as if capital contributions and property acquisitions during
1995 and 1996 had occurred on January 1, 1995. Unaudited pro forma financial
information is presented for informational purposes only and may not be
indicative of what the actual results of operations of the Company would have
been had the events occurred as of January 1, 1995, nor does it purport to
represent the results of operations for future periods. Pro forma results
have not been presented for 1994 as the Company operations did not commence
until May 26, 1994.
F-22
<PAGE>
BEACON PROPERTIES CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--Continued
(dollars in thousands, except per share amounts)
<TABLE>
<CAPTION>
December 31,
-----------------------
1996 1995
----------- -----------
<S> <C> <C>
Revenues $299,147 $266,882
Income before extraordinary items 74,845 69,894
Net income 71,416 69,894
Net income per common share 1.48 1.45
</TABLE>
18. Discontinued Operations:
On December 31, 1996, certain assets of the Construction Company were
sold. These assets included fixed assets, general construction contracts in
progress, and the receivables and payables related to these contracts. All
employees were transferred to the buyer who is expected to complete all
outstanding construction work for projects not purchased as part of the sale.
19. Subsequent Events:
Declaration of Dividend
On January 28, 1997, the Company declared a quarterly dividend of $0.4625
per common share, payable on February 28, 1997 to shareholders of record on
February 10, 1997.
F-23
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS ON FINANCIAL STATEMENT SCHEDULES
To the Board of Directors and Stockholders of
Beacon Properties Corporation:
Our report on the consolidated financial statements of Beacon Properties
Corporation is included on page F-1 of this Form 10-K. In connection with our
audits of such financial statements, we have also audited the related
financial statement schedules listed in the Item 14(a) of this Form 10-K.
In our opinion, the financial statement schedules referred to above, when
considered in relation to the basic financial statements taken as a whole,
present fairly, in all material respects, the information required to be
included therein.
Boston, Massachusetts /s/ Coopers & Lybrand L.L.P.
January 28, 1997
F-24
<PAGE>
Schedule III
BEACON PROPERTIES CORPORATION
REAL ESTATE AND ACCUMULATED DEPRECIATION
December 31, 1996
(dollars in thousands)
<TABLE>
<CAPTION>
Initial Cost
---------------------------
Buildings and
Description Encumbrances Land Improvements
- ----------- ------------ ----------- ---------------
<S> <C> <C> <C>
Commercial Property:
Wellesley Office Park--Buildings 1-8--Wellesley, MA $ 55,000 $ 9,110 $ 75,829
Crosby Corporate Center--Bedford, MA --(1) 978 10,478
South Station--Boston, MA -- -- 21,487
175 Federal St.--Boston, MA 12,970 1,404 24,505
Center Plaza--Boston, MA 60,000 7,301 65,712
150 Federal St.--Boston, MA 56,920(2) 11,265 101,280
One Canal Park--Cambridge, MA --(1) 931 8,444
Ten Canal Park--Cambridge, MA --(1) 1,179 10,609
Two Oliver Street--Boston, MA --(1) 1,796 16,166
Westwood Business Centre--Westwood, MA --(1) 1,159 10,498
Russia Wharf--Boston, MA --(1) 1,442 12,974
Westlakes Office Park--Buildings 1, 2, 3 and 5--Berwyn,
PA --(1) 6,335 46,267
Perimeter Center--Atlanta, GA 218,000 46,438 292,305
AT&T Plaza--Oak Brook, IL --(1) 3,510 31,587
Tri-State International--Lincolnshire, IL --(1) 6,222 55,999
1333H Street, N.W.--Washington, D.C. --(1) 5,337 48,033
E.J. Randolph--McLean, VA 15,000 3,590 19,520
John Marshall I--McLean, VA 20,722 5,996 27,991
Northridge I--Herndon, VA 13,600 1,911 19,264
1300 North 17th Street--Rosslyn, VA --(1) 8,007 46,758
1616 North Fort Myer Drive--Rosslyn, VA --(1) 6,156 38,651
New England Executive Park--Burlington, MA --(1) 7,067 68,259
10960 Wilshire Boulevard--Westwood, CA -- 11,200 122,039
The Riverview Building--Cambridge, MA -- 4,513 40,616
Shoreline Technology Park--Mountain View, CA -- 39,547 101,444
Lake Marriott Business Park--Santa Clara, CA -- 12,032 31,128
Presidents Plaza--Chicago, IL -- 7,750 69,752
--------------- ----------- ---------------
$ 452,212 $212,176 $1,417,595
=============== =========== ===============
</TABLE>
F-25
<PAGE>
Schedule III
BEACON PROPERTIES CORPORATION
REAL ESTATE AND ACCUMULATED DEPRECIATION--Continued
December 31, 1996
(dollars in thousands)
Cost Capitalized
<TABLE>
<CAPTION>
Subsequent Gross Amount at Which
to Acquisition Carried at Close of Period
----------------------- -----------------------------------------
Buildings Buildings
and and
Description Land Improvements Land Improvements Total
- ----------- -------- -------------- ----------- --------------- ------------
<S> <C> <C> <C> <C> <C>
Commercial Property:
Wellesley Office Park--Buildings 1-8--
Wellesley, MA -- $12,866 $ 9,110 $ 88,695 $ 97,805
Crosby Corporate Center--Bedford, MA $1,505 14,880 2,483 25,358 27,841
South Station--Boston, MA -- 861 -- 22,348 22,348
175 Federal St.--Boston, MA -- 3,196 1,404 27,701 29,105
Center Plaza--Boston, MA -- 8,810 7,301 74,522 81,823
150 Federal St.--Boston, MA -- 1,326 11,265 102,606 113,871
One Canal Park--Cambridge, MA -- 139 931 8,583 9,514
Ten Canal Park--Cambridge, MA -- 135 1,179 10,744 11,923
Two Oliver Street--Boston, MA -- 1,376 1,796 17,542 19,338
Westwood Business Centre--Westwood, MA -- 674 1,159 11,172 12,331
Russia Wharf--Boston, MA 177 3,496 1,619 16,470 18,089
Westlakes Office Park--Buildings 1, 2, 3
and 5--Berwyn, PA -- 6,416 6,335 52,683 59,018
Perimeter Center--Atlanta, GA -- 4,271 46,438 296,576 343,014
AT&T Plaza--Oak Brook, IL -- 18 3,510 31,605 35,115
Tri-State International--Lincolnshire, IL -- 950 6,222 56,949 63,171
1333H Street, N.W.--Washington, D.C. -- 68 5,337 48,101 53,438
E.J. Randolph--McLean, VA -- 36 3,590 19,556 23,146
John Marshall I--McLean, VA -- 147 5,996 28,138 34,134
Northridge I--Herndon, VA -- 41 1,911 19,305 21,216
1300 North 17th Street--Rosslyn, VA -- 11 8,007 46,769 54,776
1616 North Fort Myer Drive--Rosslyn, VA -- 87 6,156 38,738 44,894
New England Executive Park--Burlington, MA -- 64 7,067 68,323 75,390
10960 Wilshire Boulevard--Westwood, CA -- 68 11,200 122,107 133,307
The Riverview Building--Cambridge, MA -- 54 4,513 40,670 45,183
Shoreline Technology Park--Mountain View, CA -- 49 39,547 101,493 141,040
Lake Marriott Business Park--Santa Clara, CA -- 7 12,032 31,135 43,167
Presidents Plaza--Chicago, IL -- 31 7,750 69,783 77,533
--------- ------------- ----------- --------------- ------------
$1,682 $60,077 $213,858 $1,477,672 $1,691,530
========= ============= =========== =============== ============
</TABLE>
F-26
<PAGE>
Schedule III
BEACON PROPERTIES CORPORATION
REAL ESTATE AND ACCUMULATED DEPRECIATION--Continued
December 31, 1996
(dollars in thousands)
<TABLE>
<CAPTION>
Life on Which
Depreciation
in Latest
Date of Income
Accumulated Construction/ Date Statements
Description Depreciation Renovation Acquired is Computed
- ----------- --------------- --------------- --------------- ---------------
<S> <C> <C> <C> <C>
Commercial Property:
Wellesley Office Park--Buildings 1-8--
Wellesley, MA $33,913 1963-1984 1994/1995 (3)
Crosby Corporate Center--Bedford, MA 6,702 1981 5/26/94 (3)
South Station--Boston, MA 13,434 1988 5/26/94 (3)
175 Federal St.--Boston, MA 7,258 1977 10/28/94 (3)
Center Plaza--Boston, MA 5,884 1966-1969 12/01/94 (3)
150 Federal St.--Boston, MA 8,961 1988 5/26/94 (3)
One Canal Park--Cambridge, MA 770 1987 6/10/94 (3)
Ten Canal Park--Cambridge, MA 386 1987 12/20/95 (3)
Two Oliver Street--Boston, MA 783 1982-1988 10/06/95 (3)
Westwood Business Centre--Westwood, MA 1,083 1985 6/10/94 (3)
Russia Wharf--Boston, MA 1,453 1978-1982 8/10/94 (3)
Westlakes Office Park--Buildings 1, 2, 3
and 5--Berwyn, PA 3,931 1988-1990 7/95 & 10/94 (3)
Perimeter Center--Atlanta, GA 8,822 1970-1989 2/15/96 (3)
AT&T Plaza--Oak Brook, IL 395 1984 8/16/96 (3)
Tri-State International--Lincolnshire, IL 710 1986 8/16/96 (3)
1333H Street, N.W.--Washington, D.C. 601 1984 8/16/96 (3)
E.J. Randolph--McLean, VA 217 1983 9/05/96 (3)
John Marshall I--McLean, VA 306 1981 9/05/96 (3)
Northridge I--Herndon, VA 214 1988 9/05/96 (3)
1300 North 17th Street--Rosslyn, VA 325 1980 10/18/96 (3)
1616 North Fort Myer Drive--Rosslyn, VA 271 1974 10/18/96 (3)
New England Executive Park--Burlington, MA 291 1970-1985 11/15/96 (3)
10960 Wilshire Boulevard--Westwood, CA 439 1971-1992 11/21/96 (3)
The Riverview Building--Cambridge, MA 170 1985-1986 11/21/96 (3)
Shoreline Technology Park--Mountain View, CA 141 1985-1991 12/20/96 (3)
Lake Marriott Business Park--Santa Clara, CA 43 1981 12/20/96 (3)
Presidents Plaza--Chicago, IL 32 1980-1982 12/27/96 (3)
-------
$97,535
=======
</TABLE>
(1) These properties are collateral for a Note Payable under the Credit
Facility. The outstanding balance under the Note at December 31, 1996 is
$153,000.
(2) This property is comprised of two Units. Unit A is collateral for a Note
Payable under the Credit Facility. Unit B is collateral for a Mortgage
Note Payable in the amount of $56,920.
(3) Buildings and improvements--19 to 40 years; Personal property--5 to 10
years; tenant improvements--over the terms of the related leases.
F-27
<PAGE>
Schedule III
BEACON PROPERTIES CORPORATION
REAL ESTATE AND ACCUMULATED DEPRECIATION--Continued
December 31, 1996
(dollars in thousands)
Depreciation of building and improvements and personal property is
calculated over the following estimated useful lives, using straight line and
declining balance methods:
Buildings and improvements--19 to 40 years
Tenant Improvements--over the terms of the related leases
Personal property--5 to 10 years
The aggregate cost for federal income tax purposes was approximately
$1,390.3 million at December 31, 1996.
The changes in total real estate assets for the years ended December 31,
1996 and 1995, the period May 26, 1994 to to December 31, 1994 and the period
January 1, 1994 to May 25, 1994 are as follows:
<TABLE>
<CAPTION>
Company Predecessor
------------------------------------------ ---------------
May 26, 1994 Jan. 1, 1994
to to
1996 1995 Dec. 31, 1994 May 25, 1994
------------- ----------- ---------------- ---------------
<S> <C> <C> <C> <C>
Balance, beginning of period $ 471,142 $400,419 $207,013* $81,220
Acquisitions, Construction Costs and
Improvements 1,220,388 70,723 193,406 978
------------- ----------- ---------------- ---------------
Balance, end of period $1,691,530 $471,142 $ 400,419 $82,198
============= =========== ================ ===============
</TABLE>
* Represents initial acquisition cost of properties in the formation of the
Company.
The changes in accumulated depreciation for the years ended December 31,
1996 and 1995, the period May 26, 1994 to to December 31, 1994 and the period
January 1, 1994 to May 25, 1994 are as follows:
<TABLE>
<CAPTION>
Company Predecessor
------------------------------------- ---------------
May 26, 1994 Jan. 1, 1994
to to
1996 1995 Dec. 31, 1994 May 25, 1994
--------- --------- ---------------- ---------------
<S> <C> <C> <C> <C>
Balance, beginning of period $66,571 $51,115 $45,044** $37,167
Depreciation for period 30,964 15,456 6,071 2,055
--------- --------- ---------------- ---------------
Balance, end of period $97,535 $66,571 $ 51,115 $39,222
========= ========= ================ ===============
</TABLE>
** Balance reflects prior accumulated depreciation carried over due to
accounting for formation acquisitions as poolings of interests.
F-28
<PAGE>
Schedule IV
BEACON PROPERTIES CORPORATION
MORTGAGE LOANS ON REAL ESTATE
December 31, 1996
(dollars in thousands)
<TABLE>
<CAPTION>
Principal
Amount of
Final Periodic Face Carrying Loans Subject to
Interest Maturity Payment Prior Amount of Amount of Delinquent Principal
Commercial Property Rate Date Term Liens Mortgages Mortgages (1) or Interest
- --------------------- --------- ------------------------- ------ ------------ -------------- ---------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Rowes Wharf
Boston, MA 8.71% 4/1/99 Interest-only -- $63,000 $51,491 --
</TABLE>
(1) The aggregate cost of the Company's mortgage loans for federal income tax
purposes was $51,491 at December 31, 1996.
Reconciliation of Mortgage Loans on real estate for the year ended
December 31:
<TABLE>
<CAPTION>
1996
----------
<S> <C>
Balance at beginning of year $34,778
Additions during period:
Acquisition of mortgage loans 16,713
Deductions during period:
Principal collections --
----------
Balance at end of year $51,491
==========
</TABLE>
F-29
EXHIBIT 10.1
CONTRIBUTION OF PROPERTY
AND SIXTH AMENDMENT TO
AGREEMENT OF LIMITED PARTNERSHIP
This CONTRIBUTION OF PROPERTY AND SIXTH AMENDMENT TO AGREEMENT OF
LIMITED PARTNERSHIP (the "Agreement") is entered into as of December 27, 1996 by
and among Metropolitan Life Insurance Company, a New York corporation (the
"Contributor") Beacon Properties, L.P., a Delaware limited partnership (the
"Operating Partnership"), and Beacon Properties Corporation, a Maryland
corporation and the general partner of the Operating Partnership ("Beacon" or
the "General Partner").
WHEREAS, the Contributor owns the Property, as defined in the Sale and
Contribution Agreement dated as of November 20, 1996 by and among the
Contributor and the Operating Partnership (the "Sale Agreement");
WHEREAS, the Contributor desires to contribute and transfer the
Property to the Operating Partnership (the "Contribution") in exchange for units
of limited partnership interest ("Units") in the Operating Partnership, and the
Operating Partnership desires to accept such Property from the Contributor in
consideration for Units as provided in this Agreement; and
WHEREAS, the General Partner desires to admit the Contributor as a
limited partner of the Operating Partnership as provided in the Amended and
Restated Agreement of Limited Partnership of the Operating Partnership dated May
26, 1994, as amended (the "Partnership Agreement") in consideration for the
assignment and transfer of the Property to the Operating Partnership.
NOW THEREFORE, in consideration of the mutual agreements set forth
herein, the parties hereto agree as follows:
Section 1. Contribution.
The Contributor hereby contributes and transfers all right, title and
interest in the Property to the Operating Partnership, on the terms and subject
to the conditions set forth in the Sale Agreement. In consideration of such
contribution and transfer and in reliance upon the representations and
warranties of the Contributor herein contained, the Operating Partnership hereby
issues to the Contributor 1,171,500 Units. The number of Units to be received by
the Contributor being calculated by dividing $39,000,000,by the average closing
sale price per share on the New York Stock Exchange of common stock, $.01 par
value, of Beacon (the "Common Stock") for the twenty (20) consecutive trading
days ending on the second business day immediately preceding the date of this
Agreement. The Contributor and the Operating Partnership agree that the value of
property contributed by the Contributor to the Operating Partnership as of the
date hereof is $39,000,000. The Contributor agrees to provide the Operating
Partnership such information as to the Contributor's tax attributes for the
contributed property as the Operating Partnership may reasonably request.
1
<PAGE>
Section 2. Representations and Warranties of Contributors.
As a material inducement to the Operating Partnership to enter into
this Agreement and consummate the transactions contemplated hereby, the
Contributor hereby makes to the Operating Partnership the representations and
warranties contained in this Section 2.
2.1 Authority. The Contributor has full right, authority, power and
capacity: (i) to enter into this Agreement and each agreement, document and
instrument to be executed and delivered by or on behalf of it pursuant to this
Agreement; and (ii) to carry out the transactions contemplated hereby and
thereby. This Agreement and each agreement, document and instrument executed and
delivered by or on behalf of the Contributor pursuant to this Agreement
constitutes, or when executed and delivered will constitute, the legal, valid
and binding obligation of the Contributor, each enforceable in accordance with
their respective terms. The execution, delivery and performance of this
Agreement and each such agreement, document and instrument by or on behalf of
the Contributor: (x) does not and will not violate the Contributor's
organizational documents; and (y) does not and will not violate any foreign,
federal, state, local or other laws applicable to the Contributor or require the
Contributor to obtain any approval, consent or waiver of, or make any filing
with, any person or authority (governmental or otherwise) that has not been
obtained or made or which does not remain in effect.
2.2 Investment Representations and Warranties. The Contributor
represents and warrants as follows:
(a) It is an "accredited investor" within the meaning of Rule
501(a) promulgated under the Securities Act of 1933, as amended (the "Securities
Act"). It understands the risks of, and other considerations relating to, the
purchase of the Units. It, by reason of its business and financial experience,
together with the business and financial experience of those persons, if any,
retained by it to represent or advise it with respect to its investment in the
Units, has such knowledge, sophistication and experience in financial and
business matters and in making investment decisions of this type that it is
capable of evaluating the merits and risks of an investment in the Operating
Partnership and of making an informed investment decision, (ii) is capable of
protecting its own interest or has engaged representatives or advisors to assist
it in protecting its interests and (iii) is capable of bearing the economic risk
of such investment.
(b) The Units to be issued to the Contributor will be acquired
by the Contributor for its own account for investment only and not with a view
to, or with any intention of, a distribution or resale thereof, in whole or in
part, or the grant of any participation therein.
(c) The Contributor acknowledges that (i) the Units to be
issued to it have not been registered under the Securities Act or state
securities laws by reason of a specific
2
<PAGE>
exemption or exemptions from registration under the Securities Act and
applicable state securities laws, (ii) the Operating Partnership's reliance on
such exemptions is predicated in part on the accuracy and completeness of the
representations and warranties of the Contributor contained herein, (iii) such
Units, therefore, cannot be resold unless registered under the Securities Act
and applicable state securities laws, or unless an exemption from registration
is available, (iv) there is no public market for such Units, and (v) the
Operating Partnership has no obligation or intention to register such Units for
resale under the Securities Act or any state securities laws or to take any
action that would make available any exemption from the registration
requirements of such laws. The Contributor hereby acknowledges that because of
the restrictions on transfer or assignment of such Units to be issued hereunder
which are set forth in this Agreement and in the Partnership Agreement, such
person may have to bear the economic risk of the investment commitment evidenced
by this Agreement and any Units purchased hereby for an indefinite period of
time, although (x) under the terms of the Partnership Agreement, Units may be
redeemed at the request of the holder thereof at any time for cash or (at the
option of Beacon) for Common Stock of Beacon and (y) the holder of any such
Common Stock issued upon a presentation of Units for redemption will be afforded
certain rights to have such Common Stock registered for resale under the
Securities Act or applicable state securities laws under a registration rights
agreement entered into between the Contributor and Beacon of even date herewith.
Section 3. Representations, Warranties and Covenants of the Operating
Partnership.
3.1 Authority. The Operating Partnership has full right, authority,
power and capacity: (i) to enter into this Agreement and each agreement,
document and instrument to be executed and delivered by or on behalf of the
Operating Partnership pursuant to this Agreement; and (ii) to carry out the
transactions contemplated hereby and thereby. This Agreement and each agreement,
document and instrument executed and delivered by or on behalf of the Operating
Partnership pursuant to this Agreement constitutes, or when executed and
delivered will constitute, the legal, valid and binding obligation of the
Operating Partnership, each enforceable in accordance with their respective
terms. The execution, delivery and performance of this Agreement and each such
agreement, document and instrument by or on behalf of the Operating Partnership:
(x) does not and will not violate the Operating Partnership's organizational
documents; and (y) does not and will not violate any foreign, federal, state,
local or other laws applicable to the Operating Partnership or require the
Operating Partnership to obtain any approval, consent or waiver of, or make any
filing with, any person or authority (governmental or otherwise) that has not
been obtained or made or which does not remain in effect.
3.2 Issuance. The Units to be issued in exchange for the Property upon
consummation of the Contribution have been duly authorized and validly issued,
free and clear of all mortgages, pledges, liens, security interests,
encumbrances and restrictions of every nature, except as provided in this
Agreement, the Partnership Agreement and that certain registration rights
agreement among the Contributor and Beacon. The Units to be issued
3
<PAGE>
hereunder will be of the same class as all other units of limited partnership
outstanding on the date of this Agreement. The shares of Common Stock that may
be issued upon conversion of the Units under the terms of the Partnership
Agreement will have been duly authorized and when issued in accordance with the
terms of the Partnership Agreement, will be validly issued and fully paid and
non assessable.
3.3 Partnership Agreement. Attached hereto as Exhibit A is a true,
accurate and complete copy of the Partnership Agreement, as amended. As of the
date hereof, the most recent amendment to the Partnership Agreement was the
Fifth Amendment to Agreement of Limited Partnership dated as of October 21,
1996.
3.4 REIT Qualification. Commencing with Beacon's first taxable year
ended December 31, 1994, Beacon has been organized in conformity with the
requirements for qualification as a real estate investment trust (a "REIT")
under the Internal Revenue Code of 1986, as amended (the "Code") and Beacon's
method of operation is intended to enable it to continue to meet the
requirements for taxation as a REIT under the Code.
3.5 Tax Returns. The Operating Partnership's federal income tax returns
for the calendar years 1994 and 1995, including Schedules K-1, have been
provided to the Contributor and such copies are true, correct and complete in
all material respects.
3.6 No Material Adverse Change. To the best of the Operating
Partnership's knowledge, since September 30, 1996, there has not been any
change(s) in the business or operations of Beacon or the Operating Partnership
which change(s) would have a material adverse effect on Beacon and its
subsidiaries taken as a whole.
3.7 SEC Filings. Beacon has filed all forms, reports and documents
required to be filed with the Securities and Exchange Commission (the "SEC")
since December 31, 1995, including (i) its Annual Report on Form 10-K for the
fiscal year ended December 31, 1995, (ii) its Quarterly Reports on Form 10-Q for
the periods ended March 31, June 30 and September 30, 1996, (iii) all other
reports or registration statements filed by Beacon with the SEC since December
31, 1995 and (iv) all amendments and supplements to all such reports and
registration statements filed by Beacon with the SEC. All such required forms,
reports and documents (including those enumerated in clauses (i) through (iv) of
the preceding sentence) are referred to herein as the "Beacon SEC Reports." As
of their respective dates, the Beacon SEC Reports did not at the time they were
filed (or if amended or superseded by a filing prior to the date of this
Agreement, then on the date of such filing) contain any untrue statement of a
material fact or omit to state a material fact required to be stated therein or
necessary in order to make the statements therein, in the light of the
circumstances under which they were made, not misleading.
4
<PAGE>
3.8 Partnership Status. Commencing with the Operating Partnership's
first fiscal year ended December 31, 1994, the Operating Partnership has been
organized in conformity with the requirements for qualification as a partnership
under subchapter K of the Code.
As used in this Section 3, the term "Operating Partnership's knowledge"
or words to similar effect shall mean the current actual, subjective knowledge
of Robert J. Perriello.
Section 4. Restrictions on Transfer.
The Contributor agrees that it will not, directly or indirectly, sell,
offer or contract to sell, grant any option to purchase, pledge, redeem,
convert, distribute or otherwise dispose of ("Transfer") one-half of the Units
received pursuant to the Sale Agreement for a period of six (6) months from the
date of this Agreement. Additionally, the Contributor shall not Transfer the
remaining one-half of the Units received pursuant to the Sale Agreement for a
period of one (1) year from the date of this Agreement. Any transaction prior to
such date shall be null and void and shall not be binding upon or recognized by
the Operating Partnership or Beacon.
Section 5. Admission of Limited Partners.
(a) Pursuant to the terms of this Agreement, the Contributor has made a
Capital Contributions (as defined in the Partnership Agreement) to the Operating
Partnership valued at $37,000,000. In consideration of this Capital Contribution
and pursuant to Section 12.2.A of the Partnership Agreement, the Contributor is
hereby admitted as an Additional Limited Partner (as defined in the Partnership
Agreement) of the Operating Partnership and hereby agrees to become a party to
and be bound by all of the terms and conditions of the Partnership Agreement
including, without limitation, the power of attorney granted in Section 2.4
thereof.
(b) Pursuant to Section 12.2.B of the Partnership Agreement, the
General Partner hereby consents to the admission of the Contributor as an
Additional Limited Partner of the Operating Partnership. Pursuant to Section
4.2.A of the Partnership Agreement, the General Partner hereby issues 1,171,500
Units to the Contributor.
(c) The admission of the Contributor as an Additional Limited Partner
of the Operating Partnership shall become effective as of the date of this
Agreement, which shall also be the date upon which the name of the Contributor
is recorded on the books and records of the Operating Partnership.
Section 6. Amendment to Partnership Agreement.
Pursuant to Section 14.1.B of the Partnership Agreement, the General
Partner, as general partner of the Operating Partnership and as attorney-in-fact
for its Limited Partners, hereby amends the Partnership Agreement by deleting
Exhibit A thereto in its entirety and replacing it with Exhibit A attached
hereto.
5
<PAGE>
Section 7. Miscellaneous.
7.1 Fees and Expenses. Except as set forth elsewhere in this Agreement,
each of the parties will bear its own expenses in connection with the
negotiation and the consummation of the transactions contemplated by this
Agreement.
7.2 Governing Law. This Agreement shall be construed under and governed
by the internal laws of the State of Delaware without regard to its conflict of
laws provisions.
7.3 Execution in Counterparts. For the convenience of the parties and
to facilitate execution, this Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which shall
constitute one and the same document.
7.4 Amendments. This Agreement may not be amended or modified, nor may
compliance with any condition or covenant set forth herein be waived, except by
a writing duly and validly executed by each party hereto, or in the case of a
waiver, the party waiving compliance.
7.5 Survivability of Representations, Warranties and Agreements. All
representations, warranties and agreements in this Agreement shall survive the
consummation of this Agreement for a period of twelve (12) months.
[Remainder of Page Intentionally Left Blank.]
6
<PAGE>
IN WITNESS WHEREOF the parties hereto have caused this Agreement to be
executed as of the date set forth above by their duly authorized
representatives.
OPERATING PARTNERSHIP:
BEACON PROPERTIES, L.P., a Delaware
limited partnership
By: BEACON PROPERTIES
CORPORATION, a Maryland
corporation
Its: General Partner
/s/ Charles H. Cremens
-------------------------------------------
Name: Charles H. Cremens
Title: Senior Vice President
GENERAL PARTNER:
BEACON PROPERTIES CORPORATION,
a Maryland corporation
/s/ Charles H. Cremens
-------------------------------------------
Name: Charles H. Cremens
Title: Senior Vice President
LIMITED PARTNERS:
BEACON PROPERTIES CORPORATION,
as attorney-in-fact for the Limited Partners
/s/ Charles H. Cremens
-------------------------------------------
Name: Charles H. Cremens
Title: Senior Vice President
7
<PAGE>
CONTRIBUTOR:
METROPOLITAN LIFE INSURANCE
COMPANY, a New York corporation
/s/ Jeffrey S. Moe
-------------------------------------------
Name: Jeffrey S. Moe
Title: Assistant Vice President
8
<PAGE>
Beacon Properties, L.P.
Fifth Amendment to
Agreement of Limited Partnership
This Fifth Amendment is entered into as of October 21, 1996 by and
between Beacon Properties Corporation, a Maryland corporation, as general
partner (the "General Partner"), and the limited partners (the "Limited
Partners") of Beacon Properties, L.P. (the "Partnership") for the purpose of
amending the Amended and Restated Agreement of Limited Partnership of the
Partnership, dated as of May 26, 1994, as amended (the "Partnership Agreement").
All capitalized terms used herein without definition shall have the meanings
ascribed to them in the Partnership Agreement.
WHEREAS, in accordance with Section 14.1.B of the Partnership
Agreement, the General Partner desires to amend certain provisions of the
Partnership Agreement.
NOW THEREFORE, in consideration of the mutual covenants set forth
herein, the parties agree as follows.
1. Section 12.2.C of the Partnership Agreement is hereby amended by
deleting the last sentence thereof and inserting the following in lieu thereof:
"All distributions of Available Cash with respect to which the Partnership
Record Date is before the date of such admission shall be made solely to
Partners and Assignees, other than the Additional Limited Partner. All
distributions of Available Cash with respect to which the Partnership Record
Date is after the date of such admission shall be made to all of the Partners
and Assignees, including such Additional Limited Partner, provided, however,
that such Additional Limited Partner will receive only its pro rata share of
such distribution for the portion of the period to which the distribution
relates commencing on the date of such Additional Limited Partner's admission
through the end of the period to which the distribution relates. All
distributions of Available Cash thereafter shall be made to all of the Partners
and Assignees, including such Additional Limited Partner."
2. Section 5.1 of the Partnership Agreement is hereby amended by adding
the words "Consistent with the provisions of Section 12.2.C hereof," at the
beginning of the first sentence.
3. The Partnership Agreement and the Fifth Amendment shall be read
together and shall have the same effect as if the provisions of the Partnership
Agreement and this Fifth Amendment were contained in one agreement. Any
provision of the Partnership Agreement not amended by this Fifth Amendment shall
remain in full force and effect as provided in the Partnership Agreement
immediately prior to the date hereof.
1
<PAGE>
IN WITNESS WHEREOF, the undersigned have executed this Fifth Amendment
as of the date first written above.
GENERAL PARTNER:
BEACON PROPERTIES CORPORATION
/s/ Lionel P. Fortin
-----------------------------------------
By: Lionel P. Fortin
Title: Senior Vice President and
Chief Operating Officer
LIMITED PARTNERS:
BEACON PROPERTIES CORPORATION,
As Attorney-in-Fact for the Limited Partners
/s/ Lionel P. Fortin
-----------------------------------------
By: Lionel P. Fortin
Title: Senior Vice President and
Chief Operating Officer
2
<PAGE>
Beacon Properties, L.P.
Fourth Amendment to
Agreement of Limited Partnership
This Fourth Amendment is made as of September 5, 1996 by Beacon
Properties Corporation, a Maryland corporation, as general partner (the "General
Partner") of Beacon Properties, L.P., a Delaware limited partnership (the
"Partnership") and the Persons whose names are set forth on Exhibit A attached
hereto for the purpose of amending the Amended and Restated Agreement of Limited
Partnership of the Partnership dated May 26, 1994, as amended (the "Partnership
Agreement"). All capitalized terms used herein and not defined shall have the
respective meanings ascribed to them in the Partnership Agreement.
WHEREAS, the Persons listed on Schedule A attached hereto (each, a
"Contributor", and, collectively, the "Contributors"), have made the Capital
Contributions to the Partnership enumerated on such Schedule A in connection
with that Option Agreement by and among Beacon Properties, L.P. and such
Contributors dated March 18, 1996, as amended (the "Option Agreement").
WHEREAS, the General Partner desires to admit each Contributor to the
Partnership as an Additional Limited Partner.
NOW THEREFORE, in consideration of the mutual covenants contained
herein, and other good and valuable consideration, the receipt and sufficiency
of which is hereby acknowledged, the parties hereto agree as follows:
Section 1. Admission of Limited Partners.
(a) Each of the Contributors has made the Capital Contribution set
forth next to such Contributor's name on Schedule A. In consideration of these
Capital Contributions and pursuant to Section 12.2.A of the Partnership
Agreement, each Contributor is hereby admitted as an Additional Limited Partner
of the Partnership.
(b) Pursuant to Section 12.2.B of the Partnership Agreement, the
General Partner hereby consents to the admission of each Contributor as an
Additional Limited Partner of the Partnership. Pursuant to Section 4.2.A of the
Partnership Agreement, the General Partner hereby issues to each Contributor the
number of Units set forth next to such Contributor's name on Schedule A.
(c) The admission of each Contributor as an Additional Limited Partner
of the Partnership shall become effective as of the date of this Agreement,
which shall also be the date upon which the name of each Contributor is recorded
on the books and records of the Partnership.
(d) The General Partner may use any convention permitted by law to make
the allocations contemplated in Section 12.2(C) of the Partnership Agreement in
respect of the
<PAGE>
Capital Contributions made pursuant to the Option Agreement, except that capital
gains and losses shall be allocated to the Partners and Assignees in accordance
with their interests on the date of the transaction giving rise to the capital
gain or loss. The General Partner shall use the traditional method (specified in
ss.1.704-3(b) of the Regulations) to allocate book-tax differences with respect
to the Capital Contributions made pursuant to the Option Agreement.
Section 2. Amendment to Partnership Agreement.
Pursuant to Section 14.1.B of the Partnership Agreement, the General
Partner, as general partner of the Partnership and as attorney-in-fact for its
Limited Partners, hereby amends the Partnership Agreement by deleting Exhibit A
thereto in its entirety and replacing it with the Exhibit A attached hereto.
Section 3. Counterparts.
This Amendment may be executed in any number of counterparts and by the
parties hereto in separate counterparts, each of which when so executed shall be
deemed to be an original and all of which taken together shall constitute one
and the same agreement.
[Remainder of Page Intentionally Left Blank]
2
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Amendment as
of the date first written above.
GENERAL PARTNER:
BEACON PROPERTIES CORPORATION
/s/ Lionel P. Fortin
----------------------------------------
Name: Lionel P. Fortin
Title: Senior Vice President and
Chief Operating Officer
LIMITED PARTNERS:
BEACON PROPERTIES CORPORATION,
as attorney-in-fact for the Limited Partners
/s/ Lionel P. Fortin
----------------------------------------
Name: Lionel P. Fortin
Title: Senior Vice President and
Chief Operating Officer
3
<PAGE>
Limited Partner Signature Page
The undersigned, desiring to become one of the Limited Partners of
Beacon Properties, L.P. (the "Partnership"), hereby becomes a party to the
Amended and Restated Agreement of Limited Partnership of the Partnership, as
amended (the "Partnership Agreement"). The undersigned agrees to be bound by all
of the terms and conditions of the Partnership Agreement, including, without
limitation, the power of attorney provisions, and further agrees that this
signature page may be attached to any counterpart of the Partnership Agreement.
Signature of Limited Partner:
GREENSBORO ASSOCIATES
LIMITED PARTNERSHIP,
a Virginia limited partnership
/s/ David W. Evans
----------------------------------------
By: David W. Evans
Title: General Partner
/s/ A.J. Clark
----------------------------------------
By: A.J. Clark
Title: General Partner
By: The Sotweed Corporation,
a Delaware corporation
Title: General Partner
/s/ Robert G. Goelet
----------------------------------------
By: Robert G. Goelet
Title: President
/s/ Jonathan M. Rather
----------------------------------------
By: Jonathan M. Rather
Title: Treasurer
Address of Limited Partner:
Goelet Corporation
22 East 67th Street
New York, NY 10021
Attn: Jonathan M. Rather
4
<PAGE>
Limited Partner Signature Page
The undersigned, desiring to become one of the Limited Partners of
Beacon Properties, L.P. (the "Partnership"), hereby becomes a party to the
Amended and Restated Agreement of Limited Partnership of the Partnership, as
amended (the "Partnership Agreement"). The undersigned agrees to be bound by all
of the terms and conditions of the Partnership Agreement, including, without
limitation, the power of attorney provisions, and further agrees that this
signature page may be attached to any counterpart of the Partnership Agreement.
Signature of Limited Partner:
JOHN MARSHALL ASSOCIATES
LIMITED PARTNERSHIP,
a Virginia limited partnership
/s/ David W. Evans
----------------------------------------
By: David W. Evans
Title: General Partner
/s/ A.J. Clark
----------------------------------------
By: A.J. Clark
Title: General Partner
By: The Sotweed Corporation,
a Delaware corporation
Title: General Partner
/s/ Robert G. Goelet
----------------------------------------
By: Robert G. Goelet
Title: President
/s/ Jonathan M. Rather
----------------------------------------
By: Jonathan M. Rather
Title: Treasurer
Address of Limited Partner:
c/o Goelet Corporation
22 East 67th Street
New York, NY 10021
Attn: Jonathan M. Rather
5
<PAGE>
Limited Partner Signature Page
The undersigned, desiring to become one of the Limited Partners of
Beacon Properties, L.P. (the "Partnership"), hereby becomes a party to the
Amended and Restated Agreement of Limited Partnership of the Partnership, as
amended (the "Partnership Agreement"). The undersigned agrees to be bound by all
of the terms and conditions of the Partnership Agreement, including, without
limitation, the power of attorney provisions, and further agrees that this
signature page may be attached to any counterpart of the Partnership Agreement.
Signature of Limited Partner:
PIMPERNELL ESTATES LIMITED
PARTNERSHIP, a Virginia
limited partnership
By: Pimpernell Corporation,
a Delaware corporation
Title: General Partner
/s/ Robert G. Goelet
----------------------------------------
By: Robert G. Goelet
Title: President
/s/ Jonathan M. Rather
----------------------------------------
By: Jonathan M. Rather
Title: Treasurer
Address of Limited Partner:
c/o Goelet Corporation
22 East 67th Street
New York, NY 10021
Attn: Jonathan M. Rather
6
<PAGE>
Limited Partner Signature Page
The undersigned, desiring to become one of the Limited Partners of
Beacon Properties, L.P. (the "Partnership"), hereby becomes a party to the
Amended and Restated Agreement of Limited Partnership of the Partnership, as
amended (the "Partnership Agreement"). The undersigned agrees to be bound by all
of the terms and conditions of the Partnership Agreement, including, without
limitation, the power of attorney provisions, and further agrees that this
signature page may be attached to any counterpart of the Partnership Agreement.
Signature of Limited Partner:
WOODLAND-NORTHRIDGE I
LIMITED PARTNERSHIP,
a Virginia limited partnership
/s/ David W. Evans
----------------------------------------
By: David W. Evans
Title: General Partner
/s/ A.J. Clark
----------------------------------------
By: A.J. Clark
Title: General Partner
By: White Swan Oil Corporation,
a Delaware corporation
Title: General Partner
/s/ Jonathan M. Rather
----------------------------------------
By: Jonathan M. Rather
Title: Vice President
By: Green Highlander Corporation,
a Delaware corporation
/s/ Jonathan M. Rather
----------------------------------------
By: Jonathan M. Rather
Title: Vice President
7
<PAGE>
By: Windward Oil and Gas Corporation,
a Texas corporation
Title: General Partner
/s/ Gilbert Kerlin
----------------------------------------
By: Gilbert Kerlin
Title: President
By: Smoking Tree Corporation,
a Delaware corporation
Title: General Partner
/s/ Robert G. Goelet
----------------------------------------
By: Robert G. Goelet
Title: President
/s/ Jonathan M. Rather
----------------------------------------
By: Jonathan M. Rather
Title: Treasurer
Address of Limited Partner:
c/o Goelet Corporation
22 East 67th Street
New York, NY 10021
Attn: Jonathan M. Rather
8
<PAGE>
Fourth Amendment to Partnership Agreement
Schedule A
<TABLE>
<CAPTION>
Name and Address Value of Number of Units
of Contributor Capital Contribution Issued to Contributor
- ---------------- -------------------- ---------------------
<S> <C> <C>
Greensboro Associates Limited Partnership, $4,642,519.00 180,292
a Virginia limited partnership
c/o Goelet Realty Company
22 East 67th Street
New York, NY 10021
Attn: Jonathan M. Lather
John Marshall Associates Limited Partnership, $9,529,225.25 370,067
a Virginia limited partnership
c/o Goelet Realty Company
22 East 67th Street
New York, NY 10021
Attn: Jonathan M. Lather
Pimpernell Estates Limited Partnership, $1,820,267.50 70,690
a Virginia limited partnership
c/o Goelet Realty Company
22 East 67th Street
New York, NY 10021
Attn: Jonathan M. Lather
Woodland-Northridge I Limited Partnership, $4,478,852.00 173,936
a Virginia limited partnership
c/o Goelet Realty Company
22 East 67th Street
New York, NY 10021
Attn: Jonathan M. Lather
</TABLE>
9
<PAGE>
BEACON PROPERTIES, L.P.
THIRD AMENDMENT TO
AGREEMENT OF LIMITED PARTNERSHIP
This Third Amendment is entered into as of February 15, 1996 by and
among Beacon Properties Corporation (the "Company") and the Persons whose names
are set forth on Exhibit A attached hereto. All capitalized terms used herein
shall have the meanings given to them in the Amended and Restated Agreement of
Limited Partnership of Beacon Properties, L.P. dated May 26, 1994 (the
"Partnership Agreement").
WHEREAS, Taylor & Mathis Enterprises, L.P. ("T&M Enterprises"), Taylor
& Mathis, Ltd. ("T&M Ltd.") and Taylor & Mathis/South Terraces, Ltd. ("T&M/South
Terrace"), each a Georgia limited partnership (collectively, the "Contributors")
have made an aggregate Capital Contribution to Beacon Properties, L.P. (the
"Partnership") having a value of $13,758,000 (the "Contribution") pursuant to a
Contribution of Property and Admission of Limited Partners of even date
herewith;
WHEREAS, the Contributors and their constituent partners have formed
TMPC, L.P., a Georgia limited partnership, to receive all units of limited
partner interest in the Partnership issued as a result of the Contribution; and
WHEREAS, the Company, as General Partner of the Partnership, admitted
TMPC, L.P. as an Additional Limited Partner to the Partnership pursuant to
Section 12.2 of the Partnership Agreement.
NOW THEREFORE, in consideration of the mutual covenants herein
contained, and other good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, the parties hereto agree as
follows:
Section 1. Amendment to Partnership Agreement. Pursuant to Section
14.1.B of the Partnership Agreement, the Company, as General Partner of the
Partnership, hereby amends the Partnership Agreement by deleting Exhibit A in
its entirety and replacing it with the Exhibit A attached hereto.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date first written above.
GENERAL PARTNER:
BEACON PROPERTIES CORPORATION
/s/ Lionel P. Fortin
----------------------------------------
Name: Lionel P. Fortin
Title: Chief Operating Officer
LIMITED PARTNERS:
BEACON PROPERTIES
CORPORATION,
as attorney-in-fact for the
Limited Partners
/s/ Lionel P. Fortin
----------------------------------------
Name: Lionel P. Fortin
Title: Chief Operating Officer
<PAGE>
BEACON PROPERTIES, L.P.
SECOND AMENDMENT
TO
AGREEMENT OF LIMITED PARTNERSHIP
This Second Amendment is entered into as of March 27, 1995 by and
between Beacon Properties Corporation, a Maryland corporation, as general
partner (the "General Partner"), and the limited partners (the "Limited
Partners") of Beacon Properties, L.P. (the "Partnership") for the purpose of
amending the Amended and Restated Agreement of Limited Partnership of the
Partnership, dated as of May 26, 1994 and as amended October 27, 1994 (as
amended, the "Partnership Agreement"). All capitalized terms used herein and not
defined shall have the respective meanings ascribed to them in the Partnership
Agreement.
WHEREAS, in accordance with Section 14.1.A of the Partnership
Agreement, the Limited Partners and the General Partner desire to amend certain
provisions of the Partnership Agreement.
NOW, THEREFORE, in consideration of the mutual covenants set forth
herein, the parties agree as follows:
1. Section 12.2.C of the Partnership Agreement is hereby amended by
deleting the words "the interim closing of the books method" at the end of the
first sentence thereof and inserting the words "any convention permitted by law
and selected by the General Partner" in lieu thereof.
2. The Partnership Agreement and this Second Amendment shall be read
together and shall have the same effect as if the provisions of the Partnership
Agreement and this Second Amendment were contained in one agreement. Any
provision of the Partnership Agreement not amended by this Second Amendment
shall remain in full force and effect as provided in the Partnership Agreement
immediately prior to the date hereof.
3. This Second Amendment may be executed in any number of counterparts
with the same effect as if all signing parties had signed the same document. All
counterparts shall be construed together and shall constitute the same
instrument.
1
<PAGE>
IN WITNESS WHEREOF, the undersigned have executed this Second Amendment
as of the date first above written.
GENERAL PARTNER:
BEACON PROPERTIES CORPORATION
By: /s/ Lionel P. Fortin
----------------------------------------
Title: Chief Financial Officer and
Chief Operating Officer
LIMITED PARTNERS:
See Attached Signature Pages
BEACON PROPERTIES, L.P.
2
<PAGE>
SECOND AMENDMENT TO
AGREEMENT OF LIMITED PARTNERSHIP
LIMITED PARTNER SIGNATURE PAGE
The undersigned hereby consents to the Second Amendment to the Amended
and Restated Agreement of Limited Partnership of Beacon Properties, L.P. The
undersigned agrees that this signature page may be attached to any counterpart
of the Second Amendment.
Signature line for Limited Partner: /s/ Norman W. Barron
------------------------------------
Name: Mr. Norman W. Barron
Dated: March 1, 1995
Signature line for Limited Partner: /s/ Richard L. Friedman
------------------------------------
Name: Mr. Richard L. Friedman
Dated: January 30, 1995
Signature line for Limited Partner: /s/ Steve Levanti
------------------------------------
Name: Mr. Steve Levanti
Federal 175 Realty Corp.
Dated: March 3, 1995
Signature line for Limited Partner: /s/ Steve Levanti
------------------------------------
Name: Mr. Steve Levanti
Wellesley Office Realty Corp.
Dated: March 3, 1995
Signature line for Limited Partner: /s/ Harvey I. Steinberg
------------------------------------
Name: Mr. Harvey I. Steinberg
Dated: March 27, 1995
3
<PAGE>
AMENDMENT TO
AGREEMENT OF LIMITED PARTNERSHIP
OF BEACON PROPERTIES,L.P.
This Agreement is made as of October 27, 1994 by and among Beacon
Properties Corporation (the "Company") and the Persons whose names are set forth
on Exhibit A attached hereto. All capitalized terms used herein shall have the
meanings given to them in the Amended and Restated Agreement of Limited
Partnership of Beacon Properties, L.P. dated May 26, 1994 (the "Partnership
Agreement").
WHEREAS, Wellesley Office Realty Corp., a Delaware corporation
("Wellesley") has made a Capital Contribution to Beacon Properties, L.P. (the
"Partnership") having a value of $2,600,000 and Federal 175 Realty Corp., a
Delaware Corporation ("Federal 175") has made a Capital Contribution to the
Partnership having a value of $6,600,000 pursuant to an Assignment of
Partnership Interests and Admission of Limited Partners of even date herewith;
and
WHEREAS, the Company, as General Partner of the Partnership, admitted
Wellesley and Federal 175 as Additional Limited Partners to the Partnership
pursuant to Section 12.2 of the Partnership Agreement.
NOW THEREFORE, in consideration of the mutual covenants herein
contained, and other good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, the parties hereto agree as
follows:
Section 1. Amendment to Partnership Agreement. Pursuant to Section
14.1.B(2) of the Partnership Agreement, the Company, as General Partner of the
Partnership, hereby amends the Partnership Agreement by deleting Exhibit A in
its entirety and replacing it with the Exhibit A attached hereto.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date first written above.
GENERAL PARTNER:
BEACON PROPERTIES CORPORATION
/s/ Robert J. Perriello
---------------------------------------
Name: Robert J. Perriello
Title: Senior Vice President
LIMITED PARTNERS:
BEACON PROPERTIES
CORPORATION,
as attorney-in-fact for the
Limited Partners
/s/ Robert J. Perriello
---------------------------------------
Name: Robert J. Perriello
Title: Senior Vice President
<PAGE>
AMENDED AND RESTATED
AGREEMENT OF LIMITED PARTNERSHIP
OF
BEACON PROPERTIES, L.P.
May 26, 1994
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
<S> <C> <C>
ARTICLE 1 DEFINED TERMS........................................................................................ 1
ARTICLE 2 ORGANIZATIONAL MATTERS............................................................................... 11
Section 2.1 Formation............................................................................ 11
Section 2.2 Name................................................................................. 12
Section 2.3 Registered Office and Agent; Principal Office........................................ 12
Section 2.4 Power of Attorney.................................................................... 12
Section 2.5 Term................................................................................. 13
ARTICLE 3 PURPOSE.............................................................................................. 14
Section 3.1 Purpose and Business................................................................. 14
Section 3.2 Powers............................................................................... 14
ARTICLE 4 CAPITAL CONTRIBUTIONS................................................................................ 14
Section 4.1 Capital Contributions of the Partners................................................ 15
Section 4.2 Issuances of Additional Partnership Interests........................................ 15
Section 4.3 Contribution of Proceeds of Issuance of REIT Shares.................................. 16
Section 4.4 Preemptive Rights.................................................................... 17
ARTICLE 5 DISTRIBUTIONS........................................................................................ 17
Section 5.1 Requirement and Characterization of Distributions.................................... 17
Section 5.2 Amounts Withheld..................................................................... 17
Section 5.3 Distributions Upon Liquidation....................................................... 18
ARTICLE 6 ALLOCATIONS.......................................................................................... 18
Section 6.1 Allocations For Capital Account Purposes............................................. 18
ARTICLE 7 MANAGEMENT AND OPERATIONS OF BUSINESS................................................................ 19
Section 7.1 Management........................................................................... 19
Section 7.2 Certificate of Limited Partnership................................................... 22
Section 7.3 Restrictions on General Partner Authority............................................ 23
Section 7.4 Reimbursement of the General Partner and the Company................................. 23
Section 7.5 Outside Activities of the General Partner............................................ 24
Section 7.6 Contracts with Affiliates............................................................ 24
Section 7.7 Indemnification...................................................................... 25
Section 7.8 Liability of the General Partner..................................................... 27
Section 7.9 Other Matters Concerning the General Partner......................................... 27
Section 7.10 Title to Partnership Assets.......................................................... 28
(i)
<PAGE>
Page
Section 7.11 Reliance by Third Parties............................................................ 28
ARTICLE 8 RIGHTS AND OBLIGATIONS OF LIMITED PARTNERS........................................................... 29
Section 8.1 Limitation of Liability.............................................................. 29
Section 8.2 Management of Business............................................................... 29
Section 8.3 Outside Activities of Limited Partners............................................... 29
Section 8.4 Return of Capital.................................................................... 30
Section 8.5 Rights of Limited Partners Relating to the Partnership............................... 30
Section 8.6 Redemption Right..................................................................... 31
ARTICLE 9 BOOKS, RECORDS, ACCOUNTING AND REPORTS............................................................... 32
Section 9.1 Records and Accounting............................................................... 32
Section 9.2 Fiscal Year.......................................................................... 33
Section 9.3 Reports.............................................................................. 33
ARTICLE 10 TAX MATTERS......................................................................................... 33
Section 10.1 Preparation of Tax Returns........................................................... 33
Section 10.2 Tax Elections........................................................................ 33
Section 10.3 Tax Matters Partner.................................................................. 34
Section 10.4 Organizational Expenses.............................................................. 35
Section 10.5 Withholding.......................................................................... 35
ARTICLE 11 TRANSFERS AND WITHDRAWALS........................................................................... 36
Section 11.1 Transfer............................................................................. 36
Section 11.2 Transfer of the Company's General Partner Interest and Limited
Partner Interest..................................................................... 37
Section 11.3 Limited Partners' Rights to Transfer................................................. 37
Section 11.4 Substituted Limited Partners......................................................... 38
Section 11.5 Assignees............................................................................ 39
Section 11.6 General Provisions................................................................... 39
ARTICLE 12 ADMISSION OF PARTNERS............................................................................... 40
Section 12.1 Admission of Successor General Partner............................................... 40
Section 12.2 Admission of Additional Limited Partners............................................. 40
Section 12.3 Amendment of Agreement and Certificate of Limited
Partnership.......................................................................... 41
ARTICLE 13 DISSOLUTION, LIQUIDATION AND TERMINATION............................................................ 41
Section 13.1 Dissolution.......................................................................... 41
Section 13.2 Winding Up........................................................................... 42
Section 13.3 Compliance with Timing Requirements of Regulations................................... 44
(ii)
<PAGE>
Page
Section 13.4 Deemed Distribution and Recontribution............................................... 44
Section 13.5 Rights of Limited Partners........................................................... 44
Section 13.6 Notice of Dissolution................................................................ 45
Section 13.7 Termination of Partnership and Cancellation of Certificate of
Limited Partnership.................................................................. 45
Section 13.8 Reasonable Time for Winding-Up....................................................... 45
Section 13.9 Waiver of Partition.................................................................. 45
ARTICLE 14 AMENDMENT OF PARTNERSHIP AGREEMENT; MEETINGS........................................................ 45
Section 14.1 Amendments........................................................................... 45
Section 14.2 Meetings of the Partners............................................................. 47
ARTICLE 15 GENERAL PROVISIONS.................................................................................. 48
Section 15.1 Addresses and Notice................................................................. 48
Section 15.2 Titles and Captions.................................................................. 48
Section 15.3 Pronouns and Plurals................................................................. 48
Section 15.4 Further Action....................................................................... 48
Section 15.5 Binding Effect....................................................................... 48
Section 15.6 Creditors............................................................................ 49
Section 15.7 Waiver............................................................................... 49
Section 15.8 Counterparts......................................................................... 49
Section 15.9 Applicable Law....................................................................... 49
Section 15.10 Invalidity of Provisions............................................................. 49
Section 15.11 Entire Agreement..................................................................... 49
</TABLE>
(iii)
<PAGE>
EXHIBITS
Exhibit A - Partners Contributions and Partnership Interests
Exhibit B - Capital Account Maintenance
Exhibit C - Special Allocation Rules
Exhibit D - Notice of Redemption
(iv)
<PAGE>
AMENDED AND RESTATED
AGREEMENT OF LIMITED PARTNERSHIP
OF
BEACON PROPERTIES, L.P.
THIS AMENDED AND RESTATED AGREEMENT OF LIMITED PARTNERSHIP OF BEACON
PROPERTIES, L.P. (this "Agreement"), dated as of May 26, 1994, is entered into
by and among Beacon Properties Corporation (the "Company") and the Persons (as
defined below) whose names are set forth on Exhibit A as attached hereto (as it
may be amended from time to time).
WHEREAS, the Company and the Persons whose names are set forth on
Exhibit A, as attached hereto, desire to amend and restate in its entirety that
certain Agreement of Limited Partnership of Beacon Properties, L.P. (the
"Partnership") dated as of April 26, 1994; and
WHEREAS, the Company and the Persons whose names are set forth on
Exhibit A, as attached hereto, will make certain capital contributions to the
Partnership;
NOW THEREFORE, in consideration of the mutual covenants herein
contained, and other valuable consideration, the receipt and sufficiency of
which is hereby acknowledged, the parties hereto, and do hereby agree as
follows:
ARTICLE 1
DEFINED TERMS
The following definitions shall be for all purposes, unless otherwise
clearly indicated to the contrary, applied to the terms used in this Agreement.
"Act" means the Delaware Revised Uniform Limited Partnership Act, as it
may be amended from time to time, and any successor to such statute.
"Additional Limited Partner" means a Person admitted to the Partnership
as a Limited Partner pursuant to Section 4.2 hereof and who is shown as such on
the books and records of the Partnership.
"Adjusted Capital Account" means the Capital Account maintained for
each Partner as of the end of each Partnership taxable year (i) increased by any
amounts which such Partner is obligated to restore pursuant to any provision of
this Agreement or is deemed to be obligated to restore pursuant to the
penultimate sentences of Regulations Sections 1.704-2(g)(1) and 1.704-2(i)(5);
and (ii) decreased by the items described in Regulations Sections
1.704-1(b)(2)(ii)(d)(4), 1.704-1(b)(2)(ii)(d)(5), and 1.704-1(b)(2)(ii)(d)(6).
The foregoing definition of Adjusted Capital Account is intended to comply with
the provisions of Regulations Section 1.704-1(b)(2)(ii)(d) and shall be
interpreted consistently therewith.
<PAGE>
"Adjusted Capital Account Deficit" means, with respect to any Partner,
the deficit balance, if any, in such Partner's Adjusted Capital Account as of
the end of the relevant Partnership taxable year.
"Adjusted Property" means any property, the Carrying Value of which has
been adjusted pursuant to Exhibit B hereof. Once an Adjusted Property is deemed
distributed by, and recontributed to, the Partnership for federal income tax
purposes upon a termination thereof pursuant to Section 708 of the Code, such
property shall thereafter constitute a Contributed Property until the Carrying
Value of such property is further adjusted pursuant to Exhibit B hereof.
"Affiliate" means, with respect to any Person, (i) any Person directly
or indirectly controlling, controlled by or under common control with such
Person; (ii) any Person owning or controlling ten percent (10%) or more of the
outstanding voting interests of such Person; (iii) any Person of which such
Person owns or controls ten percent (10%) or more of the voting interests; or
(iv) any officer, director, general partner or trustee of such Person or of any
Person referred to in clauses (i), (ii), and (iii) above.
"Agreed Value" means (i) in the case of any Contributed Property as of
the time of its contribution to the Partnership, the 704(c) Value of such
property, reduced by any liabilities either assumed by the Partnership upon such
contribution or to which such property is subject when contributed, and (ii) in
the case of any property distributed to a Partner by the Partnership, the
Partnership's Carrying Value of such property at the time such property is
distributed, reduced by any indebtedness either assumed by such Partner upon
such distribution or to which such property is subject at the time of
distribution as determined under Section 752 of the Code and the Regulations
thereunder. The aggregate Agreed Value of the Contributed Property contributed
or deemed contributed by each Partner as of the date hereof is as set forth in
Exhibit A.
"Agreement" means this Agreement of Limited Partnership, as it may be
amended, supplemented or restated from time to time.
"Articles of Incorporation" means the Articles of Incorporation of
Beacon Properties Corporation (formerly known as Beacon Office Properties, Inc.)
filed in the State of Maryland on March 4, 1994, as amended and restated from
time to time.
"Assignee" means a Person to whom one or more Partnership Units have
been transferred in a manner permitted under this Agreement, but who has not
become a Substituted Limited Partner, and who has the rights set forth in
Section 11.5.
2
<PAGE>
"Available Cash" means, with respect to any period for which such
calculation is being made, (i) the sum of:
(a) the Partnership's Net Income or Net Loss (as the case may
be) for such period (without regard to adjustments resulting from
allocations described in Sections 1.A through 1.E of Exhibit C);
(b) Depreciation and all other noncash charges deducted in
determining Net Income or Net Loss for such period;
(c) the amount of any reduction in the reserves of the
Partnership referred to in clause (ii)(f) below (including, without
limitation, reductions resulting because the General Partner determines
such amounts are no longer necessary);
(d) the excess of proceeds from the sale, exchange,
disposition, or refinancing of Partnership property for such period
over the gain recognized from such sale, exchange, disposition, or
refinancing during such period (excluding Terminating Capital
Transactions); and
(e) all other cash received by the Partnership for such period
that was not included in determining Net Income or Net Loss for such
period;
(ii) less the sum of:
(a) all principal debt payments made by the Partnership during
such period;
(b) capital expenditures made by the Partnership during such
period;
(c) investments made by the Partnership during such period in
any entity (including loans made thereto) to the extent that such
investments are not otherwise described in clause (ii)(a) or (ii)(b);
(d) all other expenditures and payments not deducted in
determining Net Income or Net Loss for such period;
(e) any amount included in determining Net Income or Net Loss
for such period that was not received by the Partnership during such
period;
(f) the amount of any increase in reserves during such period
which the General Partner determines to be necessary or appropriate in
its sole and absolute discretion; and
3
<PAGE>
(g) the amount of any working capital accounts and other cash
or similar balances which the General Partner determines to be
necessary or appropriate, in its sole and absolute discretion.
Notwithstanding the foregoing, Available Cash shall not include any
cash received or reductions in reserves, or take into account any disbursements
made or reserves established, after commencement of the dissolution and
liquidation of the Partnership.
"Book-Tax Disparities" means, with respect to any item of Contributed
Property or Adjusted Property, as of the date of any determination, the
difference between the Carrying Value of such Contributed Property or Adjusted
Property and the adjusted basis thereof for federal income tax purposes as of
such date. A Partner's share of the Partnership's Book-Tax Disparities in all of
its Contributed Property and Adjusted Property will be reflected by the
difference between such Partner's Capital Account balance as maintained pursuant
to Exhibit B and the hypothetical balance of such Partner's Capital Account
computed as if it had been maintained strictly in accordance with federal income
tax accounting principles.
"Business Day" means any day except a Saturday, Sunday or other day on
which commercial banks in New York, New York are authorized or required by law
to close.
"Capital Account" means the Capital Account maintained for a Partner
pursuant to Exhibit B hereof.
"Capital Contribution" means, with respect to any Partner, any cash,
cash equivalents or the Agreed Value of Contributed Property which such Partner
contributes or is deemed to contribute to the Partnership pursuant to Section
4.1, 4.2, or 4.3 hereof.
"Carrying Value" means (i) with respect to a Contributed Property or
Adjusted Property, the 704(c) Value of such property, reduced (but not below
zero) by all Depreciation with respect to such Property charged to the Partners'
Capital Accounts following the contribution of or adjustment with respect to
such Property; and (ii) with respect to any other Partnership property, the
adjusted basis of such property for federal income tax purposes, all as of the
time of determination. The Carrying Value of any property shall be adjusted from
time to time in accordance with Exhibit B hereof, and to reflect changes,
additions or other adjustments to the Carrying Value for dispositions and
acquisitions of Partnership properties, as deemed appropriate by the General
Partner.
"Cash Amount" means an amount of cash per Partnership Unit equal to the
Value on the Valuation Date of the REIT Shares Amount.
"Certificate" means the Certificate of Limited Partnership relating to
the Partnership to be filed simultaneously herewith in the office of the
Delaware Secretary of State, as amended from time to time in accordance with the
terms hereof and the Act.
4
<PAGE>
"Code" means the Internal Revenue Code of 1986, as amended and in
effect from time to time, as interpreted by the applicable regulations
thereunder. Any reference herein to a specific section or sections of the Code
shall be deemed to include a reference to any corresponding provision of future
law.
"Consent" means the consent or approval of a proposed action by a
Partner given in accordance with Section 14.2 hereof.
"Contributed Property" means each property or other asset, in such form
as may be permitted by the Act (but excluding cash), contributed or deemed
contributed to the Partnership (including deemed contributions to the
Partnership on termination and reconstitution thereof pursuant to Section 708 of
the Code). Once the Carrying Value of a Contributed Property is adjusted
pursuant to Exhibit B hereof, such property shall no longer constitute a
Contributed Property for purposes of Exhibit B hereof, but shall be deemed an
Adjusted Property for such purposes.
"Conversion Factor" means 1.0, provided that in the event that the
Company (i) declares or pays a dividend on its outstanding REIT Shares in REIT
Shares or makes a distribution to all holders of its outstanding REIT Shares in
REIT Shares; (ii) subdivides its outstanding REIT Shares; or (iii) combines its
outstanding REIT Shares into a smaller number of REIT Shares, the Conversion
Factor shall be adjusted by multiplying the Conversion Factor by a fraction, the
numerator of which shall be the number of REIT Shares issued and outstanding on
the record date for such dividend, distribution, subdivision or combination
assuming for such purpose that such dividend, distribution, subdivision or
combination has occurred as of such time, and the denominator of which shall be
the actual number of REIT Shares (determined without the above assumption)
issued and outstanding on the record date for such dividend, distribution,
subdivision or combination. Any adjustment to the Conversion Factor shall become
effective immediately after the effective date of such event retroactive to the
record date, if any, for such event.
"Depreciation" means, for each taxable year, an amount equal to the
federal income tax depreciation, amortization, or other cost recovery deduction
allowable with respect to an asset for such year, except that if the Carrying
Value of an asset differs from its adjusted basis for federal income tax
purposes at the beginning of such year or other period, Depreciation shall be an
amount which bears the same ratio to such beginning Carrying Value as the
federal income tax depreciation, amortization, or other cost recovery deduction
for such year bears to such beginning adjusted tax basis; provided, however,
that if the federal income tax depreciation, amortization, or other cost
recovery deduction for such year is zero, Depreciation shall be determined with
reference to such beginning Carrying Value using any reasonable method selected
by the General Partner.
"Effective Date" means the date of closing of the initial public
offering of REIT Shares pursuant to that certain purchase agreement among the
Company and Merrill, Lynch, Pierce,
5
<PAGE>
Fenner & Smith Incorporated, Kidder, Peabody & Co. Incorporated and Lehman
Brothers Inc., as representatives of the underwriters.
"General Partner" means the Company, in its capacity as the general
partner of the Partnership, or its successors as general partner of the
Partnership.
"General Partner Interest" means a Partnership Interest held by the
General Partner, in its capacity as general partner. A General Partner Interest
may be expressed as a number of Partnership Units.
"IRS" means the Internal Revenue Service, which administers the
internal revenue laws of the United States.
"Immediate Family" means, with respect to any natural Person, such
natural Person's spouse and such natural Person's natural or adoptive parents,
descendants, nephews, nieces, brothers, and sisters.
"Incapacity" or "Incapacitated" means, (i) as to any individual
Partner, death, total physical disability or entry by a court of competent
jurisdiction adjudicating him incompetent to manage his Person or his estate;
(ii) as to any corporation which is a Partner, the filing of a certificate of
dissolution, or its equivalent, for the corporation or the revocation of its
charter; (iii) as to any partnership which is a Partner, the dissolution and
commencement of winding up of the partnership; (iv) as to any estate which is a
Partner, the distribution by the fiduciary of the estate's entire interest in
the Partnership; (v) as to any trustee of a trust which is a Partner, the
termination of the trust (but not the substitution of a new trustee); or (vi) as
to any Partner, the bankruptcy of such Partner. For purposes of this definition,
bankruptcy of a Partner shall be deemed to have occurred when (a) the Partner
commences a voluntary proceeding seeking liquidation, reorganization or other
relief under any bankruptcy, insolvency or other similar law now or hereafter in
effect; (b) the Partner is adjudged as bankrupt or insolvent, or a final and
nonappealable order for relief under any bankruptcy, insolvency or similar law
now or hereafter in effect has been entered against the Partner; (c) the Partner
executes and delivers a general assignment for the benefit of the Partner's
creditors; (d) the Partner files an answer or other pleading admitting or
failing to contest the material allegations of a petition filed against the
Partner in any proceeding of the nature described in clause (b) above; (e) the
Partner seeks, consents to or acquiesces in the appointment of a trustee,
receiver or liquidator for the Partner or for all or any substantial part of the
Partner's properties; (f) any proceeding seeking liquidation, reorganization or
other relief of or against such Partner under any bankruptcy, insolvency or
other similar law now or hereafter in effect has not been dismissed within one
hundred twenty (120) days after the commencement thereof; (g) the appointment
without the Partner's consent or acquiescence of a trustee, receiver or
liquidator has not been vacated or stayed within ninety (90) days of such
appointment; or (h) an appointment referred to in clause (g) which has been
stayed is not vacated within ninety (90) days after the expiration of any such
stay.
6
<PAGE>
"Indemnitee" means (i) any Person made a party to a proceeding by
reason of (A) his status as the General Partner, or as a director, trustee or
officer of the Partnership or the General Partner, or (B) his or its
liabilities, pursuant to a loan guarantee or otherwise, for any indebtedness of
the Partnership or any Subsidiary of the Partnership (including, without
limitation, any indebtedness which the Partnership or any Subsidiary of the
Partnership has assumed or taken assets subject to); and (ii) such other Persons
(including Affiliates of the General Partner or the Partnership) as the General
Partner may designate from time to time (whether before or after the event
giving rise to potential liability), in its sole and absolute discretion.
"Limited Partner" means the Company and any other Person named as a
Limited Partner in Exhibit A attached hereto, as such Exhibit may be amended
from time to time, or any Substituted Limited Partner or Additional Limited
Partner, in such Person's capacity as a Limited Partner of the Partnership.
"Limited Partner Interest" means a Partnership Interest of a Limited
Partner in the Partnership representing a fractional part of the Partnership
Interests of all Partners and includes any and all benefits to which the holder
of such a Partnership Interest may be entitled, as provided in this Agreement,
together with all obligations of such Person to comply with the terms and
provisions of this Agreement. A Limited Partner Interest may be expressed as a
number of Partnership Units.
"Liquidating Event" has the meaning set forth in Section 13.1.
"Liquidator" has the meaning set forth in Section 13.2.
"Net Income" means, for any taxable period, the excess, if any, of the
Partnership's items of income and gain for such taxable period over the
Partnership's items of loss and deduction for such taxable period. The items
included in the calculation of Net Income shall be determined in accordance with
federal income tax accounting principles, subject to the specific adjustments
provided for in Exhibit B.
"Net Loss" means, for any taxable period, the excess, if any, of the
Partnership's items of loss and deduction for such taxable period over the
Partnership's items of income and gain for such taxable period. The items
included in the calculation of Net Loss shall be determined in accordance with
federal income tax accounting principles, subject to the specific adjustments
provided for in Exhibit B.
"Nonrecourse Built-in Gain" means, with respect to any Contributed
Properties or Adjusted Properties that are subject to a mortgage or negative
pledge securing a Nonrecourse Liability, the amount of any taxable gain that
would be allocated to the Partners pursuant to Section 2.B of Exhibit C if such
properties were disposed of in a taxable transaction in full satisfaction of
such liabilities and for no other consideration.
7
<PAGE>
"Nonrecourse Deductions" has the meaning set forth in Regulations
Section 1.704-2(b)(1), and the amount of Nonrecourse Deductions for a
Partnership taxable year shall be determined in accordance with the rules of
Regulations Section 1.704-2(c).
"Nonrecourse Liability" has the meaning set forth in Regulations
Section 1.752-1(a)(2).
"Notice of Redemption" means the Notice of Redemption substantially in
the form of Exhibit D to this Agreement.
"Partner" means a General Partner or a Limited Partner, and "Partners"
means the General Partner and the Limited Partners collectively.
"Partner Minimum Gain" means an amount, with respect to each Partner
Nonrecourse Debt, equal to the Partnership Minimum Gain that would result if
such Partner Nonrecourse Debt were treated as a Nonrecourse Liability,
determined in accordance with Regulations Section 1.704-2(i)(3).
"Partner Nonrecourse Debt" has the meaning set forth in Regulations
Section 1.704-2(b)(4).
"Partner Nonrecourse Deductions" has the meaning set forth in
Regulations Section 1.704-2(i)(2), and the amount of Partner Nonrecourse
Deductions with respect to a Partner Nonrecourse Debt for a Partnership taxable
year shall be determined in accordance with the rules of Regulations Section
1.704-2(i)(2).
"Partnership" means the limited partnership formed under the Act and
pursuant to this Agreement, as it may be amended and restated, and any successor
thereto.
"Partnership Interest" means an ownership interest in the Partnership
representing a Capital Contribution by either a Limited Partner or the General
Partner and includes any and all benefits to which the holder of such a
Partnership Interest may be entitled as provided in this Agreement, together
with all obligations of such Person to comply with the terms and provisions of
this Agreement. A Partnership Interest may be expressed as a number of
Partnership Units.
"Partnership Minimum Gain" has the meaning set forth in Regulations
Section 1.704-2(b)(2), and the amount of Partnership Minimum Gain, as well as
any net increase or decrease in a Partnership Minimum Gain, for a Partnership
taxable year shall be determined in accordance with the rules of Regulations
Section 1.704-2(d).
"Partnership Record Date" means the record date established by the
General Partner for the distribution of Available Cash pursuant to Section 5.1
hereof, which record date shall
8
<PAGE>
be the same as the record date established by the Company for a distribution to
its shareholders of some of all of its portion of such distribution.
"Partnership Unit" means a fractional, undivided share of the
Partnership Interests of all Partners issued pursuant to Sections 4.1, 4.2 and
4.3. The number of Partnership Units outstanding and the Percentage Interest in
the Partnership represented by such Units are set forth in Exhibit A attached
hereto, as such Exhibit may be amended from time to time. The ownership of
Partnership Units shall be evidenced by such form of certificate for units as
the General Partner adopts from time to time unless the General Partner
determines that the Partnership Units shall be uncertificated securities.
"Partnership Year" means the fiscal year of the Partnership, which
shall be the calendar year.
"Percentage Interest" means, as to a Partner, its interest in the
Partnership as determined by dividing the Partnership Units owned by such
Partner by the total number of Partnership Units then outstanding and as
specified in Exhibit A attached hereto, as such Exhibit may be amended from time
to time.
"Person" means an individual or a corporation, partnership, trust,
unincorporated organization, association or other entity.
"Recapture Income" means any gain recognized by the Partnership upon
the disposition of any property or asset of the Partnership, which gain is
characterized as ordinary income because it represents the recapture of
deductions previously taken with respect to such property or asset.
"Redeeming Partner" has the meaning set forth in Section 8.6 hereof.
"Redemption Right" shall have the meaning set forth in Section 8.6
hereof.
"Regulations" means the Income Tax Regulations promulgated under the
Code, as such regulations may be amended from time to time (including
corresponding provisions of succeeding regulations).
"REIT" means a real estate investment trust under Section 856 of the
Code.
"REIT Share" shall mean a share of common stock of the Company, par
value $.01 per share.
"REIT Shares Amount" shall mean a number of REIT Shares equal to the
product of the number of Partnership Units offered for redemption by a Redeeming
Partner, multiplied by the Conversion Factor, provided that in the event the
Company issues to all holders of REIT
9
<PAGE>
Shares rights, options, warrants or convertible or exchangeable securities
entitling the shareholders to subscribe for or purchase REIT Shares, or any
other securities or property (collectively, the "rights"), then the REIT Shares
Amount shall also include such rights that a holder of that number of REIT
Shares would be entitled to receive.
"Residual Gain" or "Residual Loss" means any item of gain or loss, as
the case may be, of the Partnership recognized for federal income tax purposes
resulting from a sale, exchange or other disposition of Contributed Property or
Adjusted Property, to the extent such item of gain or loss is not allocated
pursuant to Section 2.B.1(a) or 2.B.2(a) of Exhibit C to eliminate Book-Tax
Disparities.
"704(c) Value" of any Contributed Property means the fair market value
of such property or other consideration at the time of contribution, as
determined by the General Partner using such reasonable method of valuation as
it may adopt; provided, however, that the 704(c) Value of any property deemed
contributed to the Partnership for federal income tax purposes upon termination
and reconstitution thereof pursuant to Section 708 of the Code shall be
determined in accordance with Exhibit B hereof. Subject to Exhibit B hereof, the
General Partner shall, in its sole and absolute discretion, use such method as
it deems reasonable and appropriate to allocate the aggregate of the 704(c)
Values of Contributed Properties in a single or integrated transaction among the
separate properties on a basis proportional to their respective fair market
values.
"Specified Redemption Date" means the tenth (10th) Business Day after
receipt by the Company of a Notice of Redemption; provided that no Specified
Redemption Date shall occur before one (1) year from the date of this Agreement,
provided further that if the Company combines its outstanding REIT Shares, no
Specified Redemption Date shall occur after the record date of such combination
of REIT Shares and prior to the effective date of such combination.
"Subsidiary" means, with respect to any Person, any corporation,
partnership or other entity of which a majority of (i) the voting power of the
voting equity securities; or (ii) the outstanding equity interests, is owed,
directly or indirectly, by such Person.
"Substituted Limited Partner" means a Person who is admitted as a
Limited Partner to the Partnership pursuant to Section 11.4.
"Terminating Capital Transaction" means any sale or other disposition
of all or substantially all of the assets of the Partnership or a related series
of transactions that, taken together, result in the sale or other disposition of
all or substantially all of the assets of the Partnership.
"Unrealized Gain" attributable to any item of Partnership property
means, as of any date of determination, the excess, if any, of (i) the fair
market value of such property (as
10
<PAGE>
determined under Exhibit B hereof) as of such date; over (ii) the Carrying Value
of such property (prior to any adjustment to be made pursuant to Exhibit B
hereof) as of such date.
"Unrealized Loss" attributable to any item of Partnership property
means, as of any date of determination, the excess, if any, of (i) the Carrying
Value of such property (prior to any adjustment to be made pursuant to Exhibit B
hereof) as of such date; over (ii) the fair market value of such property (as
determined under Exhibit B hereof) as of such date.
"Valuation Date" means the date of receipt by the General Partner of a
Notice of Redemption or, if such date is not a Business Day, the first Business
Day thereafter.
"Value" means, with respect to a REIT Share, the average of the daily
market price for the ten (10) consecutive trading days immediately preceding the
Valuation Date. The market price for each such trading day shall be: (i) if the
REIT Shares are listed or admitted to trading on any securities exchange or the
NASDAQ-National Market System, the closing price on such day, or if no such sale
takes place on such day, the average of the closing bid and asked prices on such
day; (ii) if the REIT Shares are not listed or admitted to trading on any
securities exchange or the NASDAQ-National Market System, the last reported sale
price on such day or, if no sale takes place on such day, the average of the
closing bid and asked prices on such day, as reported by a reliable quotation
source designated by the General Partner; or (iii) if the REIT Shares are not
listed or admitted to trading on any securities exchange or the NASDAQ-National
Market System and no such last reported sale price or closing bid and asked
prices are available, the average of the reported high bid and low asked prices
on such day, as reported by a reliable quotation source designated by the
General Partner, or if there shall be no bid and asked prices on such day, the
average of the high bid and low asked prices, as so reported, on the most recent
day (not more than ten (10) days prior to the date in question) for which prices
have been so reported; provided that if there are no bid and asked prices
reported during the ten (10) days prior to the date in question, the Value of
the REIT Shares shall be determined by the General Partner acting in good faith
on the basis of such quotations and other information as it considers, in its
reasonable judgment, appropriate. In the event the REIT Shares Amount includes
rights that a holder of REIT Shares would be entitled to receive, then the Value
of such rights shall be determined by the General Partner acting in good faith
on the basis of such quotations and other information as it considers, in its
reasonable judgment, appropriate.
ARTICLE 2
ORGANIZATIONAL MATTERS
Section 2.1 Formation
The Partners hereby form a limited partnership under and pursuant to
the Act. Except as expressly provided herein to the contrary, the rights and
obligations of the Partners and the
11
<PAGE>
administration and termination of the Partnership shall be governed by the Act.
The Partnership Interest of each Partner shall be personal property for all
purposes.
Section 2.2 Name
The name of the Partnership shall be Beacon Properties, L.P. The
Partnership's business may be conducted under any other name or names deemed
advisable by the General Partner, including the name of the General Partner or
any Affiliate thereof. The words "Limited Partnership," "L.P.," "Ltd." or
similar words or letters shall be included in the Partnership's name where
necessary for the purposes of complying with the laws of any jurisdiction that
so requires. The General Partner in its sole and absolute discretion may change
the name of the Partnership at any time and from time to time and shall notify
the Limited Partners of such change in the next regular communication to the
Limited Partners.
Section 2.3 Registered Office and Agent; Principal Office
The address of the registered office of the Partnership in the State of
Delaware and the name and address of the registered agent for service of process
on the Partnership in the State of Delaware is The Corporation Trust Company,
Corporation Trust Center, 1209 Orange Street, Wilmington, Delaware 19801. The
principal office of the Partnership shall be 50 Rowes Wharf, Boston,
Massachusetts 02110, or such other place as the General Partner may from time to
time designate by notice to the Limited Partners. The Partnership may maintain
offices at such other place or places within or outside the State of Delaware as
the General Partner deems advisable.
Section 2.4 Power of Attorney
A. Each Limited Partner and each Assignee hereby constitutes and
appoints the General Partner, any Liquidator, and authorized officers and
attorneys-in-fact of each, and each of those acting singly, in each case with
full power of substitution, as its true and lawful agent and attorney-in-fact,
with full power and authority in its name, place and stead to:
(1) execute, swear to, acknowledge, deliver, file and
record in the appropriate public offices (a) all
certificates, documents and other instruments
(including, without limitation, this Agreement and
the Certificate and all amendments or restatement
thereof) that the General Partner or the Liquidator
deems appropriate or necessary to form, qualify or
continue the existence or qualification of the
Partnership as a limited partnership (or a
partnership in which the Limited Partners have
limited liability) in the State of Delaware and in
all other jurisdictions in which the Partnership may
or plans to conduct business or own property; (b) all
instruments that the General Partner deems
appropriate or necessary to reflect any amendment,
change, modification or restatement
12
<PAGE>
of this Agreement in accordance with its terms; (c)
all conveyances and other instruments or documents
that the General Partner or the Liquidator deems
appropriate or necessary to reflect the dissolution
and liquidation of the Partnership pursuant to the
terms of this Agreement, including, without
limitation, a certificate of cancellation; (d) all
instruments relating to the admission, withdrawal,
removal or substitution of any Partner pursuant to,
or other events described in, Article 11, 12 or 13
hereof or the Capital Contribution of any Partner;
and (e) all certificates, documents and other
instruments relating to the determination of the
rights, preferences and privileges of Partnership
Interest; and
(2) execute, swear to, seal, acknowledge and file all
ballots, consents, approvals, waivers, certificates
and other instruments appropriate or necessary, in
the sole and absolute discretion of the General
Partner or any Liquidator, to make, evidence, give,
confirm or ratify any vote, consent, approval,
agreement or other action which is made or given by
the Partners hereunder or is consistent with the
terms of this agreement or appropriate or necessary,
in the sole discretion of the General Partner or any
Liquidator, to effectuate the terms or intent of this
Agreement.
Nothing contained herein shall be construed as authorizing the General Partner
or any Liquidator to amend this Agreement except in accordance with Article 14
hereof or as may be otherwise expressly provided for in this Agreement.
B. The foregoing power of attorney is hereby declared to be irrevocable
and a power coupled with an interest, in recognition of the fact that each of
the Partners will be relying upon the power of the General Partner and any
Liquidator to act as contemplated by this agreement in any filing or other
action by it on behalf of the Partnership, and it shall survive and not be
affected by the subsequent Incapacity of any Limited Partner or Assignee and the
transfer of all or any portion of such Limited Partner's or Assignee's
Partnership Units and shall extend to such Limited Partner's or Assignee's
heirs, successors, assigns and personal representatives. Each such Limited
Partner or Assignee hereby agrees to be bound by any representation made by the
General Partner or any Liquidator, acting in good faith pursuant to such power
of attorney, and each such Limited Partner or Assignee hereby waives any and all
defenses which may be available to contest, negate or disaffirm the action of
the General Partner or any Liquidator, taken in good faith under such power of
attorney. Each Limited Partner or Assignee shall execute and deliver to the
General Partner or the Liquidator, within fifteen (15) days after receipt of the
General Partner's or Liquidator's request therefor, such further designation,
powers of attorney and other instruments as the General Partner or the
Liquidator, as the case may be, deems necessary to effectuate this Agreement and
the purposes of the Partnership.
13
<PAGE>
Section 2.5 Term
The term of the Partnership shall commence on the date hereof and shall
continue until December 31, 2093, unless, the Partnership is dissolved sooner
pursuant to the provisions of Article 13 or as otherwise provided by law.
ARTICLE 3
PURPOSE
Section 3.1 Purpose and Business
The purpose and nature of the business to be conducted by the
Partnership is (i) to conduct any business that may be lawfully conducted by a
limited partnership organized pursuant to the Act; provided, however, that such
business shall be limited to and conducted in such a manner as to permit the
Company at all times to be classified as a REIT, unless the Company ceases to
qualify as a REIT for reasons other than the conduct of the business of the
Partnership; (ii) to enter into any partnership, joint venture or other similar
arrangement to engage in any of the foregoing or to own interests in any entity
engaged in any of the foregoing; and (iii) to do anything necessary or
incidental to the foregoing. In connection with the foregoing, and without
limiting the Company's right, in its sole discretion, to cease qualifying as a
REIT, the Partners acknowledge the Company's current status as a REIT inures to
the benefit of all of the Partners and not solely the General Partner.
Section 3.2 Powers
The Partnership is empowered to do any and all acts and things
necessary, appropriate, proper, advisable, incidental to or convenient for the
furtherance and accomplishment of the purposes and business described herein and
for the protection and benefit of the Partnership; provided, however, that the
Partnership shall not take, or refrain from taking, any action which, in the
judgment of the General Partner, in its sole and absolute discretion, (i) could
adversely affect the ability of the Company to continue to qualify as a REIT;
(ii) could subject the Company to any additional taxes under Section 857 or
Section 4981 of the Code; or (iii) could violate any law or regulation of any
governmental body or agency having jurisdiction over the Company or its
securities, unless such action (or inaction) shall have been specifically
consented to by the General Partner in writing.
14
<PAGE>
ARTICLE 4
CAPITAL CONTRIBUTIONS
Section 4.1 Capital Contributions of the Partners
At the time of the execution of this agreement, the Partners shall make
the Capital Contributions set forth in Exhibit A to this Agreement. At the
General Partner's direction, certain Capital Contributions may be made by way of
transfers to Wellesley Holding, L.P., or other subsidiaries of the Partnership,
as the General Partner may identify. To the extent the Partnership acquires any
property by the merger of any other Person into the Partnership, Persons who
receive Partnership Interests in exchange for their interests in the Person
merging into the Partnership shall become Partners and shall be deemed to have
made Capital Contributions as provided in the applicable merger agreement and as
set forth in Exhibit A, as amended to reflect such deemed Capital Contributions.
The Partners shall own Partnership Units in the amounts set forth for such
Partner in Exhibit A and shall have a Percentage Interest in the Partnership as
set forth in Exhibit A, which Percentage Interest shall be adjusted in Exhibit A
from time to time by the General Partner to the extent necessary to reflect
accurately redemptions, additional Capital Contributions, the issuance of
additional Partnership Units (pursuant to any merger or otherwise), or similar
events having an effect on any Partner's Percentage Interest. The number of
Partnership Units held by the General Partner, in its capacity as general
partner, (equal to one percent (1%) of all outstanding Partnership Units from
time to time) shall be deemed to be the General Partner Interest. Except as
provided in Sections 4.2 and 10.5, the Partners shall have no obligation to make
any additional Capital Contributions or loans to the Partnership.
Section 4.2 Issuances of Additional Partnership Interests
A. The General Partner is hereby authorized to cause the Partnership
from time to time to issue to the Partners (including the General Partner) or
other Persons additional Partnership Units or other Partnership Interests in one
or more classes, or one or more series of any of such classes, with such
designations, preferences and relative, participating, optional or other special
rights, powers and duties, including rights, powers and duties senior to Limited
Partner Interests, all as shall be determined by the General Partner in its sole
and absolute discretion subject to Delaware law, including, without limitation,
(i) the allocations of items of Partnership income, gain, loss, deduction and
credit to each such class or series of Partnership Interests; (ii) the right of
each such class or series of Partnership Interests to share in Partnership
distributions; and (iii) the rights of each such class or series of Partnership
Interests upon dissolution and liquidation of the Partnership; provided that no
such additional Partnership Units or other Partnership Interests shall be issued
to the Company, as the General Partner or a Limited Partner, unless either
(a)(1) the additional Partnership Interests are issued in connection with an
issuance of REIT Shares or other shares by the Company, which shares have
designations, preferences and other rights such that the economic interests
attributable to such shares are substantially similar to the designations,
preferences and other rights of the
15
<PAGE>
additional Partnership Interests issued to the Company in accordance with this
Section 4.2.A, and (2) the Company shall make a Capital Contribution to the
Partnership in an amount equal to the proceeds raised in connection with such
issuance, or (b) the additional Partnership Interests are issued to all Partners
in proportion to their respective Percentage Interests. In addition, the Company
may acquire Units from other Partners pursuant to this Agreement.
B. After the initial public offering of REIT Shares, the Company shall
not issue any additional REIT Shares (other than REIT Shares issued pursuant to
Section 8.6), or rights, options, warrants or convertible or exchangeable
securities containing the right to subscribe for or purchase REIT Shares
(collectively "New Securities") other than to all holders of REIT Shares unless
(i) the General Partner shall cause the Partnership to issue to the Company,
Partnership Interests or rights, options, warrants or convertible or
exchangeable securities of the Partnership having designations, preferences and
other rights, all such that the economic interests are substantially similar to
those of the New Securities; and (ii) the Company contributes to the Partnership
the proceeds from the issuance of such New Securities and from the exercise of
rights contained in such New Securities. Without limiting the foregoing, the
Company is expressly authorized to issue New Securities for less than fair
market value, and the General Partner is expressly authorized to cause the
Partnership to issue to the Company corresponding Partnership Interests, so long
as (x) the General Partner concludes in good faith that such issuance is in the
interests of the Company and the Partnership (for example, and not by way of
limitation, the issuance of REIT Shares and corresponding Units pursuant to an
employee stock purchase plan providing for employee purchases of REIT Shares at
a discount from fair market value or employee stock options that have an
exercise price that is less than the fair market value of the REIT Shares,
either at the time of issuance or at the time of exercise); and (y) the Company
contributes all proceeds from such issuance and exercise to the Partnership.
Section 4.3 Contribution of Proceeds of Issuance of REIT Shares
In connection with the initial public offering of REIT Shares by the
Company and any other issuance of REIT Shares or New Securities pursuant to
Section 4.2, the Company shall contribute to the Partnership any proceeds (or a
portion thereof) raised in connection with such issuance; provided that if the
proceeds actually received by the Company are less than the gross proceeds of
such issuance as a result of any underwriter's discount or other expenses paid
or incurred in connection with such issuance, then the Company shall be deemed
to have made a Capital Contribution to the Partnership in the amount equal to
the sum of the net proceeds of such issuance plus the amount of such
underwriter's discount and other expenses paid by the Company (which discount
and expense shall be treated as an expense for the benefit of the Partnership
for purposes of Section 7.4). In the case of employee purchases of New
Securities at a discount from fair market value, the amount of such discount
representing compensation to the employee, as determined by the General Partner,
shall be treated as an expense of the issuance of such New Securities.
16
<PAGE>
Section 4.4 Preemptive Rights
Except as otherwise provided in this Section 4.4, no Person shall have
any preemptive, preferential or other similar right with respect to (i)
additional Capital Contributions or loans to the Partnership; or (ii) issuance
or sale of any Partnership Units or other Partnership Interests. Notwithstanding
the foregoing, in connection with any Capital Contribution made pursuant to
Sections 4.2 and 4.3 hereof, Limited Partners (other than the Company) shall
have the right to contribute to the Partnership an amount equal to or less than
their then-existing Percentage Interest in such Capital Contribution. The
General Partner, prior to making a Capital Contribution pursuant to Sections 4.2
and 4.3, shall deliver notice to all Limited Partners of its intent to make such
a Capital Contribution and of the contemplated amount thereof. Limited Partners
must deliver written notice to the Partnership of their intent to exercise their
rights hereunder and of the amount of their intended contribution, within five
business days of their receipt of such notice from the General Partner. The
amount of any Capital Contribution made to the Partnership pursuant to Sections
4.2 and 4.3 shall be reduced to reflect all corresponding Capital Contributions
made by Limited Partners pursuant to this Section.
ARTICLE 5
DISTRIBUTIONS
Section 5.1 Requirement and Characterization of Distributions
The General Partner shall distribute at least quarterly an amount equal
to 100% of Available Cash generated by the Partnership during such quarter or
shorter period to the Partners who are Partners on the Partnership Record Date
with respect to such quarter or shorter period in accordance with their
respective Percentage Interests on such Partnership Record Date; provided that
in no event may a Partner receive a distribution of Available Cash with respect
to a Partnership Unit if such Partner is entitled to receive a distribution out
of such Available Cash with respect to a REIT Share for which such Partnership
Unit has been exchanged and such distribution shall be made to the Company. The
General Partner shall take such reasonable efforts, as determined by it in its
sole and absolute discretion and consistent with the Company's qualification as
a REIT, to distribute Available Cash to the Limited Partners so as to preclude
any such distribution or portion thereof from being treated as part of a sale of
property to the Partnership by a Limited Partner under Section 707 of the Code
or the Regulations thereunder; provided that the General Partner and the
Partnership shall not have liability to a Limited Partner under any
circumstances as a result of any distribution to a Limited Partner being so
treated.
17
<PAGE>
Section 5.2 Amounts Withheld
All amounts withheld pursuant to the Code or any provisions of any
state or local tax law and Section 10.5 hereof with respect to any allocation,
payment or distribution to the Partners or Assignees shall be treated as amounts
distributed to the Partners or Assignees pursuant to Section 5.1 for all
purposes under this Agreement.
Section 5.3 Distributions Upon Liquidation
Proceeds from a Terminating Capital Transaction and any other cash
received or reductions in reserves made after commencement of the liquidation of
the Partnership shall be distributed to the Partners in accordance with Section
13.2
ARTICLE 6
ALLOCATIONS
Section 6.1 Allocations For Capital Account Purposes
For purposes of maintaining the Capital Accounts and in determining the
rights of the Partners among themselves, the Partnership's items of income,
gain, loss and deduction (computed in accordance with Exhibit B hereof) shall be
allocated among the Partners in each taxable year (or portion thereof) as
provided herein below.
A. Net Income shall be allocated (i) first, to the General Partner to
the extent that Net Losses previously allocated to the General Partner pursuant
to the last sentence of Section 6.1.B exceed Net Income previously allocated to
the General Partner pursuant to this clause (i) of Section 6.1.A; and (ii)
thereafter, Net Income shall be allocated to the Partners in accordance with
their respective Percentage Interests.
B. After giving effect to the special allocations set forth in Section
1 of Exhibit C attached hereto, Net Losses shall be allocated to the Partners in
accordance with their respective Percentage Interests; provided that Net Losses
shall not be allocated to any Limited Partner pursuant to this Section 6.1.B to
the extent that such allocation would cause such Limited Partner to have an
Adjusted Capital Account Deficit at the end of such taxable year (or increase
any existing Adjusted Capital Account Deficit). All Net Losses in excess of the
limitations set forth in this Section 6.1.B shall be allocated to the General
Partner.
C. For purposes of Regulations Section 1.752-3(a), the Partners agree
that Nonrecourse Liabilities of the Partnership in excess of the sum of (i) the
amount of Partnership Minimum Gain; and (ii) the total amount of Nonrecourse
Built-in Gain shall be allocated among the Partners in accordance with their
respective Percentage Interests.
18
<PAGE>
D. Any gain allocated to the Partners upon the sale or other taxable
disposition of any Partnership asset shall, to the extent possible, after taking
into account other required allocations of gain pursuant to Exhibit C, be
characterized as Recapture Income in the same proportions and to the same extent
as such Partners have been allocated any deductions directly or indirectly
giving rise to the treatment of such gains as Recapture Income.
ARTICLE 7
MANAGEMENT AND OPERATIONS OF BUSINESS
Section 7.1 Management
A. Except as otherwise expressly provided in this Agreement, all
management powers over the business and affairs the Partnership are and shall be
exclusively vested in the General Partner, and no Limited Partner shall have any
right to participate in or exercise control or management power over the
business and affairs of the Partnership. The General Partner may not be removed
by the Limited Partners with or without cause. In addition to the powers now or
hereafter granted a general partner of a limited partnership under applicable
law or which are granted to the General Partner under any other provision of
this Agreement, the General Partner, subject to Section 7.3 hereof, shall have
full power and authority to do all things deemed necessary or desirable by it to
conduct the business of the Partnership, to exercise all powers set forth in
Section 3.2 hereof and to effectuate the purposes set forth in Section 3.1
hereof, including, without limitation:
(1) the making of any expenditures, the lending or
borrowing of money (including, without limitation,
making prepayments on loans and borrowing money to
permit the Partnership to make distributions to its
Partners in such amounts as will permit the Company
(so long as the Company qualifies as a REIT) to avoid
the payment of any federal income tax (including, for
this purpose, any excise tax pursuant to Section 4981
of the Code) and to make distributions to its
shareholders in amounts sufficient to permit the
Company to maintain REIT status), the assumption or
guarantee of, or other contracting for, indebtedness
and other liabilities, the issuance of evidence of
indebtedness (including the securing of the same by
deed, mortgage, deed of trust or other lien or
encumbrance on the Partnership's assets) and the
incurring of any obligations it deems necessary for
the conduct of the activities of the Partnership;
(2) the making of tax, regulatory and other filings, or
rendering of periodic or other reports to
governmental or other agencies having jurisdiction
over the business or assets of the Partnership;
19
<PAGE>
(3) the acquisition, disposition, mortgage, pledge,
encumbrance, hypothecation or exchange of any assets
of the Partnership (including the exercise or grant
of any conversion, option, privilege, or subscription
right or other right available in connection with any
assets at any time held by the Partnership) or the
merger or other combination of the Partnership with
or into another entity (all of the foregoing subject
to any prior approval only to the extent required by
Section 7.3 hereof);
(4) the use of the assets of the Partnership (including,
without limitation, cash on hand) for any purpose
consistent with the terms of this Agreement and on
any terms it sees fit, including, without limitation,
the financing of the conduct of the operations of the
Company, the Partnership or any of the Partnership's
Subsidiaries, the lending of funds to other Persons
(including, without limitation, the Subsidiaries of
the Partnership and/or the Company) and the repayment
of obligations of the Partnership and its
Subsidiaries and any other Person in which it has an
equity investment, and the making of capital
contributions to its Subsidiaries;
(5) the management, operation, leasing, landscaping,
repair, alteration, demolition or improvement of any
real property or improvements owed by the Partnership
or any Subsidiary of the Partnership;
(6) the negotiation, execution, and performance of any
contracts, conveyances or other instruments that the
General Partner considers useful or necessary to the
conduct of the Partnership's operations or the
implementation of the General Partner's powers under
this Agreement, including contracting with
contractors, developers, consultants, accountants,
legal counsel, other professional advisors and other
agents and the payment of their expenses and
compensation out of the Partnership's assets;
(7) the distribution of Partnership cash or other
Partnership assets in accordance with this Agreement;
(8) holding, managing, investing and reinvesting cash and
other assets of the Partnership;
(9) the collection and receipt of revenues and income of
the Partnership;
(10) the establishment of one or more divisions of the
Partnership, the selection and dismissal of employees
of the Partnership (including, without limitation,
employees having titles such as "president," "vice
20
<PAGE>
president," "secretary" and "treasurer" of the
Partnership), and agents, outside attorneys,
accountants, consultants and contractors of the
Partnership, and the determination of their
compensation and other terms of employment or hiring;
(11) the maintenance of such insurance for the benefit of
the Partnership and the Partners as it deems
necessary or appropriate;
(12) the formation of, or acquisition of an interest in,
and the contribution of property to, any further
limited or general partnerships, joint ventures or
other relationships that it deems desirable
(including, without limitation, the acquisition of
interests in, and the contributions of property to,
its Subsidiaries and any other Person in which it has
an equity investment from time to time);
(13) the control of any matters affecting the rights and
obligations of the Partnership, including the
settlement, compromise, submission to arbitration or
any other form of dispute resolution, or abandonment
of, any claim, cause of action, liability, debt or
damages, due or owing to or from the Partnership, the
commencement or defense of suits, legal proceedings,
administrative proceedings, arbitration or other
forms of dispute resolution, and the representation
of the Partnership in all suits or legal proceedings,
administrative proceedings, arbitrations or other
forms of dispute resolution, the incurring of legal
expense, and the indemnification of any Person
against liabilities and contingencies to the extent
permitted by law;
(14) the undertaking of any action in connection with the
Partnership's direct or indirect investment in its
Subsidiaries or any other Person (including, without
limitation, the contribution or loan of funds by the
Partnership to such Persons);
(15) the determination of the fair market value of any
Partnership property distributed in kind using such
reasonable method of valuation as the General Partner
may adopt;
(16) the exercise, directly or indirectly, through any
attorney-in-fact acting under a general or limited
power of attorney, of any right, including the right
to vote, appurtenant to any asset or investment held
by the Partnership;
(17) the exercise of any of the powers of the General
Partner enumerated in this Agreement on behalf of or
in connection with any Subsidiary of the
21
<PAGE>
Partnership or any other Person in which the
Partnership has a direct or indirect interest, or
jointly with any such Subsidiary or other Person;
(18) the exercise of any of the powers of the General
Partner enumerated in this Agreement on behalf of any
Person in which the Partnership does not have an
interest pursuant to contractual or other
arrangements with such Person;
(19) the making, execution and delivery of any and all
deeds, leases, notes, mortgages, deeds of trust,
security agreements, conveyances, contracts,
guarantees, warranties, indemnities, waivers,
releases or legal instruments or agreements in
writing necessary or appropriate, in the judgment of
the General Partner, for the accomplishment of any of
the powers of the General Partner enumerated in this
Agreement; and
(20) the issuance of additional Partnership Units, as
appropriate, in connection with Capital Contributions
by Additional Limited Partners and additional Capital
Contributions by Partners pursuant to Article 4
hereof.
B. Each of the Limited Partners agrees that the General Partner is
authorized to execute, deliver and perform the above-mentioned agreements and
transactions on behalf of the Partnership without any further act, approval or
vote of the Partners, notwithstanding any other provision of this Agreement
(except as provided in Section 7.3), the Act or any applicable law, rule or
regulation, to the fullest extent permitted under the Act or other applicable
law, rule or regulation. The execution, delivery or performance by the General
Partner or the Partnership of any agreement authorized or permitted under this
Agreement shall not constitute a breach by the General Partner of any duty that
the General Partner may owe the Partnership or the Limited Partners or any other
Persons under this Agreement or of any duty stated or implied by law or equity.
C. At all times from and after the date hereof, the General Partner may
cause the Partnership to establish and maintain at any and all times working
capital accounts and other cash or similar balances in such amounts as the
General Partner, in its sole and absolute discretion, deems appropriate and
reasonable from time to time.
D. In exercising its authority under this Agreement, the General
Partner may, but shall be under no obligation to, take into account the tax
consequences to any Partner of any action taken by it. The General Partner and
the Partnership shall not have liability to a Limited Partner under any
circumstances as a result of an income tax liability incurred by such Limited
Partner as a result of an action (or inaction) by the General Partner taken
pursuant to its authority under this Agreement and in accordance with the terms
of Section 7.3.
22
<PAGE>
Section 7.2 Certificate of Limited Partnership
The General Partner shall file, simultaneously herewith, the
Certificate with the Secretary of State of Delaware as required by the Act. The
General Partner shall use all reasonable efforts to cause to be filed such other
certificates or documents as may be reasonable and necessary or appropriate for
the formation, continuation, qualification and operation of a limited
partnership (or a partnership in which the limited partners have limited
liability) in the State of Delaware and any other state, or the District of
Columbia, in which the Partnership may elect to do business or own property. To
the extent that such action is determined by the General Partner to be
reasonable and necessary or appropriate, the General Partner shall file
amendments to and restatements of the Certificate and do all of the things to
maintain the Partnership as a limited partnership (or a partnership in which the
limited partners have limited liability) under the laws of the State of Delaware
and each other state, or the District of Columbia, in which the Partnership may
elect to do business or own property. Subject to the terms of Section 8.5.A(4)
hereof, the General Partner shall not be required, before or after filing, to
deliver or mail a copy of the Certificate or any amendment thereto to any
Limited Partner.
Section 7.3 Restrictions on General Partner Authority
A. The General Partner may not take any action in contravention of an
express prohibition or limitation of this Agreement without the written Consent
of Limited Partners holding a majority of the Percentage Interests of the
Limited Partners (including Limited Partner Interests held by the Company), or
such other percentage of the Limited Partners as may be specifically provided
for under a provision of this Agreement.
B. Except as provided in Article 13 hereof, the General Partner may not
cause the Partnership to engage in a Terminating Capital Transaction (including
by way of merger, consolidation or other combination with any other Person),
without the Consent of Limited Partners holding 85% or more of the Percentage
Interests of the Limited Partners (including Limited Partnership Interests held
by the Company).
Section 7.4 Reimbursement of the General Partner and the Company
A. Except as provided in this Section 7.4 and elsewhere in this
Agreement (including the provisions of Articles 5 and 6 regarding distributions,
payments, and allocations to which it may be entitled), the General Partner
shall not be compensated for its services as general partner of the Partnership.
B. The General Partner shall be reimbursed on a monthly basis, or such
other basis as it may determine in its sole and absolute discretion, for all
expenses that it incurs relating to the ownership and operation of, or for the
benefit of, the Partnership; provided that the amount of any such reimbursement
shall be reduced by any interest earned by the General
23
<PAGE>
Partner with respect to bank accounts or other instruments or accounts held by
it on behalf of the Partnership, and provided further than the General Partner
shall not be reimbursed for any (i) directors fees, (ii) income tax liabilities
or (iii) filing or similar fees in connection with maintaining the General
Partner's continued corporate existence that are incurred by the General
Partner, but the Partners acknowledge that all other expenses of the General
Partner are deemed to be for the benefit of the Partnership. Such reimbursement
shall be in addition to any reimbursement made as a result of indemnification
pursuant to Section 7.7 hereof.
C. As set forth in Section 4.3, the Company shall be treated as having
made a Capital Contribution in the amount of all expenses that it incurs
relating to the Company's initial public offering of REIT Shares.
D. In the event that the Company shall elect to purchase from its
shareholders REIT Shares for the purpose of delivering such REIT Shares to
satisfy an obligation under any dividend reinvestment program adopted by the
Company, any employee stock purchase plan adopted by the Company, or any similar
obligation or arrangement undertaken by the Company in the future, the purchase
price paid by the Company for such REIT Shares and any other expenses incurred
by the Company in connection with such purchase shall be considered expenses of
the Partnership and shall be reimbursed to the Company, subject to the condition
that: (i) if such REIT Shares subsequently are sold by the Company, the Company
shall pay to the Partnership any proceeds received by the Company for such REIT
Shares (which sales proceeds shall include the amount of dividends reinvested
under any dividend reinvestment or similar program provided that a transfer of
REIT Shares for Units pursuant to Section 8.6 would not be considered a sale for
such purposes); and (ii) if such REIT Shares are not retransferred by the
Company within 30 days after the purchase thereof, the Company, as General
Partner, shall cause the Partnership to cancel a number of Partnership Units
held by the Company, as a Limited Partner, equal to the product obtained by
multiplying the Conversion Factor by the number of such REIT Shares (in which
case such reimbursement shall be treated as a distribution in redemption of
Units held by the Company).
Section 7.5 Outside Activities of the General Partner
The General Partner shall not directly or indirectly enter into or
conduct any business other than in connection with the ownership, acquisition
and disposition of Partnership Interests and the management of the business of
the Partnership, and such activities as are incidental thereto. The General
Partner and any Affiliates of the General Partner may acquire Limited Partner
Interests and shall be entitled to exercise all rights of a Limited Partner
relating to such Limited Partner Interests.
Section 7.6 Contracts with Affiliates
A. The Partnership may lend or contribute funds or other assets to its
Subsidiaries or other Persons in which it has an equity investment and such
Persons may borrow funds
24
<PAGE>
from the Partnership, on terms and conditions established in the sole and
absolute discretion of the General Partner. The foregoing authority shall not
create any right or benefit in favor of any Subsidiary or any other Person.
B. Except as provided in Section 7.5, the Partnership may transfer
assets to joint ventures, other partnerships, corporations or other business
entities in which it is or thereby becomes a participant upon such terms and
subject to such conditions consistent with this Agreement and applicable law as
the General Partner, in its sole and absolute discretion, believes are
advisable.
C. Except as expressly permitted by this Agreement, neither the General
Partner nor any of its Affiliates shall sell, transfer or convey any property
to, or purchase any property from, the Partnership, directly or indirectly,
except pursuant to transactions that are determined by the General Partner in
good faith to be fair and reasonable.
D. The General Partner, in its sole and absolute discretion and without
the approval of the Limited Partners, may propose and adopt, on behalf of the
Partnership, employee benefit plans, stock option plans, and similar plans
funded by the Partnership for the benefit of employees of the General Partner,
the Partnership, Subsidiaries of the Partnership or any Affiliate of any of them
in respect of services performed, directly or indirectly, for the benefit of the
Partnership, the General Partner, or any Subsidiaries of the Partnership.
E. The General Partner is expressly authorized to enter into, in the
name and on behalf of the Partnership, a right of first opportunity arrangement
and other conflict avoidance agreements with various Affiliates of the
Partnership and the General Partner, on such terms as the General Partner, in
its sole and absolute discretion, believes are advisable.
Section 7.7 Indemnification
A. To the fullest extent permitted by Delaware law, the Partnership
shall indemnify each Indemnitee from and against any and all losses, claims,
damages, liabilities, joint or several, expenses (including, without limitation,
attorneys fees and other legal fees and expenses), judgments, fines,
settlements, and other amounts arising from any and all claims, demands,
actions, suits or proceedings, civil, criminal, administrative or investigative,
that relate to the operations of the Partnership or the Company as set forth in
this Agreement, in which such Indemnitee may be involved, or is threatened to be
involved, as a party or otherwise. Without limitation, the foregoing indemnity
shall extend to any liability of any Indemnitee, pursuant to a loan guaranty or
otherwise for any indebtedness of the Partnership or any Subsidiary of the
Partnership (including without limitation, any indebtedness which the
Partnership or any Subsidiary of the Partnership has assumed or taken subject
to), and the General Partner is hereby authorized and empowered, on behalf of
the Partnership, to enter into one or more indemnity agreements consistent with
the provisions of this Section 7.7 in favor of any Indemnitee having or
potentially having liability for any such indebtedness. Any
25
<PAGE>
indemnification pursuant to this Section 7.7 shall be made only out of the
assets of the Partnership, and neither the General Partner nor any Limited
Partner shall have any obligation to contribute to the capital of the
Partnership, or otherwise provide funds, to enable the Partnership to fund its
obligations under this Section 7.7.
B. Reasonable expenses incurred by an Indemnitee who is a party to a
proceeding shall be paid or reimbursed by the Partnership in advance of the
final disposition of the proceeding.
C. The indemnification provided by this Section 7.7 shall be in
addition to any other rights to which an Indemnitee or any other Person may be
entitled under any agreement, pursuant to any vote of the Partners, as a matter
of law or otherwise, and shall continue as to an Indemnitee who has ceased to
serve in such capacity unless otherwise provided in a written agreement pursuant
to which such Indemnities are indemnified.
D. The Partnership may, but shall not be obligated to, purchase and
maintain insurance, on behalf of the Indemnities and such other Persons as the
General Partner shall determine, against any liability that may be asserted
against or expenses that may be incurred by such Person in connection with the
Partnership's activities, regardless of whether the Partnership would have the
power to indemnify such Person against such liability under the provisions of
this Agreement.
E. For purposes of this Section 7.7, the Partnership shall be deemed to
have requested an Indemnitee to serve as fiduciary of an employee benefit plan
whenever the performance by it of its duties to the Partnership also imposes
duties on, or otherwise involves services by, it to the plan or participants or
beneficiaries of the plan; excise taxes assessed on an Indemnitee with respect
to an employee benefit plan pursuant to applicable law shall constitute fines
within the meaning of Section 7.7; and actions taken or omitted by the
Indemnitee with respect to an employee benefit plan in the performance of its
duties for a purpose reasonably believed by it to be in the interest of the
participants and beneficiaries of the plan shall be deemed to be for a purpose
which is not opposed to the best interests of the Partnership.
F. In no event may an Indemnitee subject any of the Partners to
personal liability by reason of the indemnification provisions set forth in this
Agreement.
G. An Indemnitee shall not be denied indemnification in whole or in
part under this Section 7.7 because the Indemnitee had an interest in the
transaction with respect to which the indemnification applies if the transaction
was otherwise permitted by the terms of this Agreement.
H. The provisions of this Section 7.7 are for the benefit of the
Indemnities, their heirs, successors, assigns and administrators and shall not
be deemed to create any rights for
26
<PAGE>
the benefit of any other Persons. Any amendment, modification or repeal of this
Section 7.7 or any provision hereof shall be prospective only and shall not in
any way affect the Partnership's liability to any Indemnitee under this Section
7.7, as in effect immediately prior to such amendment, modification, or repeal
with respect to claims arising from or relating to matters occurring, in whole
or in part, prior to such amendment, modification or repeal, regardless of when
such claims may arise or be asserted.
Section 7.8 Liability of the General Partner
A. Notwithstanding anything to the contrary set forth in this
Agreement, the General Partner and its officers and directors shall not be
liable for monetary damages to the Partnership, any Partners or any Assignees
for losses sustained or liabilities incurred as a result of errors in judgment
or of any act or omission if the General Partner acted in good faith.
B. The Limited Partners expressly acknowledge that the General Partner
is acting on behalf of the Partnership and the shareholders of the Company
collectively, that the General Partner is under no obligation to consider the
separate interests of the Limited Partners (except as otherwise provided herein)
in deciding whether to cause the Partnership to take (or decline to take) any
actions, and that the General Partner shall not be liable for monetary damages
for losses sustained, liabilities incurred, or benefits not derived by Limited
Partners in connection with such decisions, provided that the General Partner
has acted in good faith.
C. Subject to its obligations and duties as General Partner set forth
in Section 7.1.A hereof, the General Partner may exercise any of the powers
granted to it by this Agreement and perform any of the duties imposed upon it
hereunder either directly or by or through its agents. The General Partner shall
not be responsible for any misconduct or negligence on the part of any such
agent appointed by the General Partner in good faith.
D. Any amendment, modification or repeal of this Section 7.8 or any
provision hereof shall be prospective only and shall not in any way affect the
limitations on the General Partner's and its officers' and directors' liability
to the Partnership and the Limited Partners under this Section 7.8 as in effect
immediately prior to such amendment, modification or repeal with respect to
claims arising from or relating to matters occurring, in whole or in part, prior
to such amendment, modification or repeal, regardless of when such claims may
arise or be asserted.
Section 7.9 Other Matters Concerning the General Partner
A. The General Partner may rely and shall be protected in acting, or
refraining from acting, upon any resolution, certificate, statement, instrument,
opinion, report, notice, request, consent, order, bond, debenture, or other
paper or document believed by it in good faith to be genuine and to have been
signed or presented by the proper party or parties.
27
<PAGE>
B. The General Partner may consult with legal counsel, accountants,
appraisers, management consultants, investment bankers, architects, engineers,
environmental consultants and other consultants and advisers selected by it, and
any act taken or omitted to be taken in reliance upon the opinion of such
Persons as to matters which such General Partner reasonably believes to be
within such Person's professional or expert competence shall be conclusively
presumed to have been done or omitted in good faith and in accordance with such
opinion.
C. The General Partner shall have the right, in respect of any of its
powers or obligations hereunder, to act through any of its duly authorized
officers and duly appointed attorneys-in-fact. Each such attorney shall, to the
extent provided by the General Partner in the power of attorney, have full power
and authority to do and perform all and every act and duty which is permitted or
required to be done by the General Partner hereunder.
D. Notwithstanding any other provisions of this Agreement or the Act,
any action of the General Partner on behalf of the Partnership or any decision
of the General Partner to refrain from acting on behalf of the Partnership,
undertaken in the good faith belief that such action or omission is necessary or
advisable in order (i) to protect the ability of the Company to continue to
qualify as a REIT; or (ii) to avoid the Company incurring any taxes under
Section 857 or Section 4981 of the Code, is expressly authorized under this
Agreement and is deemed approved by all of the Limited Partners.
Section 7.10 Title to Partnership Assets
Title to Partnership assets, whether real, personal or mixed and
whether tangible or intangible, shall be deemed to be owned by the Partnership
as an entity, and no Partner, individually or collectively, shall have any
ownership interest in such Partnership assets or any portion thereof. Title to
any or all of the Partnership assets may be held in the name of the Partnership,
the General Partner or one or more nominees, as the General Partner may
determine, including Affiliates of the General Partner. The General Partner
hereby declares and warrants that any Partnership assets for which legal title
is held in the name of the General Partner or any nominee or Affiliate of the
General Partner shall be held by the General Partner for the use and benefit of
the Partnership in accordance with the provisions of this Agreement; provided,
however,that the General Partner shall use its best efforts to cause beneficial
and record title to such assets to be vested in the Partnership as soon as
reasonably practicable. All Partnership assets shall be recorded as the property
of the Partnership in its books and records, irrespective of the name in which
legal title to such Partnership assets is held.
Section 7.11 Reliance by Third Parties
Notwithstanding anything to the contrary in this Agreement, any Person
dealing with the Partnership shall be entitled to assume that the General
Partner has full power and authority, without consent or approval of any other
Partner or Person, to encumber, sell or otherwise use in any manner any and all
assets of the Partnership and to enter into any
28
<PAGE>
contracts on behalf of the Partnership, and take any and all actions on behalf
of the Partnership and such Person shall be entitled to deal with the General
Partner as if the General Partner were the Partnership's sole party in interest,
both legally and beneficially. Each Limited Partner hereby waives any and all
defenses or other remedies which may be available against such Person to
contest, negate or disaffirm any action of the General Partner in connection
with any such dealing. In no event shall any Person dealing with the General
Partner or its representatives be obligated to ascertain that the terms of this
Agreement have been complied with or to inquire into the necessity or expedience
of any act or action of the General Partner or its representatives. Each and
every certificate, document or other instrument executed on behalf of the
Partnership by the General Partner or its representatives shall be conclusive
evidence in favor of any and every Person relying thereon or claiming thereunder
that (i) at the time of the execution and delivery of such certificate, document
or instrument, this Agreement was in full force and effect; (ii) the Person
executing and delivering such certificate, document or instrument was duly
authorized and empowered to do so for and on behalf of the Partnership; and
(iii) such certificate, document or instrument was duly executed and delivered
in accordance with the terms and provisions of this Agreement and is binding
upon the Partnership.
ARTICLE 8
RIGHTS AND OBLIGATIONS OF LIMITED PARTNERS
Section 8.1 Limitation of Liability
The Limited Partners shall have no liability under this Agreement
except as expressly provided in this Agreement, including Section 10.5 hereof,
or under the Act.
Section 8.2 Management of Business
No Limited Partner or Assignee (other than the General Partner, any of
its Affiliates or any officer, director, employee, agent or trustee of the
General Partner, the Partnership or any of their Affiliates, in their capacity
as such) shall take part in the operation, management or control (within the
meaning of the Act) of the Partnership's business, transact any business in the
Partnership's name or have the power to sign documents for or otherwise bind the
Partnership. The transaction of any such business by the General Partner, any of
its Affiliates or any officer, director, employee, partner, agent or trustee of
the General Partner, the Partnership or any of their Affiliates, in their
capacity as such, shall not affect, impair or eliminate the limitations on the
liability of the Limited Partners or Assignees under this Agreement.
29
<PAGE>
Section 8.3 Outside Activities of Limited Partners
Subject to any agreements entered into pursuant to Section 7.6.E hereof
and any other agreements entered into by a Limited Partner or its Affiliates
with the Partnership or any of its Subsidiaries, any Limited Partner (other than
the Company) and any officer, director, employee, agent, trustee, Affiliate or
shareholder of any Limited Partner (other than the Company) shall be entitled to
and may have business interests and engage in business activities in addition to
those relating to the Partnership, including business interests and activities
that are in direct competition with the Partnership or that are enhanced by the
activities of the Partnership. Neither the Partnership nor any Partners shall
have any rights by virtue of this Agreement in any business ventures of any
Limited Partner or Assignee. None of the Limited Partners (other than the
Company) nor any other Person shall have any rights by virtue of this Agreement
or the Partnership relationship established hereby in any business ventures of
any other Person and such Person shall have no obligation pursuant to this
Agreement to offer any interest in any such business ventures to the
Partnership, any Limited Partner or any such other Person, even if such
opportunity is of a character which, if presented to the Partnership, any
Limited Partner or such other Person, could be taken by such Person.
Section 8.4 Return of Capital
Except pursuant to the right of redemption set forth in Section 8.6, no
Limited Partner shall be entitled to the withdrawal or return of its Capital
Contribution, except to the extent of distributions made pursuant to this
Agreement or upon termination of the Partnership as provided herein. Except to
the extent provided by Exhibit C hereof or as otherwise expressly provided in
this Agreement, no Limited Partner or Assignee shall have priority over any
other Limited Partner or Assignee, either as to the return of Capital
Contributions or as to profits, losses or distributions.
Section 8.5 Rights of Limited Partners Relating to the
Partnership
A. In addition to the other rights provided by this Agreement or by the
Act, and except as limited by Section 8.5.C hereof, each Limited Partner shall
have the right, for a purpose reasonably related to such Limited Partner's
interest as a limited partner in the Partnership, upon written demand with a
statement of the purpose of such demand and at such Limited Partner's own
expense (including such copying and administrative charges as the General
Partner may establish from time to time):
(1) to obtain a copy of the most recent annual and
quarterly reports filed with the Securities and
Exchange Commission by the Company pursuant to the
Securities Exchange Act of 1934;
(2) to obtain a copy of the Partnership's federal, state
and local income tax returns for each Partnership
Year;
30
<PAGE>
(3) to obtain a current list of the name and last known
business, residence or mailing address of each
Partner;
(4) to obtain a copy of this Agreement and the
Certificate and all amendments thereto, together with
executed copies of all powers of attorney pursuant to
which this Agreement, the Certificate and all
amendments thereto have been executed; and
(5) to obtain true and full information regarding the
amount of cash and a description and statement of any
other property or services contributed by each
Partner and which each Partner has agreed to
contribute in the future, and the date on which each
became a Partner.
B. The Partnership shall notify each Limited Partner, upon request, of
the then current Conversion Factor.
C. Notwithstanding any other provision of this Section 8.5, the General
Partner may keep confidential from the Limited Partners, for such period of time
as the General Partner determines in its sole and absolute discretion to be
reasonable, any information that (i) the General Partner reasonably believes to
be in the nature of trade secrets or other information, the disclosure of which
the General Partner in good faith believes is not in the best interests of the
Partnership or could damage the Partnership or its business; or (ii) the
Partnership is required by law or by agreements with an unaffiliated third party
to keep confidential.
Section 8.6 Redemption Right
A. Subject to Sections 8.6.B and 8.6.C hereof, on or after the date one
(1) year after the closing of the initial public offering of REIT Shares by the
Company, each Limited Partner (other than the Company) shall have the right (the
"Redemption Right") to require the Partnership to redeem on a Specified
Redemption Date all or a portion of the Partnership Units held by such Limited
Partner at a redemption price per Unit equal to and in the form of the Cash
Amount to be paid by the Partnership. The Redemption Right shall be exercised
pursuant to a Notice of Redemption delivered to the Partnership (with a copy to
the Company) by the Limited Partner who is exercising the redemption right (the
"Redeeming Partner"); provided, however, that the Partnership shall not be
obligated to satisfy such Redemption Right if the Company elects to purchase the
Partnership Units subject to the Notice of Redemption pursuant to Section 8.6.B.
A Limited Partner may not exercise the Redemption Right for less than one
thousand (1,000) Partnership Units or, if such Limited Partner holds less than
one thousand (1,000) Partnership Units, all of the Partnership Units held by
such Partner. The Redeeming Partner shall have no right, with respect to any
Partnership Units so redeemed, to receive any distributions paid on or after the
Specified Redemption Date. The Assignee of any Limited Partner may exercise the
rights of such Limited Partner pursuant to
31
<PAGE>
this Section 8.6, and such Limited Partner shall be deemed to have assigned such
rights to such Assignee and shall be bound by the exercise of such rights by
such Assignee. In connection with any exercise of such rights by an Assignee on
behalf of a Limited Partner, the Cash Amount shall be paid by the Partnership
directly to such Assignee and not to such Limited Partner.
B. Notwithstanding the provisions of Section 8.6.A, a Limited Partner
that exercises the Redemption Right shall be deemed to have offered to sell the
Partnership Units described in the Notice of Redemption to the Company, and the
Company may, in its sole and absolute discretion, elect to purchase directly and
acquire such Partnership Units by paying to the Redeeming Partner either the
Cash Amount or the REIT Shares Amount, as elected by the Company (in its sole
and absolute discretion), on the Specified Redemption Date, whereupon the
Company shall acquire the Partnership Units offered for redemption by the
Redeeming Partner and shall be treated for all purposes of this Agreement as the
owner of such Partnership Units. If the Company shall elect to exercise its
right to purchase Partnership Units under this Section 8.6.B with respect to a
Notice of Redemption, it shall so notify the Redeeming Partner within five
Business Days after the receipt by it of such Notice of Redemption. Unless the
Company (in its sole and absolute discretion) shall exercise its right to
purchase Partnership Units from the Redeeming Partner pursuant to this Section
8.6.B, the Company shall not have any obligation to the Redeeming Partner or the
Partnership with respect to the Redeeming Partner's exercise of the Redemption
Right. In the event the Company shall exercise its right to purchase Partnership
Units with respect to the exercise of a Redemption Right in the manner described
in the first sentence of this Section 8.6.B, the Partnership shall have no
obligation to pay any amount to the Redeeming Partner with respect to such
Redeeming Partner's exercise of such Redemption Right, and each of the Redeeming
Partner, the Partnership, and the Company shall treat the transaction between
the Company and the Redeeming Partner, for federal income tax purposes, as a
sale of the Redeeming Partner's Partnership Units to the Company. Each Redeeming
Partner agrees to execute such documents as the Company may reasonably require
in connection with the issuance of REIT Shares upon exercise of the Redemption
Right.
C. Notwithstanding the provisions of Section 8.6.A and Section 8.6.B, a
Partner shall not be entitled to exercise the Redemption Right pursuant to
Section 8.6.A if the delivery of REIT Shares to such Partner on the Specified
Redemption Date by the Company pursuant to Section 8.6.B (regardless of whether
or not the Company would in fact exercise its rights under Section 8.6.B) would
be prohibited under the Articles of Incorporation of the Company.
32
<PAGE>
ARTICLE 9
BOOKS, RECORDS, ACCOUNTING AND REPORTS
Section 9.1 Records and Accounting
The General Partner shall keep or cause to be kept at the principal
office of the Partnership those records and documents required to be maintained
by the Act and other books and records deemed by the General Partner to be
appropriate with respect to the Partnership's business, including, without
limitation, all books and records necessary to provide to the Limited Partners
any information, lists and copies of documents required to be provided pursuant
to Section 9.3 hereof. Any records maintained by or on behalf of the Partnership
in the regular course of its business may be kept on, or be in the form of,
punch cards, magnetic tape, photographs, micrographics or any other information
storage device, provided that the records so maintained are convertible into
clearly legible written form within a reasonable period of time. The books of
the Partnership shall be maintained, for financial and tax reporting purposes,
on an accrual basis in accordance with generally accepted accounting principles,
or such other basis as the General Partner determines to be necessary or
appropriate.
Section 9.2 Fiscal Year
The fiscal year of the Partnership shall be the calendar year.
Section 9.3 Reports
A. As soon as practicable, but in no event later than one hundred five
(105) days after the close of each Partnership Year, the General Partner shall
cause to be mailed to each Limited Partner as of the close of the Partnership
Year, an annual report containing financial statements of the Partnership, or of
the Company if such statements are prepared solely on a consolidated basis with
the Company, for such Partnership Year, presented in accordance with generally
accepted accounting principles, such statements to be audited by a nationally
recognized firm of independent public accountants selected by the General
Partner.
B. As soon as practicable, but in no event later than one hundred five
(105) days after the close of each calendar quarter (except the last calendar
quarter of each year), the General Partner shall cause to be mailed to each
Limited Partner as of the last day of the calendar quarter, a report containing
unaudited financial statements of the Partnership, or of the Company, if such
statements are prepared solely on a consolidated basis with the Company, and
such other information as may be required by applicable law or regulation, or as
the General Partner determines to be appropriate.
33
<PAGE>
ARTICLE 10
TAX MATTERS
Section 10.1 Preparation of Tax Returns
The General Partner shall arrange for the preparation and timely filing
of all returns of Partnership income, gains, deductions, losses and other items
required of the Partnership for federal and state income tax purposes and shall
use all reasonable efforts to furnish, within ninety (90) days of the close of
each taxable year, the tax information reasonably required by Limited Partners
for federal and state income tax reporting purposes.
Section 10.2 Tax Elections
Except as otherwise provided herein, the General Partner shall, in its
sole and absolute discretion, determine whether to make any available election
pursuant to the Code. Notwithstanding the above, in making any such tax election
the General Partner shall take into account the tax consequences to the Limited
Partners resulting from any such election. The General Partner shall make such
tax elections on behalf of the Partnership as the Limited Partners holding a
majority of the Percentage Interests of the Limited Partners (excluding Limited
Partner Interests held by the Company) request, provided that the General
Partner believes that such election is not adverse to the interests of the
General Partner, including its interest in preserving its qualification as a
REIT under the Code. The General Partner intends to elect the so-called
"traditional method" of making Section 704(c) allocations pursuant to
Regulations Section 1.704-3 with respect to property contributed as of the date
hereof. The General Partner shall have the right to seek to revoke any tax
election it makes (including, without limitation, the election under Section 754
of the Code) upon the General Partner's determination, in its sole and absolute
discretion, that such revocation is in the best interests of the Partners.
Section 10.3 Tax Matters Partner
A. The General Partner shall be the "tax matters partner" of the
Partnership for federal income tax purposes. Pursuant to Section 6230(e) of the
Code, upon receipt of notice from the IRS of the beginning of an administrative
proceeding with respect to the Partnership, the tax matters partner shall
furnish the IRS with the name, address, taxpayer identification number, and
profit interest of each of the Limited Partners and the Assignees; provided,
however, that such information is provided to the Partnership by the Limited
Partners and the Assignees.
B. The tax matters partner is authorized, but not required:
(1) to enter into any settlement with the IRS with
respect to any administrative or judicial proceedings
for the adjustment of Partnership
34
<PAGE>
items required to be taken into account by a Partner
for income tax purposes (such administrative
proceedings being referred to as a "tax audit" and
such judicial proceedings being referred to as
"judicial review"), and in the settlement agreement
the tax matters partner may expressly state that such
agreement shall bind all Partners, except that such
settlement agreement shall not bind any Partner (i)
who (within the time prescribed pursuant to the Code
and Regulations) files a statement with the IRS
providing that the tax matters partner shall not have
the authority to enter into a settlement agreement on
behalf of such Partner; or (ii) who is a "notice
partner" (as defined in Section 6231(a)(8) of the
Code) or a member of a "notice group" (as defined in
Section 6223(b)(2) of the Code);
(2) in the event that a notice of a final administrative
adjustment at the Partnership level of any item
required to be taken into account by a Partner for
tax purposes (a "final adjustment") is mailed to the
tax matters partner, to seek judicial review of such
final adjustment, including the filing of a petition
for readjustment with the Tax Court or the filing of
a complaint for refund with the United States Claims
Court or the District Court of the United States for
the district in which the Partnership's principal
place of business is located;
(3) to intervene in any action brought by any other
Partner for judicial review of a final adjustment;
(4) to file a request for an administrative adjustment
with the IRS and, if any part of such request is not
allowed by the IRS, to file an appropriate pleading
(petition or complaint) for judicial review with
respect to such request;
(5) to enter into an agreement with the IRS to extend the
period for assessing any tax which is attributable to
any item required to be taken account of by a Partner
for tax purposes, or an item affected by such item;
and
(6) to take any other action on behalf of the Partners or
the Partnership in connection with any tax audit or
judicial review proceeding to the extent permitted by
applicable law or regulations.
The taking of any action and the incurring of any expense by the tax
matters partner in connection with any such proceeding, except to the extent
required by law, is a matter in the sole and absolute discretion of the tax
matters partner and the provisions relating to
35
<PAGE>
indemnification of the General Partner set forth in Section 7.7 of this
Agreement shall be fully applicable to the tax matters partner in its capacity
as such.
C. The tax matters partner shall receive no compensation for its
services. All third party costs and expenses incurred by the tax matters partner
in performing its duties as such (including legal and accounting fees and
expenses) shall be borne by the Partnership. Nothing herein shall be construed
to restrict the Partnership from engaging an accounting firm to assist the tax
matters partner in discharging its duties hereunder, so long as the compensation
paid by the Partnership for such services is reasonable.
Section 10.4 Organizational Expenses
The Partnership shall elect to deduct expenses, if any, incurred by it
in organizing the Partnership ratably over a sixty (60) month period as provided
in Section 709 of the Code.
Section 10.5 Withholding
Each Limited Partner hereby authorizes the Partnership to withhold
from, or pay on behalf of or with respect to, such Limited Partner any amount of
federal, state, local, or foreign taxes that the General Partner determines that
the Partnership is required to withhold or pay with respect to any amount
distributable or allocable to such Limited Partner pursuant to this Agreement,
including, without limitation, any taxes required to be withheld or paid by the
Partnership pursuant to Sections 1441, 1442, 1445, or 1446 of the Code. Any
amount paid on behalf of or with respect to a Limited Partner shall constitute a
loan by the Partnership to such Limited Partner, which loan shall be repaid by
such Limited Partner within fifteen (15) days after notice from the General
Partner that such payment must be made unless (i) the Partnership withholds such
payment from a distribution which would otherwise be made to the Limited
Partner; or (ii) the General Partner determines, in its sole and absolute
discretion, that such payment may be satisfied out of the available funds of the
Partnership which would, but for such payment, be distributed to the Limited
Partner. Any amounts withheld pursuant to the foregoing clauses (i) or (ii)
shall be treated as having been distributed to such Limited Partner. Each
Limited Partner hereby unconditionally and irrevocably grants to the Partnership
a security interest in such Limited Partner's Partnership Interest to secure
such Limited Partner's obligation to pay to the Partnership any amounts required
to be paid pursuant to this Section 10.5. In the event that a Limited Partner
fails to pay any amounts owed to the Partnership pursuant to this Section 10.5
when due, the General Partner may, in its sole and absolute discretion, elect to
make the payment to the Partnership on behalf of such defaulting Limited
Partner, and in such event shall be deemed to have loaned such amount to such
defaulting Limited Partner and shall succeed to all rights and remedies of the
Partnership as against such defaulting Limited Partner. Without limitation, in
such event the General Partner shall have the right to receive distributions
that would otherwise be distributable to such defaulting Limited Partner until
such time as such loan, together with all interest thereon, has been paid in
full, and any such distributions so received by the General Partner shall be
36
<PAGE>
treated as having been distributed to the defaulting Limited Partner and
immediately paid by the defaulting Limited Partner to the General Partner in
repayment of such loan. Any amounts payable by a Limited Partner hereunder shall
bear interest at the lesser of (A) the base rate on corporate loans at large
United States money center commercial banks, as published from time to time in
the Wall Street Journal, plus four (4) percentage points, or (B) the maximum
lawful rate of interest on such obligation, such interest to accrue from the
date such amount is due (i.e., fifteen (15) days after demand) until such amount
is paid in full. Each Limited Partner shall take such actions as the Partnership
or the General Partner shall request in order to perfect or enforce the security
interest created hereunder.
ARTICLE 11
TRANSFERS AND WITHDRAWALS
Section 11.1 Transfer
A. The term "transfer," when used in this Article 11 with respect to a
Partnership Unit, shall be deemed to refer to a transaction by which the General
Partner purports to assign all or any part of its General Partner Interest to
another Person or by which a Limited Partner purports to assign all or any part
of its Limited Partner Interest to another Person, and includes a sale,
assignment, gift, pledge, encumbrance, hypothecation, mortgage, exchange or any
other disposition by law or otherwise. The term "transfer" when used in this
Article 11 does not include any redemption of Partnership Interests by the
Partnership from a Limited Partner or any acquisition of Partnership Units from
a Limited Partner by the Company pursuant to Section 8.6.
B. No Partnership Interest shall be transferred, in whole or in part,
except in accordance with the terms and conditions set forth in this Article 11.
Any transfer or purported transfer of a Partnership Interest not made in
accordance with this Article 11 shall be null and void.
Section 11.2 Transfer of the Company's General Partner Interest and
Limited Partner Interest
The Company may not transfer any of its General Partner Interest or
withdraw as General Partner, or transfer any of its Limited Partner Interest,
unless Limited Partners holding a majority of the Percentage Interests of the
Limited Partners (other than Limited Partner Interests held by the Company)
consent to such transfer or withdrawal or such transfer is to an entity which is
wholly-owned by the Company and is a Qualified REIT Subsidiary under Section
856(i) of the Code.
37
<PAGE>
Section 11.3 Limited Partners' Rights to Transfer
A. Subject to the provisions of Sections 11.3.C, 11.3.D, 11.3.E, and
11.4, a Limited Partner (other than the Company) may transfer, with or without
the consent of the General Partner, all or any portion of its Partnership
Interest, or any of such Limited Partner's economic rights as a Limited Partner.
B. If a Limited Partner is subject to Incapacity, the executor,
administrator, trustee, committee, guardian, conservator or receiver of such
Limited Partner's estate shall have all of the rights of a Limited Partner, but
not more rights than those enjoyed by other Limited Partners, for the purpose of
settling or managing the estate and such power as the Incapacitated Limited
Partner possessed to transfer all or any part of his or its interest in the
Partnership. The Incapacity of a Limited Partner, in and of itself, shall not
dissolve or terminate the Partnership.
C. The General Partner may prohibit any transfer by a Limited Partner
of its Partnership Units if, in the opinion of legal counsel to the Partnership,
such transfer would require filing of a registration statement under the
Securities Act of 1933 or would otherwise violate any federal or state
securities laws or regulations applicable to the Partnership or the Partnership
Units.
D. No transfer by a Limited Partner of its Partnership Units may be
made to any Person if (i) in the opinion of legal counsel for the Partnership,
it would result in the Partnership being treated as an association taxable as a
corporation; (ii) it is made within one year after the consummation of the
initial public offering of the Company; (iii) such transfer is effectuated
through an "established securities market" or a "secondary market (or the
substantial equivalent thereof)" with the meaning of Section 7704 of the Code;
(iv) such transfer would cause the Partnership to become, with respect to any
employee benefit plan subject to Title I of ERISA, a "party-in-interest" (as
defined in Section 3(14) of ERISA) or a "disqualified person" (as defined in
Section 4975(c) of the Code); (v) such transfer would, in the opinion of legal
counsel for the Partnership, cause any portion of the assets of the Partnership
to constitute assets of any employee benefit plan pursuant to Department of
Labor Regulations Section 2510.2-101; or (vi) such transfer would subject the
Partnership to be regulated under the Investment Company Act of 1940, the
Investment Advisors Act of 1940 or the Employee Retirement Income Security Act
of 1974, each as amended.
E. No transfer of any Partnership Units may be made to a lender to the
Partnership or any Person who is related (within the meaning of Section
1.752-4(b) of the Regulations) to any lender to the Partnership whose loan
constitutes a Nonrecourse Liability, without the consent of the General Partner,
in its sole and absolute discretion; provided that as a condition to such
consent the lender will be required to enter into an arrangement with the
Partnership and the General Partner to redeem for the Cash Amount any
Partnership Units in which a security interest is held simultaneously with the
time at which such lender would be deemed to
38
<PAGE>
be a partner in the Partnership for purposes of allocating liabilities to such
lender under Section 752 of the Code.
Section 11.4 Substituted Limited Partners
A. No Limited Partner shall have the right to substitute a transferee
as a Limited Partner in his place. The General Partner shall, however, have the
right to consent to the admission of a transferee of the interest of a Limited
Partner pursuant to this Section 11.4 as a Substituted Limited Partner, which
consent may be given or withheld by the General Partner in its sole and absolute
discretion. The General Partner's failure or refusal to permit a transferee of
any such interests to become a Substituted Limited Partner shall not give rise
to any cause of action against the Partnership or any Partner.
B. A transferee who has been admitted as a Substituted Limited Partner
in accordance with this Article 11 shall have all the rights and powers and be
subject to all the restrictions and liabilities of a Limited Partner under this
Agreement.
C. Upon the admission of a Substituted Limited Partner, the General
Partner shall amend Exhibit A to reflect the name, address, number of
Partnership Units, and Percentage Interest of such Substituted Limited Partner
and to eliminate or adjust, if necessary, the name, address and interest of the
predecessor of such Substituted Limited Partner.
Section 11.5 Assignees
If the General Partner, in its sole and absolute discretion, does not
consent to the admission of any permitted transferee as a Substituted Limited
Partner, as described in Section 11.4, such transferee shall be considered an
Assignee for purposes of this Agreement. An Assignee shall be deemed to have had
assigned to it, and shall be entitled to receive distributions from the
Partnership and the share of Net Income, Net Losses, Recapture Income, and any
other items, gain, loss deduction and credit of the Partnership attributable to
the Partnership Units assigned to such transferee, but shall not be deemed to be
a holder of Partnership Units for any other purpose under this Agreement, and
shall not be entitled to vote such Partnership Units in any matter presented to
the Limited Partners for a vote (such Partnership Units being deemed to have
been voted on such matter in the same proportion as all other Partnership Units
held by Limited Partners are voted). In the event any such transferee desires to
make a further assignment of any such Partnership Units, such transferee shall
be subject to all of the provisions of this Article 11 to the same extent and in
the same manner as any Limited Partner desiring to make an assignment of
Partnership Units.
39
<PAGE>
Section 11.6 General Provisions
A. No Limited Partner may withdraw from the Partnership other than as a
result of a permitted transfer of all of such Limited Partner's Partnership
Units in accordance with this Article 11 or pursuant to redemption of all of its
Partnership Units under Section 8.6.
B. Any Limited Partner who shall transfer all of its Partnership Units
in a transfer permitted pursuant to this Article 11 shall cease to be a Limited
Partner upon the admission of all Assignees of such Partnership Units as
Substitute Limited Partners. Similarly, any Limited Partner who shall transfer
all of its Partnership Units pursuant to a redemption of all of its Partnership
Units under Section 8.6 shall cease to be a Limited Partner.
C. Transfers pursuant to this Article 11 may only be made on the first
day of a fiscal quarter of the Partnership, unless the General Partner otherwise
agrees.
D. If any Partnership Interest is transferred or assigned during any
quarterly segment of the Partnership's fiscal year in compliance with the
provisions of this Article 11 or redeemed or transferred pursuant to Section 8.6
on any day other than the first day of a Partnership Year, then Net Income, Net
Losses, each item thereof and all other items attributable to such interest for
such Partnership Year shall be divided and allocated between the transferor
Partner and the transferee Partner by taking into account their varying
interests during the Partnership Year in accordance with Section 706(d) of the
Code, using the interim closing of the books method. Solely for purposes of
making such allocations, each of such items for the calendar month in which the
transfer or assignment occurs shall be allocated to the transferee Partner, and
none of such items for the calendar month in which a redemption occurs shall be
allocated to the Redeeming Partner; provided, however, that the General Partner
may adopt such other conventions relating to allocations in connection with
transfers, assignments or redemptions as it determines are necessary or
appropriate. All distributions of Available Cash attributable to such
Partnership Unit with respect to which the Partnership Record Date is before the
date of such transfer, assignment, or redemption shall be made to the transferor
Partner or the Redeeming Partner, as the case may be, and in the case of a
transfer or assignment other than a redemption, all distributions of Available
Cash thereafter attributable to such Partnership Unit shall be made to the
transferee Partner.
ARTICLE 12
ADMISSION OF PARTNERS
Section 12.1 Admission of Successor General Partner
A successor to all of the General Partner Interest pursuant to Section
11.2 hereof who is proposed to be admitted as a successor General Partner shall
be admitted to the Partnership as the General Partner, effective upon such
transfer. Any such transferee shall carry on the
40
<PAGE>
business of the Partnership without dissolution. In each case, the admission
shall be subject to the successor General Partner executing and delivering to
the Partnership an acceptance of all of the terms and conditions of this
Agreement and such other documents or instruments as may be required to effect
the admission. In the case of such admission on any day other than the first day
of a Partnership Year, all items attributable to the General Partner Interest
for such Partnership Year shall be allocated between the transferring General
Partner and such successor as provided in Section 11.6.D hereof.
Section 12.2 Admission of Additional Limited Partners
A. After the admission to the Partnership of the initial Limited
Partners on the date hereof, a Person who makes a Capital Contribution to the
Partnership in accordance with this Agreement shall be admitted to the
Partnership as an Additional Limited Partner only upon furnishing to the General
Partner (i) evidence of acceptance in form satisfactory to the General Partner
of all of the terms and conditions of this Agreement, including, without
limitation, the power of attorney granted in Section 2.4 hereof and (ii) such
other documents or instruments as may be required in the discretion of the
General Partner in order to effect such Person's admission as an Additional
Limited Partner.
B. Notwithstanding anything to the contrary in this Section 12.2, no
Person shall be admitted as an Additional Limited Partner without the consent of
the General Partner, which consent may be given or withheld in the General
Partner's sole and absolute discretion. The admission of any Person as an
Additional Limited Partner shall become effective on the date upon which the
name of such Person is recorded on the books and records of the Partnership,
following the consent of the General Partner to such admission.
C. If any Additional Limited Partner is admitted to the Partnership on
any day other than the first day of a Partnership Year, then Net Income, Net
Losses, each item thereof and all other items allocable among Partners and
Assignees for such Partnership Year shall be allocated among such Additional
Limited Partner and all other Partners and Assignees by taking into account
their varying interests during the Partnership Year in accordance with Section
706(d) of the Code, using the interim closing of the books method. Solely for
purposes of making such allocations, each such item for the calendar month in
which an admission of any Additional Limited Partner occurs shall be allocated
among all of the Partners and Assignees, including such Additional Limited
Partner; provided, however, that the General Partner may adopt such other
conventions relating to allocations to Additional Limited Partners as it
determines are necessary or appropriate. All distributions of Available Cash
with respect to which the Partnership Record Date is before the date of such
admission shall be made solely to Partners and Assignees, other than the
Additional Limited Partner, and all distributions of Available Cash thereafter
shall be made to all of the Partners and Assignees, including such Additional
Limited Partner.
41
<PAGE>
Section 12.3 Amendment of Agreement and Certificate of Limited
Partnership
For the admission to the Partnership of any Partner, the General
Partner shall take all steps necessary and appropriate under the Act to amend
the records of the Partnership and, if necessary, to prepare as soon as
practical an amendment of this Agreement (including an amendment of Exhibit A)
and, if required by law, shall prepare and file an amendment to the Certificate
and may for this purpose exercise the power of attorney granted pursuant to
Section 2.4 hereof.
ARTICLE 13
DISSOLUTION, LIQUIDATION AND TERMINATION
Section 13.1 Dissolution
The Partnership shall not be dissolved by the admission of Substituted
Limited Partners or Additional Limited Partners or by the admission of a
successor General Partner in accordance with the terms of this Agreement. Upon
the withdrawal of the General Partner, any successor General Partner shall
continue the business of the Partnership. The Partnership shall dissolve, and
its affairs shall be wound up, only upon the first to occur of any of the
following ("Liquidating Events"):
A. the expiration of its term as provided in Section 2.5 hereof;
B. an event of withdrawal of the General Partner, as defined in the Act
(other than an event of bankruptcy), unless, within ninety (90) days after such
event of withdrawal a majority in interest of the remaining Partners agree in
writing to continue the business of the Partnership and to the appointment,
effective as of the date of withdrawal, of a successor General Partner;
C. from and after the date of this Agreement through December 31, 2053,
an election to dissolve the Partnership made by the General Partner with the
Consent of Partners holding 85% of the Percentage Interests of the Limited
Partners (including Limited Partner Interests held by the Company);
D. on or after January 1, 2054, an election to dissolve the Partnership
made by the General Partner, in its sole and absolute discretion;
E. entry of a decree of judicial dissolution of the Partnership
pursuant to the provisions of the Act;
F. the sale of all or substantially all of the assets and properties of
the Partnership; or
42
<PAGE>
G. a final and non-appealable judgment is entered by a court of
competent jurisdiction ruling that the General Partner is bankrupt or insolvent,
or a final and non-appealable order for relief is entered by a court with
appropriate jurisdiction against the General Partner, in each case under any
federal or state bankruptcy or insolvency laws as now or hereafter in effect,
unless prior to the entry of such order or judgment all of the remaining
Partners agree in writing to continue the business of the Partnership and to the
appointment, effective as of a date prior to the date of such order or judgment,
of a substitute General Partner.
Section 13.2 Winding Up
A. Upon the occurrence of a Liquidating Event, the Partnership shall
continue solely for the purposes of winding up its affairs in an orderly manner,
liquidating its assets, and satisfying the claims of its creditors and Partners.
No Partner shall take any action that is inconsistent with, or not necessary to
or appropriate for, the winding up of the Partnership's business and affairs.
The General Partner, or, in the event there is no remaining General Partner, any
Person elected by a majority in interest of the Limited Partners (the General
Partner or such other Person being referred to herein as the "Liquidator"),
shall be responsible for overseeing the winding up and dissolution of the
Partnership and shall take full account of the Partnership's liabilities and
property and the Partnership property shall be liquidated as promptly as is
consistent with obtaining the fair value thereof, and the proceeds therefrom
(which may, to the extent determined by the General Partner, include shares of
common stock in the Company) shall be applied and distributed in the following
order:
(1) First, to the payment and discharge of all of the
Partnership's debts and liabilities to creditors
other than the Partners;
(2) Second, to the payment and discharge of all of the
Partnership's debts and liabilities to the General
Partner;
(3) Third, to the payment and discharge of all of the
Partnership's debts and liabilities to the other
Partners; and
(4) The balance, if any, to the General Partner and
Limited Partners in accordance with their Capital
Accounts, after giving effect to all contributions,
distributions, and allocations for all periods.
The General Partner shall not receive any additional compensation for any
services performed pursuant to this Article 13.
B. Notwithstanding the provisions of Section 13.2.A hereof which
require liquidation of the assets of the Partnership, but subject to the order
of priorities set forth therein, if prior to or upon dissolution of the
Partnership the Liquidator determines that an
43
<PAGE>
immediate sale of part or all of the Partnership's assets would be impractical
or would cause undue loss to the Partners, the Liquidator may, in its sole and
absolute discretion, defer for a reasonable time the liquidation of any assets
except those necessary to satisfy liabilities of the Partnership (including to
those Partners as creditors) and/or distribute to the Partners, in lieu of cash,
as tenants in common and in accordance with the provisions of Section 13.2.A
hereof, undivided interests in such Partnership assets as the Liquidator deems
not suitable for liquidation. Any such distributions in kind shall be made only
if, in the good faith judgment of the Liquidator, such distributions in kind are
in the best interest of the Partners, and shall be subject to such conditions
relating to the disposition and management of such properties as the Liquidator
deems reasonable and equitable and to any agreements governing the operation of
such properties at such time. The Liquidator shall determine the fair market
value of any property distributed in kind using such reasonable method of
valuation as it may adopt.
C. In the discretion of the Liquidator, a pro rata portion of the
distributions that would otherwise be made to the General Partner and Limited
Partners pursuant to this Article 13 may be:
(1) distributed to a trust established for the benefit of
the General Partner and Limited Partners for the
purposes of liquidating Partnership assets,
collecting amounts owed to the Partnership, and
paying any contingent or unforeseen liabilities or
obligations of the Partnership or the General Partner
arising out of or in connection with the Partnership.
The assets of any such trust shall be distributed to
the General Partner and Limited Partners from time to
time, in the reasonable discretion of the Liquidator,
in the same proportions as the amount distributed to
such trust by the Partnership would otherwise have
been distributed to the General Partner and Limited
Partners pursuant to this Agreement; or
(2) withheld or escrowed to provide a reasonable reserve
for Partnership liabilities (contingent or otherwise)
and to reflect the unrealized portion of any
installment obligations owed to the Partnership,
provided that such withheld or escrowed amounts shall
be distributed to the General Partner and Limited
Partners in the manner and order of priority set
forth in Section 13.2.A as soon as practicable.
Section 13.3 Compliance with Timing Requirements of Regulations
In the event the Partnership is "liquidated" within the meaning of
Regulations Section 1.704-1(b)(2)(ii)(g), distributions shall be made pursuant
to this Article 13 to the General Partner and Limited Partners who have positive
Capital Accounts in compliance with Regulations Section 1.704-1(b)(2)(ii)(b)(2).
If any Partner has a deficit balance in his Capital Account (after giving effect
to all contributions, distributions and allocations for all taxable years,
including the year during which such liquidation occurs), such Partner shall
have no
44
<PAGE>
obligation to make any contribution to the capital of the Partnership with
respect to such deficit, and such deficit shall not be considered a debt owed to
the Partnership or to any other Person for any purpose whatsoever.
Section 13.4 Deemed Distribution and Recontribution
Notwithstanding any other provision of this Article 13, in the event
the Partnership is considered "liquidated" within the meaning of Regulations
Section 1.704-1(b)(2)(ii)(g), but no Liquidating Event has occurred, the
Partnership's property shall not be liquidated, the Partnership's liabilities
shall not be paid or discharged, and the Partnership's affairs shall not be
wound up. Instead, for federal income tax purposes and for purposes of
maintaining Capital Accounts pursuant to Exhibit B hereto, the Partnership shall
be deemed to have distributed the property in kind to the General Partner and
Limited Partners, who shall be deemed to have assumed and taken such property
subject to all Partnership liabilities, all in accordance with their respective
Capital Accounts. Immediately thereafter, the General Partner and Limited
Partners shall be deemed to have recontributed the Partnership property in kind
to the Partnership, which shall be deemed to have assumed and taken such
property subject to all such liabilities.
Section 13.5 Rights of Limited Partners
Except as otherwise provided in this Agreement, each Limited Partner
shall look solely to the assets of the Partnership for the return of its Capital
Contributions and shall have no right or power to demand or receive property
other than cash from the Partnership. Except as otherwise provided in this
Agreement, no Limited Partner shall have priority over any other Partner as to
the return of its Capital Contributions, distributions, or allocations.
Section 13.6 Notice of Dissolution
In the event a Liquidating Event occurs or an event occurs that would,
but for the provisions of an election or objection by one or more Partners
pursuant to Section 13.1, result in a dissolution of the Partnership, the
General Partner shall, within thirty (30) days thereafter, provide written
notice thereof to each of the Partners.
Section 13.7 Termination of Partnership and Cancellation of
Certificate of Limited Partnership
Upon the completion of the liquidation of the Partnership's assets, as
provided in Section 13.2 hereof, the Partnership shall be terminated, a
certificate of cancellation shall be filed, and all qualifications of the
Partnership as a foreign limited partnership in jurisdictions other than the
State of Delaware shall be cancelled and such other actions as may be necessary
to terminate the Partnership shall be taken.
45
<PAGE>
Section 13.8 Reasonable Time for Winding-Up
A reasonable time shall be allowed for the orderly winding-up of the
business and affairs of the Partnership and the liquidation of its assets
pursuant to Section 13.2 hereof, in order to minimize any losses otherwise
attendant upon such winding-up, and the provisions of this Agreement shall
remain in effect between the Partners during the period of liquidation.
Section 13.9 Waiver of Partition
Each Partner hereby waives any right to partition of the Partnership
property.
ARTICLE 14
AMENDMENT OF PARTNERSHIP AGREEMENT; MEETINGS
Section 14.1 Amendments
A. Amendments to this Agreement may be proposed by the General Partner
or by any Limited Partners (other than the Company) holding twenty percent (20%)
or more of the Partnership Interests. Following such proposal, the General
Partner shall submit any proposed amendment to the Limited Partners. The General
Partner shall seek the written vote of the Partners on the proposed amendment or
shall call a meeting to vote thereon and to transact any other business that it
may deem appropriate. For purposes of obtaining a written vote, the General
Partner may require a response within a reasonable specified time, but not less
than fifteen (15) days, and failure to respond in such time period shall
constitute a vote which is consistent with the General Partner's recommendation
with respect to the proposal. Except as provided in Section 7.3.A, 7.3.B,
13.1.C, 14.1.B, 14.1.C or 14.1.D, a proposed amendment shall be adopted and be
effective as an amendment hereto if it is approved by the General Partner and it
receives the Consent of Partners holding a majority of the Percentage Interests
of the Limited Partners (including Limited Partner Interests held by the
Company).
B. Notwithstanding Section 14.1.A, the General Partner shall have the
power, without the consent of the Limited Partners, to amend this Agreement as
may be required to facilitate or implement any of the following purposes:
(1) to add to the obligations of the General Partner or
surrender any right or power granted to the General
Partner or any Affiliate of the General Partner for
the benefit of the Limited Partners;
(2) to reflect the admission, substitution, termination,
or withdrawal of Partners in accordance with this
Agreement;
46
<PAGE>
(3) to set forth the designations, rights, powers,
duties, and preferences of the holders of any
additional Partnership Interests issued pursuant to
Section 4.2.A hereof;
(4) to reflect a change that is of an inconsequential
nature and does not adversely affect the Limited
Partners in any material respect, or to cure any
ambiguity, correct or supplement any provision in
this Agreement not inconsistent with law or with
other provisions, or make other changes with respect
to matters arising under this Agreement that will not
be inconsistent with law or with the provisions of
this Agreement; and
(5) to satisfy any requirements, conditions, or
guidelines contained in any order, directive,
opinion, ruling or regulation of a federal or state
agency or contained in federal or state law.
The General Partner shall provide notice to the Limited Partners when any action
under this Section 14.1.B is taken.
C. Notwithstanding Section 14.1.A and 14.1.B hereof, this Agreement
shall not be amended without the Consent of each Partner adversely affected if
such amendment would (i) convert a Limited Partner's interest in the Partnership
into a General Partner Interest; (ii) modify the limited liability of a Limited
Partner in a manner adverse to such Limited Partner; (iii) alter rights of the
Partner to receive distributions pursuant to Article 5 or Article 13, or the
allocations specified in Article 6 (except as permitted pursuant to Section 4.2
and Section 14.1.B(3) hereof); (iv) alter or modify the Redemption Right and
REIT Shares Amount as set forth in Sections 8.6 and 11.2.B, and the related
definitions, in a manner adverse to such Partner; (v) cause the termination of
the Partnership prior to the time set forth in Sections 2.5 or 13.1; or (vi)
amend this Section 14.1.C. Further, no amendment may alter the restrictions on
the General Partner's authority set forth in Section 7.3.B without the Consent
specified in that section.
D. Notwithstanding Section 14.1.A or Section 14.1.B hereof, the General
Partner shall not amend Sections 4.2.A, 7.5, 7.6, 11.2 or 14.2 without the
Consent of Limited Partners holding a majority of the Percentage Interests of
the Limited Partners, excluding Limited Partner Interests held by the General
Partner.
Section 14.2 Meetings of the Partners
A. Meetings of the Partners may be called by the General Partner and
shall be called upon the receipt by the General Partner of a written request by
Limited Partners (other than the Company) holding twenty percent (20%) or more
of the Partnership Interests. The request shall state the nature of the business
to be transacted. Notice of any such meeting shall
47
<PAGE>
be given to all Partners not less than seven (7) days nor more than thirty (30)
days prior to the date of such meeting. Partners may vote in person or by proxy
at such meeting. Whenever the vote or Consent of the Partners is permitted or
required under this Agreement, such vote or Consent may be given at a meeting of
the Partners or may be given in accordance with the procedure prescribed in
Section 14.1.A hereof. Except as otherwise expressly provided in this Agreement,
the Consent of holders of a majority of the Percentage Interests held by Limited
Partners (including Limited Partnership Interests held by the Company) shall
control.
B. Any action required or permitted to be taken at a meeting of the
Partners may be taken without a meeting if a written consent setting forth the
action so taken is signed by a majority of the Percentage Interests of the
Partners (or such other percentage as is expressly required by this Agreement).
Such consent may be in one instrument or in several instruments, and shall have
the same force and effect as a vote of a majority of the Percentage Interests of
the Partners (or such other percentage as is expressly required by this
Agreement). Such consent shall be filed with the General Partner. An action so
taken shall be deemed to have been taken at a meeting held on the effective date
so certified.
C. Each Limited Partner may authorize any Person or Persons to act for
him by proxy on all matters in which a Limited Partner is entitled to
participate, including waiving notice of any meeting, or voting or participating
at a meeting. Every proxy must be signed by the Limited Partner or his
attorney-in-fact. No proxy shall be valid after the expiration of eleven (11)
months from the date thereof unless otherwise provided in the proxy. Every proxy
shall be revocable at the pleasure of the Limited Partner executing it, such
revocation to be effective upon the Partnership's receipt of written notice of
such revocation from the Limited Partner executing such proxy.
D. Each meeting of the Partners shall be conducted by the General
Partner or such other Person as the General Partner may appoint pursuant to such
rules for the conduct of the meeting as the General Partner or such other Person
deems appropriate. Without limitation, meetings of Partners may be conducted in
the same manner as meetings of the shareholders of the Company and may be held
at the same time, and as part of, meetings of the shareholders of the Company.
ARTICLE 15
GENERAL PROVISIONS
Section 15.1 Addresses and Notice
Any notice, demand, request or report required or permitted to be given
or made to a Partner or Assignee under this Agreement shall be in writing and
shall be deemed given or made when delivered in person or when sent by first
class United States mail or by other means of written communication to the
Partner or Assignee at the address set forth in
48
<PAGE>
Exhibit A or such other address of which the Partner shall notify the General
Partner in writing.
Section 15.2 Titles and Captions
All article or section titles or captions in this Agreement are for
convenience only. They shall not be deemed part of this Agreement and in no way
define, limit, extend or describe the scope or intent of any provisions hereof.
Except as specifically provided otherwise, references to "Articles" and
"Sections" are to Articles and Sections of this Agreement.
Section 15.3 Pronouns and Plurals
Whenever the context may require, any pronoun used in this Agreement
shall include the corresponding masculine, feminine or neuter forms, and the
singular form of nouns, pronouns and verbs shall include the plural and vice
versa.
Section 15.4 Further Action
The parties shall execute and deliver all documents, provide all
information and take or refrain from taking action as may be necessary or
appropriate to achieve the purposes of this Agreement.
Section 15.5 Binding Effect
This Agreement shall be binding upon and inure to the benefit of the
parties hereto and their heirs, executors, administrators, successors, legal
representatives and permitted assigns.
Section 15.6 Creditors
Other than as expressly set forth herein with respect to the
Indemnities, none of the provisions of this Agreement shall be for the benefit
of, or shall be enforceable by, any creditor of the Partnership.
Section 15.7 Waiver
No failure by any party to insist upon the strict performance of any
covenant, duty, agreement or condition of this Agreement or to exercise any
right or remedy consequent upon a breach thereof shall constitute waiver of any
such breach or any other covenant, duty, agreement or condition.
49
<PAGE>
Section 15.8 Counterparts
This Agreement may be executed in counterparts, all of which together
shall constitute one agreement binding on all of the parties hereto,
notwithstanding that all such parties are not signatories to the original or the
same counterpart. Each party shall become bound by this Agreement immediately
upon affixing its signature hereto.
Section 15.9 Applicable Law
This Agreement shall be construed and enforced in accordance with and
governed by the laws of the State of Delaware, without regard to the principles
of conflicts of law.
Section 15.10 Invalidity of Provisions
If any provision of this Agreement is or becomes invalid, illegal or
unenforceable in any respect, the validity, legality and enforceability of the
remaining provisions contained herein shall not be affected thereby.
Section 15.11 Entire Agreement
This Agreement contains the entire understanding and agreement among
the Partners with respect to the subject matter hereof and supersedes the Prior
Agreement and any other prior written or oral understandings or agreements among
them with respect thereto.
50
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date first written above.
GENERAL PARTNER:
Beacon Properties Corporation
By: /s/ Alan M. Leventhal
---------------------------------------
Title: Alan M. Leventhal, President
[CORPORATE SEAL]
LIMITED PARTNERS:
By: ____________________________________
as Attorney-in-Fact for the Limited Partners
By:_________________________________
Title:______________________________
[CORPORATE SEAL]
51
<PAGE>
LIMITED PARTNER SIGNATURE PAGE
The undersigned, desiring to become one of the within named Limited
Partners of Beacon Properties, L.P., hereby becomes a party to the Agreement of
Limited Partnership of Beacon Properties, L.P. by and among Beacon Properties
Corporation and such Limited Partners, dated as of May 26, 1994. The undersigned
agrees that this signature page may be attached to any counterpart of said
Agreement of Limited Partnership.
<TABLE>
<S> <C>
Signature line for Limited Partner /s/ Edwin N. Sidman
---------------------------------------
By: Edwin N. Sidman, as Attorney-in-
Fact for each Investor Limited
Partner in 175 Federal Street
Associates
Address of Limited Partner c/o Beacon Properties Corporation
50 Rowes Wharf
Boston, MA 02110
Signature line for Limited Partner /s/ Richard L. Friedman
---------------------------------------
By: Richard L. Friedman
Address of Limited Partner c/o Carpenter & Co.
175 Federal Street
Boston, MA 02110
Signature line for Limited Partner /s/ John L. Hall, II
---------------------------------------
By: John L. Hall, II
Address of Limited Partner c/o Hall Properties Inc.
1 International Place
Boston, MA 02110
Signature line for Limited Partner /s/ Harvey I. Steinberg
---------------------------------------
By: Harvey I. Steinberg
Address of Limited Partner 273 Singletary Lane
Framingham, MA 01701
52
<PAGE>
Signature line for Limited Partner /s/ Howard Rubin
---------------------------------------
By: Howard Rubin, as Trustee under
Indenture of Trust made by
Robert Leventhal dated June 3, 1996,
and not individually
Address of Limited Partner Rubin and Rudman
50 Rowes Wharf
Boston, MA 02110
Signature line for Limited Partner /s/ Lionel P. Fortin
---------------------------------------
By: Lionel P. Fortin, as Attorney-in-
Fact for each Grantor under The
Omnibus Option Agreement dated
as of March 7, 1994
Address of Limited Partner c/o Beacon Properties Corporation
50 Rowes Wharf
Boston, MA 02110
THE BEACON TRUST
Signature line for Limited Partner /s/ Mark S. Leventhal
---------------------------------------
By: Mark S. Leventhal
Its: Trustee
Address of Limited Partner 21 Bonnybrook Road
Waban, MA 02168
BONNEYBROOK TRUST
Signature line for Limited Partner /s/ Alan M. Leventhal
---------------------------------------
By: Alan M. Leventhal
Its: Trustee
Address of Limited Partner 35 Wykeham Road
W. Newton, MA 02165
53
<PAGE>
THE BEACON TRUST
Signature line for Limited Partner /s/ Mark S. Leventhal
---------------------------------------
By: Mark S. Leventhal
Its: Trustee
Address of Limited Partner 21 Bonnybrook Road
Waban, MA 02168
DARTMOUTH TRUST
Signature line for Limited Partner /s/ Mark S. Leventhal
---------------------------------------
By: Mark S. Leventhal
Its: Trustee
Address of Limited Partner 21 Bonnybrook Road
Waban, MA 02168
PICKWICK TRUST
Signature line for Limited Partner /s/ Mark S. Leventhal
---------------------------------------
By: Mark S. Leventhal
Its: Trustee
Address of Limited Partner 21 Bonnybrook Road
Waban, MA 02168
POSC TRUST
Signature line for Limited Partner /s/ Paul D. Fortin
---------------------------------------
By: Paul D. Fortin
Its: Trustee
Address of Limited Partner 85 Brookside Drive
Bridgewater, MA 02324
54
<PAGE>
TRILEV PROPERTY TRUST
Signature line for Limited Partner /s/ J. Robert Casey
---------------------------------------
By: J. Robert Casey
Its: Trustee
Address of Limited Partner 206 Waban Avenue
Waban, MA 02168
WYKEHAM TRUST
Signature line for Limited Partner /s/ Mark S. Leventhal
---------------------------------------
By: Mark S. Leventhal
Its: Trustee
Address of Limited Partner 21 Bonnybrook Road
Waban, MA 02168
JERAL LIMITED PARTNERSHIP
Signature line for Limited Partner /s/ Mark S. Leventhal
---------------------------------------
By: Mark S. Leventhal
Its: Trustee
Address of Limited Partner 21 Bonnybrook Road
Waban, MA 02168
TRIDON LIMITED PARTNERSHIP
Signature line for Limited Partner /s/ Alan M. Leventhal
---------------------------------------
By: Alan M. Leventhal
Its: Trustee
Address of Limited Partner 35 Wykeham Road
W. Newton, MA 02165
55
<PAGE>
HOMATT LIMITED PARTNERSHIP
Signature line for Limited Partner /s/ Alan M. Leventhal
---------------------------------------
By: Alan M. Leventhal
Its: General Partner
Address of Limited Partner 35 Wykeham Road
W. Newton, MA 02165
</TABLE>
56
<PAGE>
Exhibit A
Partners Contributions and Partnership Interests
<TABLE>
<CAPTION>
Name and Address Cash Agreed Value of Total Partnership Percentage
of Partner Contribution Contributed Property Contribution Units Interest
- ---------------- ------------ -------------------- ------------ ----------- -----------
<S> <C> <C> <C> <C> <C>
</TABLE>
A-1
<PAGE>
Exhibit B
Capital Account Maintenance
1. Capital Accounts of the Partners
A. The Partnership shall maintain for each Partner a separate Capital
Account in accordance with the rules of Regulations Section 1.704-1(b)(2)(iv).
Such Capital Account shall be increased by (i) the amount of all Capital
Contributions and any other deemed contributions made by such Partner to the
Partnership pursuant to this Agreement; and (ii) all items of Partnership income
and gain (including income and gain exempt from tax) computed in accordance with
Section 1.B hereof and allocated to such Partner pursuant to Section 6.1.A of
the Agreement and Exhibit C hereof, and decreased by (x) the amount of cash or
Agreed Value of all actual and deemed distributions of cash or property made to
such Partner pursuant to this Agreement; and (y) all items of Partnership
deduction and loss computed in accordance with Section 1.B hereof and allocated
to such Partner pursuant to Section 6.1.B of the Agreement and Exhibit C hereof.
B. For purposes of computing the amount of any item of income, gain,
deduction or loss to be reflected in the Partners' Capital Accounts, unless
otherwise specified in this Agreement, the determination, recognition and
classification of any such item shall be the same as its determination,
recognition and classification for federal income tax purposes determined in
accordance with Section 703(a) of the Code (for this purpose all items of
income, gain, loss or deduction required to be stated separately pursuant to
Section 703(a)(1) of the Code shall be included in taxable income or loss), with
the following adjustments:
(1) Except as otherwise provided in Regulations Section
1.704-1(b)(2)(iv)(m), the computation of all items of
income, gain, loss and deduction shall be made
without regard to any election under Section 754 of
the Code which may be made by the Partnership,
provided that the amounts of any adjustments to the
adjusted bases of the assets of the Partnership made
pursuant to Section 734 of the Code as a result of
the distribution of property by the Partnership to a
Partner (to the extent that such adjustments have not
previously been reflected in the Partners' Capital
Accounts) shall be reflected in the Capital Accounts
of the Partners in the manner and subject to the
limitations prescribed in Regulations Section
1.704(b)(2)(iv)(m)(4).
(2) The computation of all items of income, gain, and
deduction shall be made without regard to the fact
that items described in Sections 705(a)(1)(B) or
705(a)(2)(B) of the Code are not includable gross
income
B-1
<PAGE>
or are neither currently deductible nor capitalized
for federal income tax purposes.
(3) Any income, gain or loss attributable to the taxable
disposition of any Partnership property shall be
determined as if the adjusted basis of such property
as of such date of disposition were equal in amount
to the Partnership's Carrying Value with respect to
such property as of such date.
(4) In lieu of the depreciation, amortization, and other
cost recovery deductions taken into account in
computing such taxable income or loss, there shall be
taken into account Depreciation for such fiscal year.
(5) In the event the Carrying Value of any Partnership
Asset is adjusted pursuant to Section 1.D hereof, the
amount of any such adjustment shall be taken into
account as gain or loss from the disposition of such
asset.
C. Generally, a transferee (including an Assignee) of a Partnership
Unit shall succeed to a pro rata portion of the Capital Account of the
transferor; provided, however, that, if the transfer causes a termination of the
Partnership under Section 708(b)(1)(B) of the Code, the Partnership's properties
shall be deemed solely for federal income tax purposes, to have been distributed
in liquidation of the Partnership to the holders of Partnership Units (including
such transferee) and recontributed by such Persons in reconstitution of the
Partnership. In such event, the Carrying Values of the Partnership properties
shall be adjusted immediately prior to such deemed distribution pursuant to
Section 1.D(2) hereof. The Capital Accounts of such reconstituted Partnership
shall be maintained in accordance with the principles of this Exhibit B.
D. (1) Consistent with the provisions of Regulations
Section 1.704-1(b)(2)(iv)(f), and as provided in
Section 1.D(2), the Carrying Value of all Partnership
assets shall be adjusted upward or downward to
reflect any Unrealized Gain or Unrealized Loss
attributable to such Partnership property, as of the
times of the adjustments provided in Section 1.D(2)
hereof, as if such Unrealized Gain or Unrealized Loss
had been recognized on an actual sale of each such
property and allocated pursuant to Section 6.1 of the
Agreement.
(2) Such adjustments shall be made as of the following
times: (a) immediately prior to the acquisition of an
additional interest in the Partnership by any new or
existing Partner in exchange for more than a de
minimis Capital Contribution; (b) immediately prior
to the distribution by the Partnership to a Partner
of more than a de minimis amount of property as
consideration for an interest in the Partnership;
B-2
<PAGE>
and (c) immediately prior to the liquidation of the
Partnership within the meaning of Regulations Section
1.704-1(b)(2)(ii)(g), provided, however, that
adjustments pursuant to clauses (a) and (b) above
shall be made only if the General Partner determines
that such adjustments are necessary or appropriate to
reflect the relative economic interests of the
Partners in the Partnership.
(3) In accordance with Regulations Section
1.704-1(b)(2)(iv)(e), the Carrying Value of
Partnership assets distributed in kind shall be
adjusted upward or downward to reflect any Unrealized
Gain or Unrealized Loss attributable to such
Partnership property, as of the time any such asset
is distributed.
(4) In determining Unrealized Gain or Unrealized Loss for
purposes of this Exhibit B, the aggregate cash amount
and fair market value of all Partnership assets
(including cash or cash equivalents) shall be
determined by the General Partner using such
reasonable method of valuation as it may adopt, or in
the case of a liquidating distribution pursuant to
Article 13 of the Agreement, shall be determined and
allocated by the Liquidator using such reasonable
methods of valuation as it may adopt. The General
Partner, or the Liquidator, as the case may be, shall
allocate such aggregate value among the assets of the
Partnership (in such manner as it determines in its
sole and absolute discretion to arrive at a fair
market value for individual properties).
E. The provisions of this Agreement (including this Exhibit B and other
Exhibits to this Agreement) relating to the maintenance of Capital Accounts are
intended to comply with Regulations Section 1.704-1(b), and shall be interpreted
and applied in a manner consistent with such Regulations. In the event the
General Partner shall determine that it is prudent to modify (i) the manner in
which the Capital Accounts, or any debits or credits thereto (including, without
limitation, debits or credits relating to liabilities which are secured by
contributed or distributed property or which are assumed by the Partnership, the
General Partner, or the Limited Partners) are computed; or (ii) the manner in
which items are allocated among the Partners for federal income tax purposes in
order to comply with such Regulations or to comply with Section 704(c) of the
Code, the General Partner may make such modification without regard to Article
14 of the Agreement, provided that it is not likely to have a material effect on
the amounts distributable to any Person pursuant to Article 13 of the Agreement
upon the dissolution of the Partnership. The General Partner also shall (i) make
any adjustments that are necessary or appropriate to maintain equality between
the Capital Accounts of the Partners and the amount of Partnership capital
reflected on the Partnership's balance sheet, as computed for book purposes, in
accordance with Regulations Section 1.704-1(b)(2)(iv)(q); and (ii) make any
appropriate modifications in the event unanticipated events might otherwise
cause this Agreement not to comply with Regulations Section
B-3
<PAGE>
1.704-1(b). In addition, the General Partner may adopt and employ such methods
and procedures for (i) the maintenance of book and tax capital accounts; (ii)
the determination and allocation of adjustments under Sections 704(c), 734 and
743 of the Code; (iii) the determination of Net Income, Net Loss, taxable loss
and items thereof under this Agreement and pursuant to the Code; (iv) the
adoption of reasonable conventions and methods for the valuation of assets and
the determination of tax basis; (v) the allocation of asset value and tax basis;
and (vi) conventions for the determination of cost recovery, depreciation and
amortization deductions, as it determines in its sole discretion are necessary
or appropriate to execute the provisions of this Agreement, to comply with
federal and state tax laws, and are in the best interest of the Partners.
2. No Interest
No interest shall be paid by the Partnership on Capital Contributions
or on balances in Partners' Capital Accounts.
3. No Withdrawal
No Partner shall be entitled to withdraw any part of his Capital
Contribution or his Capital Account or to receive any distribution from the
Partnership, except as provided in Articles 4, 5, 7 and 13 of the Agreement.
B-4
<PAGE>
Exhibit C
Special Allocation Rules
1. Special Allocation Rules
Notwithstanding any other provision of the Agreement or this Exhibit C,
the following special allocations shall be made in the following order:
A. Minimum Gain Chargeback. Notwithstanding the provisions of Section
6.1 of the Agreement or any other provisions of this Exhibit C, if there is a
net decrease in Partnership Minimum Gain during any Partnership taxable year,
each Partner shall be specially allocated items of Partnership income and gain
for such year (and, if necessary, subsequent years) in an amount equal to such
Partner's share of the net decrease in Partnership Minimum Gain, as determined
under Regulations Section 1.704-2(g). Allocations pursuant to the previous
sentence shall be made in proportion to the respective amounts required to be
allocated to each Partner pursuant thereto. The items to be so allocated shall
be determined in accordance with Regulations Section 1.704-2(f)(6). This Section
1.A is intended to comply with the minimum gain chargeback requirements in
Regulations Section 1.704-2(f) and shall be interpreted consistently therewith.
Solely for purposes of this Section 1.A, each Partner's Adjusted Capital Account
Deficit shall be determined prior to any other allocations pursuant to Section
6.1 of Partner Minimum Gain during such Partnership taxable year.
B. Partner Minimum Gain Chargeback. Notwithstanding any other provision
of Section 6.1 of this Agreement or any other provisions of this Exhibit C
(except Section 1.A hereof), if there is a net decrease in Partner Minimum Gain
attributable to a Partner Nonrecourse Debt during any Partnership taxable year,
each Partner who has a share of the Partner Minimum Gain attributable to such
Partner Nonrecourse Debt, determined in accordance with Regulations Section
1.702-2(i)(5), shall be specially allocated items of Partnership income and gain
for such year (and, if necessary, subsequent years) in an amount equal to such
Partner's share of the net decrease in Partner Minimum Gain attributable to such
Partner Nonrecourse Debt, determined in accordance with Regulations Section
1.704-2(i)(5). Allocations pursuant to the previous sentence shall be made in
proportion to the respective amounts required to be allocated to each Partner
pursuant thereto. The items to be so allocated shall be determined in accordance
with Regulations Section 1.704-2(i)(4). This Section 1.B is intended to comply
with the minimum gain chargeback requirement in such Section of the Regulations
and shall be interpreted consistently therewith. Solely for purposes of the
Section 1.B, each Partner's Adjusted Capital Account Deficit shall be determined
prior to any other allocations pursuant to Section 6.1 of the Agreement or this
Exhibit with respect to such Partnership taxable year, other than allocations
pursuant to Section 1.A hereof.
C-1
<PAGE>
C. Qualified Income Offset. In the event any Partner unexpectedly
receives any adjustments, allocations or distributions described in Regulations
Sections 1.704-1(b)(2)(ii)(d)(4), 1.704-1(b)(2)(ii)(d)(5), or
1.704-1(b)(2)(ii)(d)(6), and after giving effect to the allocations required
under Sections 1.A and 1.B hereof such Partner has an Adjusted Capital Account
Deficit, items of Partnership income and gain (consisting of a pro rata portion
of each item of Partnership income, including gross income and gain for the
Partnership taxable year) shall be specially allocated to such Partner in an
amount and manner sufficient to eliminate, to the extent required by the
Regulations, its Adjusted Capital Account Deficit created by such adjustments,
allocations or distributions as quickly as possible.
D. Nonrecourse Deductions. Nonrecourse Deductions for any Partnership
taxable year shall be allocated to the Partners in accordance with their
respective Percentage Interests. If the General Partner determines in its good
faith discretion that the Partnership's Nonrecourse Deductions must be allocated
in a different ratio to satisfy the safe harbor requirements of the Regulations
promulgated under Section 704(b) of the Code, the General Partner is authorized,
upon notice to the Limited Partners, to revise the prescribed ratio to the
numerically closest ratio for such Partnership taxable year which would satisfy
such requirements.
E. Partner Nonrecourse Deductions. Any Partner Nonrecourse Deductions
for any Partnership taxable year shall be specially allocated to the Partner who
bears the economic risk of loss with respect to the Partner Nonrecourse Debt to
which such Partner Nonrecourse Deductions are attributable in accordance with
Regulations Section 1.704-2(i).
F. Code Section 754 Adjustments. To the extent an adjustment to the
adjusted tax basis of any Partnership asset pursuant to Section 734(b) or 743(b)
of the Code is required, pursuant to Regulations Section 1.704-1(b)(2)(iv)(m),
to be taken into account in determining Capital Accounts, the amount of such
adjustment to the Capital Accounts shall be treated as an item of gain (if the
adjustment increases the basis of the asset) or loss (if the adjustment
decreases such basis, and such item of gain or loss shall be specially allocated
to the Partners in a manner consistent with the manner in which their Capital
Accounts are required to be adjusted pursuant to such Section of the
Regulations.
G. Curative Allocations. The allocations set forth in Section 1.A
through 1.F of this Exhibit C (the "Regulatory Allocations") are intended to
comply with certain requirements of the Regulations under Section 704(b) of the
Code. The Regulatory Allocations may not be consistent with the manner in which
the Partners intend to divide Partnership distributions. Accordingly, the
General Partner is hereby authorized to divide other allocations of income,
gain, deduction and loss among the Partners so as to prevent the Regulatory
Allocations from distorting the manner in which Partnership distributions will
be divided among the Partners. In general, the Partners anticipate that, if
necessary, this will be accomplished by specially allocating other items of
income, gain, loss and deduction among the Partners so that the net amount of
the Regulatory Allocations and such special allocations
C-2
<PAGE>
to each person is zero. However, the General Partner will have discretion to
accomplish this result in any reasonable manner; provided, however, that no
allocation pursuant to this Section 1.G shall cause the Partnership to fail to
comply with the requirements of Regulations Sections 1.704-1(b)(2)(ii)(d), -2(e)
or -2(i).
2. Allocations for Tax Purposes
A. Except as otherwise provided in this Section 2, for federal income
tax purposes, each item of income, gain, loss and deduction shall be allocated
among the Partners in the same manner as its correlative item of "book" income,
gain, loss or deduction is allocated pursuant to Section 6.1 of the Agreement
and Section 1 of this Exhibit C.
B. In an attempt to eliminate Book-Tax Disparities attributable to a
Contributed Property or Adjusted Property, items of income, gain, loss, and
deduction shall be allocated for federal income tax purposes among the Partners
as follows:
(1) (a) In the case of a Contributed Property,
such items attributable thereto shall be
allocated among the Partners, consistent
with the principles of Section 704(c) of the
Code and the Regulations thereunder, to take
into account the variation between the
704(c) Value of such property and its
adjusted basis at the time of contribution;
and
(b) any item of Residual Gain or Residual Loss
attributable to a Contributed Property shall
be allocated among the Partners in the same
manner as its correlative item of "book"
gain or loss is allocated pursuant to
Section 6.1 of the Agreement and Section 1
of this Exhibit C.
(2) (a) In the case of an Adjusted Property, such
items shall
(1) first, be allocated among the Partners
in a manner consistent with the principles
of Section 704(c) of the Code and the
Regulations thereunder to take into account
the Unrealized Gain or Unrealized Loss
attributable to such property and the
allocations thereof pursuant to Exhibit B;
and
(2) second, in the event such property was
originally a Contributed Property, be
allocated among the Partners in a manner
consistent with Section 2.B(1) of this
Exhibit C; and
(b) any item of Residual Gain or Residual Loss
attributable to an Adjusted Property shall
be allocated among the Partners in the
C-3
<PAGE>
same manner its correlative item of "book"
gain or loss is allocated pursuant to
Section 6.1 of the Agreement and Section 1
of this Exhibit C.
(3) all other items of income, gain, loss and deduction
shall be allocated among the Partners the same manner
as their correlative item of "book" gain or loss is
allocated pursuant to Section 6.1 of the Agreement
and Section 1 of the Exhibit C.
C. To the extent that the Treasury Regulations promulgated pursuant to
Section 704(c) of the Code permit the Partnership to utilize alternative methods
to eliminate the disparities between the Carrying Value of property and its
adjusted basis, the General Partner shall have the authority to elect the method
to be used by the Partnership and such election shall be binding on all
Partners.
3. No Withdrawal
No Partner shall be entitled to withdraw any part of his Capital
Contribution or his Capital Account or to receive any distribution from the
Partnership, except as provided in Articles 4, 5, 8 and 13 of the Agreement.
C-4
<PAGE>
Exhibit D
Notice of Redemption
The undersigned Limited Partner hereby irrevocably (i) redeems
__________ Limited Partnership Units in Beacon Properties, L.P. in accordance
with the terms of the Agreement of Limited Partnership of Beacon Properties,
L.P. and the Redemption Right referred to therein; (ii) surrenders such Limited
Partnership Units and all right, title and interest therein; and (iii) directs
that the Cash Amount or REIT Shares Amount (as determined by the General
Partner) deliverable upon exercise of the Redemption Right be delivered to the
address specified below, and if REIT Shares are to be delivered, such REIT
Shares be registered or placed in the name(s) and at the address(es) specified
below. The undersigned hereby, represents, warrants, and certifies that the
undersigned (a) has marketable and unencumbered title to such Limited
Partnership Units, free and clear of the rights or interests of any other person
or entity; (b) has the full right, power, and authority to redeem and surrender
such Limited Partnership Units as provided herein; and (c) has obtained the
consent or approval of all person or entities, if any, having the right to
consent or approve such redemption and surrender.
Dated:_________________________
Name of Limited Partner:____________________________________
Please Print
------------------------------------
(Signature of Limited Partner)
------------------------------------
(Street Address)
------------------------------------
(City) (State) (Zip Code)
Signature Guaranteed by:
------------------------------------
D-1
<PAGE>
If REIT Shares are to be issued, issue to:
Name:_________________________________
Please insert social security or identifying number:__________________
D-2
Exhibit 10.10
-------------
REGISTRATION RIGHTS AGREEMENT
-----------------------------
This Registration Rights Agreement (this "Agreement") is entered into as of
September 5, 1996 by and between Beacon Properties Corporation, a Maryland
corporation (the "Company") and John Marshall Associates Limited Partnership, a
Virginia limited partnership, Greensboro Associates Limited Partnership, a
Virginia limited partnership, Woodland-Northridge I Limited Partnership, a
Virginia limited partnership, and Pimpernell Estates Limited Partnership, a
Virginia limited partnership (each a "Holder" and collectively the "Holders").
WHEREAS, the Holders are to receive units of limited partnership interest
("Units") in Beacon Properties, L.P. (the "Operating Partnership") which may be
redeemed for shares of the Company's common stock, no par value ("Common Stock")
issued without registration under the Securities Act of 1933, as amended (the
"Securities Act"), pursuant to an Option Agreement dated March 18, 1996 by and
between the Holders and the Operating Partnership.
NOW, THEREFORE, in consideration of the mutual promises and agreements set
forth herein, and other valuable consideration, the receipt and sufficiency of
which are hereby acknowledged, the parties hereto hereby agree as follows:
1. Registration.
(a) Demand Registration. At any time after March 18, 1997 until the earlier
of (i) March 18, 2007 or (ii) the date on which all of the Registrable Shares
(as hereinafter defined) have become eligible for sale pursuant to Rule 144
promulgated under the Securities Act, subject to the conditions set forth in
this Agreement, Holders may request that the Company cause to be filed, a
registration statement (a "Demand Registration Statement") under Rule 415 under
the Securities Act relating to the sale by such Holders of their previously or
concurrently issued Registrable Shares in accordance with the terms hereof. As
used in this Agreement, the term "Registrable Shares" means shares of Common
Stock issued or to be issued to the Holders upon redemption or in exchange for
their Units, excluding (A) Common Stock for which a Registration Statement
relating to the sale thereof shall have become effective under the Securities
Act and which have been disposed of under such Registration Statement, (B)
Common Stock sold pursuant to Rule 144 under the Securities Act or (C) Common
Stock eligible for sale pursuant to Rule 144 under the Securities Act. Upon
receipt of any such request, the Company shall promptly give written notice of
such proposed registration to all Holders of Units and Registrable Shares. Such
Holders shall have the right, by giving written notice to the Company within
fifteen (15) days after such notice referred to in the preceding sentence has
been given by the Company to elect to have included in the Demand Registration
Statement such of their Registrable Shares as each Holder may request in such
notice of election. Thereupon, the Company shall use its best efforts to cause
such Demand Registration Statement to be declared effective by the Securities
and Exchange Commission (the "SEC") for all Registrable Shares which the Company
has been requested to register as soon as practicable thereafter. The Company
agrees to use its best efforts to keep the Demand Registration Statement
continuously effective until the earliest of (a) the date on which the Holders
no longer hold any Registrable Shares registered under the Demand
1
<PAGE>
Registration Statement, (b) the date on which the Registrable Shares may be sold
by the Holders pursuant to Rule 144 promulgated under the Securities Act or (c)
the date which is six (6) months from the effective date of such Demand
Registration Statement. The Company shall not be required to file and effect a
new Demand Registration Statement pursuant to this Section 1(a) until a period
of twelve (12) months has elapsed from the termination of the registration
statement with respect to Registrable Shares covered by a prior registration
request.
(b) Piggyback Registration. If at any time while any Registrable Shares are
outstanding the Company proposes to file a registration statement under the
Securities Act with respect to an offering of Common Stock solely for cash
(other than a registration statement (i) on Form S-8 or any successor form or in
connection with any employee or director welfare, benefit or compensation plan,
(ii) on Form S-4 or any successor form or in connection with an exchange offer,
(iii) in connection with a rights offering exclusively to existing holders of
Common Stock, (iv) in connection with an offering solely to employees of the
Company or its affiliates, or (v) relating to a transaction pursuant to Rule 145
of the Securities Act), whether or not for its own account (a "Piggyback
Registration Statement"), the Company shall give written notice of such proposed
filing at least 10 business days before filing to the Holders. The notice
referred to in the preceding sentence shall offer Holders the opportunity to
register such amount of Registrable Shares as each Holder may request (a
"Piggyback Registration"). Subject to the provisions of Section 2 below, the
Company shall include in such Piggyback Registration all Registrable Shares
requested to be included in the registration for which the Company has received
written requests for inclusion therein within fifteen (15) calendar days after
the notice referred to above has been given by the Company to the Holders.
Holders of Registrable Shares shall be permitted to withdraw all or part of the
Registrable Shares from a Piggyback Registration at any time prior to the
effective date of such Piggyback Registration. If a Piggyback Registration is an
underwritten registration on behalf of the Company and the managing underwriter
advises the Company that the total number of shares of Common Stock requested to
be included in such registration exceeds the number of shares of Common Stock
which can be sold in such offering, the Company will include in such
registration in the following priority: (i) first, all shares of Common Stock
the Company proposes to sell and (ii) second, up to the full number of
applicable Registrable Shares requested to be included in such registration and,
which in the opinion of such managing underwriter, can be sold without adversely
affecting the price range or probability of success of such offering, which
shall be allocated among the Holders and all other stockholders requesting
registration on a pro rata basis. No Registrable Securities or other shares of
Common Stock requested to be included in a registration pursuant to demand
registration rights shall be excluded from the underwriting unless all
securities other than such securities are first excluded.
(c) Registration Statement Covering Issuance of Common Stock. In lieu of
the registration rights set forth in Section 1(a) and 1(b) above, the Company
may, in its sole discretion, prior to the first date upon which the Units held
by the Holders may be redeemed (or such other date as may be required under
applicable provisions of the Securities Act) file a registration statement (the
"Shelf Registration Statement") under Rule 415 under the Securities
2
<PAGE>
Act relating to the issuance to Holders of shares of Common Stock upon the
redemption or in exchange for their Units. Thereupon, the Company shall use its
best efforts to cause such Registration Statement to be declared effective by
the SEC for all shares of Common Stock covered thereby. The Company agrees to
use its best efforts to keep the Shelf Registration Statement continuously
effective until the date on which each Holder has redeemed or exchanged such
Holder's Units for Common Stock. In the event that the Company is unable to
cause such Registration Statement to be declared effective by the SEC or is
unable to keep such Registration Statement effective until the date on which
each Holder has redeemed or exchanged such Holder's Units for Common Stock, then
the rights of each Holder set forth in Section 1(a) and 1(b) above shall be
restored. Any Demand Registration Statement, Piggyback Registration Statement or
Shelf Registration Statement are sometimes referred to as a "Registration
Statement."
2. Registration Procedures.
(a) The Company shall notify each Holder of the effectiveness of the
Registration Statement and shall furnish to each Holder such number of copies of
the Registration Statement (including any amendments, supplements and exhibits),
the prospectus contained therein (including each preliminary prospectus), any
documents incorporated by reference in the Registration Statement and such other
documents as the Holder may reasonably request in order to facilitate its sale
of the Registrable Shares in the manner described in the Registration Statement.
(b) The Company shall prepare and file with the SEC from time to time such
amendments and supplements to the Registration Statement and prospectus used in
connection therewith as may be necessary to keep the Registration Statement
effective and to comply with the provisions of the Securities Act with respect
to the disposition of all the Registrable Shares until the earlier of (i) such
time as all of the Registrable Shares have been disposed of in accordance with
the intended methods of disposition by the Holders as set forth in the
Registration Statement or (ii) the date on which the Registration Statement
ceases to be effective in accordance with the terms of Section 1. Upon ten (10)
business days' notice, the Company shall file any supplement or post-effective
amendment to the Registration Statement with respect to such Holder's interests
in or plan of distribution of Registrable Shares that is reasonably necessary to
permit the sale of the Holder's Registrable Shares pursuant to the Registration
Statement and the Company shall file any necessary listing applications or
amendments to the existing applications to cause the shares to be then listed or
quoted on the primary exchange or quotation system on which the Common Stock is
then listed or quoted.
(c) The Company shall promptly notify each Holder of, and confirm in
writing, any request by the SEC for amendments or supplements to the
Registration Statement or the prospectus related thereto or for additional
information. In addition, the Company shall promptly notify each Holder of, and
confirm in writing, the filing of the Registration Statement, any prospectus
supplement related thereto or any post-effective amendment to the Registration
Statement and the effectiveness of any post-effective amendment.
3
<PAGE>
(d) The Company shall immediately notify each Holder, at any time when a
prospectus relating to the Registration Statement is required to be delivered
under the Securities Act, of the happening of any event as a result of which the
prospectus included in the Registration Statement, as then in effect, includes
an untrue statement of a material fact or omits to state any material fact
required to be stated therein or necessary to make the statements therein, in
light of the circumstances under which they were made, not misleading. In such
event and subject to paragraph 7 of this Agreement, the Company shall promptly
prepare and furnish to each Holder a reasonable number of copies of a supplement
to or an amendment of such prospectus as may be necessary so that, as thereafter
delivered to the purchasers of Registrable Shares, such prospectus shall not
include an untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements therein, in
light of the circumstances under which they are made, not misleading.
3. State Securities Laws. Subject to the conditions set forth in this
Agreement, the Company shall, promptly upon the filing of a Registration
Statement including Registrable Shares, file such documents as may be necessary
to register or qualify the Registrable Shares under the securities or "Blue Sky"
laws of such states as any Holder may reasonably request, and the Company shall
use its best efforts to cause such filings to become qualified; provided,
however, that the Company shall not be obligated to qualify as a foreign
corporation to do business under the laws of any such state in which it is not
then qualified or to file any general consent to service of process in any such
state. Once qualified, the Company shall use its best efforts to keep such
filings qualified until the earlier of (a) such time as all of the Registrable
Shares have been disposed of in accordance with the intended methods of
disposition by the Holder as set forth in the Registration Statement, (b) in the
case of a particular state, a Holder has notified the Company that it no longer
requires qualified filing in such state in accordance with its original request
for filing or (c) the date on which the Registration Statement ceases to be
effective. The Company shall promptly notify each Holder of, and confirm in
writing, the receipt by the Company of any notification with respect to the
suspension of the qualification of the Registrable Shares for sale under the
securities or "Blue Sky" laws of any jurisdiction or the initiation or threat of
any proceeding for such purpose.
4. Expenses. The Company shall bear all expenses incurred in connection
with the registration of the Registrable Shares pursuant to Section 1(b) and
Section 1(c) of this Agreement. Additionally, the Company shall bear all
expenses incurred in connection with the registration of the Registrable Shares
pursuant to Section 1(a) of this Agreement for each Registration Statement
registering $1 million or more of Registrable Shares, and the Holders shall bear
their ratable shares of all expenses incurred by the Company in connection with
a registration in which the Holders are included pursuant to Section 1(a) of
this Agreement based on the number of Registrable Shares included to the total
number of shares of Common Stock so registered for each Registration Statement
registering less than $1 million of Registrable Shares. Such expenses shall
include, without limitation, all printing, legal and accounting expenses
incurred by the Company and all registration and filing fees imposed by the SEC,
any state securities commission or the New York Stock Exchange or, if the Common
4
<PAGE>
Stock is not then listed on the New York Stock Exchange, the principal national
securities exchange or national market system on which the Common Stock is then
traded or quoted. In addition, Holders shall be responsible for any brokerage or
underwriting commissions and taxes of any kind (including, without limitation,
transfer taxes) with respect to any disposition, sale or transfer of Registrable
Shares and for any legal, accounting and other expenses incurred by them.
5. Indemnification by the Company. The Company agrees to indemnify each of
the Holders and their respective officers, directors, employees, agents,
representatives and affiliates, and each person or entity, if any, that controls
a Holder within the meaning of the Securities Act, and each other person or
entity, if any, subject to liability because of his, her or its connection with
a Holder, and any underwriter and any person who controls the underwriter within
the meaning of the Securities Act (an "Indemnitee") against any and all losses,
claims, damages, actions, liabilities, costs and expenses (including without
limitation reasonable attorneys' fees, expenses and disbursements documented in
writing), joint or several, arising out of or based upon any untrue or alleged
untrue statement of material fact contained in the Registration Statement or any
prospectus contained therein, or any omission or alleged omission to state
therein a material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which they were made,
not misleading, except insofar as and to the extent that such statement or
omission arose out of or was based upon information regarding the Indemnitee or
its plan of distribution which was furnished to the Company by the Indemnitee
for use therein, provided, further that the Company shall not be liable to any
person who participates as an underwriter in the offering or sale of Registrable
Shares or any other person, if any, who controls such underwriter within the
meaning of the Securities Act, in any such case to the extent that any such
loss, claim, damage, liability (or action or proceeding in respect thereof) or
expense arises out of or is based upon (i) an untrue statement or alleged untrue
statement or omission or alleged omission made in such Registration Statement,
any such preliminary prospectus, final prospectus, summary prospectus, amendment
or supplement in reliance upon and in conformity with information furnished to
the Company for use in connection with the Registration Statement or the
prospectus contained therein by such Indemnitee or (ii) such Indemnitee's
failure to send or give a copy of the final prospectus furnished to it by the
Company at or prior to the time such action is required by the Securities Act to
the person claiming an untrue statement or alleged untrue statement or omission
or alleged omission if such statement or omission was corrected in such final
prospectus. The obligations of the Company under this Section 5 shall survive
the completion of any offering of Registrable Shares pursuant to a Registration
Statement under this Agreement or otherwise and shall survive the termination of
this Agreement.
6. Covenants of Holders. Each of the Holders hereby agrees (a) to cooperate
with the Company and to furnish to the Company all such information in
connection with the preparation of the Registration Statement and any filings
with any state securities commissions as the Company may reasonably request, (b)
to deliver or cause delivery of the prospectus contained in the Registration
Statement to any purchaser of the shares covered by the Registration Statement
from the Holder, (c) to indemnify the Company, its officers, directors,
5
<PAGE>
employees, agents, representatives and affiliates, and each person, if any, who
controls the Company within the meaning of the Securities Act, and each other
person, if any, subject to liability because of his connection with the Company,
against any and all losses, claims, damages, actions, liabilities, costs and
expenses arising out of or based upon (i) any untrue statement or alleged untrue
statement of material fact contained in either Registration Statement or the
prospectus contained therein, or any omission or alleged omission to state
therein a material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which they were made,
not misleading, if and to the extent that such statement or omission arose out
of or was based upon information regarding the Holder or its plan of
distribution which was furnished to the Company by the Holder expressly for use
therein, or (ii) the failure by the Holder to deliver or cause to be delivered
the prospectus contained in the Registration Statement (as amended or
supplemented, if applicable) furnished by the Company to the Holder to any
purchaser of the shares covered by the Registration Statement from the Holder.
Notwithstanding the foregoing, (i) in no event will a Holder have any obligation
under this Section 6 for amounts the Company pays in settlement of any such
loss, claim, damage, liability or action if such settlement is effected without
the consent of the Holder (which consent shall not be unreasonably withheld) and
(ii) the total amount for which a Holder shall be liable under this Section 6
shall not in any event exceed the aggregate proceeds received by him or it from
the sale of the Holder's Registrable Shares in such registration. The
obligations of the Holders under this Section 6 shall survive the completion of
any offering of Registrable Shares pursuant to a Registration Statement under
this Agreement or otherwise and shall survive the termination of this Agreement.
7. Suspension of Registration Requirement.
(a) The Company shall promptly notify each Holder of, and confirm in
writing, the issuance by the SEC of any stop order suspending the effectiveness
of the Registration Statement or the initiation of any proceedings for that
purpose. The Company shall use its best efforts to obtain the withdrawal of any
order suspending the effectiveness of the Registration Statement at the earliest
possible moment.
(b) Notwithstanding anything to the contrary set forth in this Agreement,
the Company's obligation under this Agreement to use its best efforts to cause
the Registration Statement and any filings with any state securities commission
to be made or to become effective or to amend or supplement the Registration
Statement shall be suspended in the event and during such period pending
negotiations relating to, or consummation of, a transaction or the occurrence of
an event that would require additional disclosure of material information by the
Company in the Registration Statement or such filing, as to which the Company
has a bona fide business purpose for preserving confidentiality or which renders
the Company unable to comply with SEC requirements (such circumstances being
hereinafter referred to as a "Suspension Event") that would make it impractical
or unadvisable to cause the Registration Statement or such filings to be made or
to become effective or to amend or supplement the Registration Statement, but
such suspension shall continue only for so long as such event or its effect is
continuing but in no event will that suspension exceed 60 days. The Company
agrees
6
<PAGE>
not to exercise the rights set forth in this Section 7(b) more than twice in any
twelve month period and further agrees that the 60-day periods shall be
non-consecutive. The Company shall notify the Holder of the existence of any
Suspension Event.
(c) Each holder of Registrable Shares whose Registrable Shares are covered
by a Registration Statement filed pursuant to Section 1 hereof agrees, if
requested by the Company in the case of a nonunderwritten offering (a
"Nonunderwritten Offering") or if requested by the managing underwriter or
underwriters in an underwritten offering (an "Underwritten Offering,"
collectively with Nonunderwritten Offering, the "Offering"), not to effect any
public sale or distribution of any of the securities of the Company of any class
included in such Offering, including a sale pursuant to Rule 144 or Rule 144A
under the Securities Act (except as part of such Underwritten Offering), during
the 15-day period prior to, and during the 60-day period (or such longer period
as may be required by the managing underwriter or underwriters) beginning on,
the date of pricing of each Offering, to the extent timely notified in writing
by the Company or the managing underwriters.
8. Black-Out Period. Following the effectiveness of the Registration
Statement and the filings with any state securities commissions, the Holders
agree that they will not effect any sales of the Registrable Shares pursuant to
the Registration Statement or any such filings at any time after they have
received notice from the Company to suspend sales as a result of the occurrence
or existence of any Suspension Event, during any Offering or so that the Company
may correct or update the Registration Statement or such filing pursuant to
Section 2(c) or 2(d). The Holder may recommence effecting sales of the
Registrable Shares pursuant to the Registration Statement or such filings
following further notice to such effect from the Company, which notice shall be
given by the Company not later than five (5) days after the conclusion of any
such Suspension Event or Offering.
9. Additional Shares. The Company, at its option, may register, under any
registration statement and any filings with any state securities commissions
filed pursuant to this Agreement, any number of unissued shares of Common Stock
or any shares of Common Stock owned by any other shareholder or shareholders of
the Company.
10. Contribution. If the indemnification provided for in Sections 5 and 6
is unavailable to an indemnified party with respect to any losses, claims,
damages, actions, liabilities, costs or expenses referred to therein or is
insufficient to hold the indemnified party harmless as contemplated therein,
then the indemnifying party, in lieu of indemnifying such indemnified party,
shall contribute to the amount paid or payable by such indemnified party as a
result of such losses, claims, damages, actions, liabilities, costs or expenses
in such proportion as is appropriate to reflect the relative fault of the
Company, on the one hand, and the Holder, on the other hand, in connection with
the statements or omissions which resulted in such losses, claims, damages,
actions, liabilities, costs or expenses as well as any other relevant equitable
considerations. The relative fault of the Company, on the one hand, and of the
Holder, on the other hand, shall be determined by reference to, among other
factors, whether the untrue or alleged untrue statement of a material fact or
omission to state a material
7
<PAGE>
fact relates to information supplied by the Company or by the Holder and the
parties' relative intent, knowledge, access to information and opportunity to
correct or prevent such statement or omission; provided, however, that in no
event shall the obligation of any indemnifying party to contribute under this
Section 10 exceed the amount that such indemnifying party would have been
obligated to pay by way of indemnification if the indemnification provided for
under Sections 5 or 6 hereof had been available under the circumstances.
The Company and the Holders agree that it would not be just and equitable
if contribution pursuant to this Section 10 were determined by pro rata
allocation or by any other method of allocation that does not take account of
the equitable considerations referred to in the immediately preceding paragraph.
No indemnified party guilty of fraudulent misrepresentation (within the
meaning of Section 11(f) of the Securities Act) shall be entitled to
contribution from any indemnifying party who was not guilty of such fraudulent
misrepresentation.
11. No Other Obligation to Register. Except as otherwise expressly provided
in this Agreement, the Company shall have no obligation to the Holders to
register the Registrable Shares under the Securities Act.
12. Amendments and Waivers. The provisions of this Agreement may not be
amended, modified or supplemented without the prior written consent of the
Company and Holders holding in excess of 50% of the Registrable Shares.
13. Notices. Except as set forth below, all notices and other
communications provided for or permitted hereunder shall be in writing and shall
be deemed to have been duly given if delivered personally or sent by telex or
telecopier, registered or certified mail (return receipt requested), postage
prepaid or courier or overnight delivery service to the Company at the following
address and to the Holder at the address set forth on his signature page to this
Agreement (or at such other address for any party as shall be specified by like
notice, provided that notices of a change of address shall be effective only
upon receipt thereof), and further provided that in case of directions to amend
the Registration Statement pursuant to Section 2(b) or Section 6, a Holder must
confirm such notice in writing by overnight express delivery with confirmation
of receipt:
If to the Company: Beacon Properties Corporation
50 Rowes Wharf
Boston, MA 02110
Attn: Alan M. Leventhal,
Chief Executive Officer
8
<PAGE>
With a copy to: Goodwin, Procter & Hoar LLP
Exchange Place
Boston, MA 02109
Attn: Gilbert G. Menna, P.C.
In addition to the manner of notice permitted above, notices given pursuant to
Sections 1, 7 and 8 hereof may be effected telephonically and confirmed in
writing thereafter in the manner described above.
14. Successors and Assigns. This Agreement shall be binding upon and inure
to the benefit of the successors and assigns of the Company. This Agreement may
not be assigned by any Holder and any attempted assignment hereof by any Holder
will be void and of no effect and shall terminate all obligations of the Company
hereunder with respect to such Holder; provided, however, that this Agreement
may be assigned to any general or limited partner of a Holder where such partner
is a transferee pursuant to Section 11.3 of the Amended and Restated Agreement
of Limited Partnership of the Operating Partnership of any or all of such
Holder's Units or Registrable Shares.
15. Counterparts. This Agreement may be executed in any number of
counterparts and by the parties hereto in separate counterparts, each of which
when so executed shall be deemed to be an original and all of which taken
together shall constitute one and the same agreement.
16. Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of Maryland applicable to contracts made
and to be performed wholly within said State.
17. Severability. In the event that any one or more of the provisions
contained herein, or the application thereof in any circumstances, is held
invalid, illegal or unenforceable in any respect for any reason, the validity,
legality and enforceability of any such provision in every other respect and of
the remaining provisions contained herein shall not be in any way impaired
thereby, it being intended that all of the rights and privileges of the parties
hereto shall be enforceable to the fullest extent permitted by law.
18. Entire Agreement. This Agreement is intended by the parties as a final
expression of their agreement and intended to be the complete and exclusive
statement of the agreement and understanding of the parties hereto in respect of
the subject matter contained herein. There are no restrictions, promises,
warranties or undertakings, other than those set forth or referred to herein,
with respect to such subject matter. This Agreement supersedes all prior
agreements and understandings between the parties with respect to such subject
matter.
9
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the date first written above.
BEACON PROPERTIES CORPORATION
/s/ Charles H. Cremens
---------------------------------
Name: Charles H. Cremens
Title: Senior Vice President
10
<PAGE>
GREENSBORO ASSOCIATES LIMITED
PARTNERSHIP, a Virginia limited
partnership
By: /s/ David W. Evans
---------------------------------
Name: David W. Evans
Title: General Partner
By: /s/ A.J. Clark
---------------------------------
Name: A.J. Clark
Title: General Partner
By: The Sotweed Corporation, a Delaware
corporation, as general partner
By: /s/ Robert G. Goelet
-----------------------------
Name: Robert G. Goelet
Title: President
By: /s/ Jonathan M. Rather
-----------------------------
Name: Jonathan M. Rather
Title: Treasurer
JOHN MARSHALL ASSOCIATES
LIMITED PARTNERSHIP, a Virginia
limited partnership
By: /s/ David W. Evans
-----------------------------
Name: David W. Evans
Title: General Partner
By: /s/ A.J. Clark
-----------------------------
Name: A.J. Clark
Title: General Partner
11
<PAGE>
By: The Sotweed Corporation, a
Delaware corporation, as general
partner
By: /s/ Robert G. Goelet
---------------------------
Name: Robert G. Goelet
Title: President
By: /s/ Jonathan M. Rather
---------------------------
Name: Jonathan M. Rather
Title: Treasurer
PIMPERNELL ESTATES LIMITED
PARTNERSHIP, a Virginia limited
partnership
By:Pimpernell Corporation, a Delaware
corporation, as general partner
By: /s/ Robert G. Goelet
---------------------------
Name: Robert G. Goelet
Title: President
By: /s/ Jonathan M. Rather
---------------------------
Name: Jonathan M. Rather
Title: Treasurer
WOODLAND-NORTHRIDGE I LIMITED
PARTNERSHIP, a Virginia limited
partnership
By: /s/ David W. Evans
-------------------------------
Name: David W. Evans
Title: General Partner
12
<PAGE>
By: /s/ A.J. Clark
---------------------------------
Name: A.J. Clark
Title: General Partner
By:White Swan Oil Corporation, a
Delaware corporation, as general
partner
By: /s/ Jonathan M. Rather
------------------------------
Name: Jonathan M. Rather
Title: Vice President
By:Green Highlander Corporation, a
Delaware corporation, as general
partner
By: /s/ Jonathan M. Rather
------------------------------
Name: Jonathan M. Rather
Title: Vice President
By:Windward Oil and Gas Corporation, a
Texas corporation, as general partner
By: /s/ Gilbert Kerlin
------------------------------
Name: Gilbert Kerlin
Title: President
By:Smoking Tree Corporation, a
Delaware corporation, as general
partner
By: /s/ Robert G. Goelet
------------------------------
Name: Robert G. Goelet
Title: President
13
<PAGE>
By: /s/ Jonathan M. Rather
------------------------------
Name: Jonathan M. Rather
Title: Treasurer
Each Holder's address: c/o Goelet Corporation
22 East 67th Street
New York, NY 10021
Attn: Jonathan M. Rather
14
Exhibit 10.11
REGISTRATION RIGHTS AGREEMENT
This Registration Rights Agreement (this "Agreement") is entered into as of
December 27, 1996 by and between Beacon Properties Corporation, a Maryland
corporation (the "Company") and Metropolitan Life Insurance Company (the
"Holder").
WHEREAS, the Holder is to receive units of limited partnership interest
("Units") in Beacon Properties, L.P. (the "Operating Partnership") which may be
redeemed for shares of the Company's common stock, $.01 par value ("Common
Stock") pursuant to a Sale and Contribution Agreement dated as of November 20,
1996 (the "Sale Agreement") by and between the Holder and the Operating
Partnership; and
WHEREAS, the Holder has agreed not to dispose of one-half of the Units to
be received pursuant to the Sale Agreement for a period of six months from the
date of issuance (the "Six-Month Units") and has further agreed not to dispose
of the remaining one-half of the Units to be received pursuant to the Sale
Agreement for a period of twelve months from the date of issuance (the
"Twelve-Month Units").
NOW, THEREFORE, in consideration of the mutual promises and agreements set
forth herein, and other valuable consideration, the receipt and sufficiency of
which are hereby acknowledged, the parties hereto hereby agree as follows:
1. Registration.
(a) Initial Registration. No later than 120 days after the date of this
Agreement, the Company shall cause to be filed a registration statement (the
"Initial Registration Statement") under Rule 415 under the Securities Act of
1933, as amended (the "Securities Act") relating to the sale by the Holder of
its Registrable Shares (as hereinafter defined) issued upon the redemption of
the Six-Month Units (the "Initial Registered Shares"). As used in this
Agreement, the term "Registrable Shares" means shares of Common Stock issued or
to be issued to the Holder upon redemption or in exchange for its Units,
excluding (A) Common Stock for which a Registration Statement relating to the
sale thereof shall have become effective under the Securities Act and which have
been disposed of under such Registration Statement, (B) Common Stock sold
pursuant to Rule 144 under the Securities Act or (C) Common Stock eligible for
sale pursuant to Rule 144(k) under the Securities Act. The Company shall use
reasonable efforts to cause such Initial Registration Statement to be declared
effective by the Securities and Exchange Commission (the "SEC") for the
Initially Registered Shares as soon as practicable thereafter but in no event
later than six months after the date of this Agreement. The Company agrees to
use reasonable efforts to keep the Initial Registration Statement continuously
effective until the earliest of (a) the date on which the Holder no longer holds
any Registrable Shares registered under the Initial Registration Statement, (b)
the date on which the Registrable Shares may be sold by the Holder pursuant to
Rule 144(k) under the Securities Act or (c) the date which is the later of two
years after the effective date of the Initial Registration Statement and two and
one-half years after the date of this Agreement.
1
<PAGE>
(b) Demand Registration. At any time after two and one-half years after the
date of this Agreement until the earlier of (i) the seven and one-half year
anniversary of this Agreement or (ii) the date on which all of the Registrable
Shares have become eligible for sale pursuant to Rule 144(k) promulgated under
the Securities Act, subject to the conditions set forth in this Agreement, the
Holder may request that the Company cause to be filed, a registration statement
(a "Demand Registration Statement") under Rule 415 under the Securities Act
relating to the sale by the Holder of its Registrable Shares issued upon the
redemption of the Six-Month Units in accordance with the terms hereof. The
Company shall use reasonable efforts to cause such Demand Registration Statement
to be declared effective by the SEC for all Registrable Shares which the Company
has been requested to register as soon as practicable thereafter. The Company
agrees to use reasonable efforts to keep the Demand Registration Statement
continuously effective until the earliest of (a) the date on which the Holder no
longer holds any Registrable Shares registered under the Demand Registration
Statement, (b) the date on which the Registrable Shares may be sold by the
Holder pursuant to Rule 144(k) promulgated under the Securities Act or (c) the
date which is two (2) years from the effective date of such Demand Registration
Statement. The Company shall not be required to file and effect a new Demand
Registration Statement pursuant to this Section 1(b) until a period of twelve
(12) months has elapsed from the termination of the registration statement with
respect to Registrable Shares covered by a prior registration request. The
Company shall not be required to file and effect more than two Demand
Registration Statements pursuant to this Section 1(b).
(c) Piggyback Registration. If at any time while any Registrable Shares are
outstanding the Company proposes to file a registration statement under the
Securities Act with respect to an offering of Common Stock solely for cash
(other than a registration statement (i) on Form S-8 or any successor form or in
connection with any employee or director welfare, benefit or compensation plan,
(ii) on Form S-4 or any successor form or in connection with an exchange offer,
(iii) in connection with a rights offering exclusively to existing holders of
Common Stock, or (iv) in connection with an offering solely to employees of the
Company or its affiliates), whether or not for its own account (a "Piggyback
Registration Statement"), the Company shall give written notice of such proposed
filing at least fifteen (15) business days before filing to the Holder. The
notice referred to in the preceding sentence shall offer the Holder the
opportunity to register such amount of Registrable Shares as the Holder may
request (a "Piggyback Registration"). Subject to the provisions of Section 2
below, the Company shall include in such Piggyback Registration all Registrable
Shares requested to be included in the registration for which the Company has
received written requests for inclusion therein within ten (10) business days
after the notice referred to above has been given by the Company to the Holder.
The Holder shall be permitted to withdraw all or part of the Registrable Shares
from a Piggyback Registration at any time prior to the effective date of such
Piggyback Registration. If a Piggyback Registration is an underwritten
registration on behalf of the Company and the managing underwriter advises the
Company that the total number of shares of Common Stock requested to be included
in such registration exceeds the number of shares of Common Stock which can be
sold in such offering, the Company will include in such registration in the
following priority: (i) first, all shares of Common Stock the Company proposes
to sell and (ii) second, up to the full number of applicable Registrable
2
<PAGE>
Shares requested to be included in such registration and, which in the opinion
of such managing underwriter, can be sold without adversely affecting the price
range or probability of success of such offering, which shall be allocated among
the Holder and all other stockholders requesting registration on a pro rata
basis. No Registrable Securities or other shares of Common Stock requested to be
included in a registration pursuant to demand registration rights shall be
excluded from the underwriting unless all securities requested to be included in
a registration pursuant to piggyback registration rights are first excluded.
(d) Registration Statement Covering Issuance of Common Stock. At least 45
days prior to the first date upon which the Twelve-Month Units held by the
Holder may be redeemed (or such other date as may be required under applicable
provisions of the Securities Act), the Company shall cause to be filed a
registration statement (the "Issuance Registration Statement") under Rule 415
under the Securities Act relating to the issuance to the Holder of registered
shares of Common Stock (i.e., without legend pursuant to Rule 502(d)(3) under
the Securities Act) upon the redemption of or in exchange for its Twelve-Month
Units. Thereupon, the Company shall use reasonable efforts to cause such
Registration Statement to be declared effective by the SEC for all shares of
Common Stock covered thereby as soon as practicable thereafter but in no event
later than twelve months after the date of this Agreement. The Company agrees to
use reasonable efforts to keep the Issuance Registration Statement continuously
effective until the date on which the Holder has redeemed or exchanged all of
its Twelve-Month Units for Common Stock. In the event that the Company is unable
to cause such Registration Statement to be declared effective by the SEC or is
unable to keep such Registration Statement effective until the date on which the
Holder has redeemed or exchanged its Twelve-Month Units for Common Stock, then
the rights of the Holder set forth in Section 1(b) and 1(c) above shall apply to
Common Stock received upon the redemption of Twelve-Month Units, as well as
Six-Month Units. The Initial Registration Statement, any Demand Registration
Statement, Piggyback Registration Statement or Issuance Registration Statement
are sometimes referred to as a "Registration Statement."
2. Registration Procedures.
(a) The Company shall notify the Holder of the effectiveness of the
Registration Statement and shall furnish to the Holder such number of copies of
the Registration Statement (including any amendments, supplements and exhibits),
the prospectus contained therein (including each preliminary prospectus), any
documents incorporated by reference in the Registration Statement and such other
documents as the Holder may reasonably request in order to facilitate its sale
of the Registrable Shares in the manner described in the Registration Statement.
(b) The Company shall prepare and file with the SEC from time to time such
amendments and supplements to the Registration Statement and prospectus used in
connection therewith as may be necessary to keep the Registration Statement
effective and to comply with the provisions of the Securities Act with respect
to the disposition of all the Registrable Shares until the earlier of (i) such
time as all of the Registrable Shares have been issued (pursuant to the Issuance
Registration Statement) or disposed of (pursuant to the Initial Registration
3
<PAGE>
Statement, a Demand Registration Statement or a Piggyback Registration
Statement) in accordance with the intended methods of disposition by the Holder
as set forth in the Registration Statement or (ii) the date on which the
Registration Statement ceases to be effective in accordance with the terms of
Section 1. Upon ten (10) business days' notice, the Company shall file any
supplement or post-effective amendment to the Registration Statement with
respect to the Holder's interests in or plan of distribution of Registrable
Shares that is reasonably necessary to permit the sale of the Holder's
Registrable Shares pursuant to the Registration Statement.
(c) The Company shall file any necessary listing applications or amendments
to the existing applications to cause the shares to be listed or quoted on the
primary exchange or quotation system on which the Common Stock is then listed or
quoted.
(d) The Company shall promptly notify the Holder of, and confirm in
writing, any request by the SEC for amendments or supplements to the
Registration Statement or the prospectus related thereto or for additional
information. In addition, the Company shall promptly notify the Holder of, and
confirm in writing, the filing of the Registration Statement, any prospectus
supplement related thereto or any post-effective amendment to the Registration
Statement and the effectiveness of any post-effective amendment.
(e) The Company shall promptly notify the Holder, at any time when a
prospectus relating to the Registration Statement is required to be delivered
under the Securities Act, of the happening of any event as a result of which the
prospectus included in the Registration Statement, as then in effect, includes
an untrue statement of a material fact or omits to state any material fact
required to be stated therein or necessary to make the statements therein, in
light of the circumstances under which they were made, not misleading. In such
event and subject to paragraph 7 of this Agreement, the Company shall promptly
prepare and furnish to the Holder a reasonable number of copies of a supplement
to or an amendment of such prospectus as may be necessary so that, as thereafter
delivered to the purchasers of Registrable Shares, such prospectus shall not
include an untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements therein, in
light of the circumstances under which they are made, not misleading.
3. State Securities Laws. Subject to the conditions set forth in this
Agreement, the Company shall, promptly upon the filing of a Registration
Statement including Registrable Shares, file such documents as may be necessary
to register or qualify the Registrable Shares under the securities or "Blue Sky"
laws of such states as the Holder may reasonably request, and the Company shall
use reasonable efforts to cause such filings to become qualified; provided,
however, that the Company shall not be obligated to qualify as a foreign
corporation to do business under the laws of any such state in which it is not
then qualified or to file any general consent to service of process in any such
state. Once qualified, the Company shall use reasonable efforts to keep such
filings qualified until the earlier of (a) such time as all of the Registrable
Shares have been disposed of in accordance with the intended methods of
disposition by the Holder as set forth in the Registration Statement, (b) in the
case of a particular state, the Holder has notified the Company that it no
longer requires qualified filing
4
<PAGE>
in such state in accordance with its original request for filing or (c) the date
on which the Registration Statement ceases to be effective. The Company shall
promptly notify the Holder of, and confirm in writing, the receipt by the
Company of any notification with respect to the suspension of the qualification
of the Registrable Shares for sale under the securities or "Blue Sky" laws of
any jurisdiction or the initiation or threat of any proceeding for such purpose.
4. Expenses. The Company shall bear all expenses incurred in connection
with the registration of the Registrable Shares pursuant to Section 1(a), 1(c)
and Section 1(d) of this Agreement. The Holder shall bear all expenses incurred
by the Company in connection with a registration pursuant to Section 1(b) of
this Agreement. Such expenses shall include, without limitation, all printing,
legal and accounting expenses incurred by the Company and all registration and
filing fees imposed by the SEC, any state securities commission or the New York
Stock Exchange or, if the Common Stock is not then listed on the New York Stock
Exchange, the principal national securities exchange or national market system
on which the Common Stock is then traded or quoted. In addition, the Holder
shall be responsible for any brokerage or underwriting commissions and taxes of
any kind (including, without limitation, transfer taxes) with respect to any
disposition, sale or transfer of Registrable Shares and for any legal,
accounting and other expenses incurred by it.
5. Indemnification by the Company. The Company agrees to indemnify the
Holder and its officers, directors, employees, agents, representatives and
affiliates, and each person or entity, if any, that controls the Holder within
the meaning of the Securities Act, and each other person or entity, if any,
subject to liability because of his, her or its connection with the Holder, and
any underwriter and any person who controls the underwriter within the meaning
of the Securities Act (an "Indemnitee") against any and all losses, claims,
damages, actions, liabilities, costs and expenses (including without limitation
reasonable attorneys' fees, expenses and disbursements documented in writing),
joint or several, arising out of or based upon any untrue or alleged untrue
statement of material fact contained in the Registration Statement or any
prospectus contained therein, or any omission or alleged omission to state
therein a material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which they were made,
not misleading, except insofar as and to the extent that such statement or
omission arose out of or was based upon information regarding the Indemnitee or
its plan of distribution which was furnished to the Company by the Indemnitee
for use therein, provided, further that the Company shall not be liable to any
person who participates as an underwriter in the offering or sale of Registrable
Shares or any other person, if any, who controls such underwriter within the
meaning of the Securities Act, in any such case to the extent that any such
loss, claim, damage, liability (or action or proceeding in respect thereof) or
expense arises out of or is based upon (i) an untrue statement or alleged
5
<PAGE>
untrue statement or omission or alleged omission made in such Registration
Statement, any such preliminary prospectus, final prospectus, summary
prospectus, amendment or supplement in reliance upon and in conformity with
information furnished to the Company for use in connection with the Registration
Statement or the prospectus contained therein by such Indemnitee or (ii) such
Indemnitee's failure to send or give a copy of the final prospectus furnished to
it by the Company at or prior to the time such action is required by the
Securities Act to the person claiming an untrue statement or alleged untrue
statement or omission or alleged omission if such statement or omission was
corrected in such final prospectus. The obligations of the Company under this
Section 5 shall survive the completion of any offering of Registrable Shares
pursuant to a Registration Statement under this Agreement or otherwise and shall
survive the termination of this Agreement.
6. Covenants of the Holder. The Holder hereby agrees (a) to cooperate with
the Company and to furnish to the Company all such information in connection
with the preparation of the Registration Statement and any filings with any
state securities commissions as the Company may reasonably request, (b) to
deliver or cause delivery of the prospectus contained in the Registration
Statement to any purchaser of the shares covered by the Registration Statement
from the Holder, (c) to notify the Company of any sale of Registrable Shares by
such Holder and (d) to indemnify the Company, its officers, directors,
employees, agents, representatives and affiliates, and each person, if any, who
controls the Company within the meaning of the Securities Act, and each other
person, if any, subject to liability because of his connection with the Company,
against any and all losses, claims, damages, actions, liabilities, costs and
expenses arising out of or based upon (i) any untrue statement or alleged untrue
statement of material fact contained in either the Registration Statement or the
prospectus contained therein, or any omission or alleged omission to state
therein a material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which they were made,
not misleading, if and to the extent that such statement or omission arose out
of or was based upon information regarding the Holder or its plan of
distribution which was furnished to the Company by the Holder, in writing, for
use therein, or (ii) the failure by the Holder to deliver or cause to be
delivered the prospectus contained in the Registration Statement (as amended or
supplemented, if applicable) furnished by the Company to the Holder to any
purchaser of the shares covered by the Registration Statement from the Holder.
Notwithstanding the foregoing, (i) in no event will a Holder have any obligation
under this Section 6 for amounts the Company pays in settlement of any such
loss, claim, damage, liability or action if such settlement is effected without
the consent of the Holder (which consent shall not be unreasonably withheld) and
(ii) the total amount for which a Holder shall be liable under this Section 6
shall not in any event exceed the aggregate proceeds received by him or it from
the sale of the Holder's Registrable Shares in such registration. The
obligations of the Holders under this Section 6 shall survive the completion of
any offering of Registrable Shares pursuant to a Registration Statement under
this Agreement or otherwise and shall survive the termination of this Agreement.
7. Suspension of Registration Requirement.
(a) The Company shall promptly notify the Holder of, and confirm in
writing, the issuance by the SEC of any stop order suspending the effectiveness
of the Registration Statement or the initiation of any proceedings for that
purpose. The Company shall use reasonable efforts to obtain the withdrawal of
any order suspending the effectiveness of the Registration Statement at the
earliest possible moment.
(b) Notwithstanding anything to the contrary set forth in this Agreement,
the Company's obligation under this Agreement to use reasonable efforts to cause
the Registration
6
<PAGE>
Statement and any filings with any state securities commission
to be made or to become effective or to amend or supplement the Registration
Statement shall be suspended in the event and during such period pending
negotiations relating to, or consummation of, a transaction or the occurrence of
an event that would require additional disclosure of material information by the
Company in the Registration Statement or such filing, as to which the Company
has a bona fide business purpose for preserving confidentiality (such
circumstances being hereinafter referred to as a "Suspension Event") that would
make it impractical or unadvisable to cause the Registration Statement or such
filings to be made or to become effective or to amend or supplement the
Registration Statement, but such suspension shall continue only for so long as
such event or its effect is continuing but in no event will that suspension
exceed sixty (60) days. The Company agrees not to exercise the rights set forth
in this Section 7(b) more than twice in any twelve month period. The Company
shall notify the Holder of the existence of any Suspension Event.
(c) Each holder of Registrable Shares whose Registrable Shares are covered
by a Registration Statement filed pursuant to Section 1(a), (b) or (c) hereof
agrees, if requested by the Company in the case of a nonunderwritten offering (a
"Nonunderwritten Offering") or if requested by the managing underwriter or
underwriters in an underwritten offering (an "Underwritten Offering,"
collectively with Nonunderwritten Offering, the "Offering"), not to effect any
public sale or distribution of any of the securities of the Company of any class
included in such Offering, including a sale pursuant to Rule 144 or Rule 144A
under the Securities Act (except as part of such Underwritten Offering), during
the 15-day period prior to, and during the 60-day period beginning on, the date
of pricing of each such Offering, to the extent timely notified in writing by
the Company or the managing underwriters.
8. Black-Out Period. Following the effectiveness of the Registration
Statement and the filings with any state securities commissions, the Holder
agrees that it will not effect any sales of the Registrable Shares pursuant to
the Registration Statement or any such filings at any time after it has received
notice from the Company to suspend sales as a result of the occurrence or
existence of any Suspension Event, during any Offering, or so that the Company
may correct or update the Registration Statement or such filing pursuant to
Section 2(d) or 2(e). The Holder may recommence effecting sales of the
Registrable Shares pursuant to the Registration Statement or such filings
following further notice to such effect from the Company, which notice shall be
given by the Company not later than five (5) business days after the conclusion
of any such Suspension Event.
9. Additional Shares. The Company, at its option, may register, under any
registration statement and any filings with any state securities commissions
filed pursuant to this Agreement, any number of unissued shares of Common Stock
or any shares of Common Stock owned by any other shareholder or shareholders of
the Company. Notwithstanding the foregoing, the Company will not hereafter enter
into any agreement with respect to its securities which is inconsistent with,
violates or materially adversely affects the rights granted to the Holder in
this Agreement.
7
<PAGE>
10. Contribution. If the indemnification provided for in Sections 5 and 6
is unavailable to an indemnified party with respect to any losses, claims,
damages, actions, liabilities, costs or expenses referred to therein or is
insufficient to hold the indemnified party harmless as contemplated therein,
then the indemnifying party, in lieu of indemnifying such indemnified party,
shall contribute to the amount paid or payable by such indemnified party as a
result of such losses, claims, damages, actions, liabilities, costs or expenses
in such proportion as is appropriate to reflect the relative fault of the
Company, on the one hand, and the Holder, on the other hand, in connection with
the statements or omissions which resulted in such losses, claims, damages,
actions, liabilities, costs or expenses as well as any other relevant equitable
considerations. The relative fault of the Company, on the one hand, and of the
Holder, on the other hand, shall be determined by reference to, among other
factors, whether the untrue or alleged untrue statement of a material fact or
omission to state a material fact relates to information supplied by the Company
or by the Holder and the parties' relative intent, knowledge, access to
information and opportunity to correct or prevent such statement or omission;
provided, however, that in no event shall the obligation of any indemnifying
party to contribute under this Section 10 exceed the amount that such
indemnifying party would have been obligated to pay by way of indemnification if
the indemnification provided for under Sections 5 or 6 hereof had been available
under the circumstances.
The Company and the Holder agree that it would not be just and equitable if
contribution pursuant to this Section 10 were determined by pro rata allocation
or by any other method of allocation that does not take account of the equitable
considerations referred to in the immediately preceding paragraph.
No indemnified party guilty of fraudulent misrepresentation (within the
meaning of Section 11(f) of the Securities Act) shall be entitled to
contribution from any indemnifying party who was not guilty of such fraudulent
misrepresentation.
11. Rule 144. The Company agrees to use best efforts to file all reports
required to be filed by it under the Securities Act and the Exchange Act of
1934, as amended (or, if the Company is not required to file such reports, it
will, upon the request of the Holder, make publicly available other information
so long as necessary to permit sales under Rule 144 under the Securities Act),
and it will take such further action as the Holder may reasonably request, all
to the extent required from time to time to enable the Holder to sell
Registerable Securities without registration under the Securities Act within the
limitation of the exemptions provided by (i) Rule 144 under the Securities Act,
as such rules may be amended from time to time, or (ii) any similar rule or
regulation hereafter adopted by the SEC.
12. No Other Obligation to Register. Except as otherwise expressly provided
in this Agreement, the Company shall have no obligation to the Holder to
register the Registrable Shares under the Securities Act.
13. Amendments and Waivers. The provisions of this Agreement may not be
amended, modified or supplemented without the prior written consent of the
Company and the Holder.
8
<PAGE>
14. Notices. Except as set forth below, all notices and other
communications provided for or permitted hereunder shall be in writing and shall
be deemed to have been duly given if delivered personally or sent by telex or
telecopier, registered or certified mail (return receipt requested), postage
prepaid or courier or overnight delivery service to the Company at the following
address and to the Holder at the address set forth on his signature page to this
Agreement (or at such other address for any party as shall be specified by like
notice, provided that notices of a change of address shall be effective only
upon receipt thereof), and further provided that in case of directions to amend
the Registration Statement pursuant to Section 2(b) or Section 6, the Holder
must confirm such notice in writing by overnight express delivery with
confirmation of receipt:
If to the Company: Beacon Properties Corporation
50 Rowes Wharf
Boston, MA 02110
Attn: Alan M. Leventhal,
Chief Executive Officer
With a copy to: Goodwin, Procter & Hoar LLP
Exchange Place
Boston, MA 02109
Attn: Gilbert G. Menna, P.C.
15. Successors and Assigns. This Agreement shall be binding upon and inure
to the benefit of the successors and assigns of the Company. This Agreement may
not be assigned by the Holder except in connection with (a) the sale of any
Registrable Shares received upon the conversion of Twelve-Month Units, or (b)
the sale of all Registrable Shares received upon the conversion of Six-Month
Units and any attempted assignment hereof by any Holder in violation of the
foregoing will be void and of no effect and shall terminate all obligations of
the Company hereunder with respect to such Holder. Any person or entity to which
this Agreement is assigned shall be considered a Holder hereunder.
16. Counterparts. This Agreement may be executed in any number of
counterparts and by the parties hereto in separate counterparts, each of which
when so executed shall be deemed to be an original and all of which taken
together shall constitute one and the same agreement.
17. Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of Maryland applicable to contracts made
and to be performed wholly within said State.
18. Severability. In the event that any one or more of the provisions
contained herein, or the application thereof in any circumstances, is held
invalid, illegal or unenforceable in any respect for any reason, the validity,
legality and enforceability of any such provision in every other respect and of
the remaining provisions contained herein shall not be in any way
9
<PAGE>
impaired thereby, it being intended that all of the rights and privileges of the
parties hereto shall be enforceable to the fullest extent permitted by law.
19. Entire Agreement. This Agreement is intended by the parties as a
final expression of their agreement and intended to be the complete and
exclusive statement of the agreement and understanding of the parties hereto in
respect of the subject matter contained herein. There are no restrictions,
promises, warranties or undertakings, other than those set forth or referred to
herein, with respect to such subject matter. This Agreement supersedes all prior
agreements and understandings between the parties with respect to such subject
matter.
[Remainder of Page Intentionally Left Blank]
10
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the date first written above.
BEACON PROPERTIES CORPORATION
/s/ Charles H. Cremens
----------------------------------
Name: Charles H. Cremens
Title: Senior Vice President
11
<PAGE>
Registration Rights Agreement
Holder Signature Page
METROPOLITAN LIFE INSURANCE
COMPANY
/s/ Jeffrey S. Moe
----------------------------------
By: Jeffrey S. Moe
Title: Assistant Vice President
Address:
Metropolitan Life Insurance Company
Equity Investments & Sales
2021 Spring Road - Suite 350
Oak Brook, IL 60521
Fax: (630) 574-5695
Attn: Jeffrey S. Moe, Esq.
Copy to:
Katten Muchin & Zavis
525 W. Monroe, Suite 1600
Chicago, IL 60661
Fax: (312) 902-1061
Attn: Nina B. Matis, Esq.
12
LOAN AGREEMENT
BEACON PROPERTIES, L.P.,
A DELAWARE LIMITED PARTNERSHIP
and
METROPOLITAN LIFE INSURANCE COMPANY,
A NEW YORK CORPORATION
March 15, 1996
$218,000,000.00
<PAGE>
LOAN AGREEMENT
THIS LOAN AGREEMENT (this "Agreement") dated as of March 15, 1996, is made
and entered into by and between BEACON PROPERTIES, L.P., a Delaware limited
partnership ("Borrower"), and METROPOLITAN LIFE INSURANCE COMPANY, a New York
corporation ("Lender").
In consideration of the mutual covenants and undertakings of the parties
which are hereinafter set forth, Borrower and Lender hereby agree as follows:
ARTICLE 1 - Definitions
-----------
For the purposes of this Agreement:
"Affiliate" shall mean any Person directly or indirectly controlling,
controlled by, or under common control with Borrower including employees of
Borrower and the general partner of Borrower.
"Agreement" shall mean this Loan Agreement.
"Assignment of Leases" shall mean that certain Assignment of Lessor's
Interest in Leases dated of even date herewith by and between Borrower and
Lender.
"Beacon Affiliate" shall mean an entity which is controlled by Borrower's
sole general partner, Beacon Properties Corporation, a Maryland corporation and
at least fifty-one percent (51%) of the interest in which is owned, directly or
indirectly, by Borrower.
"Borrower" shall mean Beacon Properties, L.P., a Delaware limited
partnership.
"Costs" shall mean "Costs" as defined in the Unsecured Indemnity Agreement,
as modified by Section 5.10) herein.
"Debt Service Coverage Ratio" shall mean the (i) Net Operating Income of
the Remaining Property, the Transferred Property or the Non-Transferred
Property, as the case may be, for a given period of time divided by (ii) the
debt service on the Loan for such period of time, as determined by Lender (which
determination shall be binding in the absence of manifest error).
"Environmental Claim" shall mean "Environmental Claim" as defined in the
Unsecured Indemnity Agreement.
"Event of Default" shall mean an "Event of Default" as defined in the
Security Deed.
<PAGE>
"Financing Statements" shall mean the Uniform Commercial Code Financing
Statements of even date herewith made by Borrower as "Debtor" in favor of Lender
as "Secured Party," giving notice of the security interest created by the
Security Deed.
"Hazardous Materials" shall mean "Hazardous Materials" as defined in the
Unsecured Indemnity Agreement.
"Insurance Proceeds" shall mean "Insurance Proceeds" as defined in the
Security Deed, exclusive of any proceeds of the policies referred to in
Subsection 1.05(a)(2) of the Security Deed.
"Lender" shall mean Metropolitan Life Insurance Company, a New York
corporation, and any assignees of Lender.
"Lien" shall mean any mortgage, lien, pledge, assignment, charge, security
interest, title retention agreement, levy, execution, seizure, attachment,
garnishment or other encumbrance of any loan whether or not choate, vested or
perfected.
"Loan" shall mean the loan by Lender to Borrower evidenced by the Note.
"Loan Application" shall mean that certain Mortgage Loan Application dated
January 26, 1996 executed by Borrower and accepted by Lender, as amended, a copy
of which is attached hereto as Exhibit "A" and by this reference incorporated
herein.
"Loan Documents" shall mean the "Loan Documents" as defined in the Security
Deed.
"Material Adverse Effect" shall mean a material adverse effect upon the
ability of Borrower to perform its obligations under this Agreement or any of
the other Loan Documents, in any case, whether resulting from any single act,
omission, situation, status, event, or undertaking, or several acts, emissions,
situations, statuses, events, or undertakings.
"Minimum Debt Service Coverage Ratio" shall mean the Minimum Debt Service
Coverage Ratio of Remaining Property set forth in Column 5 of Schedule I
attached hereto and by this reference made a part hereof with respect to each of
the Release Parcels.
"Net Operating Income" shall mean the gross proceeds generated from the
portion of the Property under consideration and received by Borrower during a
given period of time, including rental income, tenant reimbursements, profits
and other income, less the normal operating expenses, maintenance, real estate
taxes and property insurance incurred by Borrower in the ownership and operation
of such portion of the Property during such period of time, but excluding
depreciation, amortization and capital expenditure items such as tenant
improvements and leasing commissions.
"New Loan Documents" shall have the meaning set forth in Section 3.2(m)(5)
hereof.
2
<PAGE>
"New Note" shall have the meaning set forth in Section 3.2(m)(4) hereof.
"New Security Deed" shall have the meaning set forth in Section 3.2(m)(5)
hereof.
"Non-Transferred Property" shall mean the Property, including without
limitation all easements contemplated by Section 3.2(m)(9) hereof, less and
except all (x) Release Parcels for which Lender has previously delivered a
Release, and (y) Release Parcels which have been transferred pursuant to Article
3 hereof.
"Note" shall mean that Promissory Note dated of even date herewith, in the
original principal amount of $218,000,000.00, made by Borrower to the order of
Lender, and any extensions, renewals or amendments thereof.
"Obligations" shall mean all payment and performance obligations of
Borrower under this Agreement and the other Loan Documents, as they may be
amended from time to time.
"Person" shall mean an individual, corporation, partnership, limited
liability company, trust or unincorporated organization, or a government or any
agency or political subdivision thereof.
"Prepayment Fee" shall mean the "Prepayment Fee" as defined in the Note.
"Property" shall mean the "Property" as defined in the Security Deed.
"Qualified Real Estate Investor" shall mean any reputable corporation,
partnership, limited liability company, joint venture, joint-stock company,
trust or one or more individuals as to which (x) if the applicable aggregate
Release Amount is greater than $50,000,000 but less than $100,000,000, such
investor shall have a minimum net worth of $150,000,000, real estate assets of
not less than $300,000,000, and short-term liquid assets of not less than
$10,000,000, and (y) if the applicable aggregate Release Amount is equal to or
greater than $100,000,000, such investor shall have a minimum net worth of
$300,000,000, real estate assets of not less than $600,000,000 and short-term
liquid assets of not less than $20,000,000, and in either case (x) or (y) shall
be free from any bankruptcy, reorganization or insolvency proceedings or any
criminal charges or any proceedings which would, in Lender's good faith
judgment, raise a material question as to the reputation of such investor or the
Transferee or its ability to own and to operate the Property, and shall not have
been, at the time of transfer or in the past, an adverse litigant, plaintiff or
defendant in any suit or other proceeding brought against or by Lender.
"Release" shall have the meaning set forth in Section 2.1 hereof.
"Release Amount" shall mean the amount set forth in Column 4 of Schedule 1
attached hereto.
3
<PAGE>
"Release Date", as it relates to any applicable Release Parcel, shall mean
the date Lender unconditionally delivers the Release as to such Release Parcel
to Borrower.
"Release Parcel" or "Release Parcels" shall mean, individually or
collectively, those portions of the Property generally described in Schedule 1
attached hereto (it being understood and agreed that the precise description of
each Release Parcel and the easements described in Sections 2.1(f)(5) and
3.2(m)(9) below, shall be subject to Lender's approval).
"Remaining Property" shall mean the Property, including without limitation
all easements contemplated by Section 2.1(f)(5) hereof, less and except all (x)
Release Parcels for which Lender has previously delivered a Release, and (y)
Release Parcels which have been transferred pursuant to Article 3 hereof.
"Request for Release" shall have the meaning set forth in Section 2.1
hereof.
"Request for Transfer" shall have the meaning set forth in Section 3.2(k)
hereof.
"Requirements" shall mean the "Requirements" as defined in the Security
Deed.
"Requirements for Restoration" shall mean the "Requirements for
Restoration" as defined in the Security Deed.
"Restated Note" shall have the meaning set forth in Section 3.2(m)(4)
hereof.
"Restoration" shall mean "Restoration" as defined in the Security Deed.
"Security Deed" shall mean that certain Deed to Secure Debt and Security
Agreement dated of even date herewith given by Borrower to Lender.
"Small Insurance Proceeds" shall mean Insurance Proceeds of less than
$500,000.00.
"Transfer" shall have the meaning set forth in Section 3.1 hereof.
"Transfer Date" shall have the meaning set forth in Section 3.2(a) hereof.
"Transfer Fee" shall have the meaning set forth in Section 3.2(i) hereof.
"Transferred Property" shall mean any portion of the Property to be
transferred in accordance with the terms and conditions set forth in Article 3
hereof.
"Transferee" shall have the meaning set forth in Section 3.1 hereof.
4
<PAGE>
"Unsecured Indemnity Agreement" shall mean that certain Unsecured Indemnity
Agreement dated of even date herewith executed by Borrower, as Indemnitor, in
favor of Lender.
"Work" shall mean the "Work" as defined in the Security Deed.
Each definition of an instrument or agreement in this Article I shall
include such instrument or agreement as modified, amended or supplemented from
time to time with the prior written consent of Lender, and except where the
context otherwise requires, definitions imparting the singular shall include the
plural and vice versa. Except where otherwise specifically restricted, reference
to a party to a Loan Document includes that party and its successors and
assigns. Each capitalized term used herein, unless otherwise defined herein,
shall have the meaning ascribed to that term in the Security Deed.
ARTICLE 2 - Release of Parcels; Conditions Precedent
----------------------------------------
Section 2.1 Release of Parcels. Lender, upon the written request of
Borrower (such a request which contains or is accompanied by the materials
required in Section 2.1(e) hereof is referred to as a "Request for Release")
shall release (a "Release") individual Release Parcels subject to the easements
contemplated by Section 2.1(f)(5) hereof from the Lien of the Security Deed, the
Assignment of Leases, the Financing Statements and the Unsecured Indemnity
Agreement (as to releases, discharges or spills of Hazardous Materials or other
environmental conditions arising after the Release Date) by the execution and
delivery of a quitclaim deed of release in form satisfactory to Lender with
respect to such Release Parcel, subject to the following conditions precedent:
(a) Each Release shall be effected only in connection with the bona
fide sale of the Release Parcel to a Person that is not an Affiliate of
Borrower;
(b) The Net Operating Income of the Remaining Property following the
Release shall be sufficient to provide a Debt Service Coverage Ratio on an
annualized basis equal to or greater than the Minimum Debt Service Coverage
Ratio specified in Schedule 1 with respect to the Remaining Property, as
determined by Lender based upon the cash flow statements and projected cash flow
statements furnished to Lender pursuant to Section 2.l(e)(2) hereof and other
information available to Lender and computed after capital expenditures;
(c) Lender shall receive on the Release Date, in cash or other medium
of payment satisfactory to Lender in its sole discretion, a release price with
respect to such Release Parcel in an amount equal to the sum of (i) the Release
Amount for such proposed Release Parcel, which amount shall be applied as a
prepayment of principal in reduction of the outstanding principal balance of the
Note in accordance with the terms of the Note, (ii) all accrued and unpaid
interest calculated on the amount set forth in clause (i) above, (iii) the
Prepayment Fee calculated on the amount set forth in Column 3 of Schedule 1, and
(iv) all of
6 5
<PAGE>
Lender's costs and expenses actually incurred as a result of such Release in
accordance with Section 2.2 hereof;
(d) Borrower shall deliver the Request for Release to Lender not less
than sixty (60) days prior to the proposed Release Date (which Request for
Release may be withdrawn not later than five (5) business days prior to the
proposed Release Date, in which event Borrower shall reimburse Lender upon
demand for its costs and expenses incurred in connection with such proposed
Request for Release);
(e) The Request for Release shall contain or be accompanied by the
following:
(1) a metes and bounds legal description of the Release Parcel
satisfactory to Lender and a boundary plat of survey of the Release Parcel
acceptable to Lender, describing and showing the Release Parcel in relation to
the abutting portions of the Property and the easements described in Section
2.l(f)(5) hereof;
(2) separate cash flow statements for the Release Parcel and the
Remaining Property certified to be true and correct by Borrower and the general
partner of Borrower for the six (6) calendar months immediately preceding the
calendar month in which the Request for Release is delivered to Lender,
projected cash flow statements for the Remaining Property certified by Borrower
and the general partner of Borrower to be their good faith best estimates of
such projections for the calendar month in which the Request for Release is
delivered to Lender and the five (5) immediately succeeding calendar months, and
a current rent roll for the Remaining Property and the Release Parcel certified
to be true and correct by the general partner of Borrower, together with all
other information necessary for Lender to calculate the Debt Service Coverage
Ratio for the aforesaid periods;
(3) a certification by Borrower and the general partner of
Borrower to Lender that neither has any actual knowledge of the occurrence of
any event which with notice or the passage of time would cause or give rise to
an Event of Default; and
(4) an estoppel certificate in the form contemplated in Section
3.04(a) of the Security Deed;
(f) Lender shall have received on or before the Release Date the
following certificates, reports, statements, title insurance endorsements,
easements and opinions of counsel and such other documents as Lender may
reasonably request:
(1) updated separate cash flow statements for the Release Parcel
and the Remaining Property certified to Lender to be true and correct by
Borrower and the general partner of Borrower for the six (6) calendar months
immediately preceding the calendar month in which the Release Date occurs and a
current rent roll for the Remaining Property and the
6
<PAGE>
Release Parcel certified to Lender to be true and correct by the Borrower and
the general partner of Borrower;
(2) projected cash flow statements for the Remaining Property
certified by Borrower and the general partner of Borrower to be their good faith
best estimates of such projections for the calendar month in which the Release
Date occurs and the five (5) immediately succeeding calendar months;
(3) a certification by Borrower and the general partner of
Borrower to Lender that there is no Event of Default as of the Release Date;
(4) an endorsement to Lender's title insurance policy or policies
at Borrower's expense extending the effective date thereof to the date of the
recording of the Release and insuring Lender that the Lien on the Remaining
Property created by the Security Deed is and remains a first and prior Lien with
no additional exceptions not approved in writing by Lender, in form, scope and
substance satisfactory to Lender, and a report satisfactory to Lender
establishing that there is no other Lien of record affecting the personal
property included within the Remaining Property which was not permitted or
consented to by Lender pursuant to the terms of the Security Deed;
(5) documents reserving or creating all easements burdening the
Release Parcel which, in Lender's opinion, are necessary or proper for the
normal operation of the Remaining Property (including all Improvements thereon),
including, but not limited to, pedestrian and vehicular traffic, ingress and
egress, parking and utility easements at locations satisfactory to Lender, which
easements shall be encumbered by the Lien of the Security Deed and shall be
insured as appurtenances in Lender's title policy or policies with no exceptions
thereto other than those approved in writing by Lender;
(6) an opinion of Borrower's counsel (and, to the extent required
by Lender, by Lender's special counsel) in form, scope and substance
satisfactory to Lender, at Borrower's expense, confirming (i) the validity and
enforceability of the Loan Documents, as amended, (ii) that the Property
comprising the Remaining Property upon which Lender will retain a first Lien is
(or will be as of the first day of January of the following calendar year)
assessed as a separate tax parcel, (iii) that the Remaining Property will not be
in violation of any applicable covenants, conditions, restrictions, laws,
ordinances, rules and regulations as a result of the Release, and (iv) that the
Release will not result in the need for any variances or all such required
variances have been obtained by Borrower and approved by Lender; and
(7) evidence satisfactory to Lender that each building located on
the Release Parcel and the Remaining Property shall be self-sufficient as to
plumbing, electrical, heating, ventilating, air-conditioning, sewer and other
mechanical and utility systems and connections, and that there are no
cross-connections or common systems or meters as between any portion of the
Release Parcel and the Remaining Property;
7
<PAGE>
(g) All of the representations and warranties of Borrower under this
Agreement and all certificates of Borrower delivered pursuant to this Agreement
shall remain true and correct in all material respects;
(h) No Event of Default shall have occurred and be continuing as of
the Release Date, either before or after giving effect to the Release; and
(i) All release instruments shall be satisfactory to Lender in form,
scope and substance.
Section 2.2 Costs. Borrower shall pay or reimburse to Lender, upon
request of Lender but not later than Release Date and whether or not Borrower
qualifies to obtain a Release, all costs associated with each proposed Release,
including without limitation, the fees and expenses of Lender's counsel, the
costs of title insurance premiums (including all costs for endorsements to the
existing mortgagee's title policy or policies insuring the Lien of the Security
Deed), surveys, plats of survey, Uniform Commercial Code searches, filing fees
and taxes, including without limitation any intangible recording taxes. The
payment of such costs shall be deemed to constitute part of the Obligations.
ARTICLE 3 - Transfers; Conditions Precedent
-------------------------------
Section 3.1 Transfers. Lender hereby agrees to consent to the transfer (a
"Transfer") of all or a portion of the Property from Borrower to a Person (the
"Transferee") upon the terms and conditions set forth in this Article.
Section 3.2 Transfer of Property. Borrower shall be permitted to Transfer
the Property or one or more Release Parcels (the "Transferred Property") subject
to the following conditions precedent:
(a) There shall not exist, either at the time the Request for Transfer
is delivered to Lender or on the date of the closing of the Transfer (the
"Transfer Date"), any Event of Default under the Security Deed or any default or
event of default under any of the other Loan Documents which has not been cured
within any applicable grace period;
(b) The first Request for Transfer shall not be made prior to April 1,
1998;
(c) No more than two (2) Transfers shall be permitted during the term
of the Loan;
(d) The Loan Documents shall remain in all respects in full force and
effect as to all Non-Transferred Property, and the Transfer shall not adversely
affect or impair Lender's security under the Loan Documents;
8
<PAGE>
(e) The Transferee shall not be a "foreign person" or a person or
entity that would cause or result in a violation of any of the representations
made by Borrower in this Agreement, the other Loan Documents or in the Loan
Application, including without limitation the representations contained in
Section 1.18 of the Security Deed;
(f) If the Transfer is of less than all of the Property, the
Transferred Property shall consist of one or more of the Release Parcels with
respect to which the applicable aggregate Release Amount is not less than
$50,000,000.00;
(g) Each Transferee must be approved by Lender, which approval shall
not be unreasonably withheld so long as Lender determines in good faith that the
proposed Transferee is a Qualified Real Estate Investor or is controlled by or
under common control with a Qualified Real Estate Investor (and Borrower
provides Lender with all information necessary to enable Lender to determine
whether the proposed Transferee is or is controlled by or under common control
with a Qualified Real Estate Investor);
(h) If the Transferee is not itself a Qualified Real Estate Investor
because it does not meet the qualifications set forth in clause (x) or clause
(y) of the definition of Qualified Real Estate Investor set forth in Article I
above, but otherwise meets the qualifications for a Qualified Real Estate
Investor and is controlled by or under common control with a Qualified Real
Estate Investor, Borrower shall cause such Qualified Real Estate Investor to (i)
execute in favor of Lender an unsecured indemnity agreement similar in form to
the Unsecured Indemnity Agreement and (ii) be bound by the recourse obligations
set forth in Section 1.17 of the Security Deed;
(i) Borrower shall pay to Lender a transfer fee (the "Transfer Fee")
in an amount equal to one percent (1%) of the outstanding principal balance of
the Loan as of the Transfer Date, in the event that the entire Property then
encumbered by the Security Deed is to be transferred, or one percent (1%) of the
applicable aggregate Release Amount in the event that one or more of the Release
Parcels (but less than the entire Property then encumbered by the Security Deed)
are to be transferred;
(j) The Net Operating Income of the Transferred Property and the Net
Operating Income of the Non-Transferred Property shall each be sufficient to
provide a Debt Service Coverage Ratio on an annualized basis of not less than
1.5 as determined by Lender based on the information furnished to Lender
pursuant to Sections 3.2(l) and 3.2(m) hereof and other information available to
Lender;
(k) Borrower shall deliver to Lender not less than sixty (60) days
prior to the proposed Transfer Date written notice of Borrower's desire to
Transfer the Transferred Property (the "Request for Transfer");
(l) The Request for Transfer shall contain or be accompanied by the
following:
9
<PAGE>
(1) a metes and bounds legal description of the Transferred
Property satisfactory to Lender and a boundary plat of survey of the Transferred
Property acceptable to Lender, describing and showing the Transferred Property
in relation to the abutting portions of the Property and the easements described
in Section 3.2(m)(9) hereof;
(2) separate cash flow statements for the Transferred Property
and the Non-Transferred Property certified to be true and correct by Borrower
and the general partner of Borrower for the six (6) calendar months immediately
preceding the calendar month in which the Request for Transfer is delivered to
Lender, projected cash flow statements for the Transferred Property and the
Non-Transferred Property certified by Borrower and the general partner of
Borrower to be their good faith best estimates of such projections for the
calendar month in which the Request for Transfer is delivered to Lender and the
five (5) immediately succeeding calendar months, and a current rent roll for the
Transferred Property and the Non-Transferred Property certified to be true and
correct by the general partner of Borrower, together with all other information
necessary for Lender to calculate the Debt Service Coverage Ratio for the
aforesaid periods;
(3) a certification by Borrower and the general partner of
Borrower to Lender that neither has any actual knowledge of the occurrence of
any event which with notice or the passage of time would cause or give rise to
an Event of Default; and
(4) an estoppel certificate in the form contemplated in Section
3.04(a) of the Security Deed.
(m) Lender shall have received on or before the Transfer Date such
other certificates, reports, statements, title insurance endorsements,
easements, opinions of counsel and other documents as Lender may request,
including, but not limited to the following:
(1) a certification by Borrower and the general partner of
Borrower to Lender that there is no Event of Default as of the Transfer Date;
(2) updated separate cash flow statements for the Transferred
Property and the Non-Transferred Property certified to Lender to be true and
correct by Borrower and the general partner of Borrower for the six (6) calendar
months immediately preceding the calendar month in which the Transfer Date
occurs, and a current rent roll for the Transferred Property and the
Non-Transferred Property certified to Lender to be true and correct by the
Borrower and the general partner of Borrower;
(3) projected cash flow statements for the Transferred Property
and the Non-Transferred Property certified to be their good faith best estimates
of such projections by Borrower and the general partner of Borrower for the
calendar month in which the Transfer Date occurs and the five (5) immediately
succeeding calendar months; and
10
<PAGE>
(4) a fully executed Promissory Note (the "New Note") similar in
form and substance to the Note, evidencing that portion of the outstanding
principal balance of the Loan allocated to the Transferred Property and a fully
executed Amended and Restated Promissory Note (the "Restated Note") amending and
restating the Note, similar in form and substance to the Note and evidencing the
remainder of the outstanding principal balance of the Loan, both in form, scope
and substance satisfactory to Lender. Borrower and Lender hereby agree that (i)
the allocation of the outstanding principal balance of the Loan between the
Restated Note and the New Note shall be determined based upon a ratio, as to the
New Note, of the applicable Release Amounts described in Schedule 1 hereof (such
ratio to be calculated by dividing the aggregate Release Amounts allocable to
the Transferred Property by the aggregate Release Amounts allocable to the
Transferred Property and the Non-Transferred Property), (ii) the principal
amounts of the Restated Note and the New Note shall together equal the
outstanding principal balance of the Loan immediately prior to the Transfer,
(iii) the loan to value ratio of each of the loans evidenced by the Restated
Note and the New Note shall not be more than sixty-five percent (65%), as
determined by Lender (and both the Borrower and/or the Transferee shall have the
right to partially prepay the Loan to the extent necessary to achieve such 65%
loan to value ratio, subject to paying the Prepayment Fee computed on the
portion of the Loan so prepaid); (iv) the maturity date of the Restated Note and
the New Note shall be the Maturity Date (as defined in the Note); and (v) the
monthly installments of principal and interest due pursuant to the Restated Note
and the New Note shall be an amount necessary to amortize the then outstanding
principal balance at the interest rate set forth in Section l (a) of the Note in
equal monthly installments over the remainder of the original twenty-five (25)
year amortization period (i.e., 300 months minus the number of principal and
interest installments previously paid);
(5) a fully executed Deed to Secure Debt (the "New Security
Deed") and other loan documents (including, if required, those documents
necessary to comply with Section 3.2(h) of this Agreement) (collectively with
the New Note and the New Security Deed, the "New Loan Documents") similar in
form, scope and substance to the Loan Documents, encumbering and/or relating to
the Transferred Property, except that the New Loan Documents shall not contain
the Release and Transfer provisions set forth in Articles 2 and 3 hereof or any
of the other terms and conditions set forth in this Agreement, and the New Loan
Documents shall not be cross-defaulted or cross-collateralized with the Loan
Documents;
(6) fully executed documents in form, scope and substance
satisfactory to Lender to amend and modify the Loan Documents to cause the same
to apply only to the Non-Transferred Property (and appurtenant easements);
(7) if all of the Property is being transferred to the
Transferee, an assignment and assumption agreement executed by the Transferee in
form, scope and substance satisfactory to Lender pursuant to which the
Transferee assumes all of Borrower's obligations under the Loan Documents;
11
<PAGE>
(8) an endorsement to Lender's title insurance policy or
policies, and/or at Lender's election the issuance of a new title insurance
policy or policies, at Borrower's expense, extending the effective date thereof
to the dates (as applicable) of the recording of the modification of the
Security Deed and the date of the recording of the New Security Deed and
insuring Lender that the Liens on the Transferred Property and the
Non-Transferred Property created by the Security Deed and the New Security Deed,
respectively, are and remain first and prior Liens with no additional exceptions
not approved in writing by Lender, in form, scope and substance satisfactory to
Lender, and a report satisfactory to Lender establishing that there is no other
Lien of record affecting the personal property included within the Transferred
Property and the Non-Transferred Property which was not permitted or consented
to by Lender pursuant to the terms of the Security Deed;
(9) documents reserving or creating all easements burdening the
Non-Transferred Property and/or the Transferred Property which, in Lender's
opinion, are necessary or proper for the normal operation of the Transferred
Property and the Non-Transferred Property (including all Improvements thereon),
including, but not limited to, pedestrian and vehicular traffic, ingress and
egress, parking and utility easements at locations satisfactory to Lender, which
easements shall be encumbered by the Liens of the Security Deed and the New
Security Deed and shall be insured as appurtenances in Lender's title policy or
policies with no exceptions applicable thereto except as approved in writing by
Lender;
(10) opinions of Borrower's counsel, Transferee's counsel (and,
to the extent required by Lender, by Lender's special counsel) in form, scope
and substance satisfactory to Lender, at Borrower's or Transferee's expense,
confirming (i) the validity and enforceability of the modification documents
(including, but not limited to, the Loan Documents as amended) and the New Loan
Documents, (ii) that the Property comprising the Transferred Property and the
Non-Transferred Property are (or will be as of the first day of January of the
following calendar year) assessed as a separate tax parcel (iii) that neither
the Transferred Property nor the Non-Transferred Property will be in violation
of any applicable covenants, conditions, restrictions, laws, ordinances, rules
and regulations as a result of the Transfer and (iv) that the Transfer will not
result in the need for any variances or all such required variances have been
obtained by Borrower and approved by Lender; and
(11) evidence satisfactory to Lender that each building located
on the Transferred Property and the Non-Transferred Property shall be
self-sufficient as to plumbing, electrical, heating, ventilating,
air-conditioning, sewer and other mechanical and utility systems and
connections, and that there are no cross-connections or common systems or meters
as between any portion of the Transferred Property and the Non-Transferred
Property;
(n) All of the representations and warranties of Borrower under this
Agreement and all certificates delivered pursuant to this Agreement shall remain
true and correct in all material respects; and
12
<PAGE>
(o) The proposed Transfer shall be subject to and shall comply with
all of the terms and conditions of the Loan Application (provided, however, that
in the event of a direct conflict between the terms of the Loan Application and
the terms of the Loan Documents, the terms of the Loan Documents shall control),
and all modification documents (including but not limited to the New Loan
Documents) shall be satisfactory to Lender in form, scope and substance.
Section 3.3 Costs. In the event Borrower requests a Transfer pursuant to
Section 3.2 hereof, Borrower shall pay or reimburse to Lender upon request of
Lender but not later than the Transfer Date and whether or not Borrower
qualifies to obtain a Transfer all costs associated with the Transfer, including
without limitation, the fees and expenses of Lender's counsel, the costs of
title insurance premiums (including all costs for endorsements to existing
mortgagee's title policy or policies insuring the Liens of the Security Deed, as
amended, and the New Security Deed), surveys, plats of survey, Uniform
Commercial Code searches, filing fees and taxes. The payment of such costs shall
be deemed to constitute part of the Obligations.
Section 3.4 Lender's Obligations. Lender agrees to exercise good faith in
reviewing all documentation it deems necessary to determine whether the proposed
Transferee is or is controlled by or under common control with a Qualified Real
Estate Investor. Lender shall notify Borrower within sixty (60) days after
Lender's receipt of all such documentation and information whether the
Transferee has been approved.
ARTICLE 4 - Representations and Warranties
------------------------------
Section 4.1 Representations and Warranties. The representations, warranties
and releases set forth below shall be deemed to be made as of the date each
Request for Release or Request for Transfer is delivered to Lender, and as of
each Release Date or Transfer Date, and shall be true and correct in all
material respects and effective as of the date hereof, as of the date each
Request for Release or Request for Transfer is delivered to Lender, and as of
each Release Date or Transfer Date. All representations, warranties and releases
made under this Agreement shall survive, and not be waived by, the Release or
Transfer of any Parcel pursuant to this Agreement.
(a) Litigation. Borrower represents, warrants and covenants that there
is no material action, suit, proceeding or investigation pending against, or, to
the best knowledge of Borrower, threatened against or in any other manner
relating adversely to, Borrower or the Remaining Property, the Transferred
Property or the Non-Transferred Property in any court or before any arbitrator
of any kind or before or by any governmental body, which action, suit,
proceeding or investigation (i) calls into question the validity of this
Agreement or any other Loan Document or any New Loan Document, or (ii) could, if
determined adversely to Borrower, the Remaining Property, the Transferred
Property or the Non-Transferred Property, have a Material Adverse Effect.
13
<PAGE>
(b) Taxes. Borrower represents, warrants and covenants that all
Impositions required to be paid by Borrower which are due and payable, have been
paid, except any such Imposition the payment of which Borrower is contesting in
good faith by proper legal action in accordance with the terms and conditions of
the Security Deed.
(c) Financial Statements. Borrower represents, warrants and covenants
that all financial statements, cash flow statements and other information which
Borrower has furnished or caused to be furnished to Lender to enable the Lender
to determine the compliance of Borrower with the applicable conditions precedent
to a Release, as set forth in Article 2 hereof, or a Transfer, as set forth in
Article 3 hereof, are correct and complete in all material respects as of the
date thereof.
(d) Governmental Regulation. Borrower represents, warrants and
covenants that Borrower is not required to obtain any consent, approval,
authorization, permit or license which has not already been obtained from, or
effect any filing or registration which has not already been effected with, any
Federal, state or local regulatory authority in connection with the Release or
Transfer, as the case may be.
ARTICLE 5 - Additional Agreements
---------------------
Section 5.1 Additional Agreements. Notwithstanding anything in the other
Loan Documents to the contrary, Lender and Borrower hereby agree as follows
(which agreements shall inure solely to the benefit of Lender, its successors
and assigns, and Borrower and not to the benefit of any Transferee [other than a
Beacon Affiliate to whom all of the Property is transferred in accordance with
Section 3.03(a) of the Security Deed]):
(a) So long as no Event of Default exists, Borrower shall be entitled
to settle, adjust or compromise any claims for loss, damage or destruction to
the Property under the following conditions: (i) Borrower shall allow Lender and
Lender's representatives to participate in all settlement, adjustment or
compromise negotiations, (ii) Borrower shall employ attorneys and consultants
for such purposes acceptable to Lender, and (iii) Borrower shall not agree to or
finalize any settlement, adjustment or compromise of any claim without the prior
written consent of Lender, which consent shall not be unreasonably withheld or
delayed.
(b) All Small Insurance Proceeds received by Lender shall be delivered
to Borrower, unless at the time the Small Insurance Proceeds are to be delivered
to Borrower there exists an Event of Default, in which event Lender shall have
no obligation to deliver the Small Insurance Proceeds to Borrower, and Lender
shall be entitled (but not obligated) to retain and apply the Small Insurance
Proceeds in reduction of the indebtedness evidenced by the Note. All Small
Insurance Proceeds delivered to Borrower shall be held by Borrower in a separate
account designated only for the Restoration, and shall be disbursed only for
costs and expenses related to the Restoration for which the Small Insurance
Proceeds were paid. In the event that the estimated cost of Restoration exceeds
the amount of the Small Insurance
14
<PAGE>
Proceeds, the initial cost of such Restoration shall be paid from other sources
until such time as the amount held in the designated account is sufficient to
pay the cost of the remaining Restoration in full, after which time funds may be
disbursed from such account for the remaining costs and expenses of the
Restoration. It is the intent of the parties that except where costs and
expenses may initially be paid from another source, there shall always be
sufficient funds in the designated account to pay the costs and expenses related
to the Restoration; however, the foregoing shall not limit the obligation of
Borrower to cause the Restoration to be completed in accordance with the
Requirements and all costs and expenses related thereto to be paid, whether or
not there are sufficient funds in such designated account. As to Restoration
relating to damage or destruction covered by Small Insurance Proceeds, Borrower
shall not be obligated to comply with the Requirements for Restoration set forth
in the Security Deed. Upon completion of the Restoration and the payment of all
costs and expenses related to such Restoration, provided that there is no Event
of Default, any funds remaining in such designated account for the Restoration
shall be funds of Borrower free from the foregoing restrictions and obligations.
(c) Upon the occurrence of an Event of Default, Borrower shall deliver
to Lender all Small Insurance Proceeds then held by Borrower and Lender may
apply such amounts to the reduction of the indebtedness evidenced by the Note.
(d) All Insurance Proceeds received by Lender and held by Lender
pending completion of the Work pursuant to the Security Deed shall be held in an
interest bearing account and such interest shall be held and utilized in the
same manner as Insurance Proceeds.
(e) Borrower may acquire fixtures, equipment or other property forming
a part of the Property pursuant to a lease, license, title retention document or
similar agreement without Lender's express written approval, if the aggregate
annualized amount payable by Borrower under all such leases, licenses, title
retention documents or similar agreements is less than $100,000.00.
(f) The personal liability of Beacon Properties, L.P. or of a Beacon
Affiliate to whom the Property is transferred pursuant to Section 3.03(a) of the
Security Deed, as the case may be, and their respective general partners, under
Section 1.17 of the Security Deed for damages arising from, or in connection
with, a breach of any of the covenants, obligations, liabilities, warranties and
representations contained in Section 3.08 of the Security Deed, shall not
include damages for diminution in the market value of the Property resulting
from a release or discharge of Hazardous Materials onto the Property caused by a
person or entity other than Beacon Properties, L.P. or a Beacon Affiliate.
(g) With respect to the Transferred Property, Borrower's personal
liability under the Unsecured Indemnity Agreement and under Section 3.08 of the
Security Deed shall be terminated for those releases, discharges or spills of
Hazardous Materials or other environmental conditions arising or occurring
subsequent to the Transfer of the Transferred Property if, in connection with
the Transfer, a Qualified Real Estate Investor executes in favor
15
<PAGE>
of Lender an unsecured indemnity agreement in substantially the same form as the
Unsecured Indemnity Agreement and executes additional documentation causing such
Qualified Real Estate Investor to be bound by the recourse obligations set forth
in the security deed executed by the Transferee in favor of Lender or assumed by
the Transferee.
(h) The surety bond referenced in Subparagraph (a)(v) of Exhibit "D"
to the Security Deed shall be required only if the total estimated cost of
completing the Work is more than $500,000.00.
(i) With respect to the Unsecured Indemnity Agreement, Section 3(a)
shall be deemed to read as follows:
"In any circumstance in which this Agreement applies,
Indemnitor shall employ counsel and consultants approved by
Lender (such approval not to be unreasonably withheld) to
investigate, prosecute, negotiate, or defend any Environmental
Claim until resolution. In the event that a conflict or
dispute arises between Indemnitor and Lender that cannot be
settled through informal negotiation, Lender shall have the
right to employ its own counsel and/or consultants, whose fees
and expenses shall be paid by Indemnitor upon Lender's demand.
Indemnitor shall reimburse Lender, upon demand, for all Costs
incurred by Lender, including the amount of all Costs of
settlements entered into by Lender, provided such settlements
are approved by Indemnitor, which approval shall not be
unreasonably withheld or delayed."
(j) With respect to the Unsecured Indemnity Agreement, the term
"Costs" as used therein shall not include diminution in the market value of all
or any portion of the Property resulting from a release or discharge of
Hazardous Materials onto the Property or any portion thereof caused by a person
or entity other than Beacon Properties, L.P. or a Beacon Affiliate (such a
release or discharge is referred to herein as a "Third-Party Release"); however,
in the event of a Third-Party Release, "Costs" shall include all other (that is
other than diminution in the market value of the Property) liabilities, losses,
costs, damages, expenses, claims, fees and disbursements, including without
limitation, remedial, removal, response, abatement, cleanup, legal investigative
and monitoring costs and related costs, expenses, losses, damages, penalties,
fines, obligations, defenses, judgments, suits, proceedings and disbursements.
(k) Upon the application of any Condemnation Proceeds to the reduction
of the indebtedness evidenced by the Note, the monthly installments of principal
and interest due under the Note shall be adjusted in the same manner as such
installments are to be adjusted in the event of a partial prepayment under
Section 1 of the Note.
16
<PAGE>
(l) Clause (4) of Subsection 1.07(b) of the Security Deed is deemed to
be amended to read as follows:
"(4) Grantor (A) shall secure and protect the
Improvements remaining on the damaged portion of the Property,
(B) shall endeavor diligently to satisfy all conditions and
requirements of this Security Deed regarding the utilization
of the Net Insurance Proceeds for the Restoration, and (C)
within one hundred eighty (180) days after the occurrence of
the damage or destruction to the Property requiring
Restoration, shall submit to Grantee and receive Grantee's
approval (which approval shall not be unreasonably withheld or
delayed) of the plans and specifications for such Restoration
and shall deposit with Grantee the additional amount necessary
to accomplish the Restoration as provided in subparagraph (a)
of the Requirements for Restoration."
(m) Section 1.07(b) of the Security Deed is deemed to be amended by
adding the following language to the end of the last sentence thereof:
"; provided, however, if less than twenty-five (25%) percent
of the Improvements (as measured by the net leasable area of
all Improvements) is damaged or destroyed, and Grantee intends
to declare the entire Secured Indebtedness immediately due and
payable, Grantee shall give Grantor written notice of such
intent (the "Notice of Intent") and shall forbear from
exercising its right to accelerate the Loan (as defined in the
Loan Agreement) if the following conditions are met:
(i) Grantor delivers to Grantee, no later than ten (10) business
days after the effective date of the Notice of Intent, a Request for Release in
accordance with the terms and conditions set forth in the Loan Agreement,
requesting the release of the parcel or parcels on which the damaged or
destroyed portions of the Improvements are situated;
(ii) No later than ninety (90) days after the Request for Release
is submitted to Grantee, Grantor satisfies all of the conditions and
requirements for such Release under the Loan Agreement except for the conditions
set forth in Section 2. I (a) and (b) of the Loan Agreement, which requirements
are hereby waived by Grantee with respect to such Release; and
(iii) the Release Amount is paid to Grantee on the Release Date
(it being agreed by Grantee that the Net Insurance Proceeds arising out of the
damage or destruction to the Improvements on the parcel or parcels being
Released may be applied towards the Release Amount)."
17
<PAGE>
and by adding the following new sentence to the end of Section 1.07(b):
"Notwithstanding the foregoing, in the event of damage or
destruction to Building 64A, Building 301/303, the North
Terraces Building or the South Terraces Building (as such
Buildings are identified in Schedule 1 to the Loan Agreement)
which does not render untenantable or unusable more than
twenty-five percent (25%) of the net leasable area of such
Building, and in the further event that Grantor shall fail to
satisfy any of the conditions set forth in clauses (2), (3)
and (4) of the first sentence of this Subsection 1.07(b) with
respect to such damage or destruction, then Grantee may apply
the Net Insurance Proceeds to the reduction of the Secured
Indebtedness in such order as Grantee may determine, but (in
the absence of an Event of Default) Grantee shall not declare
the entire Secured Indebtedness immediately due and payable
solely as a result of Grantor's failure to satisfy such
conditions or as a result of Grantor's failure to effect the
Restoration of such Building if Grantee applies the Net
Insurance Proceeds to the reduction of the Secured
Indebtedness. If Grantee shall elect, under such
circumstances, to apply the Net Insurance Proceeds to the
reduction of the Secured Indebtedness, Grantee shall give
written notice of such election (the "Special Election
Notice') to Grantor, and Grantee shall then have a special
right (i.e., in addition to its general rights under Article 2
of the Loan Agreement) to obtain a Release of the parcel or
parcels on which the damaged or destroyed portions of the
Improvements are situated if the following conditions are met:
(i) Grantor delivers to Grantee, no later than ten (10) business
days after the effective date of the Special Election Notice, a Request for
Release in accordance with the terms and conditions set forth in the Loan
Agreement, requesting the release of the parcel or parcels on which the damaged
or destroyed portions of the Improvements are situated;
(ii) No later than ninety (90) days after the Request for Release
is submitted to Grantee, Grantor satisfies all of the conditions and
requirements for such Release under the Loan Agreement except for the condition
set forth in Section 2. l (a) of the Loan Agreement, which requirement is hereby
waived by Grantee with respect to such Release; and
(iii) The Release Amount is paid to Grantee on the Release Date
(it being agreed by Grantee that the Net Insurance Proceeds arising out of the
damage or destruction to the Improvements on the parcel or parcels being
Released may be applied towards the Release Amount)."
18
<PAGE>
ARTICLE 6 - Miscellaneous
--------------
Section 6.1 Notices.
(a) All notices, consents, approvals, elections and other
communications (collectively "Notices") hereunder shall be in writing (whether
or not the other provisions of this Agreement expressly so provide) and shall be
deemed to have been duly given if (1) mailed by United States registered or
certified mail, with return receipt requested, postage prepaid or (2) by United
States Express Mail or other comparable overnight courier service to the parties
at the following addresses (or at such other addresses as shall be given in
writing by any party to the others pursuant to this Section 6. 1) and shall be
deemed complete upon receipt or refusal to accept delivery as indicated in the
return receipt or in the receipt of such United States Express Mail or courier
service:
If to Borrower to: Beacon Properties, L.P.
50 Rowes Wharf
Boston, Massachusetts 02110
Attention: Robert J. Perziello, Senior Vice President
with a copy to: Goulston and Storrs, P.C.
400 Atlantic Avenue
Boston, Massachusetts 02110
Attention: Jordan P. Krasnow, Esq.
If to Lender to: Metropolitan Life Insurance Company
303 Perimeter Center North, Suite 600
Atlanta, Georgia 30346
Attention: Bob Edwards, Vice-President
Real Estate Investments
Head of Loan Servicing Unit
and Metropolitan Life Insurance Company
303 Perimeter Center North, Suite 600
Atlanta, Georgia 30346
Attention: William Lafferty, Senior Portfolio Manager
Real Estate Investments
Head of Southeast Loan Servicing Unit
with a copy to: Metropolitan Life Insurance Company
One Madison Avenue
New York, New York 10010-3690
Attention: Vice-President and Investment Counsel
19
<PAGE>
(b) Any party hereto may change the address to which notices shall be
directed under this Section 6.1 by giving ten (10) days' prior written notice of
such change to the other party.
Section 6.2 Waivers. No failure or delay by Lender in exercising any right
of Lender hereunder shall operate as a waiver of such right. Lender expressly
reserves the right to require strict compliance with the terms of this Agreement
in connection with any Request for Release or Request for Transfer. In the event
Lender decides to approve a Request for Release or Request for Transfer at a
time when Borrower is not in strict compliance with the terms of this Agreement,
such decision by Lender shall not be deemed to constitute an undertaking by
Lender to approve any further Request for Release or Request for Transfer or
preclude Lender from exercising any rights available to Lender under the Loan
Documents or at law or equity. Any waiver or indulgence granted by Lender shall
not constitute a modification of this Agreement, except to the extent expressly
provided in such waiver or indulgence, or constitute a course of dealing by
Lender at variance with the terms of this Agreement such as to require further
notice by Lender of Lender's intent to require strict adherence to the terms of
this Agreement in the future. Any such actions shall not in any way affect the
ability of Lender, in Lender's discretion, to exercise any rights available to
Lender under this Agreement or under any of the other Loan Documents.
Section 6.3 Assignment. Borrower may not assign or transfer any of its
rights or obligations hereunder without the prior written consent of Lender,
except to a Beacon Affiliate to whom all of the Property is transferred in
accordance with Section 3.03(a) of the Security Deed.
Section 6.4 Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be deemed to be an original, but all such
separate counterparts shall together constitute but one and the same instrument.
Section 6.5 Governing Law. This Agreement shall be construed in accordance
with and governed by the laws of the State of Georgia.
Section 6.6 Severability. If any provision of this Agreement should be held
unenforceable or void, then such provision shall be deemed separable from the
remaining provisions and shall in no way affect the validity of this Agreement,
except that if such provision relates to the payment of any monetary sum, then,
Lender may, at its option declare the Secured Indebtedness immediately due and
payable.
Section 6.7 Headings. Headings used in this Agreement are for convenience
only and shall not be used in connection with the interpretation of any
provision hereof.
Section 6.8 Entire Agreement. Except as otherwise expressly provided
herein, this Agreement and the other documents described or contemplated herein
embody the entire Agreement and understanding among the parties hereto and
thereto and supersede all prior
20
<PAGE>
agreements, understandings, and conversations relating to the subject matter
hereof and thereof.
Section 6.9 Amendment and Waiver. Neither this Agreement nor any term
hereof may be amended orally, nor may any provision hereof be waived orally but
only by an instrument in writing signed by Lender and Borrower.
Section 6.10 Other Relationships. No relationship created hereunder or
under any other Document shall in any way affect the ability of Lender to enter
into or maintain business relationships with Borrower, or any of its Affiliates,
beyond the relationships specifically contemplated by this Agreement and the
other Loan Documents.
Section 6.11 Liability of Borrower. Notwithstanding anything to the
contrary contained in this Agreement or in any of the other Loan Documents, but
without in any manner releasing, impairing or otherwise affecting this Agreement
or any of the other Loan Documents, or the validity hereof or thereof, or the
lien of the Security Deed, except as expressly set forth in this Section 6.11,
the liability of Borrower and the general partners of Borrower, if any, with
respect to this Agreement and the other Loan Documents shall be limited to and
satisfied out of the Property. Notwithstanding any of the foregoing, nothing
contained in this Section 6.11 shall be deemed to prejudice the rights of Lender
to (i) recover damages against Borrower and the general partners of Borrower, if
any, for fraud, willful misrepresentation or willful waste committed by
Borrower, its general partner(s) or any of their officers or employees; and/or
(ii) recover any Condemnation Proceeds or Insurance Proceeds or other similar
funds or payments attributable to the Property, which may have been misapplied
by Borrower or which, under the terms of the Loan Documents, should have been
paid to Lender; and/or (iii) recover any tenant security deposits, prepaid rents
or other similar sums paid to or held by Borrower or any Other entity or person
on behalf of Borrower in connection with the Property; and/or (iv) recover the
Rents and Profits under this clause (iv) accruing from and after the occurrence
of default (provided that with respect to a default under Section 2.01(b), (d)
or (e) of the Security Deed, notice of such default shall have been given to
Borrower), which have not been applied to pay any portion of the indebtedness
evidenced by the Note, operating and maintenance expenses of the Property,
Premiums, Impositions, deposits into a reserve for replacement or other sums
required by the Loan Documents, provided, however, that the personal liability
of Borrower with respect to such Rents and Profits under this clause (iv) shall
be eliminated with respect to such default upon the curing of such default
within any applicable grace period under the Loan Documents or upon the curing
of such default after the expiration of such grace period if Lender elects to
accept such cure (it being acknowledged by Borrower that Lender has no
obligation to accept any such cure after the expiration of a grace period);
and/or (v) recover damages against Borrower and/or the general partners of
Borrower, if any, arising from, or in connection with, the covenants,
obligations, liabilities, warranties and representations contained in Section
3.08 of the Security Deed and/or the terms, covenants and provisions of the
Unsecured Indemnity Agreement; and/or (vi) except to the extent Lender actually
received proceeds therefor under its lender's title policy, recover from
Borrower and/or the general partners of Borrower, if any, the entire
21
<PAGE>
indebtedness secured by the Loan Documents, in the event of any judicial
determination that the lien of the Security Deed is invalid (provided that the
personal liability of Borrower and its general partner(s) under this clause (vi)
shall not exceed the value of the Property as of the Maturity Date or (if
earlier) the date of acceleration); and/or (vii) recover from Borrower and/or
the general partners of Borrower, if any, all amounts due and payable pursuant
to Section 3.06 of the Security Deed; and/or (viii) recover damages against
Borrower and/or the general partners of Borrower, if any, arising from a breach
of any warranty set forth in Section 1. 18 of the Security Deed; and/or (ix)
recover Rents or Profits under this clause (ix) accruing during the period six
(6) months prior to Lender's giving notice of acceleration of the maturity of
the Loan through the date Lender takes possession of or title to the Property,
to the extent such Rents or Profits are diverted by Borrower from payment of the
following: the indebtedness evidenced by the Note, operating and maintenance
expenses of the Property, Premiums, Impositions, deposits into a reserve for
replacement or other sums required by the Loan Documents, to the extent any of
the foregoing are due and payable at the time such Rents or Profits were
diverted. Borrower and/or the general partners of Borrower, if any, shall be
personally liable for Borrower's obligations arising in connection with the
matters set forth in the foregoing clauses (i) to (ix) inclusive.
Section 6.12 Mezzanine Financing. Borrower hereby represents and warrants
that any and all loans secured by the Property (including but not limited to
so-called "mezzanine financing" or "bridge loans") heretofore obtained by
Borrower to finance its acquisition of the Property have been paid in full and
that all Liens and security interests securing such loans have been released and
terminated (or will be released and terminated simultaneously with the closing
of the Loan) and Borrower further represents that it is in compliance with the
terms and conditions of Section 3.03(a) of the Security Deed.
Section 6.13 Purchase and Sale Agreement. The Loan Documents do not contain
and shall not constitute a release of any of Lender's obligations under that
certain Agreement of Purchase and Sale dated as of December 19, 1995 by and
between Lender, as Seller, and Borrower, as Purchaser.
[SIGNATURES BEGIN ON FOLLOWING PAGE]
22
<PAGE>
IN WITNESS WHEREOF, the Parties hereto have executed this Agreement or
caused it to be executed under seal by their duly authorized officers, all as of
the day and year first above written.
BORROWER:
BEACON PROPERTIES, L.P., a Delaware
limited partnership
By: Beacon Properties Corporation, a
Maryland corporation, its sole general
partner
By: /s/ Robert J. Perriello
---------------------------------
Printed Name: Robert J. Perriello
Title: Chief Financial Officer
[CORPORATE SEAL]
LENDER:
METROPOLITAN LIFE INSURANCE
COMPANY, a New York corporation
By: /s/ Robert N. Jenkins
---------------------------------
Name: Robert N. Jenkins
Title: Vice President
[CORPORATE SEAL]
23
MORTGAGE, SECURITY AGREEMENT AND FIXTURE FILING
20 WILLIAM STREET
40 WILLIAM STREET
45 WILLIAM STREET
55 WILLIAM STREET
60 WILLIAM STREET
65 WILLIAM STREET
80 WILLIAM STREET
100 WILLIAM STREET
WELLESLEY, MASSACHUSETTS
<PAGE>
MORTGAGE, SECURITY AGREEMENT AND FIXTURE FILING
TABLE OF CONTENTS
-----------------
Page
1. Payment of Indebtedness .............................. ..............9
2. Covenants of Title..................................................10
3. Usury ..............................................................13
4. Impositions ........................................................13
5. Tax Deposits....................................................... 15
6. Change in Taxes.................................................... 19
7. Insurance ......................................................... 20
8. Insurance/Condemnation Proceeds ....................................24
9. Restoration Following Fire and Other Casualty
or Condemnation....................................................26
10. Disposition of Condemnation or Insurance
Proceeds ..........................................................34
11. Fire and Other Casualty; Self-Help..................................37
12. Rent Insurance Proceeds ............................................38
13. Intentionally Omitted ..............................................39
14. Repair; Alterations; Waste; Environmental ..........................39
15. Environmental Indemnification ......................................49
16. Independence of Security ...........................................49
17. No Other Liens......................................................50
18. Management..........................................................51
19. Ground Lease .......................................................52
20. Sidewalks, Municipal Charges ......................................52
21. Assignment of Rents and Leases ....................................53
22. Future Leases ......................................................56
23. Mortgagors's Obligations as Lessor .................................62
24. Leases; Foreclosure ................................................63
25. Intentionally Deleted ..............................................64
26. Events of Default ..................................................64
27. Remedies Upon Default ..............................................74
28. Acceleration Interest ..............................................80
29. Late Charge ........................................................81
30. Waiver of Statutory Rights..........................................81
31. Security Interest ..................................................82
32. Right of Entry......................................................83
33. Estoppel Certificate................................................84
34. Annual Statements ..................................................84
35. Rights Cumulative ..................................................86
36. Subrogation ........................................................86
37. No Waiver ..........................................................87
38. Mortgage Extension .................................................87
39. Indemnification ....................................................88
40. Scope of Liability..................................................88
41. Attorneys' Fees ....................................................88
42. Administrative Fees ................................................89
43. Protection of Security; Cost and Expenses...........................90
<PAGE>
MORTGAGE, SECURITY AGREEMENT AND FIXTURE FILING
TABLE OF CONTENTS (Continued)
-----------------
Page
44. Notices ............................................................92
45. Release/Partial Release.............................................93
46. Applicable Law .....................................................97
47. Invalidity..........................................................97
48. Captions............................................................98
49. Modifications ......................................................98
50. Bind and Inure......................................................98
51. Replacement of Note ................................................98
52. Time of the Essence ................................................99
53. Statutory Condition; Statutory Power of Sale .......................99
54. ERISA...............................................................99
<PAGE>
Recording Requested By and
When Recorded Return to:
Nutter, McClennen & Fish
One International Place
Boston, MA 02110-2699
Attn: Robert A. Fishman, Esq.
MORTGAGE, SECURITY AGREEMENT AND FIXTURE FILING
THIS MORTGAGE is made as of the 8th day of January, 1996, by WELLESLEY
HOLDING, L.P. ("Wellesley I"), WELLESLEY HOLDING II, L.P. ("Wellesley II") and
BEACON PROPERTIES, L.P. ("BPLP"), each of which is a Delaware limited
partnership, and each of which has a principal place of business at 50 Rowes
Wharf, Boston, Massachusetts 02110 (Wellesley I, Wellesley II and BPLP are
singly each hereinafter referred to as a "Mortgagor" and collectively
hereinafter referred to as "Mortgagors") to CONNECTICUT GENERAL LIFE INSURANCE
COMPANY, a Connecticut corporation having its principal place of business at 900
Cottage Grove Road, Bloomfield, Connecticut 06002 (hereinafter referred to as
"Mortgagee").
W I T N E S S E T H:
THAT, to secure (i) payment to Mortgagee of the principal indebtedness of
Fifty-Five Million and No/100 Dollars ($55,000,000) together with interest
thereon, as evidenced by that certain promissory note (hereinafter referred to
as the "Note") of even date herewith, and any renewals, extensions or
modifications thereof (including, without limitation, any modification
increasing the interest rate, the principal amount, the monthly payments or
extending the maturity date) given by
-1-
<PAGE>
Mortgagors to Mortgagee and made payable to the order of Mortgagee, with the
final payment being due and payable on February 1, 2003 (the "Maturity Date"),
in and by which Note Mortgagors promise to pay the said principal indebtedness
and interest at the rate and in installments as provided in the Note (the loan
represented and evidenced by the Note is referred to as the "Loan"), (ii) the
performance of the covenants herein contained and the payment of any monies
expended by Mortgagee in connection therewith, (iii) the payment of all
obligations and the performance of all covenants of Mortgagors under any other
loan documents, agreements or instruments between Mortgagors and Mortgagee given
in connection with or related to this Mortgage or the Note, and (iv) any and all
additional advances made by Mortgagee to protect or preserve the Security
(hereinafter defined) or the security interest created hereby on the Security,
or for taxes, assessments, or insurance premiums as hereinafter provided or for
performance of any of Mortgagors' obligations hereunder or for any other purpose
provided herein (whether or not the original Mortgagors remain the owner of the
Security at the time of such advances) (all of the aforesaid indebtedness and
obligations of Mortgagors from time to time outstanding being herein called the
"Indebtedness", and all of the documents, agreements and instruments between
Mortgagors and Mortgagee or given by Mortgagors in favor of Mortgagee now or
hereafter evidencing or securing the repayment of, or otherwise pertaining to,
the Indebtedness being herein collectively called the "Loan Documents"),
Mortgagors do hereby mortgage, grant with MORTGAGE COVENANTS, bargain, sell,
assign, pledge, transfer, and convey unto Mortgagee and to Mortgagee's
successors and assigns forever,
-2-
<PAGE>
all of the following described land, improvements, real and personal property,
rents and leases, and all of its estate, right, title and interest therein
(hereinafter collectively called the "Security"):
The land described in Exhibit A attached hereto and made a part hereof,
situate, lying and being in the Town of Wellesley, County of Norfolk, and
Commonwealth of Massachusetts (the "Land");
TOGETHER with all buildings and other improvements now or hereafter located
on said Land or any part thereof including but not limited to, all extensions,
betterments, renewals, renovations, substitutions and replacements of, and all
additions and appurtenances to, the Security (the "Improvements");
TOGETHER with all of the right, title and interest of Mortgagors in and
to the land lying in the bed of any street, road, highway or avenue in front of
or adjoining the Land to the center lines thereof;
TOGETHER with the right to use, in perpetuity, in connection with the
operation of the Security the names "Wellesley Office Park", "20 William
Street", "40 William Street", 45 William Street", "55 William Street", "60
William Street", "65 William Street", "80 William Street", "100 William Street"
and any other names similar thereto (provided, however, that notwithstanding
anything to the contrary contained in any of the Loan Documents, the parties
acknowledge and agree that 100 William Street is not
-3-
<PAGE>
part of Wellesley Office Park, so called, but is immediately adjacent thereto);
TOGETHER with the benefit of and subject to those of the Permitted
Encumbrances (as hereinafter defined) listed in Part I of Exhibit B attached
hereto and made a part hereof, including, without limitation, all easements now
or hereafter located on or appurtenant to the Land and/or Improvements, or under
or above the same or any part thereof, and together with all rights-of-way and
(to the extent assignable) all licenses, permits, approvals and privileges,
belonging or in any way appertaining to the Land and/or Improvements including
without limitation (i) any drainage ponds or other like drainage areas not
located on the Land which may be required for water run-off, (ii) any easements
necessary to obtain access from the Land to such drainage areas, or to any other
location to which Mortgagors have a right to drain water or sewage, (iii) any
land required to be maintained as undeveloped land by the zoning rules and
regulations applicable to the Land, and (iv) any easements and agreements which
are or may be established to allow satisfactory ingress to, egress from and
operation of the Land and/or the Improvements;
TOGETHER with any and all awards hereafter to be made by any municipal or
other governmental authorities to the present and all subsequent owners of the
Security for the taking of all or any portion of the Security by power of
eminent domain, including, without limitation, awards for damage to the
remainder of the Security and any awards for any change or changes of grade of
streets affecting the Security, which said awards are hereby
-4-
<PAGE>
assigned to Mortgagee, and Mortgagee, at its option, is hereby authorized,
directed and empowered (subject to Section 8 below) to collect and receive the
proceeds of any such awards from the authorities making the same and to give
proper receipts and acquittances therefor, and to apply the same in accordance
with the applicable provisions of this Mortgage (all of the foregoing Land,
Improvements, rights, easements, rights-of-way, licenses, privileges, and
awards, collectively, the "Real Property");
TOGETHER with all proceeds, insurance or otherwise, paid for the damage
done to any of the Security and all proceeds of the conversion, voluntarily or
involuntarily, of any of the Security into cash or liquidated claims;
TOGETHER with all fixtures, machinery, equipment, goods, and every other
article of personal property, tangible and intangible, now or hereafter attached
to or used in connection with the Real Property, or placed on any part thereof
and whether or not attached thereto, appertaining or adapted to the use,
management, operation or improvement of the Real Property, insofar as the same
and any reversionary right thereto may now or hereafter be owned or acquired by
one or more of the Mortgagors (as more completely described in this paragraph
and the next following paragraph, the "Personal Property"), including, but
without limitation: all partitions; screens; awnings; shades; blinds; floor
coverings; hall and lobby equipment; heating, lighting, plumbing, ventilating,
refrigerating, incinerating, elevator, escalator, air conditioning and
communication plants or systems with appurtenant fixtures; vacuum cleaning
systems; call
-5-
<PAGE>
systems; sprinkler systems and other fire prevention and extinguishing apparatus
and materials; all equipment, manual, mechanical and motorized, for the
construction, maintenance, repair and cleaning of, and removal of snow from,
parking areas, walks, underground ways, truck ways, driveways, common areas,
roadways, highways and streets; all equipment, manual, mechanical and motorized,
for the transportation of customers or employees to and from the facilities on
the Real Property; all telephone, computer and other electronic equipment and
appurtenances thereto, including software; and all other machinery, pipes,
poles, appliances, equipment, wiring, fittings, panels and fixtures; and any
proceeds therefrom, any replacements thereof or additions or accessions thereto;
all of Mortgagors' rights, but not Mortgagors' obligations, under Mortgagors'
leases for Personal Property; all contract rights held by Mortgagors from time
to time in existence of whatever nature relating to the Real Property or
Personal Property, including, but not limited to, architectural and engineering
plans, drawings, tests, reports or studies, contracts for goods or services and
management contracts, all warranties and guaranties under such contracts and
rights under insurance policies; all rights of Mortgagors under architect's
contracts, construction contracts, completion bonds, performance bonds and
payment bonds related to the Real Property or Personal Property; all accounts,
accounts receivable, parking garage revenues and receivables, contract rights,
general intangibles, documents, instruments and chattel paper arising from or in
connection with the Real Property or Personal Property, including all books and
records in connection therewith and reserve accounts required to be established
now or at any
-6-
<PAGE>
time in the future under the Loan Documents, and all proceeds of any and all of
the same; all rights under all causes of action held by Mortgagors related to
the Real Property or Personal Property, including claims relating to
construction or the condition of the Improvements; all of Mortgagors' right,
title and interest in and to all artwork and sculpture located on the Real
Property; and all building materials, supplies and other property delivered to
the Real Property for incorporation into the Improvements thereon, all of which,
to the extent permitted by law, are declared to be a part of the realty and
covered by the lien hereof, but said lien shall not cover any fixture,
machinery, equipment or article of personal property which is owned by a tenant
and which can be removed from the Real Property by the tenant, but said lien
shall include any other fixture, machinery, equipment or article of personal
property incorporated into the improvements so as to constitute realty under
applicable law;
TOGETHER with all of Mortgagors' books of account and records relating to
the Security, including all computers and software relating thereto;
TOGETHER with all contracts of sale and leases in the nature of a sale of
the Real Property, or any portion thereof, now and hereafter entered into and
all right, title and interest of Mortgagors thereunder, including, without
limitation, cash or securities deposited thereunder to secure performance by the
contract purchasers, which deposits Mortgagors may retain unless an Event of
Default (as hereinafter defined) exists hereunder;
-7-
<PAGE>
all licenses, permits, franchises, governmental approvals and all sanitary
sewer, drainage, water and utility service agreements, reservations and
capacities benefiting the Real Property or any part thereof; and all rights of
Mortgagors under any covenants, agreements, easements, restrictions or
declarations relating to, or as an appurtenance to, the Real Property or the
Personal Property or any part thereof;
TOGETHER with all leases, subleases, licenses, concession agreements,
occupancy agreements or grants of other possessory interests now or hereafter in
force or effect, oral or written, and all renewals, extensions, modifications,
replacements and guaranties thereto affecting all or any part of the Land or
Improvements;
TOGETHER with all rents, issues, revenues, profits and income from the Real
Property and Personal Property;
TOGETHER with all of the right, title and interest of Mortgagors in and to
all and singular the tenements, hereditaments and appurtenances belonging to or
in any way pertaining to the Security; all the estate, right, title and claim
whatsoever of Mortgagors, either in law or in equity, in and to the Security;
and any and all other, further or additional title, estate, interest or right
which may at any time be acquired by Mortgagors in or to the Security, and if
one or more of the Mortgagors shall at any time acquire any further estate or
interest in or to the Security, the lien of this Mortgage shall attach, extend
to, cover and be a lien upon such further estate
-8-
<PAGE>
or interest automatically without further instrument or instruments, and
Mortgagors, upon request of Mortgagee, shall execute such instrument or
instruments as shall reasonably be requested by Mortgagee to confirm such lien,
subject to the limitations on Mortgagors' liability set forth in Section 40
below;
TO HAVE AND TO HOLD the Security, and each and every part thereof, unto
Mortgagee and its successors and assigns forever, for the purposes and uses
herein set forth.
AND, Mortgagors each hereby further covenant, agree and warrant (as
applicable) as follows:
l. Payment of Indebtedness. Mortgagors will pay the principal indebtedness
and interest thereon in accordance with the provisions of the Note and all
prepayment fees, late charges and fees required thereunder, and all extensions,
renewals, modifications, amendments and replacements thereof, and will keep and
perform all the covenants, promises and agreements, and pay all sums provided in
(i) each of the Note or any other promissory note or notes at any time hereafter
issued by Mortgagors to evidence the Indebtedness, (ii) this Mortgage, and (iii)
any and all other Loan Documents, all in the manner herein or therein set forth.
Subject to the limitations of liability set forth in Section 40 of this Mortgage
and Section 16 of the Note, Mortgagors shall each be fully liable for such
payment and performance. If more than one corporation, partnership, trust,
limited liability company or other entity or person shall in the
-9-
<PAGE>
future execute this Mortgage as one of the Mortgagors or shall directly assume
some or all of the obligations of Mortgagors hereunder, whether as a result of a
transfer of an interest in the Security permitted by the Loan Documents, or
otherwise as may be agreed to in writing by Mortgagee, then each such entity and
person shall be jointly and severally liable for the satisfaction of all
obligations and duties of Mortgagors under this Mortgage, subject to the
limitations of liability set forth in Section 40 of this Mortgage and Section 16
of the Note.
2. Covenants of Title. Wellesley I has good and indefeasible title to the
entire Wellesley I Parcels (as hereinafter defined) in fee simple, has absolute
title to Wellesley I's Personal Property (except as to personal property which
is leased by Wellesley I, as to which Wellesley I shall have good title to the
lessee's interest under the leases), and has good right and full power to sell,
mortgage and convey the same; the Wellesley I Parcels and the balance of the
Wellesley I portion of the Security are free and clear of easements,
restrictions, liens, leases and encumbrances, except those easements,
restrictions, liens, leases and encumbrances related to the Wellesley I Parcels
listed on Exhibit B hereto or which may hereafter be created and be permitted to
continue to exist pursuant to the terms hereof; and Wellesley I will warrant and
defend title to the Wellesley I portion of the Security against all claims and
demands whatsoever except the Permitted Encumbrances (defined hereinbelow)
related to the Wellesley I Parcels. The "Wellesley I Parcels" shall mean the
parcels of
-10-
<PAGE>
land with the buildings and other improvements thereon described as "Parcel I"
on Exhibit A hereto.
Wellesley II has good and indefeasible title to the entire Wellesley II
Parcel (as hereinafter defined) in fee simple, has absolute title to Wellesley
II's Personal Property (except as to personal property which is leased by
Wellesley II, as to which Wellesley II shall have good title to the lessee's
interest under the leases), and has good right and full power to sell, mortgage
and convey the same; the Wellesley II Parcel and the balance of the Wellesley II
portion of the Security are free and clear of easements, restrictions, liens,
leases and encumbrances, except those easements, restrictions, liens, leases and
encumbrances related to the Wellesley II Parcel listed on Exhibit B hereto or
which may hereafter be created and be permitted to continue to exist pursuant to
the terms hereof; and Wellesley II will warrant and defend title to the
Wellesley II portion of the Security against all claims and demands whatsoever
except the Permitted Encumbrances related to the Wellesley II Parcel. The
"Wellesley II Parcel" shall mean the parcel of land with the buildings and other
improvements thereon described as "Parcel V" on Exhibit A hereto.
BPLP has good and indefeasible title to the entire BPLP Parcels (as
hereinafter defined) in fee simple, has absolute title to BPLP's Personal
Property (except as to personal property which is leased by BPLP, as to which
BPLP shall have good title to the lessee's interest under the leases), and has
good right and full power to sell, mortgage and convey the same; the BPLP
-11-
<PAGE>
Parcels and the balance of the BPLP portion of the Security are free and clear
of easements, restrictions, liens, leases and encumbrances, except those
easements, restrictions, liens, leases and encumbrances related to the BPLP
Parcels listed on Exhibit B hereto or which may hereafter be created and be
permitted to continue to exist pursuant to the terms hereof; and BPLP will
warrant and defend title to the BPLP portion of the Security against all claims
and demands whatsoever except the Permitted Encumbrances related to the BPLP
Parcels. The "BPLP Parcels" shall mean the parcels of land with the buildings
and other improvements thereon described as "Parcel II," "Parcel III" and
"Parcel IV" on Exhibit A hereto.
Those easements, restrictions, liens, leases and encumbrances listed on
Exhibit B hereto which relate to the Wellesley I Parcels, the Wellesley II
Parcel and the BPLP Parcels, or which may hereafter be created and be permitted
to continue to exist pursuant to the terms hereof, are collectively herein
referred to as the "Permitted Encumbrances". The Permitted Encumbrances also
include leases and lease amendments hereafter entered into by Mortgagors (or any
of them) in accordance with Section 22 hereof. Mortgagee shall have the right,
at its option and at such time or times as it shall deem necessary, to take
whatever action it may deem necessary to defend or uphold the lien of this
Mortgage or otherwise enforce any of the rights of Mortgagee hereunder or any
obligation secured hereby, including without limitation, the right to institute
appropriate legal proceedings for such purposes.
-12-
<PAGE>
3. Usury. It is hereby expressly agreed that if from any circumstances
whatsoever fulfillment of any provision of the Note, this Mortgage, or any other
Loan Documents, at the time performance of such provision shall be due, shall
involve transcending the limit of validity presently prescribed by any
applicable usury statute or any other law, with regard to obligations of like
character and amount, then ipso facto the obligation to be fulfilled shall be
reduced to the limit of such validity, so that in no event shall any exaction be
possible under the Loan Documents that is in excess of the limit of such
validity. In no event shall Mortgagors be bound to pay for the use, forbearance
or detention of the money loaned pursuant to the Loan Documents, interest of
more than the current applicable legal limit, if any; the right to demand any
such excess being hereby expressly waived by Mortgagee.
4. Impositions. Subject to the right of Mortgagors (or any of them) to
contest an Imposition (as hereinafter defined) as set forth below and subject to
Section 5 below, Mortgagors shall pay, before the last day on which the same may
be paid without penalty or interest, all real estate taxes, sewer rents, water
charges, municipal electric and all other municipal and governmental
assessments, rates, charges, impositions and liens (hereinafter referred to as
"Impositions") which now or hereafter are imposed by law upon the Security.
Subject to the contest rights hereinafter provided for, if any Imposition is not
paid within the time hereinabove specified, Mortgagee shall have the right to
pay the same, together with any penalty and interest thereon, and the amount or
amounts so paid or advanced shall
-13-
<PAGE>
forthwith be payable by Mortgagors to Mortgagee and shall be secured by the lien
of this Mortgage; but Mortgagors (or any of them) may in good faith contest, at
their (or its) own cost and expense, by proper legal proceedings, the validity
or amount of any Imposition, on the condition that the Mortgagor(s) in question
first shall deposit with Mortgagee or a mutually satisfactory escrow agent
pursuant to a mutually satisfactory agreement, as security for the payment of
such contested item, an amount equal to the contested item plus all penalties
and interest which would be payable if Mortgagors (or any of them) are
ultimately required to pay such contested item (with due credit to Mortgagors
for interest which will accrue on such deposit if held by such escrow agent,
Mortgagee hereby agreeing to permit such escrow agent to invest the same at
Mortgagors' direction in the investments permitted under the Tax Escrow
Agreement (as defined in Section 5 hereof) unless an Event of Default exists
hereunder, in which event Mortgagee shall direct such investments), and on the
further condition that no amount so contested may remain unpaid for such length
of time as shall permit the Security, or the lien thereon created by the item
being contested, to be sold for the nonpayment thereof, or as shall permit an
action of foreclosure or the like to be commenced by the holder of any such
lien. In the event that there is not an escrow agent, any deposit required
hereunder shall be deposited with Mortgagee to be held in a service account
which is non-interest bearing to the Mortgagors. Mortgagors will not claim any
credit on, or make any deduction from the Indebtedness by reason of the payment
of, any Imposition.
-14-
<PAGE>
Mortgagors hereby assign to Mortgagee all rights of Mortgagors now or
hereafter arising in and to the refund of any Imposition and any interest
thereon. If at the time of receipt of any such refund by Mortgagee there exists
no Event of Default hereunder, then Mortgagee shall pay over the same to
Mortgagors promptly after demand; if there exists an Event of Default hereunder,
Mortgagee may apply said refund in reduction of the Indebtedness in whatever
order Mortgagee may elect.
5. Tax Deposits. Mortgagors, Mortgagee and Fowler, Goedecke, Ellis &
O'Connor, Incorporated, as Escrow Agent, have entered into a certain Real Estate
Tax Escrow and Security Agreement of even date herewith, the terms of which
provide for the escrow and payments of money with respect to real estate taxes
(the "Tax Escrow Agreement"). Mortgagors covenant to perform their obligations
under the Tax Escrow Agreement, and Mortgagee hereby agrees that such
performance shall satisfy Mortgagors' obligations under this Mortgage with
respect to real estate taxes. In the event that Mortgagors shall default beyond
applicable grace periods under the Tax Escrow Agreement, or the Tax Escrow
Agreement shall be terminated for any reason, or in the event that the Tax
Escrow Agreement becomes ineffective or otherwise unenforceable, then the
balance of the terms and conditions of this Section 5 shall be applicable and
control with respect to real estate taxes.
Mortgagors shall deposit with Mortgagee or with an escrow agent selected by
Mortgagors and approved by Mortgagee (not to be unreasonably withheld or
delayed) pursuant to an
-15-
<PAGE>
escrow agreement reasonably acceptable to Mortgagee, on the first day of the
calendar month immediately following the date of this Mortgage and on the first
day of each calendar month thereafter (each of which dates is hereinafter called
the "monthly tax deposit date") until the payment in full of the Indebtedness, a
sum equal to one-twelfth of the real estate taxes, assessments and any other
Impositions which are required to be, or are customarily, paid with real estate
taxes or assessments (the "Qualified Impositions") to be levied, charged,
assessed or imposed upon or for the Security within one year after said monthly
tax deposit date. If on any monthly tax deposit date the amount of Qualified
Impositions to be levied, charged, assessed or imposed within the ensuing one
year period shall not be fixed, such amount, for the purpose of computing the
deposit to be made by Mortgagors hereunder, shall be estimated by Mortgagee,
with appropriate adjustment when the amount of such Qualified Impositions is
fixed.
The sums deposited by Mortgagors under this Section shall be held in an
interest bearing account with interest being retained by Mortgagee and free of
trust, except as otherwise provided in the grammatical paragraph next following
and except to the extent, if any, that applicable law shall otherwise require,
and applied in payment of such Qualified Impositions when due (subject to
Mortgagors' contest rights set forth above). Mortgagors shall give fifteen (15)
days prior written notice to Mortgagee in each instance when a Qualified
Imposition is due, specifying the Qualified Imposition to be paid and the amount
thereof, the place of payment and the last day on which the same
-16-
<PAGE>
may be paid in order to be within the time limit specified in Section 4 hereof
entitled "Impositions". Mortgagee shall not be responsible for any acts of or
events affecting the escrow agent nor shall Mortgagee have any obligation or
liability to Mortgagors if a different depository, or a different account with
the selected escrow agent, would or might pay a greater return on invested
funds.
Notwithstanding the foregoing provision, so long as Mortgagors collectively
hold title to and control the Security, Impositions are paid in full when due
and there exists no uncured default under the Loan Documents, notice of which
has been given by Mortgagee to Mortgagors, the interest earned by such escrows,
less reasonable escrow costs, will be paid to Mortgagors on each monthly tax
deposit date; provided, however, that interest shall be paid only if the escrow
account is held by a mutually agreed escrow agent and not by Mortgagee itself.
If for any reason the sums on deposit with Mortgagee or escrow agent under
this Section shall not be sufficient to pay a Qualified Imposition within the
time specified in Section 4 hereof, then Mortgagors shall, within ten (10) days
after demand by Mortgagee, deposit sufficient sums so that Mortgagee may pay
such Qualified Imposition in full, together with any penalty and interest
thereon, subject to Mortgagors' contest rights set forth above. Mortgagee may
change its estimate of Qualified Impositions for any period, on the basis of a
change in an assessment or tax rate or on the basis of a prior miscalculation or
for any other bona fide reason communicated by Mortgagee to
-17-
<PAGE>
Mortgagors, in which event Mortgagors shall deposit with Mortgagee or escrow
agent within ten (10) days after demand the amount of any excess of the deposits
which would theretofore have been payable under the revised estimate over the
sums actually deposited.
If any Qualified Imposition shall be levied, charged, assessed or imposed
upon or for the Security, or any portion thereof, and if such Qualified
Imposition shall also be a levy, charge, assessment or imposition upon or for
any other premises not covered by the lien of this Mortgage, then the
computation of the amounts to be deposited under this Section shall be based
upon the entire amount of such Qualified Imposition and Mortgagors shall not
have the right to apportion any deposit with respect to such Qualified
Imposition.
Upon an assignment of this Mortgage, Mortgagee shall have the right to
arrange to transfer all amounts deposited and still in its possession to the
assignee and, provided that the assignee assumes the obligations of Mortgagee
with respect to such amounts deposited, Mortgagee shall thereupon be completely
released from all liability with respect to such deposit and Mortgagors and the
owner of the Security shall look solely to the assignee or transferee in
reference thereto.
Upon the payment in full by Mortgagors of the entire Indebtedness, any sums
then held by Mortgagee (or escrow agent) under this Section shall be refunded to
Mortgagors.
-18-
<PAGE>
All amounts deposited shall be held by Mortgagee as additional security for
the sums secured by this Mortgage, and each of Mortgagors hereby grants to
Mortgagee a security interest in such sums, and upon the occurrence of an Event
of Default hereunder, Mortgagee may, in its sole and absolute discretion, apply
said amounts to the payment of the Indebtedness in whatever order Mortgagee may
elect.
Immediately upon receipt of such by any of the Mortgagors, such Mortgagor
shall deliver to Mortgagee copies of all notices, demands, claims, bills, and
receipts in relation to the Qualified Impositions.
Notwithstanding the foregoing provisions, Mortgagee hereby waives the
requirement for deposits as to that portion of Qualified Impositions payable
directly to the governmental or other authority by tenants under the terms of
leases approved by Mortgagee, provided satisfactory proof of payment is promptly
furnished to Mortgagee.
6. Change in Taxes. In the event that, by reason of changes in law or in
the application or interpretation thereof, any tax (other than general income
taxes and similar taxes based on income) shall be due or become due and payable
to the United States of America, the Commonwealth of Massachusetts or any
political subdivision thereof with respect to the execution and delivery or
recordation of this Mortgage or any other Loan Document or the interest of
Mortgagee in the Security, Mortgagors shall, subject to Mortgagors' contest
rights set forth in
-19-
<PAGE>
Section 4 above, which shall be applicable hereto, mutatis mutandis, pay such
tax at the time and in the manner required by applicable law and Mortgagors
shall hold Mortgagee harmless and shall indemnify Mortgagee against any
liability of any nature whatsoever as a result of the imposition of any such
tax. Notwithstanding the foregoing, in the event that such tax shall be due or
become due and payable as aforesaid in an amount greater than $150,000 and if
Mortgagee shall require Mortgagors to make payment thereof or to indemnify
Mortgagee as aforesaid, Mortgagors shall have the right to prepay the
Indebtedness in full, without paying a prepayment fee. If one or more of the
Mortgagors are not permitted by law to make such payments, the Indebtedness
shall, at the option of Mortgagee, become due and payable upon one hundred
eighty (180) days notice without Mortgagors being obligated to pay a prepayment
fee. Notwithstanding the foregoing, Mortgagee shall not require Mortgagors to
pay such taxes or to indemnify Mortgagee as aforesaid, nor will Mortgagee
exercise its option to accelerate the Indebtedness pursuant to the preceding
sentence, unless it is the policy of Mortgagee to enforce such rights generally
(meaning that, over the course of numerous transactions, Mortgagee would more
often than not elect to enforce such rights) in connection with similar
commercial mortgage loans held by Mortgagee.
7. Insurance. Mortgagors collectively shall, at all times
until the Indebtedness shall be paid in full, keep the Security
insured against loss or damage for its full replacement cost
(which cost shall be reset once a year at Mortgagee's option)
under policies of so-called All Risk Replacement Cost Insurance
-20-
<PAGE>
with Agreed Amount Endorsement (including risks of war and nuclear explosion, if
available at commercially reasonable rates), and shall further provide flood
insurance (if the Security is situated in an area which is considered a flood
risk area by the federal government or any agency thereof), boiler and machinery
insurance, earthquake insurance (if available at commercially reasonable rates),
rent loss insurance in an amount sufficient to cover the total of all rents
accruing from the Security for a one (1) year period, comprehensive general
liability insurance in a minimum amount of One Million Dollars ($1,000,000), and
excess or umbrella liability of at least Five Million Dollars ($5,000,000), and
during any period of restoration, a policy or policies of builder's "all risk"
insurance in an amount not less than the full insurable value of the Security
against such risks as Mortgagee may reasonably request, and such other
appropriate insurance as Mortgagee may reasonably require from time to time, in
such amounts and with such companies as shall be reasonably approved by
Mortgagee with a Best's rating of A:X or better (except to the extent Mortgagee,
in its reasonable discretion, approves a lower Best's rating upon Mortgagors'
written request), and will deliver the original policy or policies of such
insurance (or certified duplicates thereof) to Mortgagee. Each such policy shall
provide that the same may not be cancelled or materially modified except upon
thirty (30) days prior written notice to Mortgagee, and shall otherwise be in
such form as shall be reasonably acceptable to Mortgagee, so that at all times
until the payment in full of the Indebtedness, Mortgagee shall have and hold the
said policy and policies (or certified duplicates thereof) as further collateral
-21-
<PAGE>
for the payment of all Indebtedness. Each liability policy shall name Mortgagee
as an "additional insured"; and each other policy required to be maintained
hereunder (other than rent loss insurance) shall name Mortgagee as "loss payee"
and provide that all proceeds shall be payable to Mortgagee and that no act or
thing done by Mortgagors shall invalidate the policy as against Mortgagee, and
shall be endorsed with standard non-contributory mortgagee clauses and lender's
loss payee endorsements in favor of and in form reasonably acceptable to
Mortgagee. If Mortgagors shall fail to obtain any such policy or policies
required by Mortgagee, or shall fail to deliver the same (or certified
duplicates thereof) to Mortgagee, then Mortgagee may, after ten (10) days notice
to Mortgagors (or such shorter notice period as shall be appropriate if the
policy is about to expire), obtain such insurance and pay the premium or
premiums therefor, in which event Mortgagors shall, on demand of Mortgagee,
repay such premium or premiums to Mortgagee and such repayment shall be secured
by the lien of this Mortgage. Notwithstanding the foregoing, provided that such
policies providing for such coverages are in fact in effect (as evidenced by
certificates thereof delivered by Mortgagors to Mortgagee), and that Mortgagors
have paid the premiums therefor, Mortgagors shall not be required to deliver any
such insurance policy (or a certified duplicate thereof) to Mortgagee until the
policy (or a certified duplicate thereof) is delivered to Mortgagors by the
insurer. Mortgagors each covenant to exercise reasonable efforts to secure
delivery of such policies from the insurer promptly after the policy has been
underwritten and approved by the insurer. If Mortgagors fail to maintain the
level of insurance required under
-22-
<PAGE>
this Mortgage with regard to their Respective Security (defined hereinbelow),
then Mortgagors shall indemnify Mortgagee to the extent that a casualty occurs
with regard to their Respective Security and insurance proceeds would have been
available had such insurance been maintained.
For purposes of this Mortgage and the other Loan Documents, the term
"Respective Security" shall mean (i) with regard to BPLP, the BPLP Parcels and
all of the corresponding Real Property and Personal Property pertaining thereto,
(ii) with regard to Wellesley I, the Wellesley I Parcels and all of the
corresponding Real Property and Personal Property pertaining thereto, and (iii)
with regard to Wellesley II, the Wellesley II Parcel and all of the
corresponding Real Property and Personal Property pertaining thereto.
Mortgagors shall promptly provide to Mortgagee copies of any and all
material notices (including notice of non-renewal and policy amendments),
claims, and demands which Mortgagors receive from insurers of the Security.
Mortgagors hereby assign to Mortgagee all rights of Mortgagors in and to
any unearned premiums on any insurance policy required to be furnished by
Mortgagors, which assignment may be exercised by Mortgagee at any time an Event
of Default exists hereunder.
-23-
<PAGE>
8. Insurance/Condemnation Proceeds. Mortgagors hereby assign to Mortgagee
all proceeds of any insurance or condemnation awards which Mortgagors may be
entitled to receive for loss or damage to, or a taking of, the Security. In the
event of loss or damage to, or a taking of, the Security, the proceeds of said
insurance or condemnation award shall be payable to Mortgagee alone and each of
the Mortgagors hereby authorizes and directs any affected insurance company or
government agency to make payment of the insurance proceeds or condemnation
awards directly to Mortgagee; provided, however, if such proceeds or awards do
not exceed Three Hundred Thousand Dollars ($300,000), they shall be paid to
Mortgagors instead of Mortgagee for application by Mortgagors to the costs of
repair or restoration provided that there exists no uncured monetary default
under the Loan Documents and no uncured non-monetary default of which notice has
been given by Mortgagee to Mortgagors under the Loan Documents. In the event
that any such insurance proceeds or condemnation awards in excess of Three
Hundred Thousand Dollars ($300,000) are paid directly to Mortgagors, Mortgagors
shall deliver such proceeds or awards to Mortgagee within five (5) days of
Mortgagors' receipt thereof. No such loss or damage shall itself reduce the
Indebtedness. Unless an Event of Default exists hereunder, Mortgagors shall have
the right, with Mortgagee's consent, which consent shall not be unreasonably
withheld or delayed, to adjust and compromise any loss or damage; provided,
however, that if such loss or damage does not exceed Three Hundred Thousand
Dollars ($300,000), and provided no Event of Default exists hereunder,
Mortgagors shall have the right to so adjust and compromise without Mortgagee's
consent. Subject to the
-24-
<PAGE>
provisions of Sections 9, 10, and 11 hereof, such proceeds or awards shall be
applied first toward reimbursement of all reasonable costs and expenses of
Mortgagee in collecting said proceeds or awards, then toward payment of the
Indebtedness or any portion thereof then outstanding, in whatever order
Mortgagee may elect, or Mortgagee may, at its option, apply said insurance
proceeds or condemnation awards in whole or in part toward restoration of the
Security for which such insurance proceeds or condemnation awards shall have
been paid. Any insurance proceeds or condemnation awards received by Mortgagee
on account of a loss or damage to, or taking of, the Security shall, until the
same are applied by Mortgagee as aforesaid, be held by Mortgagee in an
interest-bearing account, with all interest and other income earned thereon to
accrue to Mortgagors' benefit (except as set forth in the next following
sentence of this Section 8); and such proceeds or awards shall be invested at
Mortgagors' direction in the investments permitted under the Tax Escrow
Agreement, unless an Event of Default exists hereunder, in which event Mortgagee
shall direct such investments. Notwithstanding the foregoing, interest on such
proceeds and awards only shall be payable if Mortgagee and Mortgagors make
arrangements for a mutually acceptable third party to hold such proceeds and
awards and to invest the same pursuant to an agreement reasonably acceptable to
Mortgagee; if Mortgagee itself holds such proceeds and awards, Mortgagee shall
have no obligation to pay interest thereon. The income earned in respect of such
proceeds or awards shall be added thereto, and shall be held and applied by
Mortgagee in the same manner as provided for herein with respect to the proceeds
or awards themselves.
-25-
<PAGE>
In the event of foreclosure of this Mortgage or other transfer of title to
the Security in lieu of foreclosure, all right, title, and interest of
Mortgagors in and to any insurance policy, or premiums or payments of proceeds
or awards in satisfaction of claims or any other rights thereunder then in
force, shall pass to the purchaser or grantee notwithstanding the amount of any
bid at such foreclosure sale. Nothing contained herein shall prevent the accrual
of interest as provided in the Note on any portion of the principal balance due
under the Note until such time as the insurance proceeds or condemnation awards
are actually received and applied to reduce the principal balance outstanding.
9. Restoration Following Fire and Other Casualty or Condemnation. In
the event of damage to the Security by reason of fire or other hazard or
casualty, Mortgagors shall give prompt written notice thereof to Mortgagee and
(subject to the following provisions) shall proceed with reasonable diligence to
perform repair, replacement and/or rebuilding work (hereinafter referred to as
the "Work") to restore the Security to substantially its condition prior to such
damage in compliance in all material respects with all legal requirements,
provided that Mortgagee makes insurance proceeds available therefor. In the
event of a taking by power of eminent domain or conveyance in lieu thereof
("condemnation"), if restoration is feasible as reasonably determined by
Mortgagee, then Mortgagors (subject to the following provisions) shall proceed
with reasonable diligence to perform such restoration (also referred to as the
"Work"), provided that Mortgagee makes the condemnation awards available
-26-
<PAGE>
therefor. Before commencing the Work, Mortgagors shall comply with the following
requirements if the cost of the Work exceeds Three Hundred Thousand Dollars
($300,000):
a. Mortgagors shall furnish to Mortgagee complete plans and
specifications for the Work, for Mortgagee's approval, which approval shall not
be unreasonably withheld. Said plans and specifications shall bear the signed
approval thereof by an architect reasonably satisfactory to Mortgagee and shall
be accompanied by the architect's signed estimate, bearing the architect's seal,
of the entire cost of completing the Work.
b. Mortgagors shall furnish to Mortgagee certified copies of all
permits and approvals required by law in connection with the commencement and
conduct of the Work.
c. Mortgagors shall furnish to Mortgagee, prior to the commencement of
the Work, a surety bond for or guaranty of completion of and payment for the
Work, which bond or guaranty shall be in form satisfactory to Mortgagee and
shall be signed by a surety or sureties, or guarantor or guarantors, as the case
may be, who are reasonably acceptable to Mortgagee, and in an amount not less
than the architect's estimate of the entire cost of completing the Work, less
the amount of insurance proceeds or condemnation awards, if any, then held by
Mortgagee and which Mortgagee shall have elected or shall be required to apply
toward restoration of the Security as provided in Section 10 hereof.
-27-
<PAGE>
If the cost of the Work exceeds Three Hundred Thousand Dollars ($300,000),
Mortgagors shall not commence any of the Work until Mortgagors shall have
complied with the above requirements, and thereafter Mortgagors shall perform
the Work diligently (subject to delays caused by events of force majeure) and in
good faith substantially in accordance with the plans and specifications
referred to in subsection (a) above.
If, as provided in Section 10 hereof, Mortgagee shall have elected or is
required to apply any insurance proceeds or condemnation awards toward repair or
restoration of the Security, then so long as the Work is being diligently
performed (subject to delays caused by events of force majeure) by Mortgagors in
accordance with the provisions of this Mortgage, Mortgagee shall disburse such
insurance proceeds or condemnation awards to Mortgagors from time to time during
the course of the Work in accordance with the following provisions which shall
be applicable if the cost of the Work exceeds $300,000:
A. The Work shall be in the charge of an experienced construction
manager reasonably satisfactory to Mortgagee with the consultation of an
architect or engineer, and before Mortgagors commence any Work, Mortgagee
shall have approved the plans and specifications for the Work to be
submitted by Mortgagors, it being nevertheless understood that, to the
extent feasible, said plans and specifications shall provide for such Work
that, upon completion thereof, the items being repaired or restored shall
be at least equal in value and general utility to
-28-
<PAGE>
their value and general utility prior to the damage, destruction or
condemnation;
B. Each request for payment shall not be made more often than at
thirty (30) day intervals, on seven (7) business days prior notice to
Mortgagee, and shall be accompanied by a certificate from an architect or
engineer with respect to items (i) and (iv) and a certificate from
Mortgagors with respect to items (ii), (iii), (v) and (vi), dated not more
than ten (10) days prior to the application for withdrawal of funds,
stating:
(i) that, to the best of its knowledge and belief, based upon
diligent performance under its contract with Mortgagors in accordance
with generally accepted standards of professional knowledge and skill,
all of the Work for which payment is being requested is in place
(except for materials stored off-site with Mortgagee's consent, which
shall not be unreasonably withheld or delayed) and has been completed
substantially in compliance with the approved plans and specifications
and all applicable legal requirements;
(ii) that the sum then requested to be withdrawn has been paid by
Mortgagors and/or is justly due to contractors, subcontractors,
materialmen, engineers, architects or other persons (whose names and
addresses shall be stated) who have rendered or furnished certain
services or materials for the Work and giving a brief description of
such services and materials and the
-29-
<PAGE>
principal subdivisions or categories thereof and the respective amounts so
paid or due to each of said persons in respect thereof and stating the
progress of the Work up to the date of said certificate;
(iii) that the sum then requested to be withdrawn, plus all sums
previously withdrawn, does not exceed the cost of the Work insofar as
actually accomplished up to the date of such certificate and that the
remainder of the monies held by Mortgagee will be sufficient to pay
for the completion of the Work in full;
(iv) that, to the best knowledge of such architect or engineer,
the remainder of the moneys held by Mortgagee will be sufficient to
pay in full for the completion of the Work;
(v) that no part of the cost of the services and materials
described in the foregoing paragraph (ii) of this Clause B has been or
is being made the basis of the withdrawal of any funds in any previous
or then pending application; and
(vi) that, except for the amounts, if any, specified in the
foregoing paragraph (ii) of this Clause B to be due for services or
materials, there is no outstanding indebtedness known, after due
inquiry, which is then due and payable for work, labor, services
-30-
<PAGE>
or materials in connection with the Work which, if unpaid, might
become the basis of a vendor's, mechanic's, laborer's or materialman's
statutory or other similar lien upon the Security or any part thereof.
C. Mortgagors shall deliver to Mortgagee reasonably satisfactory
evidence that the Security and every part thereof, and all materials and
all property described in the certificate furnished pursuant to the
foregoing Clause B, are free and clear of all mortgages, liens, charges or
encumbrances, except (a) encumbrances, if any, securing indebtedness due to
persons (whose names and addresses and the several amounts due them shall
be stated) specified in said certificate furnished pursuant to the
foregoing Clause B, which encumbrances will be discharged upon disbursement
of the funds then being requested, and (b) this Mortgage and the other
Permitted Encumbrances. Mortgagee shall accept as satisfactory evidence
under this Clause C a certificate of a title insurance company acceptable
to Mortgagee or an endorsement to Mortgagee's existing loan title policy
insuring the lien of this Mortgage, dated as of the date of the making of
the disbursement, confirming the foregoing.
D. Prior to the final disbursement, if Mortgagee reasonably requests,
Mortgagors shall deliver to Mortgagee a survey of the Security dated as of
a date within ten (10) days prior to the making of such disbursement
showing no encroachments other than those, if any, shown on the survey
-31-
<PAGE>
delivered to Mortgagee contemporaneously with the execution and delivery of this
Mortgage or otherwise acceptable to Mortgagee.
E. Prior to the first disbursement, Mortgagors shall deliver to
Mortgagee, to Mortgagee's reasonable satisfaction, an opinion of counsel
that the Security, if repaired, replaced and/or rebuilt in accordance with
the approved plans and specifications, would comply with all applicable
zoning, building, and similar land use laws, rules, and regulations.
F. There exists no uncured monetary default under the Loan Documents
and no uncured non-monetary default notice of which has been given by
Mortgagee to Mortgagors under any of the Loan Documents.
Mortgagee at its option may waive any of the foregoing requirements.
Upon compliance by Mortgagors with the foregoing Clauses A, B, C, D, E
and F (except for such requirements, if any, as Mortgagee at its option may
have waived), Mortgagors shall, to the extent of the insurance proceeds or
condemnation award, if any, which Mortgagee shall have elected or shall be
required to apply to restoration of the Security, pay or cause to be paid
to the persons named in the certificate furnished pursuant to the foregoing
Clause B, the respective amounts stated in said certificate to be
-32-
<PAGE>
due them less a retainage amount of 10% of the total contract price prior
to 50% completion of the Work or such other retainage (or without
retainage) ("Retainage") as shall be provided for in the applicable
contract(s) approved by Mortgagee, which approval shall not be unreasonably
withheld; and Mortgagee shall pay to Mortgagors the amounts stated in said
certificate to have been paid by Mortgagors less Retainage.
Upon completion of the Work, if the cost thereof exceeds Three Hundred
Thousand Dollars ($300,000), in addition to the requirements of the
foregoing Clauses A, B, C, D, E and F, Mortgagors shall promptly deliver to
Mortgagee:
(a) A written certificate of the architect or engineer that the Work
has been fully completed in a good and workmanlike manner substantially in
accordance with the approved plans and specifications;
(b) An endorsement to Mortgagee's title insurance policy reasonably
acceptable to Mortgagee insuring the Security against mechanics' and
materialmen's liens;
(c) A certificate by Mortgagors in form and substance reasonably
satisfactory to Mortgagee, listing all costs and expenses in connection
with the completion of the Work and the amount paid by Mortgagors with
respect to the Work; and
-33-
<PAGE>
(d) A temporary certificate of occupancy and all other
applicable certificates, licenses, consents and approvals issued by
governmental agencies or authorities with respect to the Security and
(if obtainable) by the appropriate Board of Fire Underwriters or other
similar bodies acting in and for the locality in which the Security is
situated, provided further that within thirty (30) days after
completion of the Work, Mortgagors shall obtain and deliver to
Mortgagee a permanent certificate of occupancy for the Security or
affected portions thereof.
Upon receipt of the foregoing items, Mortgagee shall pay any Retainage
still held by Mortgagee to Mortgagors.
If upon completion of the Work there shall be insurance proceeds or
condemnation awards held by Mortgagee over and above the amounts withdrawn
pursuant to the foregoing provisions plus undisbursed Retainage, then, if an
Event of Default exists, Mortgagee may retain such proceeds or awards and apply
the same in reduction of the Indebtedness in whatever order Mortgagee may elect,
and if no Event of Default exists, Mortgagee shall pay over such proceeds or
awards to Mortgagors.
10. Disposition of Condemnation or Insurance Proceeds. If such proceeds
exceed Three Hundred Thousand Dollars ($300,000), Mortgagee, in its absolute
discretion (except as hereinafter provided), may decide whether and to what
extent, if any, proceeds of insurance or condemnation will be made available to
Mortgagors for repair or restoration of the Security, but
-34-
<PAGE>
Mortgagors shall effect such repair or restoration as set forth above provided
Mortgagee makes such proceeds available for that purpose. Notwithstanding the
foregoing, Mortgagee agrees to make insurance or condemnation proceeds available
to Mortgagors for repair or restoration provided:
(i) The damage to the Improvements on the Real Property or the value of
the taking does not exceed sixty percent (60%) of the replacement cost
thereof, and, in the case of a condemnation, the portion of the
Security not taken by condemnation has not, in Mortgagee's reasonable
opinion, been rendered economically nonviable by the taking;
(ii) There exists no uncured non-monetary default of which notice has been
given by Mortgagee to Mortgagors and no uncured monetary default under
the Note or any other Loan Documents;
(iii) Mortgagors can demonstrate to Mortgagee's satisfaction that
Mortgagors have the financial ability (through rent insurance or
otherwise) to make all scheduled payments when due under the Loan
Documents during repair or restoration;
(iv) In the case of a casualty, the damage to the Real Property can be
fully restored at least two months prior to the Maturity Date;
-35-
<PAGE>
(v) In the case of condemnation, sufficient parking remains, and the
operation of the Security will not, in Mortgagee's reasonable opinion,
be materially and adversely affected;
(vi) The proceeds are released under the escrow/construction funding
arrangements specified in Section 9 hereof;
(vii) Annual income from leases in place and approved (or deemed approved)
by Mortgagee (which will include, for purposes hereof, leases for
which Mortgagee's approval is not required hereunder) that will
survive restoration provide coverage of at least 1.40 times the annual
debt service (interest and, if applicable, principal) on the Loan; and
(viii) The Work will return the Improvements to substantially the size,
design, and utility as existed immediately before the casualty.
If Mortgagee elects not to, and is not required to, make the proceeds
available for repair or restoration, then such proceeds shall be applied to
reduce the Indebtedness in whatever order Mortgagee may elect. Any application
of such proceeds to the principal indebtedness evidenced by the Note shall be at
par and shall cause a pro rata reduction in payments of interest and, if
applicable, principal, under the Note; provided, however, that
-36-
<PAGE>
if there exists an Event of Default, the prepayment fee as provided in the Note
shall also be due. Prepayment of the loan following Mortgagee's application to
principal reduction of insurance or condemnation proceeds shall be permitted
without payment of a prepayment fee, provided there then exists no Event of
Default under the Loan Documents and provided further that (i) such prepayment
must be made within one hundred eighty (180) days of Mortgagee's application to
principal reduction; (ii) Mortgagors keep Mortgagee informed of its progress in
seeking replacement financing; and (iii) Mortgagors provide Mortgagee with
thirty (30) days advance notice of prepayment.
11. Fire and Other Casualty; Self-Help. Subject to delays caused by events
of force majeure: If within one hundred eighty (180) days after the occurrence
of any damage to the Security or the condemnation of any portion of the Security
in excess of Three Hundred Thousand Dollars ($300,000), Mortgagors shall not
have submitted to Mortgagee for Mortgagee's approval the plans and
specifications for the Work, or shall not have obtained or be diligently seeking
to obtain approval of such plans and specifications from all governmental
authorities whose approval is required, or if, after such plans and
specifications are approved by Mortgagee and all such governmental authorities,
Mortgagors shall fail to promptly commence such Work, or if thereafter
Mortgagors fail to perform the Work diligently or are delinquent in the payment
to mechanics, materialmen or others of the costs incurred in connection with the
Work (provided that Mortgagee shall have made proceeds available therefor), or,
if Mortgagors shall fail to complete the Work promptly, then, in
-37-
<PAGE>
addition to all other rights herein set forth, and after giving Mortgagors
twenty (20) days written notice of the nonfulfillment of one or more of the
foregoing conditions and if such conditions remain uncured, Mortgagee, or,
following an Event of Default, any lawfully appointed receiver of the Security,
may at its option, perform or cause the Work to be performed, and may take such
other steps as it deems advisable to perform the Work, and may enter upon the
Security for any of the foregoing purposes, and Mortgagors hereby waive (to the
extent Mortgagors may lawfully do so) any claim against Mortgagee or such
receiver arising out of anything done by Mortgagee or such receiver pursuant to
this Section (other than claims arising by reason of the gross negligence or
willful misconduct of Mortgagee or such receiver) and Mortgagee may apply
insurance proceeds (without the need to fulfill the requirements of Section 9
hereof) to pay for restoration costs or to reimburse Mortgagee and/or such
receiver for all amounts expended or incurred by them, respectively, in
connection with the performance of the Work, and any excess costs incurred by
Mortgagee shall be paid by Mortgagors to Mortgagee upon demand with interest at
the Default Rate (hereinafter defined) from the date of demand and such payment
shall be secured by the lien of this Mortgage.
12. Rent Insurance Proceeds. If there shall be no Event of Default under
the Loan Documents, then all rent insurance proceeds shall be paid directly to
Mortgagors. If there exists an Event of Default, then such rent insurance
proceeds shall be paid to Mortgagee and may be applied by Mortgagee, at
Mortgagee's
-38-
<PAGE>
option, to the payment of the Indebtedness in whatever order Mortgagee may
elect.
13. Intentionally Omitted.
14. Repair; Alterations; Waste; Environmental. Mortgagors shall keep all of
the Security in good and substantial repair, subject to the provisions of
Section 9, to the extent applicable, and expressly agree that they will neither
permit nor commit any waste upon the Security, nor do any act or suffer or
permit any act to be done to diminish the value of the Security or whereby the
lien hereof may be impaired. Mortgagors shall comply in all material respects
with all zoning laws, building codes, subdivision laws, environmental laws, and
other laws, ordinances, rules and regulations made or promulgated by any
government or municipality, or by any agency thereof or by any other lawful
authority, which are now or may hereafter become applicable to the Security,
including but not limited to the Americans with Disabilities Act of 1990
("ADA"). Mortgagors shall use all reasonable efforts to cause tenants of the
Real Property to comply with their lease requirements regarding ADA. Without
limiting the foregoing, Mortgagors shall comply in all material respects (within
the time schedule set forth therein) with the ADA Compliance Plan, prepared by
Mortgagors, dated January 2, 1996, previously submitted to and approved by
Mortgagee. Mortgagors agree not to initiate or acquiesce in any zoning variance
or reclassification, without Mortgagee's prior written consent. Mortgagors shall
not construct any additional building or buildings or make any other material
improvements on the Land
-39-
<PAGE>
nor alter, remove or demolish any building or other Improvements on the Land in
any material respect, without the prior written consent of Mortgagee (which
consent shall not be unreasonably withheld or delayed), except for (i) tenant
improvement work in accordance with leases approved (or deemed approved) by
Mortgagee or which Mortgagee is not required to approve pursuant to Section 22
of this Mortgage, and (ii) an expansion of the building located at 100 William
Street of up to 30,000 square feet subject to satisfaction of the following: (a)
there shall be in place throughout the construction period adequate insurance
(including builder's "all risk" insurance) naming Mortgagee as an additional
insured; (b) Mortgagors shall pay-off or bond or insure over all mechanics liens
and materialmens liens within one-hundred eighty (180) days of any filing
thereof; (c) at no time during the term of the Loan shall any subordinate
financings or lien exist with respect to the Security except those included
within the Permitted Encumbrances or approved by Mortgagee pursuant to the terms
hereof; (d) Mortgagors shall pay all of the reasonable fees and costs of
Mortgagee's representatives to inspect the expansion project no more than once
per month; (e) the expansion of the building is for office use and conforms with
the quality, appearance and design of the rest of the buildings in the Security;
(f) Beacon Properties Corporation or another affiliate of Mortgagors is the
construction manager for the expansion; and (g) Mortgagors shall provide
evidence to Mortgagee, in form and substance reasonably acceptable to Mortgagee,
that, following the expansion, the Wellesley II Parcel and the remainder of the
Security affected by the expansion will comply with all applicable legal
requirements, including, without limitation,
-40-
<PAGE>
zoning, permitting and other land use restrictions. Mortgagors shall at all
times comply in all material respects with any restrictive covenants applicable
to the Security. Mortgagors shall repair or restore any building now or
hereafter under construction on the Security and complete the same within a
reasonable period of time, subject to provisions of Section 9, to the extent
applicable.
If Mortgagors suffer or permit any Event of Default to exist under
this Section 14, or in the event of an emergency, Mortgagee, or a lawfully
appointed receiver of the Security, following an Event of Default, at
Mortgagee's option and from time to time, may perform, or cause to be performed,
any and all repairs and such other work as it deems necessary to bring the
Security into compliance with the provisions of this Section and may enter upon
the Security for any of the foregoing purposes, and each of the Mortgagors
hereby waives (to the extent Mortgagors may lawfully do so) any claim against
Mortgagee and/or such receiver arising out of such entry or out of any other act
carried out pursuant to this Section, except for claims arising out of the gross
negligence or willful misconduct of Mortgagee or such receiver. Mortgagors shall
upon demand repay to Mortgagee and such receiver, with interest at the Default
Rate, from the date of such demand, all amounts expended or incurred by them,
respectively, in connection with any action taken pursuant to this Section, and
such repayment shall be secured by the lien of this Mortgage.
-41-
<PAGE>
Mortgagors represent and warrant that there are and covenant
that at all times (except in the event of repairs or restoration, where
temporary limitations may occur) there will be located on the Real Property
paved designated parking spaces for at least 1,889 cars, which number may be
subject to reduction (but not below requirements of any leases with respect to
the Security) in the event that legal requirements applicable to the Real
Property necessitate a reduction in such parking capacity and by the actual
number of parking spaces on any portion of the Real Property released pursuant
to Section 45 of this Mortgage (subject, however, to complying with the
requirements of subsections (ix) and (x) of said Section 45).
Mortgagors represent and warrant with regard to their
Respective Security that, except as disclosed to Mortgagee in the Environmental
Report (as defined and listed on Exhibit A to the Environmental Indemnification
Agreement, as defined in Section 15 hereof), Mortgagors have not used and will
not use and, to the best of Mortgagors' knowledge, no prior owner or current or
prior tenant, subtenant, or other occupant of all or any part of their
Respective Security has used or is using Hazardous Materials (hereinafter
defined) on, from or affecting the Security in any manner that violates the
Environmental Laws (hereinafter defined); that, to the best of Mortgagors'
knowledge, except as set forth in the Environmental Report, no Hazardous
Materials have been disposed of on or migrated onto their Respective Security in
violation of Environmental Laws and that Mortgagors will not permit or suffer
any such violation of the Environmental Laws.
-42-
<PAGE>
For purposes of this Mortgage, "Hazardous Materials" shall mean and
include those elements, materials, compounds, mixtures, wastes or substances
which are contained in the list of hazardous substances adopted by the United
States Environmental Protection Agency (the "EPA") or the Massachusetts
Department of Environmental Protection ("DEP") or any list of toxic pollutants
designated by Congress or the EPA or DEP, or which are defined as hazardous,
toxic, pollutant, infectious, flammable or radioactive by any of the
Environmental Laws and whether or not included in such lists, shall be deemed to
include all elements, materials, compounds, mixtures, wastes and substances
containing petroleum, asbestos, chlorinated hydrocarbons, or polychlorinated
biphenyls ("PCB's").
For purposes of this Mortgage, "Environmental Laws" shall mean and
include any Federal, Massachusetts or local statute, law, ordinance, code, rule,
regulation, order, or decree (i) regulating or relating to protection of human
health or the environment insofar as the same concern the Disposal (hereinafter
defined) of any Hazardous Materials, as now or at any time hereafter in effect,
or (ii) regulating or imposing liability or standards of conduct concerning the
Disposal of Hazardous Materials, as now or at any time hereafter in effect, or
both, including, without limitation, the Massachusetts Oil and Hazardous
Material Release Prevention and Response Act, as amended, M.G.L. C. 21E
("Chapter 21E"), the Massachusetts Hazardous Waste Management Act, as amended,
M.G.L. C. 21C, the Federal Comprehensive Environmental Response, Compensation
and Liability Act, as amended, 42 U.S.C. SS.9601 et. seq. ("CERCLA"), the
Superfund Amendments and
-43-
<PAGE>
Reauthorization Act, 42 U.S.C. SS.9601 et. seq., the Federal Oil Pollution
Act of 1990, 33 U.S.C. SS.2701, et. seq., the Federal Toxic Substances
Control Act, 15 U.S.C. SS.2601 et. seq., the Federal Resource Conservation
and Recovery Act, as amended, 42 U.S.C. SS.6901 et. seq., the Federal
Hazardous Materials Transportation Act, 49 U.S.C. SS.1801 et. seq., the
Federal Clean Air Act, 42 U.S.C. S.7401 et. seq., the Federal Water Pollution
Control Act, 33 U.S.C. S.1251 et. seq., the River and Harbors Act of 1899, 33
U.S.C. SS.401 et. seq., and all laws, statutes, rules, ordinances and
regulations of the EPA, or any other local, state or federal department, board,
or agency, or any other agency or governmental board or entity having
jurisdiction over the Security, as any of the foregoing have been, or are
hereafter from time to time, amended, reauthorized, replaced, supplemented or
superseded.
Mortgagors individually and collectively represent and warrant with
regard to their Respective Security that, to the best of their individual and
collective knowledge, except as set forth in the Environmental Report, no
presence, release, spill, transportation, migration, generation, treatment,
processing, storage, use, or disposal of any Hazardous Materials has occurred or
is occurring on, in, under, above or emanating from any portion of their
Respective Security by any person or entity or other source, whether related or
unrelated to one or more of the Mortgagors, in violation of any Environmental
Law (collectively a "Disposal") and that Mortgagors will not permit or suffer
any such Disposal of Hazardous Materials on the Security or permit any lien
under Chapter 21E or CERCLA or any other Environmental Law to
-44-
<PAGE>
attach to the Security or any portion thereof or interest therein. Mortgagors
individually and collectively represent and warrant with regard to their
Respective Security that, except to the extent disclosed in the Environmental
Report, they have not received any notice from the DEP (or its predecessor, the
Massachusetts Department of Environmental Quality Engineering), the EPA or any
other governmental agency or any tenant of their Respective Security with regard
to such Hazardous Materials and have received no notice that the environmental
and ecological condition of their Respective Security is in violation of any
Environmental Law.
Mortgagors individually and collectively represent and warrant with
regard to their Respective Security that, to the best of their knowledge and
belief, except as disclosed in the Environmental Report, their Respective
Security does not contain any asbestos-containing material in friable form, and
there is no current airborne contamination of their Respective Security by
asbestos fiber.
Mortgagors individually and collectively represent and warrant with
regard to their Respective Security that, except as set forth in the
Environmental Report, they have not received any notice that the soil, surface
water, or ground water of or on their Respective Security are not free from any
spills of Hazardous Materials, and have no knowledge of any such spill except as
set forth in the Environmental Report.
-45-
<PAGE>
Notwithstanding anything to the contrary contained in this Mortgage or the
Environmental Indemnification Agreement, Mortgagee acknowledges that during the
ordinary course of office building and parking area operations, there are some
Hazardous Materials that are being used and stored on the Real Property by
Mortgagors and Mortgagors' tenants. Mortgagors each hereby represent and warrant
to Mortgagee with regard to their Respective Security that, to the best of their
knowledge, (i) such Hazardous Materials have not been used or stored in
violation of Environmental Laws in any material respect, and (ii) such Hazardous
Materials are present in quantities which are not known to pose a health or
safety hazard to occupants, employees or visitors to the Real Property or to any
adjacent property; and Mortgagors further covenant and agree that no such
Hazardous Materials shall be allowed to be present on their Respective Security
other than such ordinary use and incidental storage of Hazardous Substances as
are reasonably and customarily necessary for the regular and ordinary operation
and maintenance of their Respective Security as a first-class office building(s)
and parking areas, and in all events in compliance with applicable Environmental
Laws.
In the event that any investigation, site monitoring, containment,
clean-up, removal, restoration or other remedial work of any kind or nature (the
"Remedial Work") is required by any applicable Environmental Law, any judicial
order or by any governmental entity because of, or in connection with, the
current or future presence, suspected presence, release or suspected release of
a Hazardous Material in or about the air, soil, ground water, surface water or
soil vapor at, on, about, under or within
-46-
<PAGE>
the Security (or any portion thereof), Mortgagors shall within thirty (30) days
after written demand for performance thereof by Mortgagee (or such shorter
period of time as may be required under any applicable Environmental Law, court
order or governmental direction), commence and thereafter diligently prosecute
to completion, all such required Remedial Work so as to restore the Security to
compliance with all applicable Environmental Laws, court orders and governmental
directions. All such Remedial Work shall be performed by contractors approved
(which approval shall not be unreasonably withheld or delayed) in advance by
Mortgagee, and under the supervision of a consulting engineer approved (which
approval shall not be unreasonably withheld or delayed) by Mortgagee. All costs
and expenses of such Remedial Work shall be paid by Mortgagors including,
without limitation, Mortgagee's reasonable attorneys' fees, paralegal fees and
costs incurred in connection with monitoring or review of such Remedial Work. In
the event Mortgagors shall fail to timely commence and thereafter prosecute to
completion such Remedial Work, and such failure continues for thirty (30) days
after notice by Mortgagee to Mortgagors (or such shorter period of time as may
be required under any applicable Environmental Law, court order or governmental
direction or by the exigencies of the situation), Mortgagee may, but shall not
be required to, cause such Remedial Work to be performed and all costs and
expenses thereof, or incurred in connection therewith, shall become part of the
Indebtedness.
Each Mortgagor shall provide Mortgagee with prompt written notice (a)
upon such Mortgagor's becoming aware of any
-47-
<PAGE>
alleged, suspected or actual Disposal of any Hazardous Materials upon, in,
under, or emanating from their Respective Security in violation of Environmental
Laws; (b) upon such Mortgagor's receipt of any notice from any federal, state,
municipal or other governmental agency or authority in connection with any
Hazardous Materials located upon, in, or under or emanating from their
Respective Security; and (c) upon such Mortgagor's obtaining knowledge of any
incurrence of expense by any governmental agency or authority in connection with
the assessment, containment or removal of any Hazardous Materials located upon,
in, or under or emanating from their Respective Security.
Mortgagors hereby authorize Mortgagee and its agents and consultants
at any time and from time to time, upon reasonable advance notice to Mortgagors,
to enter upon the Security to conduct an environmental audit of the
Improvements, soils and ground water, including subsurface investigation, in the
event that Mortgagee has reason to believe that a Disposal of Hazardous
Materials in violation of any Environmental Laws has occurred or when a change
of or addition to the Environmental Laws makes inspection reasonable, the cost
of such audit to be added to the Indebtedness. Mortgagee shall provide
Mortgagors with an estimate of the cost of any such audit and shall conduct such
audit in a manner intended to minimize interference with the operations of the
Security.
Mortgagors hereby agree to prepare and to submit to Mortgagee for its
approval (which approval shall not be unreasonably withheld or delayed), within
ninety (90) days of the date hereof,
-48-
<PAGE>
an operations and maintenance plan regarding any asbestos presently situated on
the Real Property. Mortgagors shall comply in all material respects with the
terms and conditions of such plan(s), and shall not modify, amend, limit, delete
or reduce any practice or procedure set forth in such plan without obtaining
Mortgagee's prior written consent (which consent shall not be unreasonably
withheld or delayed).
15. Environmental Indemnification. Mortgagors and BPLP, in its own capacity
(collectively, the "Indemnitors"), have entered into an Environmental
Indemnification Agreement of even date herewith in favor of Mortgagee (the
"Environmental Indemnification Agreement"). The performance of the duties and
obligations of the Indemnitors under the Environmental Indemnification Agreement
shall be part of the Indebtedness secured by this Mortgage. Mortgagors'
obligations under the Environmental Indemnification Agreement are hereby
incorporated into this Mortgage by reference. Mortgagee's rights and remedies
under the Environmental Indemnification Agreement are intended to be in addition
to and not in substitution for any rights and remedies Mortgagee may have under
this Mortgage or as may generally be available to Mortgagee at law or in equity.
16. Independence of Security. Mortgagors shall not by act or omission
permit any building or other improvement on any premises not subject to the lien
of this Mortgage to rely on the Security or any part thereof or any interest
therein to fulfill any municipal or governmental requirement, and Mortgagors
hereby assign to Mortgagee any and all rights to give consent for all or
-49-
<PAGE>
any portion of the Security or any interest therein to be so used. Similarly, no
part of the Security shall rely on any premises not subject to the lien of this
Mortgage or any interest therein to fulfill any governmental or municipal
requirement. Mortgagors shall not by act or omission impair the integrity of the
Real Property as separate lots for zoning and subdivision purposes (separate and
apart from each other as well as from any other parcel of real property), or as
one or more complete tax parcels separate and apart from all other premises. Any
act or omission by Mortgagors which would result in a violation of any of the
provisions of this Section shall be void.
17. No Other Liens. Mortgagors shall not consent, agree to, or permit any
mortgage, lien, or security interest upon or affecting the Security or any part
thereof except as granted or permitted in this Mortgage and any other lien or
security interest granted to Mortgagee. Normal and customary equipment leases
and purchase money financing obtained to purchase new Personal Property, in
either case entered into in the ordinary course of Mortgagors' business, shall
not constitute a violation of the provisions of this Section 17.
Mortgagors will, subject to Mortgagors' contest rights set forth in
Section 4 above, which shall be applicable hereto, mutatis mutandis, promptly
pay and discharge any and all amounts which are now or hereafter become liens
against the Security whether or not superior to the lien hereof or to any
assignment of rents and leases given to Mortgagee.
-50-
<PAGE>
Wellesley I and Wellesley II will not, without the express prior
written consent of Mortgagee, conduct any business or acquire any properties
except for business and properties relating to the Security. Wellesley I and
Wellesley II are and shall at all times while this Mortgage is in effect remain
single purpose entities, with their only business being the ownership and
operation of their Respective Security. Wellesley I and Wellesley II will not
incur any debt and will not guarantee the debt of any other person or party
except indebtedness incurred pursuant hereto and any other indebtedness incurred
by Mortgagors (or any of them) to obtain funds to invest in the Security.
18. Management. During the term of the loan secured hereby, the
Security shall at all times be operated and managed by an entity controlled by
BPLP or an entity approved by Mortgagee under a written management agreement
approved in advance in writing by Mortgagee and reasonably acceptable to
Mortgagee in form and substance. Mortgagee hereby approves Beacon Property
Management, L.P. or Beacon Property Management Corporation, each being an
affiliate of BPLP, as management agent for the Security. No change in such
management (other than substitution of Beacon Property Management, L.P. for
Beacon Property Management Corporation, or visa versa) shall be made without the
prior written approval of Mortgagee, and any attempted change in management
without Mortgagee's consent shall be void. Mortgagee's approval of the
management of the Security and the terms of any management agreement shall not
be unreasonably withheld, conditioned or delayed. Any manager must have the
expertise, competence and capacity to manage first-class facilities such as
-51-
<PAGE>
the Real Property and have had actual experience managing either at least (i)
One Million (1,000,000) square feet of similar office building space in the
greater Boston area, or (ii) Two Million (2,000,000) square feet of similar
office building space in the United States. Each management agreement relating
to the Security (a) may not be modified or amended in any material respect and
any successor agreement may not be entered into or any management company
appointed (other than as permitted above) without Mortgagee's prior written
approval; and (b) must be unconditionally subordinate by its terms to the lien
of this Mortgage and terminable upon foreclosure of this Mortgage (or a deed in
lieu of foreclosure of this Mortgage) without termination fee or penalty or
other similar charge.
19. Ground Lease. Mortgagors hereby represent and warrant to Mortgagee that
there exist no ground leases relating to or executed in connection with the
Security.
20. Sidewalks, Municipal Charges. Mortgagors will promptly pay and
discharge any and all license fees and similar charges, with penalties and
interest thereon, which may be imposed by the municipality in which the Security
is situated, for the use of vaults, chutes, areas and other space beyond the lot
line and under or abutting the public sidewalks in front of or adjoining the
Security, and Mortgagors will promptly cure any violation of law and comply with
any order of such municipality respecting the repair, replacement or condition
of the sidewalk or curb in front of or adjoining the Security, and in default
thereof Mortgagee may, upon thirty (30) days notice to Mortgagors (or such
shorter
-52-
<PAGE>
notice period as may be required in order to comply with legal requirements),
pay any and all such license fees or similar charges, with penalties and
interest thereon, and the charges of the municipality for such repair or
replacement, and any amount so paid or advanced by Mortgagee and all costs and
expenses incurred in connection therewith (including, without limitation,
attorneys' fees), with interest thereon at the Default Rate from the date of
demand, shall be a demand obligation of Mortgagors to Mortgagee, and, to the
extent permitted by law, shall be added to the Indebtedness and shall be secured
by the lien of this Mortgage. The provisions of this Section 20 are subject to
Mortgagors' contest rights set forth in Section 4 above, which shall be
applicable hereto, mutatis mutandis.
21. Assignment of Rents and Leases. As further security for the payment of
the Indebtedness, Mortgagors hereby presently, irrevocably, absolutely and
unconditionally transfer, assign and set over unto Mortgagee all of their
individual and collective right, title and interest in and to all present and
future leases, lease termination agreements, license agreements, concession
agreements, parking management agreements and other occupancy agreements of any
nature, oral or written, of the Land and space in the Improvements, together
with all modifications, supplements, extensions, renewals and replacements
thereof now existing or hereafter made, and also together with the rights to sue
for, collect and receive all rents, prepaid rents, additional rents, royalties,
security deposits, damages payable upon default by tenant, or other sums in any
of said leases provided to be paid to the lessor thereunder, profits, income,
license fees, concession
-53-
<PAGE>
fees and issues of the Security (collectively, "Rents"), to be applied by
Mortgagee in payment of the Indebtedness and also together with any and all
guaranties of the obligations of the tenants thereunder and the rights of
Mortgagors to receive, hold and apply all bonds and security in all of said
leases provided to be furnished to the lessor thereunder, and also together with
the rights of Mortgagors to enforce any and all of the agreements, terms,
covenants and conditions in all of said leases provided and to give notices
thereunder. Provided, however, that until an Event of Default occurs hereunder,
Mortgagors shall have a revocable license to collect the Rents and to exercise
and enjoy all of the aforesaid rights, privileges and benefits. Mortgagee may
receive and collect the Rents personally or through a receiver upon the
occurrence of an Event of Default, and during the pendency of any foreclosure
proceeding and during any redemption period. Upon the occurrence of an Event of
Default, Mortgagors agree to consent to a receiver if this is believed necessary
or desirable by Mortgagee to enforce its rights under this Section.
Notwithstanding anything contained herein to the contrary, if all outstanding
Events of Default are subsequently cured or waived prior to Acceleration of
Maturity (as defined in the Note), then Mortgagors automatically shall have the
same revocable license to collect the Rents and enjoy all of the aforesaid
rights, privileges, and benefits.
Mortgagors shall not otherwise assign or pledge, or contract,
expressly or by implication, to assign or pledge, any lease of the Land or space
in the Improvements or the rights to sue for, collect and receive any Rents, or
the rights to receive,
-54-
<PAGE>
hold and apply any bonds and security in any of said leases provided to be
furnished to the lessor thereunder, or the rights to enforce any of the
agreements, terms, covenants or conditions of said leases or to give notices
thereunder, unless in each instance the written consent thereto of Mortgagee be
first obtained.
Nothing in this Mortgage shall be construed to obligate Mortgagee,
expressly or by implication, to perform any of the covenants of Mortgagors as
lessor under any of the leases hereinabove assigned or to pay any sum of money
or damages therein provided to be paid by the lessor.
If, notwithstanding the occurrence of an Event of Default, Mortgagee
shall from time to time suffer or permit Mortgagors to sue for, collect or
receive any Rents, or to receive, hold or apply any bonds or security under any
of the leases hereinabove assigned, or to enforce any of the agreements, terms,
covenants or conditions thereunder or to give notices under said leases, after
the occurrence of an Event of Default, neither such sufferance nor permission
shall constitute a waiver or relinquishment by Mortgagee of the rights hereunder
and hereby assigned to Mortgagee with respect to any subsequent Rents, or with
respect to any subsequent receipt, holding or application of bonds or security
or any subsequent enforcement of such agreements, terms, covenants or conditions
or any subsequent notices; provided, however, notwithstanding the foregoing, it
is agreed by Mortgagee that if all outstanding Events of Default are cured or
waived prior to Acceleration of Maturity, then Mortgagors
-55-
<PAGE>
automatically shall have the same revocable license to collect the Rents and to
otherwise deal with the leases as aforesaid.
22. Future Leases. Except as provided hereinbelow, Mortgagors will not
hereafter make any lease to any tenant or amend, modify, terminate (except for
termination for default by the tenant and then only if the Real Property is
still owned by Wellesley I, Wellesley II and/or BPLP and no Event of Default
exists hereunder), accept surrender of, renew or extend any lease (other than a
renewal or extension to which a tenant is entitled under the terms of an
existing lease or contained in a lease that is subsequently approved or deemed
approved by Mortgagee), affecting the Security unless Mortgagee shall first
consent thereto in writing, which consent shall not be unreasonably withheld.
Notwithstanding anything to the contrary contained herein, the aforesaid
approval requirements shall not apply with respect to (i) leases or amendments
to leases covering in each instance no more than 15,000 square feet of net
rentable area on the Real Property, or (ii) non-default lease terminations
unapproved by Mortgagee with respect to leases covering in each instance no more
than 15,000 square feet of net rentable area and aggregating not more than
45,000 net rentable square feet per calendar year. A lease termination incident
to relocation of tenants to other space within the Real Property shall not count
toward said 45,000 net rentable square feet per calendar year, except that any
net loss in occupied space between the old space and the new space shall be
counted. Further, if a terminated tenant is replaced with other
-56-
<PAGE>
tenant(s) in substantially the same premises within sixty (60) days of
termination, such termination shall not count toward said 45,000 net rentable
square feet per calendar year if, and only if, in Mortgagors' good faith
judgment, the economic condition of the Real Property, after giving effect to
said particular replacement, remains the same or better than the prior
situation; provided, however, that any net loss in occupied space between the
terminated tenant and the new tenant(s) shall be counted.
In addition, with respect to any new lease, amendment to lease or a
non-default lease termination as described in the immediately preceding
paragraph, all of the following conditions must be met:
(a) The Mortgagor which is the landlord furnishes Mortgagee with
certified copies of all such leases or amendments or terminations promptly
following the execution of same by all the parties thereto, together with a
detailed written breakdown of any and all costs to be incurred in
connection therewith;
(b) The Security must continue to be owned collectively by Wellesley
I, Wellesley II and/or BPLP;
(c) Mortgagors shall not be in default under the Note, this Mortgage
or any other Loan Document beyond any applicable grace or cure period;
-57-
<PAGE>
(d) All such leases or amendments or terminations must be entered into
in the ordinary course of business, and all such leases or amendments must
be (i) prepared and executed on the standard lease or amendment form
approved by Mortgagee, and (ii) consistent with such approved lease or
amendment form, except that minor and customary changes which do not
materially affect the value of the lease or the protections and assurances
granted to Mortgagee thereunder may be made;
(e) Any such lease or amendment or termination must be with a bona
fide arms-length third-party tenant (unaffiliated with Mortgagors) and
negotiated in good faith;
(f) No such lease or amendment shall provide an ownership interest in
the Security to the tenant; and
(g) Any such lease or amendment must comply with the New Lease and
Amendment Requisites (defined hereinbelow).
In circumstances where Mortgagee's prior consent is required to a lease,
lease amendment, termination or other leasing matter, Mortgagee's consent shall
be deemed to have been given unless, within ten (10) business days after
Mortgagee receives copies of the proposed lease, amendment or termination in
final form, together with the written breakdown of costs as required in clause
(a) above (or as to other matters, after Mortgagee's receipt of Mortgagors'
request for approval, together with supporting documentation or information, as
appropriate), Mortgagee advises
-58-
<PAGE>
Mortgagors of its disapproval and the grounds therefor. Mortgagors' request for
Mortgagee's approval under this Section 22 must be accompanied by a notice from
the Mortgagor which is the landlord highlighted in bold-faced capital letters
stating that Mortgagee's failure to respond within ten (10) business days will
result in Mortgagee's deemed approval as aforesaid. If Mortgagors fail to
provide such notice to Mortgagee, then the automatic approval provision provided
hereinabove shall not be applicable.
In addition to the foregoing, Mortgagors promptly shall furnish to
Mortgagee (i) progress drafts and letters of intent, if any, concerning proposed
leases, and (ii) copies of all default and/or termination notices which
Mortgagors give to or receive from tenants.
All future leases must expressly state that they are subordinate to
the lien of this Mortgage unless Mortgagee otherwise specifies. Unless otherwise
approved by Mortgagee, each future lease and each future amendment to leases
existing on the date hereof which extends the term by more than one (1) year
(other than pursuant to an extension or renewal option existing as of the date
hereof) must contain provisions that (i) upon notice to tenant by Mortgagee, the
lease shall become superior to the lien of the Mortgage, (ii) the tenant shall
attorn to any purchaser of the Real Property upon foreclosure of this Mortgage,
as amended from time to time, or in the event that a deed is given in lieu of
such foreclosure, and (iii) the tenant shall, upon receipt of notice from
Mortgagee under the separate Assignment of Rents and Leases given by Mortgagors
in favor of Mortgagee of even
-59-
<PAGE>
date herewith, commence paying its rents directly to Mortgagee (collectively
herein referred to as the "New Lease and Amendment Requisites"). Notwithstanding
the foregoing, with respect to future amendments to leases existing on the date
hereof, the New Lease and Amendment Requisites need not be met if they are
already contained in the lease or the tenant shall have previously entered into
an SNDA (as hereinafter defined) with Mortgagee with respect to the same lease.
Without limiting the foregoing, Mortgagee hereby reserves the right to
subordinate this Mortgage to any lease subsequently made by recording with the
Registry of Deeds in which this Mortgage is recorded a declaration to that
effect, executed by Mortgagee, which declaration once so recorded shall be
binding upon the tenant under such lease and its successors and assigns.
Mortgagee agrees, as to future leases and lease amendments, if requested to do
so by a tenant, to enter into a so-called subordination, non-disturbance and
attornment agreement ("SNDA"), on Mortgagee's standard form, with only such
changes as Mortgagee in its reasonable discretion agrees to (Mortgagee and
Mortgagors hereby agreeing with each other that they will each negotiate in good
faith with respect to changes to Mortgagee's standard form reasonably requested
by tenants), provided that Mortgagee shall have approved the lease or amendment
with such tenant.
Mortgagors will furnish to Mortgagee a true and complete copy of each
lease, amendment, modification, extension, termination, or renewal of lease,
hereafter made by Mortgagors with respect to the Land or space in the Security,
within ten (10)
-60-
<PAGE>
days after delivery of each such lease, amendment, modification, extension,
termination, or renewal by the parties thereto. After a tenant takes occupancy,
Mortgagors shall also furnish to Mortgagee a true and complete copy of a letter
agreement signed by such tenant confirming the commencement date and expiration
date of its lease, within ten (10) days after execution and delivery thereof by
such tenant and Mortgagors.
Mortgagors will from time to time upon demand of Mortgagee, confirm in
writing the assignment to Mortgagee of any or all leases of the Land and space
in the Improvements, and such written confirmation shall be in substantially the
same form as the Assignment of Rents and Leases of even date herewith given by
Mortgagors to Mortgagee and as shall be necessary to make the same recordable.
If Mortgagors receive an early termination fee from a tenant in excess
of $500,000 in connection with a lease termination agreement, then Mortgagors
shall deposit the entire fee into an interest-bearing escrow account to be
established with a mutually satisfactory escrow agent under a mutually
satisfactory escrow agreement, such escrowed funds to be released to Mortgagors
(a) to pay for leasing-related costs (e.g., tenant improvements, leasing
commissions, space planning, legal-leasing costs, and the like) and other
capital improvements, and (b) to the extent not used under (a) above, to
reimburse Mortgagors ratably on a monthly basis for the lost rent from the
terminated lease. In addition to the foregoing, if in any calendar year
cumulative termination fees
-61-
<PAGE>
exceed $500,000, Mortgagors shall deposit those fees in excess of $500,000 into
an interest-bearing escrow account described above.
23. Mortgagors' Obligations as Lessor. (a) Mortgagors shall, at Mortgagors'
cost and expense, perform in all material respects the obligations on the part
of the lessor to be performed pursuant to the terms of each and every lease or
letting, written or oral, now or hereafter made with respect to the Security or
any part or parts thereof, and shall not suffer or permit to exist any default
(beyond applicable notice and grace periods under said lease) in such
performance on the part of such lessor or permit any event to occur and continue
beyond the expiration of applicable notice and grace periods under the lease
which would give the tenant under any such lease the right to terminate the same
or to offset rent.
(b) Mortgagors shall give Mortgagee immediate notice of the receipt by
Mortgagors of any notice of default from the tenant or its successors or assigns
under a lease, and Mortgagors shall furnish to Mortgagee promptly any and all
information which Mortgagee may request concerning the performance and
observance of all material covenants, agreements and conditions contained in the
leases by the lessor thereunder to be kept, observed and performed and
concerning the compliance with all terms and conditions of the leases.
Mortgagors hereby authorize Mortgagee and its representatives, upon reasonable
advance notice, to make investigations and examinations concerning such
performance, observance and compliance, and Mortgagors, upon request, shall
promptly deposit with Mortgagee any and all documentary evidence
-62-
<PAGE>
relating to such performance, observance and compliance and copies of any and
all notices, communications, plans, specifications or other instruments or
documents received or given by Mortgagors in any way relating to or affecting
the leases which may concern or affect the estate of the lessor or the tenant in
or under the leases or in the premises thereby demised.
(c) In the event of any failure by Mortgagors to keep, observe or perform
any covenant, agreement or condition contained in the leases or to comply with
the terms and conditions of the leases, which continues beyond the applicable
notice and grace period contained in the lease, any performance, observance or
compliance by Mortgagee pursuant to this Mortgage on behalf of Mortgagors shall
not remove or waive, as between Mortgagors and Mortgagee, the corresponding
Event of Default under the terms of this Mortgage.
24. Leases; Foreclosure. Any proceedings or other steps taken by Mortgagee
to foreclose this Mortgage, or otherwise to protect the interests of Mortgagee
hereunder, shall not operate to terminate the rights of any present or future
tenant of space in the Improvements, notwithstanding that said rights may be
subject and subordinate to the lien of this Mortgage, unless (subject to the
terms of any SNDA now or hereafter executed by and between Mortgagee and a
particular tenant) Mortgagee specifically elects otherwise in the case of any
particular tenant. The failure to make any such tenant a defendant in any such
foreclosure proceeding and to foreclose such tenant's rights will not be
asserted by Mortgagors or any other defendant in such foreclosure
-63-
<PAGE>
proceeding as a defense to any proceeding instituted by Mortgagee to foreclose
this Mortgage or otherwise protect the interests of Mortgagee hereunder.
25. [Intentionally Omitted]
26. Events of Default. Each of the following shall constitute an "Event of
Default" hereunder and shall entitle the Mortgagee to exercise its remedies
hereunder and under any of the other Loan Documents or as otherwise provided by
law:
(a) (i) Any payment of any installment of principal or interest due
under the Note, or payment of any escrow deposits due under any of the Loan
Documents, is not received by Mortgagee within five (5) business days
following the date when such payment was due, (ii) any failure to pay the
outstanding Principal Indebtedness (as defined in the Note) on the Maturity
Date or when the maturity of the Note is accelerated in accordance with the
terms of the Note, this Mortgage or any other Loan Document, or (iii) any
failure in the performance of any payment obligation of Mortgagors under
this Mortgage or under any other Loan Document, other than the obligations
to make payments as described in clauses (i) and (ii) above, and such
failure continues uncured for a period of ten (10) business days after
Mortgagee gives written notice of such failure to Mortgagors;
(b) If there shall be a failure by Mortgagors to perform any duty of a
non-monetary nature under any of the
-64-
<PAGE>
Loan Documents, which failure to perform is not cured within thirty (30)
days after written notice from Mortgagee to Mortgagors of such failure to
perform, except if such failure to perform is not susceptible of cure
within such thirty (30) day period and Mortgagors commence to cure within
such thirty (30) day period and thereafter diligently pursue such cure,
then such cure period shall be extended for a reasonable period of time but
in no event greater than one hundred twenty (120) days after such notice of
failure to perform from Mortgagee to Mortgagors. Notwithstanding anything
contained herein to the contrary, the notice and cure period provided under
this clause (b) shall not be applicable to and shall not be in addition to
any specific notice and cure or performance period provided under any other
provision of this Section 26, and the specific notice and cure or
performance period provided for in such provision of this Section 26 shall
control, and a failure by Mortgagors to cure a default under such provision
of this Section 26 within the applicable cure period shall be an Event of
Default under this Mortgage;
(c) if an "Event of Default" occurs under the Note or under any other
Loan Document (as defined therein);
(d) Any representation, warranty or statement of Mortgagors contained
herein or in any of the other Loan Documents, including without limitation
the Environmental Indemnification Agreement, which is actually known by
Mortgagors to be untrue in any material respect as of the date when made;
-65-
<PAGE>
(e) Any representation, warranty, or statement of Mortgagors contained
herein or in any of the other Loan Documents, including without limitation
the Environmental Indemnification Agreement, which is not actually known by
Mortgagors to be untrue in any material respect as of the date when made,
but proves to be untrue in any material respect as of the date when made
and remains untrue in any material respect for a period of thirty (30) days
after Mortgagee gives Mortgagors a notice of default with respect thereto;
provided, however, that if the nature of such representation, warranty or
statement is such that the same cannot be made true in all material
respects within such thirty (30) day period and any delay in Mortgagee's
remedies would not (in Mortgagee's sole judgment) cause any material harm
to Mortgagee or any of the Security, then the period required to make the
same true in all material respects shall be extended, but in no event more
than one hundred twenty (120) days in the aggregate, and such
representation, warranty or statement shall not be deemed an Event of
Default if Mortgagors shall within such thirty (30) day period commence to
make the same true in all material respects and thereafter diligently
prosecute such cure to completion within the time period allowed;
(f) Any of Mortgagors, or any of Mortgagors' general partners, if
Mortgagors are partnerships, or any of Mortgagors' controlling
shareholders, if Mortgagors are corporations, shall (i) file a petition or
petitions seeking relief under Title 11, United States Code, (ii) seek or
-66-
<PAGE>
consent to the appointment of a receiver or trustee for itself or
themselves or for any of the Security, (iii) file a petition or petitions
or initiate a proceeding or proceedings under the bankruptcy, insolvency,
receivership, or similar laws of the United States, any state or any other
jurisdiction, (iv) make a general assignment or assignments for the benefit
of creditors, or (v) be generally unable to pay its or their debts as they
mature;
(g) A court shall enter an order, judgment or decree appointing,
without the consent of one or more of the Mortgagors, a receiver or trustee
for any of the Mortgagors or for any of the Security or approving a
petition filed against any of the Mortgagors which seeks relief under the
bankruptcy, insolvency, receivership or other similar laws of the United
States, any state, or any other jurisdiction, and such order(s),
judgment(s) or decree(s) shall remain in force, undischarged or unstayed,
for ninety (90) days after the entry thereof;
(h) Any of the Mortgagors shall voluntarily encumber the Land or the
Improvements with any lien other than the lien of this Mortgage;
(i) A Transfer not expressly permitted under the provisions of this
Section 26(i) shall occur without the prior written consent of Mortgagee. A
"Transfer" shall mean the sale, mortgage, encumbrance, pledge, assignment
or hypothecation or other transfer (collectively,
-67-
<PAGE>
"Dispositions") (i) of legal or beneficial title to the Security or any
portion thereof, excluding the Permitted Encumbrances, (ii) of any direct
or indirect legal or beneficial interest in any partner or member of any
Mortgagor, if such Mortgagor is a partnership, joint venture, syndication,
limited liability company or other group, or (iii) of a controlling
interest in the stock of any Mortgagor, if such Mortgagor is a corporation;
the liquidation or dissolution of any Mortgagor or revocation or expiration
of the charter of any Mortgagor shall also be deemed a Transfer.
Notwithstanding anything to the contrary herein contained, an
involuntary lien or encumbrance constituting a "Transfer" within the meaning set
forth above shall not be deemed a Transfer hereunder (1) if any Mortgagor
removes, bonds or insures over the same to Mortgagee's reasonable satisfaction
within thirty (30) days after any Mortgagor becomes aware of such lien or
encumbrance and, in any event, prior to the same being foreclosed upon by the
party or parties claiming such lien or encumbrance, or (2) if such involuntary
lien or encumbrance is being contested by any Mortgagor in good faith and in
accordance with the provisions of Section 4 hereof, which shall be applicable to
such involuntary liens or encumbrances, mutatis mutandis.
Notwithstanding anything to the contrary contained herein, Mortgagee
agrees that, so long as Wellesley I, Wellesley II and/or BPLP hold title to the
Security and there is no Event of
-68-
<PAGE>
Default under the Loan Documents, the following Transfers shall be permitted
without Mortgagee's consent: (a) Transfers of interests in any Mortgagor to
Beacon Affiliates (as hereinafter defined) shall be permitted provided each
Mortgagor remains a "Domestic Entity" (i.e., a corporation, partnership or other
entity organized or formed under the laws of the United States of America or any
state thereof) domiciled in the United States of America; and (b) Beacon (as
hereinafter defined) (or Beacon's successors-in-interest as partners or members
of any Mortgagor, if applicable) shall be permitted to transfer from time to
time all or any part of its or their respective interests in any Mortgagor to a
non-affiliate, provided that (x) a Beacon Affiliate continues to own at least a
fifty percent (50%) interest in each Mortgagor and remains the managing general
partner or member of each Mortgagor, and (y) each Mortgagor remains a Domestic
Entity domiciled in the United States of America.
For the purposes hereof, "Beacon" shall mean and include BPLP and/or
Beacon Properties Corporation, a Maryland corporation (the "Public REIT"); and a
"Beacon Affiliate" shall mean and include BPLP, the Public REIT and/or any other
entity which is at least 95% owned (directly or indirectly) by BPLP and/or the
Public REIT.
Notwithstanding anything to the contrary contained herein, in no event
will any of the following Dispositions be prohibited or restricted under this
Mortgage: (x) Dispositions of stock interests in the Public REIT, and (y)
Dispositions of
-69-
<PAGE>
limited partnership interests in BPLP so long as the Public REIT remains the
sole general partner of BPLP.
Notwithstanding the provisions of this Section 26(i):
A. Each Mortgagor shall have the right to transfer all or a portion of
the Security to a Beacon Affiliate or any other entity the ownership and control
of which is held by the same persons or entities which are permitted, under the
preceding provisions of this Section 26(i), to own and control Mortgagors (a
"Permitted Transferee"); provided that (I) no Event of Default exists under the
Loan Documents at the time of transfer; (II) the Permitted Transferee is a
Domestic Entity domiciled in the United States of America; (III) the Permitted
Transferee assumes the obligations of Mortgagors under the Loan Documents,
subject to the limitations on liability contained therein; and (IV) Mortgagors
shall pay for all of Mortgagee's reasonable costs and expenses associated with
the transfer, including, without limitation, attorneys' fees charged by
Mortgagee's staff counsel and outside special counsel. Upon such transfer, any
provision of this Mortgage which, by its terms, applies solely to "Mortgagors"
or "Wellesley I, Wellesley II and/or BPLP" shall also apply to such Permitted
Transferee. Following any such transfer, all the restrictions on transfers of
ownership interests in Mortgagors set forth in the preceding provisions of this
Section 26(i) shall apply to transfers of ownership interests in such Permitted
Transferee.
-70-
<PAGE>
B. Mortgagors shall also have the right to a one-time sale, transfer
or assignment in whole or in part of their interest in the Security to any party
of equal qualification and credit-worthiness provided:
(I) there is no monetary default or non-monetary default, notice of
which has been given by Mortgagee to Mortgagors, under the Loan
Documents at the time of transfer;
(II) a property inspection by Mortgagee or Mortgagee's designee shows
that all reasonably necessary maintenance on or damage or
destruction to the Real Property has been completed or repaired;
(III) the proposed transferee shall be a Domestic Entity or citizen of
the United States of America domiciled in the United States of
America;
(IV) the proposed transferee shall be a Qualified Real Estate Investor
(as hereinafter defined) which is a Domestic Entity or controlled
by, or under common control with, a Qualified Real Estate
Investor;
(V) the aggregate debt service coverage (based on Net Effective
Rents, as hereinafter defined) on the Loan exceeds 1.50;
-71-
<PAGE>
(VI) the Qualified Real Estate Investor has specific related
commercial real estate experience;
(VII) the Qualified Real Estate Investor must own or manage a minimum
of Two Million (2,000,000) square feet of Class A office space;
(VIII) at least thirty (30) days prior to the transfer, Mortgagors
must provide Mortgagee with all of the material provisions of
such transfer including without limitation the proposed date of
transfer, and the name, net worth, background and address of the
proposed transferee and the purchase price;
(IX) Mortgagors shall provide Mortgagee with such evidence as
Mortgagee may reasonably require that the proposed transferee
shall assume and fulfill each and every obligation of Mortgagors
under the Loan Documents and such transfer shall not affect or
impair Mortgagee's security and rights under the Loan Documents;
(X) a non-refundable fee in the amount of one percent (1%) of the
outstanding Principal Indebtedness shall be paid to Mortgagee at
the closing of the transfer in cash or certified check to be
retained by Mortgagee in order to induce Mortgagee to allow the
proposed transferee to assume the obligations of Mortgagors under
the Loan Documents;
-72-
<PAGE>
(XI) the loan-to-value ratio of the Loan based on a then current
appraisal obtained at Mortgagors' expense and acceptable to
Mortgagee must not exceed 70%;
(XII) Mortgagors shall pay for all of Mortgagee's reasonable costs and
expenses associated with the transfer, including, without
limitation, attorneys' fees charged by Mortgagee's staff counsel
and outside special counsel; and
(XIII) Any and all subordinate financing, whether or not previously
consented to or approved by Mortgagee, which then encumbers all
or any portion of the Security shall be completely discharged
incident to the transfer.
"Qualified Real Estate Investor" is defined as any reputable
corporation, partnership, joint venture, joint-stock company, trust or one or
more individuals which (x) shall have a minimum net worth of at least One
Hundred Fifty Million Dollars ($150,000,000), real estate assets of at least
Three Hundred Million Dollars ($300,000,000), and short-term liquid assets of at
least Ten Million Dollars ($10,000,000) and (y) if a foreign entity or
person(s), shall be represented by a domestic real estate advisor, and in any
case shall be free from any bankruptcy, reorganization or insolvency proceedings
or any criminal charges or proceedings in the United States of America or any
foreign country which would, in Mortgagee's reasonable judgment, raise a
material question as to the reputation of the investor or its
-73-
<PAGE>
ability to own and to operate the Real Property and shall not have been, at the
time of transfer or in the past, an adverse party in any suit or proceeding
brought against or by Mortgagee. Mortgagee agrees to be reasonable in the review
of such qualifications.
"Net Effective Rents" is defined as gross rent (including all rental
income for the twelve (12) month period immediately preceding the transfer)
minus operating expenses.
27. Remedies Upon Default. Each of the Mortgagors expressly, absolutely and
unconditionally acknowledges and agrees that all and every portion of the
Security shall serve as collateral for all of the covenants, obligations and
agreements under this Mortgage and the other Loan Documents, and Mortgagee
shall, upon the occurrence of an Event of Default, be authorized to proceed
against all or any one or more portions of the Security singly, jointly,
concurrently or successively as Mortgagee may so decide in the exercise of
Mortgagee's sole and absolute discretion for the sole and exclusive benefit of
Mortgagee.
Immediately upon the occurrence of any Event of Default, Mortgagee
shall have the option, in addition to and not in lieu of or substitution for all
other rights and remedies provided in this Mortgage or any other Loan Document
or provided by law or in equity, and is hereby authorized and empowered by
Mortgagors, to do any or all of the following:
(a) Declare without notice the entire unpaid amount of the
Indebtedness immediately due and payable and, at Mortgagee's
-74-
<PAGE>
option, (i) to bring suit therefor, or (ii) to bring suit for any delinquent
payment of or upon the Indebtedness, or (iii) to take any and all steps and
institute any and all other proceedings in law or in equity that Mortgagee deems
necessary to enforce payment of the Indebtedness and performance of other
obligations secured hereunder and to protect the lien of this Mortgage singly,
successively, jointly or concurrently with respect to all or any one or more
parts of the Security.
(b) Exercise the STATUTORY POWER OF SALE and commence foreclosure
proceedings singly, successively, jointly or concurrently against all or any one
or more parts of the Security, in one parcel or in several parcels, through
judicial proceedings, by advertisement or as otherwise provided by law, at the
option of Mortgagee, pursuant to the statutes in such case made and provided,
and to singly, successively, jointly or concurrently sell all or any one or more
parts of the Security or to cause the same to be sold at public sale, and to
convey the same to the purchaser, in accordance with said statutes in a single
parcel or in several parcels at the option of Mortgagee. Mortgagors and
Mortgagee hereby acknowledge, covenant and agree that the Statutory Power of
Sale shall continue in existence and not be exhausted until Mortgagee, at its
election, has foreclosed upon all of the Security.
(c) Proceed against all or any one or more parts of the Personal
Property singly, successively, jointly or concurrently in accordance with
Mortgagee's rights and remedies with respect to the Personal Property including
the right to sell all or any one
-75-
<PAGE>
or more parts of the Personal Property together with all or any one or more
parts of the Real Property or separately and without regard to the remainder of
the Security in accordance with the Mortgagee's rights and remedies provided by
the Massachusetts Uniform Commercial Code as well as other rights and remedies
available at law or in equity.
(d) Cause to be brought down to date a title examination and tax
histories of the Security, procure title insurance or title reports or, if
necessary, procure new abstracts and tax histories; procure an updated or
entirely new environmental audit of the Security including building, soil,
ground water and subsurface investigations; have the Improvements inspected by
an engineer or other qualified inspector and procure a building inspection
report; procure an MAI or other appraisal of the Security or any portion
thereof; enter upon the Security at any time and from time to time to accomplish
the foregoing and to show the Security to potential purchasers and potential
bidders at foreclosure sale; make available to potential purchasers and
potential bidders all information obtained pursuant to the foregoing and any
other information in the possession of Mortgagee regarding the Security.
(e) Either by itself or by its agent to be appointed by it for that
purpose or by a receiver appointed by a court of competent jurisdiction, as a
matter of strict right, without notice and without regard to the adequacy or
value of any security for the Indebtedness or the solvency of any party bound
for its payment, to take possession of and to operate all or any one or
-76-
<PAGE>
more parts of the Security, Mortgagors hereby waiving any right Mortgagors might
have to object to or oppose any such possession and, whether or not Mortgagee
has taken possession of the Security, to collect and apply the Rents, including
those past due and unpaid, after payment of all necessary charges and expenses,
in reduction of the Indebtedness. The receiver shall have all of the rights and
powers permitted under the laws of the Commonwealth of Massachusetts. Except for
damage caused by Mortgagee's gross negligence or willful misconduct, Mortgagors
hereby waive any claim Mortgagors may have against Mortgagee for mismanagement
of the Security during Mortgagee's operation of the Security under this
subparagraph or as mortgagee in actual possession under applicable statutes.
(f) At its option without waiving any Event of Default, pay, perform
or observe any or all of Mortgagors' obligations under the Loan Documents, and
all payments made or costs or expenses incurred by Mortgagee in connection
therewith shall be secured hereby and shall be, upon demand, immediately repaid
by Mortgagors to Mortgagee with interest thereon at the Default Rate from the
date of demand. Mortgagee shall be the sole judge of the necessity for any such
actions and of the amounts to be paid. Mortgagee is hereby empowered to enter
and to authorize others to enter upon all or any one or more parts of the
Security for the purpose of performing or observing any such defaulted term,
covenant or condition without thereby becoming liable to Mortgagors or any
person in possession holding under Mortgagors, except for damage caused by
Mortgagee's gross negligence or willful misconduct.
-77-
<PAGE>
(g) Apply against the Indebtedness in such order as Mortgagee shall
determine any funds held for the benefit of Mortgagors in escrow by Mortgagee or
by any third-party escrow agent under any of the Loan Documents.
Upon any foreclosure sale, Mortgagee may bid for and purchase all or
any one or more parts of the Security and shall be entitled to apply all or any
part of the Indebtedness as a credit to the purchase price. In the event of any
sale of all or any one or more parts of the Security by foreclosure, through
judicial proceedings, by advertisement or otherwise, the proceeds of any such
sale which are applied in accordance with this Mortgage shall be applied in the
order following to: (i) all sums reasonably expended or incurred by Mortgagee in
carrying out Mortgagors' obligations under this Mortgage and any other Loan
Documents, to the extent Mortgagee is authorized to do so under the terms of
this Mortgage or the other Loan Documents, together with interest thereon as
therein provided; (ii) all accrued and unpaid interest upon the Indebtedness;
(iii) the unpaid principal amount of the Indebtedness; (iv) Foreclosure Costs
(as hereinafter defined); and (v) the surplus, if any, to the person or persons
legally entitled thereto.
Mortgagors will pay to Mortgagee upon demand all costs and expenses
incurred by Mortgagee upon the occurrence of an Event of Default in the exercise
of Mortgagee's rights and remedies under this Mortgage and the other Loan
Documents for collection of the Indebtedness, foreclosure on the Security or
otherwise, including without limitation title insurance fees and premiums,
-78-
<PAGE>
environmental consultant's charges and appraisal, engineering and inspection
fees under Section 27(d), receiver's fees, costs and agent's compensation under
Section 27(e), auctioneer's fees and foreclosure sale advertising costs, any
deed excise tax stamps required to be affixed to the foreclosure deed and court
filing fees, together with attorneys' fees and costs which shall include without
limitation all attorneys' fees and costs incurred in connection with (A) the
exercise of Mortgagee's rights and remedies as aforesaid, (B) any negotiations,
other services and advice rendered regarding restructuring of the Indebtedness
prior to any foreclosure sale or deed-in-lieu of foreclosure, whether or not any
such restructuring or deed-in-lieu is actually accomplished, and (C) any
petition filed by or against any Mortgagor under Title 11, United States Code.
Any such amounts incurred by Mortgagee shall be secured hereby and shall be
immediately repaid by Mortgagors to Mortgagee upon demand with interest thereon
at the Default Rate, from the date of demand, all of such amounts together with
such interest being collectively referred to as "Foreclosure Costs."
Mortgagors hereby agree that after a foreclosure sale, Mortgagors will
have no right to possess or remain upon the Security, Mortgagors acknowledging
Mortgagors' status as a trespasser in such circumstances.
In the event of any acceleration of the Indebtedness pursuant to
paragraph (a) of this Section 27, Mortgagors shall pay to Mortgagee together
with the principal indebtedness and interest
-79-
<PAGE>
thereon an amount equal to the prepayment fee provided for in the Note and such
fee shall be included as part of the Indebtedness.
Failure to exercise any option to accelerate with respect to all or
any one or more parts of the Security during the existence of an Event of a
Default or other circumstance permitting the exercise of such option, shall not
constitute a waiver of the default or of the right to exercise such option at a
later time (so long as such Event of Default or other circumstance continues to
exist), or a waiver of the right to exercise such option in the event of any
other default or circumstance specified above.
28. Acceleration Interest. In addition to any late payment charge which may
be due under the Note, Mortgagors shall pay interest on all sums due hereunder
at a rate (the "Default Rate") equal to the lesser of (i) the interest rate set
forth in the Note plus four percent (4%) per annum, or (ii) the maximum rate
permitted by law, from and after the first to occur of the following events: (A)
Mortgagee elects in writing to cause the acceleration of the Indebtedness; (B) a
petition under Title 11, United States Code, shall be filed by any Mortgagor or
if any Mortgagor shall seek or consent to the appointment of a receiver or
trustee for itself or for any of the Security, file a petition seeking relief
under the bankruptcy or other similar laws of the United States, any state or
any other jurisdiction, make a general assignment for the benefit of creditors,
or is generally unable to pay its debts as they become due; (C) a court shall
enter an order, judgment or decree appointing, with or without the consent
-80-
<PAGE>
of any Mortgagor, a receiver or trustee for it or for any of the Security or
approving a petition filed against any Mortgagor which seeks relief under the
bankruptcy or other similar laws of the United States, any state or any other
jurisdiction, and any such order, judgment or decree shall remain in force,
undischarged or unstayed, ninety (90) days after it is entered; or (D) if all
sums due hereunder are not paid on the Maturity Date as set forth in the Note.
29. Late Charge. In the event any sums due under the Note (exclusive of
principal due at maturity of the Note or by reason of the acceleration of the
Note), this Mortgage or any other Loan Document, are not paid by Mortgagors when
due, without regard to any cure or grace period, Mortgagors shall pay to
Mortgagee for the month during which such payment is not made when due and for
each month or fraction thereof that such sum remains unpaid, a late charge equal
to the lesser of four percent (4%) of such installment or the maximum amount
allowed by law, as the reasonable estimate by Mortgagee and Mortgagors of a fair
average compensation for the loss that may be sustained by Mortgagee due to the
failure of Mortgagors to make timely payments, and such amount shall be secured
hereby. Such late charge shall be paid without prejudice to the right of
Mortgagee to collect any other amounts provided to be paid or (if applicable) to
declare an Event of Default under this Mortgage or any other Loan Document.
30. Waiver of Statutory Rights. Mortgagors agree, to the full extent
permitted by law, that upon an Event of Default hereunder, neither Mortgagors
nor anyone claiming through or under
-81-
<PAGE>
Mortgagors will set up, claim, or seek to take advantage of any moratorium,
reinstatement, forbearance, appraisement, valuation, stay, homestead, extension,
exemption or (after a sale by foreclosure) redemption laws now or hereafter in
force, in order to prevent or hinder the enforcement or foreclosure of this
Mortgage, or the sale of the Security or the delivery of possession thereof
immediately after such sale to the purchaser at such sale, and Mortgagors, for
themselves and all who may at any time claim through or under any of them,
hereby waive to the full extent that they may lawfully do so, the benefit of all
such laws, and any and all rights to have the assets subject to the security
interest of this Mortgage marshalled upon any foreclosure or sale under the
power granted herein.
31. Security Interest. This Mortgage shall, as to any equipment and
other Personal Property covered hereby, be deemed to constitute a security
agreement, and Mortgagors, as debtors, hereby grant to Mortgagee, as secured
party, a security interest therein pursuant to the Massachusetts Uniform
Commercial Code. Mortgagors agree, upon request of Mortgagee, to furnish an
inventory of Personal Property owned by Mortgagors and subject to this Mortgage
and, upon request by Mortgagee, to execute any supplements to this Mortgage, any
separate security agreement and any financing statements and continuation
statements in order to include specifically said inventory of Personal Property
or otherwise to perfect the security interest granted hereby, subject always to
the limitation of liability provided for in Section 16 of the Note. Upon any
Event of Default, Mortgagee shall have all of the rights and remedies provided
in said Code or otherwise
-82-
<PAGE>
provided by law or by this Mortgage, including but not limited to the right to
require Mortgagors to assemble such Personal Property and make it available to
Mortgagee at a place to be designated by Mortgagee which is reasonably
convenient to both parties, the right to take possession of the Personal
Property with or without demand and with or without process of law and the right
to sell and dispose of the same and distribute the proceeds according to law.
The parties hereto agree that any requirement of reasonable notice shall be met
if Mortgagee sends such notice to Mortgagors at least ten (10) days prior to the
date of sale, disposition or other event giving rise to the required notice, and
that the proceeds of any disposition of any such Personal Property may be
applied by Mortgagee first to the reasonable expenses in connection therewith,
including reasonable attorneys' fees and legal expenses incurred, and then to
payment of the Indebtedness. With respect to the Personal Property that has
become so attached to the Real Property that an interest therein arises under
the real property law of the Commonwealth of Massachusetts, this Mortgage shall
also constitute a financing statement and a fixture filing under the
Massachusetts Uniform Commercial Code. Mortgagors are the record owners of the
Real Property and the addresses of Mortgagors and Mortgagee are as set forth on
the first page of this Mortgage.
32. Right of Entry. Mortgagee and Mortgagee's representatives may at all
reasonable times and without notice to Mortgagors if there exists an Event of
Default (otherwise, upon reasonable advance notice) enter upon the Security and
inspect the same, or cause it to be inspected by agents, employees or
-83-
<PAGE>
independent contractors of Mortgagee, and show the same to others, but Mortgagee
shall not be obligated to make any such entry or inspection.
33. Estoppel Certificate. Mortgagors, within fifteen (15) days after
written request from Mortgagee, will furnish a signed statement in writing, duly
acknowledged, of the amount then due or outstanding hereunder and, to the best
of their knowledge, whether or not any offsets or defenses exist against the
Indebtedness, and if so, specifying such offsets and defenses. Mortgagee, within
fifteen (15) days after written request from Mortgagors, will furnish a signed
statement in writing, duly acknowledged, of the amount then due and outstanding
hereunder and, to the best of its knowledge, whether or not any default exists
under this Mortgage or any of the other Loan Documents, and if so, specifying
such default. Mortgagors shall, within fifteen (15) days following Mortgagee's
request, execute and deliver a current landlord estoppel certificate with
respect to the leases at the Security. If required by law or regulatory
authority, Mortgagors shall, upon Mortgagee's request, exercise any right it may
have to request an estoppel certificate from any or all of the tenants at the
Security; and, in such event, Mortgagee shall pay Mortgagors' reasonable costs
of preparing, requesting and negotiating such tenant estoppel certificates.
34. Annual Statements. Mortgagors shall, within one hundred twenty (120)
days after the end of each fiscal year of Mortgagors, deliver to Mortgagee (a)
annual statements audited and certified (subject only to such qualifications as
are reasonably acceptable
-84-
<PAGE>
to Mortgagee) by Coopers & Lybrand or another independent Certified Public
Accountant reasonably satisfactory to Mortgagee, together with any "Notes to
Financial Statements" prepared by such accountant in connection with such audit
and certification, all prepared in accordance with generally accepted accounting
principles and showing in detail: (i) a balance sheet for the Security as of the
last day of such fiscal year; (ii) a statement of earnings from the Security for
such fiscal year showing, among other things, all rents and other income
therefrom and all expenses paid or incurred in connection with the operation of
the Security, and (iii) a statement of operating cash flows for the Security;
and (b) a statement signed by Mortgagors listing all leases of space in the
Improvements as of the last day of such fiscal year, the respective areas
demised thereunder, the names of the tenants, the respective expiration dates of
the leases, the respective rentals provided for therein, accounts receivable and
such other information as may reasonably be requested by Mortgagee. In addition,
Mortgagors agree to provide Mortgagee with unaudited quarterly cash flow reports
and a current rent roll. Mortgagors also agree to provide Mortgagee with a pro
forma income statement and current expense statement for the current and prior
calendar year by January 31 of the current year.
If Mortgagors omit to prepare and deliver promptly any report required
by this Section, following notice and the expiration of the cure period provided
for in Section 26(b) hereof, Mortgagee may elect, in addition to exercising any
remedy for an Event of Default as provided for in this Mortgage, to make an
audit of all books and records of Mortgagors, including bank
-85-
<PAGE>
accounts, which in any way pertain to the Security, and to prepare the statement
or statements which Mortgagors failed to procure and deliver. Such audit shall
be made and such statements shall be prepared by an independent Certified Public
Accountant to be selected by Mortgagee. Mortgagors shall pay all expenses of
such audit and related services, which expenses shall be secured hereby as part
of the Indebtedness and shall be immediately due and payable upon demand with
interest thereon at the Default Rate from the date of demand.
Mortgagee shall afford any information received pursuant to this
Section the same degree of confidentiality that Mortgagee affords similar
information proprietary to Mortgagee; provided, however, that Mortgagee does not
in any way warrant or represent that such information received from Mortgagors
will remain confidential; and, provided further, that Mortgagee shall have the
unconditional right to disclose, as necessary, any such information in the event
Mortgagee sells, transfers, conveys, or assigns the Mortgage or any portion of
the Indebtedness.
35. Rights Cumulative. Each right and remedy of Mortgagee under this
Mortgage, the Note and the other Loan Documents shall be in addition to every
other right and remedy of Mortgagee and such rights and remedies may be enforced
separately or in any combination.
36. Subrogation. To the extent that proceeds of the Indebtedness are used
to pay any outstanding lien, charge or encumbrance affecting the Security, such
proceeds shall be deemed
-86-
<PAGE>
to have been advanced by Mortgagee at Mortgagors' request, and Mortgagee shall
be subrogated to all rights, interest and liens owned or held by any owner or
holder of such outstanding liens, charges and encumbrances, irrespective of
whether such liens, charges or encumbrances are released of record; provided,
however, that the terms and provisions hereof (including, without limitation,
Section 40 of this Mortgage) shall govern the rights and remedies of Mortgagee
and shall supersede the terms, provisions, rights, and remedies under the lien
or liens to which Mortgagee is subrogated hereunder.
37. No Waiver. Any failure by Mortgagee to insist upon the strict
performance by Mortgagors of any of the terms and provisions hereof shall not be
deemed to be a waiver of any of the terms and provisions hereof, and Mortgagee,
notwithstanding any such failure, shall have the right thereafter to insist upon
the strict performance by Mortgagors of any and all of the terms and provisions
hereof to be performed by Mortgagors.
38. Mortgage Extension. The lien hereof shall remain in full force and
effect during any postponement or extension of the time of payment of the
Indebtedness, or of any part thereof, and any number of extensions or
modifications hereof, of the Note or of any additional notes taken by Mortgagee,
shall not affect the lien hereof or the liability of Mortgagors or of any
subsequent obligor to pay the Indebtedness unless and until such lien or
liability be expressly released in writing by Mortgagee.
-87-
<PAGE>
39. Indemnification. Mortgagors shall indemnify and hold Mortgagee harmless
from and against all obligations, liabilities, losses, costs, expenses, fines,
penalties or damages (including attorneys' fees) which Mortgagee may incur by
reason of injury to persons or damage to property arising out of (i) tenant
improvement work or other construction work in or upon the Security by
Mortgagors or others claiming by, through or under Mortgagors, (ii) the
operation or maintenance of the Security by Mortgagors, or (iii) any other
action or inaction by, or matter which is the responsibility of, Mortgagors.
Mortgagors shall defend Mortgagee against any claim or litigation involving
Mortgagee for the same, and should Mortgagee incur such obligation, liability,
loss, cost, expense, fine, penalty or damage, then Mortgagors shall reimburse
Mortgagee upon demand. Any amount owed Mortgagee under this Section 39 shall
bear interest at the Default Rate from the date of demand therefor and shall be
secured hereby.
40. Scope of Liability. The provisions of Section 16 of the Note are hereby
incorporated by reference herein. As previously noted in Section 15 hereof, the
Indemnitors have executed a separate Environmental Indemnification Agreement to
reflect their liability for environmental matters regarding the Security,
subject to the limitations of liability set forth therein.
41. Attorneys' Fees. Any reference to "attorney fees", "attorneys' fees",
or "attorney's fees" in this document includes but is not limited to both the
fees, charges and costs incurred by Mortgagee through its retention of outside
legal counsel and the
-88-
<PAGE>
allocable fees, costs and charges for services rendered by Mortgagee's in-house
counsel. Any reference to "attorney fees", "attorneys' fees", or "attorney's
fees" shall also include but not be limited to those attorneys or legal fees,
costs and charges incurred by Mortgagee in the collection of any Indebtedness,
the enforcement of any obligations hereunder, the protection of the Security,
the foreclosure of this Mortgage, the sale of the Security in lieu of
foreclosure, the defense of actions arising hereunder and the collection,
protection or setoff of any claim the Mortgagee may have in a proceeding under
Title 11, United States Code. Attorneys' fees provided for hereunder shall
accrue whether or not Mortgagee has provided notice of default or of an
intention to exercise its remedies for an Event of Default. All such attorneys'
fees, charges and costs shall be reasonable.
42. Administrative Fees. Mortgagee shall have the right to charge
reasonable administrative fees during the term of the Note as Mortgagee may
determine, in its reasonable discretion, in connection with any servicing
requests made by Mortgagors requiring Mortgagee's evaluation, preparation and
processing of any such requests. Administrative fees shall not be charged for
routine servicing matters contemplated by the Loan Documents including, without
limitation: processing payments; processing insurance and UCC continuation
documentation; processing escrow draws; review of tenant leases, subordination,
non-disturbance and attornment agreements and tenant estoppels on standard forms
approved by Mortgagee without material modifications. Such administrative fees
shall apply without limitation to requests for matters not permitted or
contemplated by the Loan Documents
-89-
<PAGE>
(including, without limitation: requests for transfers or assignments; and
requests for review of new easements), and to requests, which, while
contemplated by the Loan Documents, because of the nature of the request, will
require significantly more time than an institutional lender, acting reasonably,
would contemplate for such request (including without limitation, requests for
the approval of tenant leases, tenant estoppels and tenant subordination,
non-disturbance and attornment agreements which contain material differences
from Mortgagors' or Mortgagee's standard forms (including any standard changes
approved by Mortgagee, which for this purpose will be considered part of the
standard form)). Mortgagee shall also be entitled to reimbursement for
professional fees it incurs for such administration, including without
limitation, those of architects, engineers and attorneys' fees (whether (i)
employed by Mortgagee or its affiliate or (ii) engaged by Mortgagee or its
affiliates as independent contractors).
43. Protection of Security; Costs and Expenses. Mortgagors shall appear in
and defend any action or proceeding purporting to affect the security hereof or
the rights or powers of Mortgagee, and shall pay all reasonable costs and
expenses, including without limitation cost of evidence of title and reasonable
attorneys' fees, in any such action or proceeding in which Mortgagee may appear,
and in any suit brought by Mortgagee to foreclose this Mortgage upon the
occurrence of an Event of Default or to enforce or establish any other rights or
remedies of Mortgagee hereunder upon the occurrence of an Event of Default. If
Mortgagors fail to perform any of the covenants or agreements contained in this
-90-
<PAGE>
Mortgage, or if any action or proceeding is commenced which affects Mortgagee's
interest in the Security or any part thereof, including, but not limited to,
eminent domain, code enforcement, or proceedings of any nature whatsoever under
any federal or state law, whether now existing or hereafter enacted or amended,
relating to bankruptcy, insolvency, arrangement, reorganization or other form of
debtor relief, then if an Event of Default exists hereunder (or, if no Event of
Default exists hereunder, if Mortgagors fail, within thirty (30) days after
notice by Mortgagee to Mortgagors [or such shorter notice period as the
exigencies of the situation may require], to take appropriate action to correct
such failure, etc., subject, however, to Mortgagors' contest rights under this
Mortgage, to the extent applicable) Mortgagee may, but without obligation to do
so and without further notice to or demand upon Mortgagors and without releasing
Mortgagors from any obligation hereunder, make such appearances, disburse such
sums and take such action as Mortgagee reasonably deems necessary or appropriate
to protect Mortgagee's interest, including, but not limited to, disbursement of
reasonable attorneys' fees, entry upon the Security to make repairs or take
other action to protect the security hereof, and payment, purchase, contest or
compromise of any encumbrance, charge or lien, other than the Permitted
Encumbrances, which in the judgment of Mortgagee appears to be prior or superior
hereto. Mortgagors further agree to pay all reasonable expenses of Mortgagee
(including without limitation attorneys' fees and disbursements) incident to the
protection of the rights of Mortgagee hereunder, or to enforcement or collection
of payment of the Indebtedness, whether by judicial or non-judicial proceedings,
or in connection with any bankruptcy,
-91-
<PAGE>
insolvency, arrangement, reorganization or other debtor relief proceeding of
Mortgagors, or otherwise in connection with an Event of Default. Any amounts
disbursed by Mortgagee pursuant to this Section shall be additional indebtedness
of Mortgagors secured by the Loan Documents as of the date of disbursement and
shall bear interest at the Default Rate from the date of demand therefor. All
such amounts shall be payable by Mortgagors immediately upon demand. Nothing
contained in this Section shall be construed to require Mortgagee to incur any
expense, make any appearance, or take any other action.
44. Notices. Any notice, demand, request, statement or consent made
hereunder shall be in writing, signed by the party giving such notice, request,
demand, statement, or consent, and shall be delivered personally or delivered to
a reputable overnight delivery service providing a receipt addressed as set
forth below or to such other address within the continental United States of
America as theretofore may have been designated in writing by such party in
accordance with the terms of this Section 44. The effective date of any notice
given as provided in this Section shall be the date of personal service or one
(1) business day after delivery to such overnight delivery service, whichever is
applicable. As used herein, the phrase "business day" or "business days" shall
mean any calendar day(s) other than a Saturday, a Sunday or a Federal or a State
holiday on which the U.S. Postal Service offices are closed for business. For
purposes hereof, the addresses are as follows:
-92-
<PAGE>
If to Mortgagee: Connecticut General Life Insurance Company
c/o CIGNA Investments, Inc.
900 Cottage Grove Road
Hartford, Connecticut 06152-2313
Attn: Investment Services, S-313
With a copy to: CIGNA Corporation
Investment Law Department
900 Cottage Grove Road
Hartford, Connecticut 06152-2215
Attn: Real Estate Division, S-215A
If to one or more
Mortgagors: Beacon Properties, L.P.
Wellesley Holding, L.P.
Wellesley Holding II, L.P
c/o Beacon Properties Corporation
50 Rowes Wharf
Boston, Massachusetts 02110
Attn: Mr. Robert J. Perriello,
Chief Financial Officer
with a courtesy
copy to: Goulston & Storrs
400 Atlantic Avenue
Boston, Massachusetts 02110-3333
Attn: Harold Stahler, Esq.
Notwithstanding the foregoing agreement to provide courtesy copies,
such copies shall be courtesy copies only, and failure to provide such courtesy
copies shall have absolutely no effect or entitle Mortgagors to any remedy
whatsoever. Any notice duly given to Mortgagors shall be effective whether or
not the courtesy copies were given.
45. Release/Partial Release. Upon the satisfaction in full of the
Indebtedness, Mortgagee shall release of record the Security from the lien
hereof and from the lien of any other Loan Document securing the indebtedness
and shall surrender this Mortgage, the other Loan Documents and all notes
evidencing indebtedness secured by this Mortgage to Mortgagors. Mortgagors shall
pay all costs of recordation.
-93-
<PAGE>
Prior to the satisfaction in full of the Indebtedness, Mortgagee agrees to
release up to two properties from the lien of this Mortgage, provided that all
of the following conditions have been satisfied:
(i) A pay-down of the outstanding Principal Indebtedness under the
Note is made by Mortgagors to Mortgagee with respect to each
building comprising the Security according to the following
schedule:
Release Property: Loan Pay-Down Required:
----------------- -----------------------
65 William Street $2,904,000
60 William Street 5,408,000
55 William Street 5,510,000
40 William Street 7,370,000
20 William Street 13,180,000
45 William Street 15,740,000
80 William Street 7,130,000
100 William Street 4,300,000
(ii) The loan-to-value ratio of the outstanding Principal Indebtedness
under the Note to the fair market value of the Security
(determined by obtaining an appraisal of the Security which will
remain immediately following such release in form and substance
reasonably acceptable to Mortgagee prepared by an MAI
-94-
<PAGE>
certified appraiser reasonably acceptable to Mortgagee), in
Mortgagee's reasonable opinion, will not exceed 65%;
(iii) There shall exist no Event of Default under the Loan Documents
and no monetary default and no non-monetary default of which
notice has been given to Mortgagors;
(iv) All information and documents requested by Mortgagee relating to
such release shall be submitted to Mortgagee at least sixty (60)
days prior to closing and must be reasonably satisfactory to
Mortgagee in form and substance;
(v) Mortgagors shall provide Mortgagee with evidence, including, if
necessary, written consent to such release by any lienholder
subordinate to the Mortgage, if any, that such release will not
affect the priority of the Mortgage on the remainder of the Real
Property;
(vi) Mortgagors shall pay all of Mortgagee's reasonable expenses,
including all of Mortgagee's local and staff attorneys' fees, in
connection with the release;
-95-
<PAGE>
(vii) Mortgagors shall pay Mortgagee a $25,000 administrative fee for
each request for a partial release covering one property or
covering two properties so long as both properties are to be
released substantially contemporaneously;
(viii) Mortgagee shall receive such title endorsements as it may
reasonably require, including, without limitation, partial
release endorsements;
(ix) If the remaining Real Property depends on the released Real
Property with respect to any of the following, there shall be in
effect such easement and other similar agreements running with
the land and benefitting the remaining Real Property and
providing for vehicle access, parking, utilities, maintenance,
repair and insurance in form and substance as Mortgagee deems
reasonably necessary; and
(x) Mortgagors shall provide evidence to Mortgagee, in form and
substance reasonably acceptable to Mortgagee, that following such
partial release the remaining Security will comply with all
applicable legal requirements which Mortgagee reasonably
determines may be affected by such partial release, including,
-96-
<PAGE>
without limitation, subdivision, zoning and other land use
restrictions.
From and after Mortgagee's receipt of the partial Loan prepayment, the debt
service payments payable under the Note from and after the Interest Only Period
(defined in the Note) shall be proportionately reduced, based upon the portion
of the Principal Indebtedness (defined in the Note) which is prepaid pursuant to
this Section 45.
46. Applicable Law. The provisions hereof shall be construed in accordance
with the laws of the Commonwealth of Massachusetts.
47. Invalidity. If any provision of this Mortgage shall be held invalid or
unenforceable, the same shall not affect in any respect whatsoever the validity
of the remainder of this Mortgage, except that if such provision provides for
the payment of the Principal Indebtedness (as defined in the Note) and/or
interest payable under the Note or any escrow deposits payable under any of the
other Loan Documents, and such provision is rendered invalid or unenforceable in
a material respect, then Mortgagee may, at its option, declare the Indebtedness
due and payable upon one hundred eighty (180) days prior written notice to
Mortgagors and, provided there exists no Event of Default hereunder, without
prepayment fee.
-97-
<PAGE>
48. Captions. The captions in this instrument are inserted only as a matter
of convenience and for reference, and are not and shall not be deemed to be any
part hereof.
49. Modifications. This Mortgage may not be changed or terminated except in
writing signed by both parties. The provisions of this Mortgage shall extend and
be applicable to all renewals, amendments, extensions, consolidations, and
modifications of the other Loan Documents, and any and all references herein to
the Loan Documents shall be deemed to include any such renewals, amendments,
extensions, consolidations or modifications thereof.
50. Bind and Inure. The provisions of this Mortgage shall be binding on the
Mortgagors and their respective heirs, successors and assigns, and any
subsequent owners of the Security. The covenants of Mortgagors herein shall run
with the land, and this Mortgage and all of the covenants herein contained shall
inure to the benefit of the Mortgagee, its successors and assigns.
51. Replacement of Note. Upon receipt of evidence reasonably satisfactory
to Mortgagors of the loss, theft, destruction or mutilation of the Note, and in
the case of any such loss, theft or destruction, upon delivery of an indemnity
agreement reasonably satisfactory to Mortgagors or, in the case of any such
mutilation, upon surrender and cancellation of the Note, Mortgagors will execute
and deliver, in lieu thereof, a replacement note, identical in form and
substance to the Note and
-98-
<PAGE>
dated as of the date of the Note and upon such execution and delivery all
references in this Mortgage to the Note shall be deemed to refer to such
replacement note.
52. Time of the Essence. Time is of the essence with respect to the intent,
meaning, construction and enforcement of each and every covenant, agreement and
obligation of Mortgagors under this Mortgage, the Note and the other Loan
Documents subject to any force majeure exceptions provided for thereunder.
53. Statutory Condition; Statutory Power of Sale. This Mortgage is upon the
STATUTORY CONDITION for any breach of which, or upon the breach of any other of
Mortgagors' covenants and undertakings hereunder, in each case, following the
expiration of applicable notice and cure periods provided for in Section 26
hereof, Mortgagee shall have the STATUTORY POWER OF SALE.
54. ERISA Provisions. Mortgagee is entering into the Loan Documents in part
on behalf of both its Separate Account 5W, The Sedgwick James, Inc. Savings and
Profit Sharing Plan (sometimes hereinafter referred to as "SA 5W") and Separate
Account BET, the 401(k) Retirement Savings Plan for Certain Represented
Employees of Bethlehem Steel Corporation and Subsidiary Companies (sometimes
hereinafter referred to as "SA BET"). SA 5W and SA BET are "separate accounts"
as defined in Section 3(17) of the Employee Retirement Income Security Act of
1974, as amended ("ERISA"). Mortgagee is therefore subject to the fiduciary
obligation provisions of ERISA and as a result may be prohibited by law from
engaging in certain transactions. Each Mortgagor
-99-
<PAGE>
hereby represents and warrants to Mortgagee that neither Mortgagor, the General
Partners of any Mortgagor, nor any person directly or indirectly, through one or
more intermediaries, controlling, controlled by, or under common control with
them (an "affiliate") have, and during the immediately preceding one year have
not exercised, the authority to appoint or terminate Mortgagee as an asset
manager of The Sedgwick James, Inc. Savings and Profit Sharing Plan (the
"Sedgwick James Plan") or the 401(k) Retirement Savings Plan for Certain
Represented Employees of Bethlehem Steel Corporation and Subsidiary Companies
(the "Bethlehem Steel Plan") or the authority to negotiate the terms of
Mortgagee's management agreement with or on behalf of the Sedgwick James Plan or
the Bethlehem Steel Plan (such authority being referred to herein as the
"disqualifying powers"). For purposes of determining who is an affiliate, the
term "control" means the power to exercise a controlling influence over the
management or the policies of a person other than an individual.
Notwithstanding any other provision in this Mortgage, each Mortgagor
represents, warrants and covenants that, during the term of the Loan, the
General Partners of each Mortgagor will not transfer a direct partnership
interest in such Mortgagor, and no Mortgagor will sell the Real Property, to an
entity unless such entity represents to Mortgagee that neither it nor its
affiliates have the disqualifying powers. Mortgagee has been informed by The
Sedgwick James, Inc. and Bethlehem Steel Corporation that, currently, no party
other than The Sedgwick James, Inc. and Bethlehem Steel Corporation and their
respective Plan Investment
-100-
<PAGE>
Committees have the disqualifying powers and Mortgagee agrees to cooperate with
each Mortgagor, upon such Mortgagor's request, in determining which entities
have disqualifying powers. Upon request, Mortgagee agrees to notify each
Mortgagor whether Mortgagee has been informed that other entities have the
disqualifying powers and the identity of such entities.
Mortgagors agree to indemnify and hold Mortgagee harmless from, against and
with respect to, and to be responsible for, any costs, expense or damage
(including reasonable attorney's fees) resulting from a breach of the
Mortgagors' representations, warranties and covenants contained in this Section
54.
IN WITNESS WHEREOF, Mortgagors have duly executed this Mortgage as a sealed
instrument on the day and year first above written.
Mortgagors:
WELLESLEY HOLDING, L.P.
By: Beacon Properties, L.P.
By: Beacon Properties Corporation
By: /s/ Robert J. Perriello
-----------------------------
Name: Robert J. Perriello
Title: Senior Vice President
By: /s/ Nancy J. Broderick
-----------------------------
Name: Nancy J. Broderick
Title: Treasurer
-101-
<PAGE>
WELLESLEY HOLDING II, L.P.
By: Beacon Properties Corporation
By: /s/ Robert J. Perriello
-----------------------------
Name: Robert J. Perriello
Title: Senior Vice President
By: /s/ Nancy J. Broderick
-----------------------------
Name: Nancy J. Broderick
Title: Treasurer
BEACON PROPERTIES, L.P.
By: Beacon Properties Corporation
By: /s/ Robert J. Perriello
-----------------------------
Name: Robert J. Perriello
Title: Senior Vice President
By: /s/ Nancy J. Broderick
-----------------------------
Name: Nancy J. Broderick
Title: Treasurer
COMMONWEALTH OF MASSACHUSETTS
Suffolk, SS. January 8, 1996
Then personally appeared Robert J. Perriello and Nancy J. Broderick, the
Senior Vice President and Treasurer, respectively, of Beacon Properties
Corporation, General Partner of Wellesley Holding II, L.P. and of Beacon
Properties, L.P., General Partner of Wellesley Holding, L.P., and acknowledged
the foregoing to be their free act and deed and the free act and deed of Beacon
Properties Corporation, Beacon Properties, L.P., Wellesley Holding, L.P. and
Wellesley Holding II, L.P., before me.
/s/ Cheray G. Shein
----------------------------
Notary Public
My Commission Expires: February 24, 2000
-102-
MORTGAGE, SECURITY AGREEMENT AND FIXTURE FILING
Center Plaza
Boston, Massachusetts
MORTGAGE, SECURITY AGREEMENT AND FIXTURE FILING
<PAGE>
TABLE OF CONTENTS
-----------------
Page
1. Payment of Indebtedness . . . . . . . . . . . . 11
2. Covenants of Title. . . . . . . . . . . . . . . 12
3. Usury . . . . . . . . . . . . . . . . . . . . . 12
4. Impositions . . . . . . . . . . . . . . . . . . 13
5. Tax Deposits. . . . . . . . . . . . . . . . . . 15
6. Change in Taxes . . . . . . . . . . . . . . . . 20
7. Insurance . . . . . . . . . . . . . . . . . . . 22
8. Insurance/Condemnation Proceeds . . . . . . . . 25
9. Restoration Following Fire and Other Casualty
or Condemnation. . . . . . . . . . . . . . . . 28
10. Disposition of Condemnation or Insurance
Proceeds . . . . . . . . . . . . . . . . . . . 37
11. Fire and Other Casualty; Self-Help. . . . . . . 40
12. Rent Insurance Proceeds . . . . . . . . . . . . 42
13. Intentionally Omitted . . . . . . . . . . . . . 42
14. Repair; Alterations; Waste; Environmental . . . 42
15. Environmental Indemnification . . . . . . . . . 52
16. Independence of Security . . . . . . . . . . . 52
17. No Other Liens. . . . . . . . . . . . . . . . . 53
18. Management. . . . . . . . . . . . . . . . . . . 54
19 Ground Lease . . . . . . . . . . . . . . . . . 56
20. Sidewalks, Municipal Charges . . . . . . . . . 56
21. Assignment of Rents and Leases . . . . . . . . 57
22. Future Leases . . . . . . . . . . . . . . . . . 60
23. Mortgagor's Obligations as Lessor . . . . . . . 67
24. Leases; Foreclosure . . . . . . . . . . . . . 69
25. Affiliate Subordinate Financing . . . . . . . . 69
26. Events of Default . . . . . . . . . . . . . . . 72
27. Remedies Upon Default . . . . . . . . . . . . . 85
28. Acceleration Interest . . . . . . . . . . . . . 91
29. Late Charge . . . . . . . . . . . . . . . . . . 92
30. Waiver of Statutory Rights. . . . . . . . . . . 93
31. Security Interest . . . . . . . . . . . . . . . 93
32. Right of Entry. . . . . . . . . . . . . . . . . 95
33. Estoppel Certificate. . . . . . . . . . . . . . 95
34. Annual Statements . . . . . . . . . . . . . . . 96
35. Rights Cumulative . . . . . . . . . . . . . . . 98
36. Subrogation . . . . . . . . . . . . . . . . . . 98
37. No Waiver . . . . . . . . . . . . . . . . . . . 99
38. Mortgage Extension. . . . . . . . . . . . . . . 99
39. Indemnification . . . . . . . . . . . . . . . . 100
40. Scope of Liability. . . . . . . . . . . . . 100
41. Attorneys' Fees . . . . . . . . . . . . . . 101
42. Administrative Fees . . . . . . . . . . . . 101
43. Protection of Security . . . . . . . . . . 103
44. Notices . . . . . . . . . . . . . . . . . . 105
45. Release . . . . . . . . . . . . . . . . . . 106
<PAGE>
46. Applicable Law. . . . . . . . . . . . . . . 107
47. Invalidity. . . . . . . . . . . . . . . . . 107
48. Captions. . . . . . . . . . . . . . . . . . 107
49. Modifications . . . . . . . . . . . . . . . 108
50. Bind and Inure. . . . . . . . . . . . . . . 108
51. Replacement of Note . . . . . . . . . . . . 108
52. Time of the Essence . . . . . . . . . . . . 109
53. Statutory Condition; Statutory Power
of Sale . . . . . . . . . . . . . . . . . 109
<PAGE>
Recording Requested By and
When Recorded Return to:
Nutter, McClennen & Fish
One International Place
Boston, MA 02110-2699
Attn: Robert A. Fishman, Esq.
MORTGAGE, SECURITY AGREEMENT AND FIXTURE FILING
THIS MORTGAGE is made as of the day of February, 1996, by CENTER PLAZA
ASSOCIATES LIMITED PARTNERSHIP, a Massachusetts limited partnership, having its
principal place of business at 50 Rowes Wharf, Boston, Massachusetts 02110
(hereinafter referred to as "Mortgagor") to CONNECTICUT GENERAL LIFE INSURANCE
COMPANY, a Connecticut corporation having its principal place of business at 900
Cottage Grove Road, Bloomfield, Connecticut 06002 (hereinafter referred to as
"Mortgagee").
W I T N E S S E T H:
THAT, to secure (i) payment to Mortgagee of the principal indebtedness
of Sixty Million and No/100 Dollars ($60,000,000) together with interest
thereon, as evidenced by that certain promissory note (hereinafter referred to
as the "Note") of even date herewith, and any renewals, extensions or
modifications thereof (including, without limitation, any modification
Page 1
<PAGE>
increasing the interest rate, the principal amount, the monthly payments or
extending the maturity date) given by Mortgagor to Mortgagee and made payable to
the order of Mortgagee, with the final payment being due and payable on March 1,
2003 (the "Maturity Date"), in and by which Note Mortgagor promises to pay the
said principal indebtedness and interest at the rate and in installments as
provided in the Note (the loan represented and evidenced by the Note is herein
referred to as the "Loan"), (ii) the performance of the covenants herein
contained and the payment of any monies expended by Mortgagee in connection
therewith, (iii) the payment of all obligations and the performance of all
covenants of Mortgagor under any other loan documents, agreements or instruments
between Mortgagor and Mortgagee given in connection with or related to this
Mortgage or the Note, and (iv) any and all additional advances made by Mortgagee
to protect or preserve the Security (hereinafter defined) or the security
interest created hereby on the Security, or for taxes, assessments, or insurance
premiums as hereinafter provided or for performance of any of Mortgagor's
obligations hereunder or for any other purpose provided herein (whether or not
the original Mortgagor remains the owner of the Security at the time of such
advances) [all of the aforesaid indebtedness and obligations of Mortgagor from
time to time outstanding being herein referred to as the "Indebtedness", and all
of the documents, agreements and instruments between Mortgagor and Mortgagee or
given by
Page 2
<PAGE>
Mortgagor, Beacon Properties, L.P., a Delaware limited partnership ("BPLP"), or
CP Holding Corp., as Trustee of the Note Holding Trust under Indenture of Trust
dated as of November 30, 1994 ("NHT") in favor of Mortgagee, now or hereafter
evidencing or securing the repayment of, or otherwise pertaining to, the
Indebtedness, including, but not limited to the Environmental Indemnification
Agreement (defined and described in Section 15 hereof), the Intercreditor
Agreement (defined and described in Section 25 hereof), the Mortgage Assignment
(defined and described in Section 25 hereof), the BPLP Pledge (defined and
described in Section 25 hereof), the Mortgage Subordination (defined and
described in Section 25 hereof) and the Non-Recourse Guaranty (defined and
described in Section 25 hereof), being herein collectively referred to as the
"Loan Documents"], Mortgagor does hereby mortgage, grant with MORTGAGE
COVENANTS, bargain, sell, assign, pledge, transfer, and convey unto Mortgagee
and to Mortgagee's successors and assigns forever, all of the following
described land, improvements, real and personal property, rents and leases, and
all of its estate, right, title and interest therein (hereinafter collectively
called the "Security"):
The land described in Exhibit A attached hereto and made a part
hereof, situate, lying and being in the City of Boston,
Page 3
<PAGE>
County of Suffolk, and Commonwealth of Massachusetts (the
"Land");
TOGETHER with all buildings and other improvements now or hereafter
located on said Land or any part thereof including but not limited to, all
extensions, betterments, renewals, renovations, substitutions and replacements
of, and all additions and appurtenances to, the Security (the "Improvements");
TOGETHER with all of the right, title and interest of Mortgagor in and
to the land lying in the bed of any street, road, highway or avenue in front of
or adjoining the Land to the center lines thereof;
TOGETHER with the right to use, in perpetuity, in connection with the
operation of the Security the names "Center Plaza", "One Center Plaza", "Two
Center Plaza" and "Three Center Plaza" and any other names similar thereto;
TOGETHER with the benefit of and subject to those of the Permitted
Encumbrances (as hereinafter defined) listed in Part I of Exhibit B attached
hereto and made a part hereof, including, without limitation, all easements now
or hereafter located on or appurtenant to the Land and/or Improvements, or under
or above the same or any part thereof, and together with all rights-of-way
Page 4
<PAGE>
and (to the extent assignable) all licenses, permits, approvals and privileges,
belonging or in any way appertaining to the Land and/or Improvements including
without limitation (i) any drainage ponds or other like drainage areas not
located on the Land which may be required for water run-off, (ii) any easements
necessary to obtain access from the Land to such drainage areas, or to any other
location to which Mortgagor has a right to drain water or sewage, (iii) any land
required to be maintained as undeveloped land by the zoning rules and
regulations applicable to the Land, and (iv) any easements and agreements which
are or may be established to allow satisfactory ingress to, egress from and
operation of the Land and/or the Improvements;
TOGETHER with any and all awards hereafter to be made by any municipal
or other governmental authorities to the present and all subsequent owners of
the Security for the taking of all or any portion of the Security by power of
eminent domain, including, without limitation, awards for damage to the
remainder of the Security and any awards for any change or changes of grade of
streets affecting the Security, which said awards are hereby assigned to
Mortgagee, and Mortgagee, at its option, is hereby authorized, directed and
empowered (subject to Section 8 below) to collect and receive the proceeds of
any such awards from the authorities making the same and to give proper receipts
and acquittances therefor, and to apply the same in accordance with
Page 5
<PAGE>
the applicable provisions of this Mortgage (all of the foregoing Land,
Improvements, rights, easements, rights-of-way, licenses, privileges, and
awards, collectively, the "Real Property");
TOGETHER with all proceeds, insurance or otherwise, paid for the
damage done to any of the Security and all proceeds of the conversion,
voluntarily or involuntarily, of any of the Security into cash or liquidated
claims;
TOGETHER with all fixtures, machinery, equipment, goods, and every
other article of personal property, tangible and intangible, now or hereafter
attached to or used in connection with the Real Property, or placed on any part
thereof and whether or not attached thereto, appertaining or adapted to the use,
management, operation or improvement of the Real Property, insofar as the same
and any reversionary right thereto may now or hereafter be owned or acquired by
Mortgagor (as more completely described in this paragraph and the next following
paragraph, the "Personal Property"), including, but without limitation: all
partitions; screens; awnings; shades; blinds; floor coverings; hall and lobby
equipment; heating, lighting, plumbing, ventilating, refrigerating,
incinerating, elevator, escalator, air conditioning and communication plants or
systems with appurtenant fixtures; vacuum cleaning systems; call systems;
sprinkler systems and other fire prevention and extinguishing
Page 6
<PAGE>
apparatus and materials; all equipment, manual, mechanical and motorized, for
the construction, maintenance, repair and cleaning of, and removal of snow from,
parking areas, walks, underground ways, truck ways, driveways, common areas,
roadways, highways and streets; all equipment, manual, mechanical and motorized,
for the transportation of customers or employees to and from the facilities on
the Real Property; all telephone, computer and other electronic equipment and
appurtenances thereto, including software; and all other machinery, pipes,
poles, appliances, equipment, wiring, fittings, panels and fixtures; and any
proceeds therefrom, any replacements thereof or additions or accessions thereto;
all of Mortgagor's rights, but not Mortgagor's obligations, under Mortgagor's
leases for Personal Property; all contract rights held by Mortgagor from time to
time in existence of whatever nature relating to the Real Property or Personal
Property, including, but not limited to, architectural and engineering plans,
drawings, tests, reports or studies, contracts for goods or services and
management contracts, all warranties and guaranties under such contracts and
rights under insurance policies; all rights of Mortgagor under architect's
contracts, construction contracts, completion bonds, performance bonds and
payment bonds related to the Real Property or Personal Property; all accounts,
accounts receivable, parking garage revenues and receivables, contract rights,
general intangibles, documents, instruments and chattel paper arising from or in
Page 7
<PAGE>
connection with the Real Property or Personal Property, including all books and
records in connection therewith and reserve accounts required to be established
now or at any time in the future under the Loan Documents, and all proceeds of
any and all of the same; all rights under all causes of action held by Mortgagor
related to the Real Property or Personal Property, including claims relating to
construction or the condition of the Improvements; all of Mortgagor's right,
title and interest in and to all artwork and sculpture located on the Real
Property; and all building materials, supplies and other property delivered to
the Real Property for incorporation into the Improvements thereon, all of which,
to the extent permitted by law, are declared to be a part of the realty and
covered by the lien hereof, but said lien shall not cover any fixture,
machinery, equipment or article of personal property which is owned by a tenant
and which can be removed from the Real Property by the tenant, but said lien
shall include any other fixture, machinery, equipment or article of personal
property incorporated into the improvements so as to constitute realty under
applicable law;
TOGETHER with all of Mortgagor's books of account and records relating
to the Security, including all computers and software relating thereto;
Page 8
<PAGE>
TOGETHER with all contracts of sale and leases in the nature of a sale
of the Real Property, or any portion thereof, now and hereafter entered into and
all right, title and interest of Mortgagor thereunder, including, without
limitation, cash or securities deposited thereunder to secure performance by the
contract purchasers, which deposits Mortgagor may retain unless an Event of
Default (as hereinafter defined) exists hereunder; all licenses, permits,
franchises, governmental approvals and all sanitary sewer, drainage, water and
utility service agreements, reservations and capacities benefiting the Real
Property or any part thereof; and all rights of Mortgagor under any covenants,
agreements, easements, restrictions or declarations relating to, or as an
appurtenance to, the Real Property or the Personal Property or any part thereof;
TOGETHER with all leases, subleases, licenses, concession agreements,
occupancy agreements or grants of other possessory interests now or hereafter in
force or effect, oral or written, and all renewals, extensions, modifications,
replacements and guaranties thereto affecting all or any part of the Land or
Improvements;
TOGETHER with all rents, issues, revenues (including garage revenues),
profits and income from the Real Property and Personal Property;
Page 9
<PAGE>
TOGETHER with all of the right, title and interest of Mortgagor in and
to all and singular the tenements, hereditaments and appurtenances belonging to
or in any way pertaining to the Security; all the estate, right, title and claim
whatsoever of Mortgagor, either in law or in equity, in and to the Security; and
any and all other, further or additional title, estate, interest or right which
may at any time be acquired by Mortgagor in or to the Security, and if Mortgagor
shall at any time acquire any further estate or interest in or to the Security,
the lien of this Mortgage shall attach, extend to, cover and be a lien upon such
further estate or interest automatically without further instrument or
instruments, and Mortgagor, upon request of Mortgagee, shall execute such
instrument or instruments as shall reasonably be requested by Mortgagee to
confirm such lien, subject to the limitations on Mortgagor's liability set forth
in Section 40 below;
TO HAVE AND TO HOLD the Security, and each and every part thereof,
unto Mortgagee and its successors and assigns forever, for the purposes and uses
herein set forth.
AND, Mortgagor hereby further covenants, agrees and warrants (as
applicable) as follows:
Page 10
<PAGE>
1. Payment of Indebtedness. Mortgagor will pay the principal indebtedness
and interest thereon in accordance with the provisions of the Note and all
prepayment fees, late charges and fees required thereunder, and all extensions,
renewals, modifications, amendments and replacements thereof, and will keep and
perform all the covenants, promises and agreements, and pay all sums provided in
(i) each of the Note or any other promissory note or notes at any time hereafter
issued by Mortgagor to evidence the Indebtedness, (ii) this Mortgage, and (iii)
any and all other Loan Documents, all in the manner herein or therein set forth.
Subject to the limitations of liability set forth in Section 40 of this Mortgage
and Section 16 of the Note, Mortgagor shall be fully liable for such payment and
performance. If more than one corporation, partnership, trust, limited liability
company or other entity or person shall in the future execute this Mortgage as
Mortgagor or shall directly assume some or all of the obligations of Mortgagor
hereunder, whether as a result of a transfer of an interest in the Security
permitted by the Loan Documents, or otherwise as may be agreed to in writing by
Mortgagee, then each such entity and person shall be jointly and severally
liable for the satisfaction of all obligations and duties of Mortgagor under
this Mortgage, subject to the limitations of liability set forth in Section 40
of this Mortgage and Section 16 of the Note.
Page 11
<PAGE>
2. Covenants of Title. Mortgagor has good and indefeasible title to the
entire Real Property in fee simple, has absolute title to the Personal Property
(except as to personal property which is leased by Mortgagor, as to which
Mortgagor shall have good title to the lessee's interest under the leases), and
has good right and full power to sell, mortgage and convey the same; the
Security is free and clear of easements, restrictions, liens, leases and
encumbrances, except those easements, restrictions, liens, leases and
encumbrances listed on Exhibit B hereto or which may hereafter be created in
accordance with the terms hereof (the "Permitted Encumbrances"); and Mortgagor
will warrant and defend title to the Security against all claims and demands
whatsoever except the Permitted Encumbrances. The Permitted Encumbrances also
include leases and lease amendments hereafter entered into by Mortgagor in
accordance with Section 22 hereof. Mortgagee shall have the right, at its option
and at such time or times as it shall deem necessary, to take whatever action it
may deem necessary to defend or uphold the lien of this Mortgage or otherwise
enforce any of the rights of Mortgagee hereunder or any obligation secured
hereby, including without limitation, the right to institute appropriate legal
proceedings for such purposes.
3. Usury. It is hereby expressly agreed that if from any circumstances
whatsoever fulfillment of any provision of the
Page 12
<PAGE>
Note, this Mortgage, or any other Loan Documents, at the time performance of
such provision shall be due, shall involve transcending the limit of validity
presently prescribed by any applicable usury statute or any other law, with
regard to obligations of like character and amount, then ipso facto the
obligation to be fulfilled shall be reduced to the limit of such validity, so
that in no event shall any exaction be possible under the Loan Documents that is
in excess of the limit of such validity. In no event shall Mortgagor be bound to
pay for the use, forbearance or detention of the money loaned pursuant to the
Loan Documents, interest of more than the current applicable legal limit, if
any; the right to demand any such excess being hereby expressly waived by
Mortgagee.
4. Impositions. Subject to the right of Mortgagor to contest an Imposition
(as hereinafter defined) as set forth below and subject to Section 5 below,
Mortgagor shall pay, before the last day on which the same may be paid without
penalty or interest, all real estate taxes, sewer rents, water charges,
municipal electric and all other municipal and governmental assessments, rates,
charges, impositions and liens (hereinafter referred to as "Impositions") which
now or hereafter are imposed by law upon the Security. Subject to the contest
rights hereinafter provided for, if any Imposition is not paid within the time
hereinabove specified, Mortgagee shall have the right to
Page 13
<PAGE>
pay the same, together with any penalty and interest thereon, and the amount or
amounts so paid or advanced shall forthwith be payable by Mortgagor to Mortgagee
and shall be secured by the lien of this Mortgage; but Mortgagor may in good
faith contest, at Mortgagor's own cost and expense, by proper legal proceedings,
the validity or amount of any Imposition, on the condition that Mortgagor first
shall deposit with Mortgagee or a mutually satisfactory escrow agent pursuant to
a mutually satisfactory agreement, as security for the payment of such contested
item, an amount equal to the contested item plus all penalties and interest
which would be payable if Mortgagor is ultimately required to pay such contested
item (with due credit to Mortgagor for interest which will accrue on such
deposit if held by such escrow agent, Mortgagee hereby agreeing to permit such
escrow agent to invest the same at Mortgagor's direction in the investments
permitted under the Tax Escrow Agreement (as defined in Section 5 hereof) unless
an Event of Default exists hereunder, in which event Mortgagee shall direct such
investments), and on the further condition that no amount so contested may
remain unpaid for such length of time as shall permit the Security, or the lien
thereon created by the item being contested, to be sold for the nonpayment
thereof, or as shall permit an action of foreclosure or the like to be commenced
by the holder of any such lien. In the event that there is not an escrow agent,
any deposit required hereunder shall be deposited with Mortgagee to
Page 14
<PAGE>
be held in a service account which is non-interest bearing to Mortgagor.
Mortgagor will not claim any credit on, or make any deduction from the
Indebtedness by reason of the payment of, any Imposition.
Mortgagor hereby assigns to Mortgagee all rights of Mortgagor now or
hereafter arising in and to the refund of any Imposition and any interest
thereon. If at the time of receipt of any such refund by Mortgagee there exists
no Event of Default hereunder, then Mortgagee shall pay over the same to
Mortgagor promptly after demand; if there exists an Event of Default hereunder,
Mortgagee may apply said refund in reduction of the Indebtedness in whatever
order Mortgagee may elect.
5. Tax Deposits. Mortgagor, Mortgagee and Fowler, Goedecke, Ellis &
O'Connor, Incorporated, as Escrow Agent, have entered into a certain Real Estate
Tax Escrow and Security Agreement of even date herewith, the terms of which
provide for the escrow and payments of money with respect to real estate taxes
(the "Tax Escrow Agreement"). Mortgagor covenants to perform its obligations
under the Tax Escrow Agreement, and Mortgagee hereby agrees that such
performance shall satisfy Mortgagor's obligations under this Mortgage with
respect to real estate taxes. In the event that Mortgagor shall default beyond
applicable grace periods under the Tax Escrow Agreement, or the
Page 15
<PAGE>
Tax Escrow Agreement shall be terminated for any reason, or in the event that
the Tax Escrow Agreement becomes ineffective or otherwise unenforceable, then
the balance of the terms and conditions of this Section 5 shall be applicable
and control with respect to real estate taxes.
Mortgagor shall deposit with Mortgagee or with an escrow agent
selected by Mortgagor and approved by Mortgagee (not to be unreasonably withheld
or delayed) pursuant to an escrow agreement reasonably acceptable to Mortgagee,
on the first day of the calendar month immediately following the date of this
Mortgage and on the first day of each calendar month thereafter (each of which
dates is hereinafter called the "monthly tax deposit date") until the payment in
full of the Indebtedness, a sum equal to one-twelfth of the real estate taxes,
assessments and any other Impositions which are required to be, or are
customarily, paid with real estate taxes or assessments (the "Qualified
Impositions") to be levied, charged, assessed or imposed upon or for the
Security within one year after said monthly tax deposit date. If on any monthly
tax deposit date the amount of Qualified Impositions to be levied, charged,
assessed or imposed within the ensuing one year period shall not be fixed, such
amount, for the purpose of computing the deposit to be made by Mortgagor
hereunder, shall be estimated by Mortgagee, with appropriate
Page 16
<PAGE>
adjustment when the amount of such Qualified Impositions is
fixed.
The sums deposited by Mortgagor under this Section shall be held in an
interest bearing account with interest being retained by Mortgagee and free of
trust, except as otherwise provided in the grammatical paragraph next following
and except to the extent, if any, that applicable law shall otherwise require,
and applied in payment of such Qualified Impositions when due (subject to
Mortgagor's contest rights set forth above). Mortgagor shall give fifteen (15)
days prior written notice to Mortgagee in each instance when a Qualified
Imposition is due, specifying the Qualified Imposition to be paid and the amount
thereof, the place of payment and the last day on which the same may be paid in
order to be within the time limit specified in Section 4 hereof entitled
"Impositions". Mortgagee shall not be responsible for any acts of or events
affecting the escrow agent nor shall Mortgagee have any obligation or liability
to Mortgagor if a different depository, or a different account with the selected
escrow agent, would or might pay a greater return on invested funds.
Notwithstanding the foregoing provision, so long as Mortgagor holds
title to and controls the Security, Impositions are paid in full when due and
there exists no uncured default
Page 17
<PAGE>
under the Loan Documents, notice of which has been given by Mortgagee to
Mortgagor, the interest earned by such escrows, less reasonable escrow costs,
will be paid to Mortgagor on each monthly tax deposit date; provided, however,
that interest shall be paid only if the escrow account is held by a mutually
agreed escrow agent and not by Mortgagee itself.
If for any reason the sums on deposit with Mortgagee or escrow agent
under this Section shall not be sufficient to pay a Qualified Imposition within
the time specified in Section 4 hereof, then Mortgagor shall, within ten (10)
days after demand by Mortgagee, deposit sufficient sums so that Mortgagee may
pay such Qualified Imposition in full, together with any penalty and interest
thereon, subject to Mortgagor's contest rights set forth above. Mortgagee may
change its estimate of Qualified Impositions for any period, on the basis of a
change in an assessment or tax rate or on the basis of a prior miscalculation or
for any other bona fide reason communicated by Mortgagee to Mortgagor, in which
event Mortgagor shall deposit with Mortgagee or escrow agent within ten (10)
days after demand the amount of any excess of the deposits which would
theretofore have been payable under the revised estimate over the sums actually
deposited.
Page 18
<PAGE>
If any Qualified Imposition shall be levied, charged, assessed or
imposed upon or for the Security, or any portion thereof, and if such Qualified
Imposition shall also be a levy, charge, assessment or imposition upon or for
any other premises not covered by the lien of this Mortgage, then the
computation of the amounts to be deposited under this Section shall be based
upon the entire amount of such Qualified Imposition and Mortgagor shall not have
the right to apportion any deposit with respect to such Qualified Imposition.
Upon an assignment of this Mortgage, Mortgagee shall have the right to
arrange to transfer all amounts deposited and still in its possession to the
assignee and, provided that the assignee assumes the obligations of Mortgagee
with respect to such amounts deposited, Mortgagee shall thereupon be completely
released from all liability with respect to such deposit and Mortgagor or the
owner of the Security shall look solely to the assignee or transferee in
reference thereto.
Upon the payment in full by Mortgagor of the entire Indebtedness, any
sums then held by Mortgagee (or escrow agent) under this Section shall be
refunded to Mortgagor.
All amounts deposited shall be held by Mortgagee as additional
security for the sums secured by this Mortgage, and
Page 19
<PAGE>
Mortgagor hereby grants to Mortgagee a security interest in such sums, and upon
the occurrence of an Event of Default hereunder, Mortgagee may, in its sole and
absolute discretion, apply said amounts to the payment of the Indebtedness in
whatever order Mortgagee may elect.
Immediately upon receipt of such by Mortgagor, Mortgagor shall deliver
to Mortgagee copies of all notices, demands, claims, bills, and receipts in
relation to the Qualified Impositions.
Notwithstanding the foregoing provisions, Mortgagee hereby waives the
requirement for deposits as to that portion of Qualified Impositions payable
directly to the governmental or other authority by tenants under the terms of
leases approved by Mortgagee, provided satisfactory proof of payment is promptly
furnished to Mortgagee.
6. Change in Taxes. In the event that, by reason of changes in law or in
the application or interpretation thereof, any tax (other than general income
taxes and similar taxes based on income) shall be due or become due and payable
to the United States of America, the Commonwealth of Massachusetts or any
political subdivision thereof with respect to the execution and delivery or
recordation of this Mortgage or any other Loan
Page 20
<PAGE>
Document or the interest of Mortgagee in the Security, Mortgagor shall, subject
to Mortgagor's contest rights set forth in Section 4 above, which shall be
applicable hereto, mutatis mutandis, pay such tax at the time and in the manner
required by applicable law and Mortgagor shall hold Mortgagee harmless and shall
indemnify Mortgagee against any liability of any nature whatsoever as a result
of the imposition of any such tax. Notwithstanding the foregoing, in the event
that such tax shall be due or become due and payable as aforesaid in an amount
greater than $150,000 and if Mortgagee shall require Mortgagor to make payment
thereof or to indemnify Mortgagee as aforesaid, Mortgagor shall have the right
to prepay the Indebtedness in full, without paying a prepayment fee. If
Mortgagor is not permitted by law to make such payments, the Indebtedness shall,
at the option of Mortgagee, become due and payable upon one hundred eighty (180)
days notice without Mortgagor being obligated to pay a prepayment fee.
Notwithstanding the foregoing, Mortgagee shall not require Mortgagor to pay such
taxes or to indemnify Mortgagee as aforesaid, nor will Mortgagee exercise its
option to accelerate the Indebtedness pursuant to the preceding sentence, unless
it is the policy of Mortgagee to enforce such rights generally (meaning that,
over the course of numerous transactions, Mortgagee would more often than not
elect to enforce such rights) in connection with similar commercial mortgage
loans held by Mortgagee.
Page 21
<PAGE>
7. Insurance. Mortgagor shall, at all times until the Indebtedness shall be
paid in full, keep the Security insured against loss or damage for its full
replacement cost (which cost shall be reset once a year at Mortgagee's option)
under policies of so-called All Risk Replacement Cost Insurance with Agreed
Amount Endorsement (including risks of war and nuclear explosion, if available
at commercially reasonable rates), and shall further provide flood insurance (if
the Security is situated in an area which is considered a flood risk area by the
federal government or any agency thereof), boiler and machinery insurance,
earthquake insurance (if available at commercially reasonable rates), rent loss
insurance in an amount sufficient to cover the total of all rents accruing from
the Security for a one (1) year period, comprehensive general liability
insurance in a minimum amount of One Million Dollars ($1,000,000), and excess or
umbrella liability of at least Five Million Dollars ($5,000,000), and during any
period of restoration, a policy or policies of builder's "all risk" insurance in
an amount not less than the full insurable value of the Security against such
risks as Mortgagee may reasonably request, and such other appropriate insurance
as Mortgagee may reasonably require from time to time, in such amounts and with
such companies as shall be reasonably approved by Mortgagee with a Best's rating
of A:X or better (except to the extent Mortgagee, in its reasonable discretion,
approves a lower Best's rating upon Mortgagor's written request),
Page 22
<PAGE>
and will deliver the original policy or policies of such insurance (or certified
duplicates thereof) to Mortgagee. Each such policy shall provide that the same
may not be cancelled or materially modified except upon thirty (30) days prior
written notice to Mortgagee, and shall otherwise be in such form as shall be
reasonably acceptable to Mortgagee, so that at all times until the payment in
full of the Indebtedness, Mortgagee shall have and hold the said policy and
policies (or certified duplicates thereof) as further collateral for the payment
of all Indebtedness. Each liability policy shall name Mortgagee as an
"additional insured"; and each other policy required to be maintained hereunder
(other than rent loss insurance) shall name Mortgagee as "loss payee" and
provide that all proceeds shall be payable to Mortgagee and that no act or thing
done by Mortgagor shall invalidate the policy as against Mortgagee, and shall be
endorsed with standard non-contributory mortgagee clauses and lender's loss
payee endorsements in favor of and in form reasonably acceptable to Mortgagee.
If Mortgagor shall fail to obtain any such policy or policies required by
Mortgagee, or shall fail to deliver the same (or certified duplicates thereof)
to Mortgagee, then Mortgagee may, after ten (10) days notice to Mortgagor (or
such shorter notice period as shall be appropriate if the policy is about to
expire), obtain such insurance and pay the premium or premiums therefor, in
which event Mortgagor shall, on demand of Mortgagee, repay such premium or
premiums to
Page 23
<PAGE>
Mortgagee and such repayment shall be secured by the lien of this Mortgage.
Notwithstanding the foregoing, provided that such policies providing for such
coverages are in fact in effect (as evidenced by certificates thereof delivered
by Mortgagor to Mortgagee), and that Mortgagor has paid the premiums therefor,
Mortgagor shall not be required to deliver any such insurance policy (or a
certified duplicate thereof) to Mortgagee until the policy (or a certified
duplicate thereof) is delivered to Mortgagor by the insurer. Mortgagor covenants
to exercise reasonable efforts to secure delivery of such policies from the
insurer promptly after the policy has been underwritten and approved by the
insurer. If Mortgagor fails to maintain the level of insurance required under
this Mortgage, then Mortgagor shall indemnify Mortgagee to the extent that a
casualty occurs and insurance proceeds would have been available had such
insurance been maintained.
Mortgagor shall promptly provide to Mortgagee copies of any and all
material notices (including notice of non-renewal and policy amendments),
claims, and demands which Mortgagor receives from insurers of the Security.
Mortgagor hereby assigns to Mortgagee all rights of Mortgagor in and
to any unearned premiums on any insurance policy required to be furnished by
Mortgagor, which assignment may be
Page 24
<PAGE>
exercised by Mortgagee at any time an Event of Default exists hereunder.
8. Insurance/Condemnation Proceeds. Mortgagor hereby assigns to Mortgagee
all proceeds of any insurance or condemnation awards which Mortgagor may be
entitled to receive for loss or damage to, or a taking of, the Security. In the
event of loss or damage to, or a taking of, the Security, the proceeds of said
insurance or condemnation award shall be payable to Mortgagee alone and
Mortgagor hereby authorizes and directs any affected insurance company or
government agency to make payment of the insurance proceeds or condemnation
awards directly to Mortgagee; provided, however, if such proceeds or awards do
not exceed Three Hundred Thousand Dollars ($300,000), they shall be paid to
Mortgagor instead of Mortgagee for application by Mortgagor to the costs of
repair or restoration provided that there exists no uncured monetary default
under the Loan Documents and no uncured non-monetary default of which notice has
been given by Mortgagee to Mortgagor under the Loan Documents. In the event that
any such insurance proceeds or condemnation awards in excess of Three Hundred
Thousand Dollars ($300,000) are paid directly to Mortgagor, Mortgagor shall
deliver such proceeds or awards to Mortgagee within five (5) days of Mortgagor's
receipt thereof. No such loss or damage shall itself reduce the Indebtedness.
Unless an Event of Default exists hereunder,
Page 25
<PAGE>
Mortgagor shall have the right, with Mortgagee's consent, which consent shall
not be unreasonably withheld or delayed, to adjust and compromise any loss or
damage; provided, however, that if such loss or damage does not exceed Three
Hundred Thousand Dollars ($300,000), and provided no Event of Default exists
hereunder, Mortgagor shall have the right to so adjust and compromise without
Mortgagee's consent. Subject to the provisions of Sections 9, 10, and 11 hereof,
such proceeds or awards shall be applied first toward reimbursement of all
reasonable costs and expenses of Mortgagee in collecting said proceeds or
awards, then toward payment of the Indebtedness or any portion thereof then
outstanding, in whatever order Mortgagee may elect, or Mortgagee may, at its
option, apply said insurance proceeds or condemnation awards in whole or in part
toward restoration of the Security for which such insurance proceeds or
condemnation awards shall have been paid. Any insurance proceeds or condemnation
awards received by Mortgagee on account of a loss or damage to, or taking of,
the Security shall, until the same are applied by Mortgagee as aforesaid, be
held by Mortgagee in an interest-bearing account, with all interest and other
income earned thereon to accrue to Mortgagor's benefit (except as set forth in
the next following sentence of this Section 8); and such proceeds or awards
shall be invested at Mortgagor's direction in the investments permitted under
the Tax Escrow Agreement, unless an Event of Default exists hereunder, in which
event Mortgagee
Page 26
<PAGE>
shall direct such investments. Notwithstanding the foregoing, interest on such
proceeds and awards only shall be payable if Mortgagee and Mortgagor make
arrangements for a mutually acceptable third party to hold such proceeds and
awards and to invest the same pursuant to an agreement reasonably acceptable to
Mortgagee; if Mortgagee itself holds such proceeds and awards, Mortgagee shall
have no obligation to pay interest thereon. The income earned in respect of such
proceeds or awards shall be added thereto, and shall be held and applied by
Mortgagee in the same manner as provided for herein with respect to the proceeds
or awards themselves.
In the event of foreclosure of this Mortgage or other transfer of
title to the Security in lieu of foreclosure, all right, title, and interest of
Mortgagor in and to any insurance policy, or premiums or payments of proceeds or
awards in satisfaction of claims or any other rights thereunder then in force,
shall pass to the purchaser or grantee notwithstanding the amount of any bid at
such foreclosure sale. Nothing contained herein shall prevent the accrual of
interest as provided in the Note on any portion of the principal balance due
under the Note until such time as the insurance proceeds or condemnation awards
are actually received and applied to reduce the principal balance outstanding.
Page 27
<PAGE>
9. Restoration Following Fire and Other Casualty or Condemnation. In the
event of damage to the Security by reason of fire or other hazard or casualty,
Mortgagor shall give prompt written notice thereof to Mortgagee and (subject to
the following provisions) shall proceed with reasonable diligence to perform
repair, replacement and/or rebuilding work (hereinafter referred to as the
"Work") to restore the Security to substantially its condition prior to such
damage in compliance in all material respects with all legal requirements,
provided that Mortgagee makes insurance proceeds available therefor. In the
event of a taking by power of eminent domain or conveyance in lieu thereof
("condemnation"), if restoration is feasible as reasonably determined by
Mortgagee, then Mortgagor (subject to the following provisions) shall proceed
with reasonable diligence to perform such restoration (also referred to as the
"Work"), provided that Mortgagee makes the condemnation awards available
therefor. Before commencing the Work, Mortgagor shall comply with the following
requirements if the cost of the Work exceeds Three Hundred Thousand Dollars
($300,000):
a. Mortgagor shall furnish to Mortgagee complete plans and
specifications for the Work, for Mortgagee's approval, which approval shall not
be unreasonably withheld. Said plans and specifications shall bear the signed
approval thereof by an architect reasonably satisfactory to Mortgagee and shall
be
Page 28
<PAGE>
accompanied by the architect's signed estimate, bearing the architect's seal, of
the entire cost of completing the Work.
b. Mortgagor shall furnish to Mortgagee certified copies of all
permits and approvals required by law in connection with the commencement and
conduct of the Work.
c. Mortgagor shall furnish to Mortgagee, prior to the commencement of
the Work, a surety bond for or guaranty of completion of and payment for the
Work, which bond or guaranty shall be in form satisfactory to Mortgagee and
shall be signed by a surety or sureties, or guarantor or guarantors, as the case
may be, who are reasonably acceptable to Mortgagee, and in an amount not less
than the architect's estimate of the entire cost of completing the Work, less
the amount of insurance proceeds or condemnation awards, if any, then held by
Mortgagee and which Mortgagee shall have elected or shall be required to apply
toward restoration of the Security as provided in Section 10 hereof.
If the cost of the Work exceeds Three Hundred Thousand Dollars
($300,000), Mortgagor shall not commence any of the Work until Mortgagor shall
have complied with the above requirements, and thereafter Mortgagor shall
perform the Work diligently (subject to delays caused by events of force
majeure) and in good
Page 29
<PAGE>
faith substantially in accordance with the plans and
specifications referred to in subsection (a) above.
If, as provided in Section 10 hereof, Mortgagee shall have elected or
is required to apply any insurance proceeds or condemnation awards toward repair
or restoration of the Security, then so long as the Work is being diligently
performed (subject to delays caused by events of force majeure) by Mortgagor in
accordance with the provisions of this Mortgage, Mortgagee shall disburse such
insurance proceeds or condemnation awards to Mortgagor from time to time during
the course of the Work in accordance with the following provisions which shall
be applicable if the cost of the Work exceeds $300,000:
A. The Work shall be in the charge of an experienced construction
manager reasonably satisfactory to Mortgagee with the consultation of an
architect or engineer, and before Mortgagor commences any Work, Mortgagee shall
have approved the plans and specifications for the Work to be submitted by
Mortgagor, it being nevertheless understood that, to the extent feasible, said
plans and specifications shall provide for such Work that, upon completion
thereof, the items being repaired or restored shall be at least equal in value
and general utility to their value and general utility prior to the damage,
destruction or condemnation;
Page 30
<PAGE>
B. Each request for payment shall not be made more often than at
thirty (30) day intervals, on seven (7) business days prior notice to Mortgagee,
and shall be accompanied by a certificate from an architect or engineer with
respect to items (i) and (iv) and a certificate from Mortgagor with respect to
items (ii), (iii), (v) and (vi), dated not more than ten (10) days prior to the
application for withdrawal of funds, stating:
(i) that, to the best of its knowledge and belief, based upon
diligent performance under its contract with Mortgagor in accordance
with generally accepted standards of professional knowledge and skill,
all of the Work for which payment is being requested is in place
(except for materials stored off-site with Mortgagee's consent, which
shall not be unreasonably withheld or delayed) and has been completed
substantially in compliance with the approved plans and specifications
and all applicable legal requirements;
(ii) that the sum then requested to be withdrawn has been paid by
Mortgagor and/or is justly due to contractors, subcontractors,
materialmen, engineers, architects or other persons (whose names and
addresses shall be stated) who have rendered or furnished certain
services or materials for the Work and giving a brief
Page 31
<PAGE>
description of such services and materials and the principal
subdivisions or categories thereof and the respective amounts so paid
or due to each of said persons in respect thereof and stating the
progress of the Work up to the date of said certificate;
(iii) that the sum then requested to be withdrawn, plus all sums
previously withdrawn, does not exceed the cost of the Work insofar as
actually accomplished up to the date of such certificate and that the
remainder of the monies held by Mortgagee will be sufficient to pay
for the completion of the Work in full;
(iv) that, to the best knowledge of such architect or engineer,
the remainder of the moneys held by Mortgagee will be sufficient to
pay in full for the completion of the Work;
(v) that no part of the cost of the services and materials
described in the foregoing paragraph (ii) of this Clause B has been or
is being made the basis of the withdrawal of any funds in any previous
or then pending application; and
Page 32
<PAGE>
(vi) that, except for the amounts, if any, specified in the
foregoing paragraph (ii) of this Clause B to be due for services or
materials, there is no outstanding indebtedness known, after due
inquiry, which is then due and payable for work, labor, services or
materials in connection with the Work which, if unpaid, might become
the basis of a vendor's, mechanic's, laborer's or materialman's
statutory or other similar lien upon the Security or any part thereof.
C. Mortgagor shall deliver to Mortgagee reasonably satisfactory
evidence that the Security and every part thereof, and all materials and all
property described in the certificate furnished pursuant to the foregoing Clause
B, are free and clear of all mortgages, liens, charges or encumbrances, except
(a) encumbrances, if any, securing indebtedness due to persons (whose names and
addresses and the several amounts due them shall be stated) specified in said
certificate furnished pursuant to the foregoing Clause B, which encumbrances
will be discharged upon disbursement of the funds then being requested, and (b)
this Mortgage and the other Permitted Encumbrances. Mortgagee shall accept as
satisfactory evidence under this Clause C a certificate of a title insurance
company acceptable to Mortgagee or an endorsement to Mortgagee's existing loan
title policy
Page 33
<PAGE>
insuring the lien of this Mortgage, dated as of the date of the making of
the disbursement, confirming the foregoing.
D. Prior to the final disbursement, if Mortgagee reasonably requests,
Mortgagor shall deliver to Mortgagee a survey of the Security dated as of a date
within ten (10) days prior to the making of such disbursement showing no
encroachments other than those, if any, shown on the survey delivered to
Mortgagee contemporaneously with the execution and delivery of this Mortgage or
otherwise acceptable to Mortgagee.
E. Prior to the first disbursement, Mortgagor shall deliver to
Mortgagee, to Mortgagee's reasonable satisfaction, an opinion of counsel
that the Security, if repaired, replaced and/or rebuilt in accordance with
the approved plans and specifications, would comply with all applicable
zoning, building, and similar land use laws, rules, and regulations.
F. There exists no uncured monetary default under the Loan Documents
and no uncured non-monetary default notice of which has been given by Mortgagee
to Mortgagor under any of the Loan Documents.
Page 34
<PAGE>
Mortgagee at its option may waive any of the foregoing requirements.
Upon compliance by Mortgagor with the foregoing Clauses A, B, C, D, E
and F (except for such requirements, if any, as Mortgagee at its option may
have waived), Mortgagor shall, to the extent of the insurance proceeds or
condemnation award, if any, which Mortgagee shall have elected or shall be
required to apply to restoration of the Security, pay or cause to be paid
to the persons named in the certificate furnished pursuant to the foregoing
Clause B, the respective amounts stated in said certificate to be due them
less a retainage amount of 10% of the total contract price prior to 50%
completion of the Work or such other retainage (or without retainage)
("Retainage") as shall be provided for in the applicable contract(s)
approved by Mortgagee, which approval shall not be unreasonably withheld;
and Mortgagee shall pay to Mortgagor the amounts stated in said certificate
to have been paid by Mortgagor less Retainage.
Upon completion of the Work, if the cost thereof exceeds Three Hundred
Thousand Dollars ($300,000), in addition to the requirements of the
foregoing Clauses A, B, C, D, E and F, Mortgagor shall promptly deliver to
Mortgagee:
Page 35
<PAGE>
(a) A written certificate of the architect or engineer that the Work
has been fully completed in a good and workmanlike manner substantially in
accordance with the approved plans and specifications;
(b) An endorsement to Mortgagee's title insurance policy reasonably
acceptable to Mortgagee insuring the Security against mechanics' and
materialmen's liens;
(c) A certificate by Mortgagor in form and substance reasonably
satisfactory to Mortgagee, listing all costs and expenses in connection
with the completion of the Work and the amount paid by Mortgagor with
respect to the Work; and
(d) A temporary certificate of occupancy and all other applicable
certificates, licenses, consents and approvals issued by governmental
agencies or authorities with respect to the Security and (if obtainable) by
the appropriate Board of Fire Underwriters or other similar bodies acting
in and for the locality in which the Security is situated, provided further
that within thirty (30) days after completion of the Work, Mortgagor shall
obtain and deliver to Mortgagee a permanent certificate of occupancy for
the Security or affected portions thereof.
Page 36
<PAGE>
Upon receipt of the foregoing items, Mortgagee shall pay any Retainage
still held by Mortgagee to Mortgagor.
If upon completion of the Work there shall be insurance proceeds or
condemnation awards held by Mortgagee over and above the amounts withdrawn
pursuant to the foregoing provisions plus undisbursed Retainage, then, if an
Event of Default exists, Mortgagee may retain such proceeds or awards and apply
the same in reduction of the Indebtedness in whatever order Mortgagee may elect,
and if no Event of Default exists, Mortgagee shall pay over such proceeds or
awards to Mortgagor.
10. Disposition of Condemnation or Insurance Proceeds. If such proceeds
exceed Three Hundred Thousand Dollars ($300,000), Mortgagee, in its absolute
discretion (except as hereinafter provided), may decide whether and to what
extent, if any, proceeds of insurance or condemnation will be made available to
Mortgagor for repair or restoration of the Security, but Mortgagor shall effect
such repair or restoration as set forth above provided Mortgagee makes such
proceeds available for that purpose. Notwithstanding the foregoing, Mortgagee
agrees to make insurance or condemnation proceeds available to Mortgagor for
repair or restoration provided:
Page 37
<PAGE>
(i) The damage to the Improvements or the value of the taking does
not exceed sixty percent (60%) of the replacement cost thereof,
and, in the case of a condemnation, the portion of the Security
not taken by condemnation has not, in Mortgagee's reasonable
opinion, been rendered economically nonviable by the taking;
(ii) There exists no uncured non-monetary default of which notice has
been given by Mortgagee to Mortgagor and no uncured monetary
default under the Note or any other Loan Documents;
(iii) Mortgagor can demonstrate to Mortgagee's satisfaction that
Mortgagor has the financial ability (through rent insurance or
otherwise) to make all scheduled payments when due under the Loan
Documents during repair or restoration;
(iv) In the case of a casualty, the damage to the Real Property can be
fully restored at least two months prior to the Maturity Date;
(v) In the case of condemnation, sufficient parking remains, and the
operation of the Security will not, in
Page 38
<PAGE>
Mortgagee's reasonable opinion, be materially and adversely
affected;
(vi) The proceeds are released under the escrow/construction funding
arrangements specified in Section 9 hereof;
(vii) Annual income from leases in place and approved (or deemed
approved) by Mortgagee (which will include, for purposes hereof,
leases for which Mortgagee's approval is not required hereunder)
that will survive restoration provide coverage of at least 1.40
times the annual debt service (interest and, if applicable,
principal) on the Loan; and
(viii) The Work will return the Improvements to substantially the
size, design, and utility as existed immediately before the
casualty.
If Mortgagee elects not to, and is not required to, make the proceeds
available for repair or restoration, then such proceeds shall be applied to
reduce the Indebtedness in whatever order Mortgagee may elect. Any application
of such proceeds to the principal indebtedness evidenced by the Note shall be at
par and shall cause a pro rata reduction in payments of interest and, if
applicable, principal, under the Note; provided, however, that
Page 39
<PAGE>
if there exists an Event of Default, the prepayment fee as provided in the Note
shall also be due. Prepayment of the loan following Mortgagee's application to
principal reduction of insurance or condemnation proceeds shall be permitted
without payment of a prepayment fee, provided there then exists no Event of
Default under the Loan Documents and provided further that (i) such prepayment
must be made within one hundred eighty (180) days of Mortgagee's application to
principal reduction; (ii) Mortgagor keeps Mortgagee informed of its progress in
seeking replacement financing; and (iii) Mortgagor provides Mortgagee with
thirty (30) days advance notice of prepayment.
11. Fire and Other Casualty; Self-Help. Subject to delays caused by events
of force majeure: If within one hundred eighty (180) days after the occurrence
of any damage to the Security or the condemnation of any portion of the Security
in excess of Three Hundred Thousand Dollars ($300,000), Mortgagor shall not have
submitted to Mortgagee for Mortgagee's approval the plans and specifications for
the Work, or shall not have obtained or be diligently seeking to obtain approval
of such plans and specifications from all governmental authorities whose
approval is required, or if, after such plans and specifications are approved by
Mortgagee and all such governmental authorities, Mortgagor shall fail to
promptly commence such Work, or if thereafter Mortgagor fails to perform the
Work diligently or is
Page 40
<PAGE>
delinquent in the payment to mechanics, materialmen or others of the costs
incurred in connection with the Work (provided that Mortgagee shall have made
proceeds available therefor), or, if Mortgagor shall fail to complete the Work
promptly, then, in addition to all other rights herein set forth, and after
giving Mortgagor twenty (20) days written notice of the nonfulfillment of one or
more of the foregoing conditions and if such conditions remain uncured,
Mortgagee, or, following an Event of Default, any lawfully appointed receiver of
the Security, may at its option, perform or cause the Work to be performed, and
may take such other steps as it deems advisable to perform the Work, and may
enter upon the Security for any of the foregoing purposes, and Mortgagor hereby
waives (to the extent Mortgagor may lawfully do so) any claim against Mortgagee
or such receiver arising out of anything done by Mortgagee or such receiver
pursuant to this Section (other than claims arising by reason of the gross
negligence or willful misconduct of Mortgagee or such receiver) and Mortgagee
may apply insurance proceeds (without the need to fulfill the requirements of
Section 9 hereof) to pay for restoration costs or to reimburse Mortgagee and/or
such receiver for all amounts expended or incurred by them, respectively, in
connection with the performance of the Work, and any excess costs incurred by
Mortgagee shall be paid by Mortgagor to Mortgagee upon demand with interest at
the Default Rate (hereinafter
Page 41
<PAGE>
defined) from the date of demand and such payment shall be secured by the lien
of this Mortgage.
12. Rent Insurance Proceeds. If there shall be no Event of Default under
the Loan Documents, then all rent insurance proceeds shall be paid directly to
Mortgagor. If there exists an Event of Default, then such rent insurance
proceeds shall be paid to Mortgagee and may be applied by Mortgagee, at
Mortgagee's option, to the payment of the Indebtedness in whatever order
Mortgagee may elect.
13. Intentionally Omitted.
14. Repair; Alterations; Waste; Environmental. Mortgagor shall keep all of
the Security in good and substantial repair, subject to the provisions of
Section 9, to the extent applicable, and expressly agrees that it will neither
permit nor commit any waste upon the Security, nor do any act or suffer or
permit any act to be done to diminish the value of the Security or whereby the
lien hereof may be impaired. Mortgagor shall comply in all material respects
with all zoning laws, building codes, subdivision laws, environmental laws, and
other laws, ordinances, rules and regulations made or promulgated by any
government or municipality, or by any agency thereof or by any other lawful
authority, which are now or may hereafter become applicable to
Page 42
<PAGE>
the Security, including but not limited to the Americans with Disabilities Act
of 1990 ("ADA"). Mortgagor shall use all reasonable efforts to cause tenants of
the Real Property to comply with their lease requirements regarding ADA. Without
limiting the foregoing, Mortgagor shall comply in all material respects (within
the time schedule set forth therein) with the ADA Compliance Plan, prepared by
Mortgagor, dated December 27, 1995, previously submitted to and approved by
Mortgagee. Mortgagor agrees not to initiate or acquiesce in any zoning variance
or reclassification, without Mortgagee's prior written consent. Mortgagor shall
not construct any additional building or buildings or make any other material
improvements on the Land nor alter, remove or demolish any building or other
Improvements on the Land in any material respect, without the prior written
consent of Mortgagee (which consent shall not be unreasonably withheld or
delayed), except for tenant improvement work in accordance with leases approved
(or deemed approved) by Mortgagee or which Mortgagee is not required to approve
pursuant to Section 22 of this Mortgage. Mortgagor shall at all times comply in
all material respects with any restrictive covenants applicable to the Security.
Mortgagor shall repair or restore any building now or hereafter under
construction on the Security and complete the same within a reasonable period of
time, subject to provisions of Section 9, to the extent applicable.
Page 43
<PAGE>
If Mortgagor suffers or permits any Event of Default to exist under
this Section 14, or in the event of an emergency, Mortgagee, or a lawfully
appointed receiver of the Security, following an Event of Default, at
Mortgagee's option and from time to time, may perform, or cause to be performed,
any and all repairs and such other work as it deems necessary to bring the
Security into compliance with the provisions of this Section and may enter upon
the Security for any of the foregoing purposes, and Mortgagor hereby waives (to
the extent Mortgagor may lawfully do so) any claim against Mortgagee and/or such
receiver arising out of such entry or out of any other act carried out pursuant
to this Section, except for claims arising out of the gross negligence or
willful misconduct of Mortgagee or such receiver. Mortgagor shall upon demand
repay to Mortgagee and such receiver, with interest at the Default Rate, from
the date of such demand, all amounts expended or incurred by them, respectively,
in connection with any action taken pursuant to this Section, and such repayment
shall be secured by the lien of this Mortgage.
Mortgagor represents and warrants that there are and covenants that at
all times (except in the event of repairs or restoration, where temporary
limitations may occur) there will be located on the Real Property capacity for
the parking of at least 575 cars, which number may be subject to reduction (but
not below lease requirements) in the event that legal requirements
Page 44
<PAGE>
applicable to the Real Property necessitate a reduction in such
capacity.
Mortgagor represents and warrants that, except as disclosed to
Mortgagee in the Environmental Report (as defined and listed on Exhibit A to the
Environmental Indemnification Agreement, as defined in Section 15 hereof),
Mortgagor has not used and will not use and, to the best of Mortgagor's
knowledge, no prior owner or current or prior tenant, subtenant, or other
occupant of all or any part of the Security has used or is using Hazardous
Materials (hereinafter defined) on, from or affecting the Security in any manner
that violates the Environmental Laws (hereinafter defined); that, to the best of
Mortgagor's knowledge, except as set forth in the Environmental Report, no
Hazardous Materials have been disposed of on or migrated onto the Security in
violation of Environmental Laws and that Mortgagor will not permit or suffer any
such violation of the Environmental Laws.
For purposes of this Mortgage, "Hazardous Materials" shall mean and
include those elements, materials, compounds, mixtures, wastes or substances
which are contained in the list of hazardous substances adopted by the United
States Environmental Protection Agency (the "EPA") or the Massachusetts
Department of Environmental Protection ("DEP") or any list of toxic pollutants
Page 45
<PAGE>
designated by Congress or the EPA or DEP, or which are defined as hazardous,
toxic, pollutant, infectious, flammable or radioactive by any of the
Environmental Laws and whether or not included in such lists, shall be deemed to
include all elements, materials, compounds, mixtures, wastes and substances
containing petroleum, asbestos, chlorinated hydrocarbons, or polychlorinated
biphenyls ("PCB's").
For purposes of this Mortgage, "Environmental Laws" shall mean and include
any Federal, Massachusetts or local statute, law, ordinance, code, rule,
regulation, order, or decree (i) regulating or relating to protection of human
health or the environment insofar as the same concern the Disposal (hereinafter
defined) of any Hazardous Materials, as now or at any time hereafter in effect,
or (ii) regulating or imposing liability or standards of conduct concerning the
Disposal of Hazardous Materials, as now or at any time hereafter in effect, or
both, including, without limitation, the Massachusetts Oil and Hazardous
Material Release Prevention and Response Act, as amended, M.G.L. C. 21E
("Chapter 21E"), the Massachusetts Hazardous Waste Management Act, as amended,
M.G.L. C. 21C, the Federal Comprehensive Environmental Response, Compensation
and Liability Act, as amended, 42 U.S.C. SS.9601 et. seq. ("CERCLA"), the
Superfund Amendments and Reauthorization Act, 42 U.S.C. SS.9601 et. seq., the
Federal Oil Pollution Act of 1990, 33 U.S.C.
Page 46
<PAGE>
SS.2701, et. seq., the Federal Toxic Substances Control Act, 15 U.S.C.
SS.2601 et. seq., the Federal Resource Conservation and Recovery Act, as
amended, 42 U.S.C. SS.6901 et. seq., the Federal Hazardous Materials
Transportation Act, 49 U.S.C. SS.1801 et. seq., the Federal Clean Air Act, 42
U.S.C. S.7401 et. seq., the Federal Water Pollution Control Act, 33 U.S.C.
S.1251 et. seq., the River and Harbors Act of 1899, 33 U.S.C. SS.401 et.
seq., and all laws, statutes, rules, ordinances and regulations of the EPA, or
any other local, state or federal department, board, or agency, or any other
agency or governmental board or entity having jurisdiction over the Security, as
any of the foregoing have been, or are hereafter from time to time, amended,
reauthorized, replaced, supplemented or superseded.
Mortgagor represents and warrants that, to the best of Mortgagor's
knowledge, except as set forth in the Environmental Report, no presence,
release, spill, transportation, migration, generation, treatment, processing,
storage, use, or disposal of any Hazardous Materials has occurred or is
occurring on, in, under, above or emanating from any portion of the Security by
any person or entity or other source, whether related or unrelated to Mortgagor,
in violation of any Environmental Law (collectively a "Disposal") and that
Mortgagor will not permit or suffer any such Disposal of Hazardous Materials on
the Security or permit any lien under Chapter 21E or CERCLA or any other
Environmental Law
Page 47
<PAGE>
to attach to the Security or any portion thereof or interest therein. Mortgagor
represents and warrants that, except to the extent disclosed in the
Environmental Reports, it has not received any notice from the DEP (or its
predecessor, the Massachusetts Department of Environmental Quality Engineering),
the EPA or any other governmental agency or any tenant of the Security with
regard to such Hazardous Materials and has received no notice that the
environmental and ecological condition of the Security is in violation of any
Environmental Law.
Mortgagor represents and warrants that, to the best of Mortgagor's
knowledge and belief, except as disclosed in the Environmental Report, the
Security does not contain any asbestos- containing material in friable form, and
there is no current airborne contamination of the Security by asbestos fiber.
Mortgagor represents and warrants that, except as set forth in the
Environmental Report, it has not received any notice that the soil, surface
water, or ground water of or on the Security are not free from any spills of
Hazardous Materials, and Mortgagor has no knowledge of any such spill except as
set forth in the Environmental Report.
Notwithstanding anything to the contrary contained in this Mortgage or
the Environmental Indemnification Agreement,
Page 48
<PAGE>
Mortgagee acknowledges that during the ordinary course of office building and
parking garage operations, there are some Hazardous Materials that are being
used and stored on the Real Property by Mortgagor and Mortgagor's tenants.
Mortgagor hereby represents and warrants to Mortgagee that, to the best of its
knowledge, (i) such Hazardous Materials have not been used or stored in
violation of Environmental Laws in any material respect, and (ii) such Hazardous
Materials are present in quantities which are not known to pose a health or
safety hazard to occupants, employees or visitors to the Real Property or to any
adjacent property; and Mortgagor further covenants and agrees that no such
Hazardous Materials shall be allowed to be present on the Real Property other
than such ordinary use and incidental storage of Hazardous Substances as are
reasonably and customarily necessary for the regular and ordinary operation and
maintenance of the Real Property as a first-class office building and parking
garage, and in all events in compliance with applicable Environmental Laws.
In the event that any investigation, site monitoring, containment,
clean-up, removal, restoration or other remedial work of any kind or nature (the
"Remedial Work") is required by any applicable Environmental Law, any judicial
order or by any governmental entity because of, or in connection with, the
current or future presence, suspected presence, release or suspected release of
a Hazardous Material in or about the air,
Page 49
<PAGE>
soil, ground water, surface water or soil vapor at, on, about, under or within
the Security (or any portion thereof), Mortgagor shall within thirty (30) days
after written demand for performance thereof by Mortgagee (or such shorter
period of time as may be required under any applicable Environmental Law, court
order or governmental direction), commence and thereafter diligently prosecute
to completion, all such required Remedial Work so as to restore the Security to
compliance with all applicable Environmental Laws, court orders and governmental
directions. All such Remedial Work shall be performed by contractors approved
(which approval shall not be unreasonably withheld or delayed) in advance by
Mortgagee, and under the supervision of a consulting engineer approved (which
approval shall not be unreasonably withheld or delayed) by Mortgagee. All costs
and expenses of such Remedial Work shall be paid by Mortgagor including, without
limitation, Mortgagee's reasonable attorneys' fees, paralegal fees and costs
incurred in connection with monitoring or review of such Remedial Work. In the
event Mortgagor shall fail to timely commence and thereafter prosecute to
completion such Remedial Work, and such failure continues for thirty (30) days
after notice by Mortgagee to Mortgagor (or such shorter period of time as may be
required under any applicable Environmental Law, court order or governmental
direction or by the exigencies of the situation), Mortgagee may, but shall not
be required to, cause such Remedial Work to be performed and all
Page 50
<PAGE>
costs and expenses thereof, or incurred in connection therewith, shall become
part of the Indebtedness.
Mortgagor shall provide Mortgagee with prompt written notice (a) upon
Mortgagor's becoming aware of any alleged, suspected or actual Disposal of any
Hazardous Materials upon, in, under, or emanating from the Security in violation
of Environmental Laws; (b) upon Mortgagor's receipt of any notice from any
federal, state, municipal or other governmental agency or authority in
connection with any Hazardous Materials located upon, in, or under or emanating
from the Security; and (c) upon Mortgagor's obtaining knowledge of any
incurrence of expense by any governmental agency or authority in connection with
the assessment, containment or removal of any Hazardous Materials located upon,
in, or under or emanating from the Security.
Mortgagor hereby authorizes Mortgagee and its agents and consultants
at any time and from time to time, upon reasonable advance notice to Mortgagor,
to enter upon the Security to conduct an environmental audit of the
Improvements, soils and ground water, including subsurface investigation, in the
event that Mortgagee has reason to believe that a Disposal of Hazardous
Materials in violation of any Environmental Laws has occurred or when a change
of or addition to the Environmental Laws makes inspection reasonable, the cost
of such audit to be added to the
Page 51
<PAGE>
Indebtedness. Mortgagee shall provide Mortgagor with an estimate of the cost of
any such audit and shall conduct such audit in a manner intended to minimize
interference with the operations of the Security.
15. Environmental Indemnification. Mortgagor and BPLP (collectively, the
"Indemnitors") have entered into an Environmental Indemnification Agreement of
even date herewith in favor of Mortgagee (the "Environmental Indemnification
Agreement"). The performance of the duties and obligations of the Indemnitors
under the Environmental Indemnification Agreement shall be part of the
Indebtedness secured by this Mortgage. Mortgagor's obligations under the
Environmental Indemnification Agreement are hereby incorporated into this
Mortgage by reference. Mortgagee's rights and remedies under the Environmental
Indemnification Agreement are intended to be in addition to and not in
substitution for any rights and remedies Mortgagee may have under this Mortgage
or as may generally be available to Mortgagee at law or in equity.
16. Independence of Security. Mortgagor shall not by act or omission permit
any building or other improvement on any premises not subject to the lien of
this Mortgage to rely on the Security or any part thereof or any interest
therein to fulfill any municipal or governmental requirement, and Mortgagor
hereby
Page 52
<PAGE>
assigns to Mortgagee any and all rights to give consent for all or any portion
of the Security or any interest therein to be so used. Similarly, no part of the
Security shall rely on any premises not subject to the lien of this Mortgage or
any interest therein to fulfill any governmental or municipal requirement.
Mortgagor shall not by act or omission impair the integrity of the Real Property
as a single zoning lot, and as one or more complete tax parcels separate and
apart from all other premises. Any act or omission by Mortgagor which would
result in a violation of any of the provisions of this Section shall be void.
17. No Other Liens. Mortgagor shall not consent, agree to, or permit any
mortgage, lien, or security interest upon or affecting the Security or any part
thereof except as granted or permitted in this Mortgage and any other lien or
security interest granted to Mortgagee. Normal and customary equipment leases
and purchase money financing obtained to purchase new Personal Property, in
either case entered into in the ordinary course of Mortgagor's business, shall
not constitute a violation of the provisions of this Section 17.
Mortgagor will, subject to Mortgagor's contest rights set forth in
Section 4 above, which shall be applicable hereto, mutatis mutandis, promptly
pay and discharge any and all amounts which are now or hereafter become liens
against the Security
Page 53
<PAGE>
whether or not superior to the lien hereof or to any assignment
of rents and leases given to Mortgagee.
Mortgagor will not, without the express prior written consent of
Mortgagee, conduct any business or acquire any properties except for business
and properties relating to the Security. Mortgagor is and shall at all times
while this Mortgage is in effect remain a single purpose entity, with its only
business being the ownership and operation of the Security. Mortgagor will not
incur any debt and will not guarantee the debt of any other person or party
except the Affiliate Subordinate Financing (as hereinafter defined),
indebtedness incurred pursuant to this Mortgage and any other unsecured
indebtedness incurred by Mortgagor to obtain funds to invest in the Security.
18. Management. During the term of the loan secured hereby, the Security
shall at all times be operated and managed by an entity controlled by BPLP or an
entity approved by Mortgagee under a written management agreement approved in
advance in writing by Mortgagee and reasonably acceptable to Mortgagee in form
and substance. Mortgagee hereby approves Beacon Property Management, L.P. or
Beacon Property Management Corporation, each being an affiliate of BPLP, as
management agent for the Security. No change in such management (other than
substitution of Beacon Property Management, L.P. for Beacon Property Management
Page 54
<PAGE>
Corporation, or visa versa) shall be made without the prior written approval of
Mortgagee, and any attempted change in management without Mortgagee's consent
shall be void. Mortgagee's approval of the management of the Security and the
terms of any management agreement shall not be unreasonably withheld,
conditioned or delayed. Any manager must have the expertise, competence and
capacity to manage first-class facilities such as the Real Property and have had
actual experience managing either at least (i) One Million (1,000,000) square
feet of similar office building space in the greater Boston area, or (ii) Two
Million (2,000,000) square feet of similar office building space in the United
States. Each management agreement relating to the Security (a) may not be
modified or amended in any material respect and any successor agreement may not
be entered into or any management company appointed (other than as permitted
above) without Mortgagee's prior written approval; and (b) must be
unconditionally subordinate by its terms to the lien of this Mortgage and
terminable upon foreclosure of this Mortgage (or a deed in lieu of foreclosure
of this Mortgage) without termination fee or penalty or other similar charge.
The foregoing approval rights of Mortgagee also shall apply to the
management and operation of the parking garage. The parking garage shall not be
managed by a third party garage
Page 55
<PAGE>
operator without Mortgagee's consent, not to be unreasonably withheld or
delayed. Mortgagee hereby approves Standard Parking as an acceptable third party
garage operator.
19. Ground Lease. Mortgagor hereby represents and warrants to Mortgagee
that there exist no ground leases relating to or executed in connection with the
Security.
20. Sidewalks, Municipal Charges. Mortgagor will promptly pay and discharge
any and all license fees and similar charges, with penalties and interest
thereon, which may be imposed by the municipality in which the Security is
situated, for the use of vaults, chutes, areas and other space beyond the lot
line and under or abutting the public sidewalks in front of or adjoining the
Security, and Mortgagor will promptly cure any violation of law and comply with
any order of such municipality respecting the repair, replacement or condition
of the sidewalk or curb in front of or adjoining the Security, and in default
thereof Mortgagee may, upon thirty (30) days notice to Mortgagor (or such
shorter notice period as may be required in order to comply with legal
requirements), pay any and all such license fees or similar charges, with
penalties and interest thereon, and the charges of the municipality for such
repair or replacement, and any amount so paid or advanced by Mortgagee and all
costs and expenses incurred in connection therewith (including, without
limitation,
Page 56
<PAGE>
attorneys' fees), with interest thereon at the Default Rate from the date of
demand, shall be a demand obligation of Mortgagor to Mortgagee, and, to the
extent permitted by law, shall be added to the Indebtedness and shall be secured
by the lien of this Mortgage. The provisions of this Section 20 are subject to
Mortgagor's contest rights set forth in Section 4 above, which shall be
applicable hereto, mutatis mutandis.
21. Assignment of Rents and Leases. As further security for the payment of
the Indebtedness, Mortgagor hereby presently, irrevocably, absolutely and
unconditionally transfers, assigns and sets over unto Mortgagee all of its
right, title and interest in and to all present and future leases, lease
termination agreements, license agreements, concession agreements, parking
management agreements and other occupancy agreements of any nature, oral or
written, of the Land and space in the Improvements, together with all
modifications, supplements, extensions, renewals and replacements thereof now
existing or hereafter made, and also together with the rights to sue for,
collect and receive all rents, prepaid rents, additional rents, royalties,
security deposits, damages payable upon default by tenant, or other sums in any
of said leases provided to be paid to the lessor thereunder, profits, income,
license fees, concession fees and issues of the Security (collectively,
"Rents"), to be applied by Mortgagee in payment of the
Page 57
<PAGE>
Indebtedness and also together with any and all guaranties of the obligations of
the tenants thereunder and the rights of Mortgagor to receive, hold and apply
all bonds and security in all of said leases provided to be furnished to the
lessor thereunder, and also together with the rights of Mortgagor to enforce any
and all of the agreements, terms, covenants and conditions in all of said leases
provided and to give notices thereunder. Provided, however, that until an Event
of Default occurs hereunder, Mortgagor shall have a revocable license to collect
the Rents and to exercise and enjoy all of the aforesaid rights, privileges and
benefits. Mortgagee may receive and collect the Rents personally or through a
receiver upon the occurrence of an Event of Default, and during the pendency of
any foreclosure proceeding and during any redemption period. Upon the occurrence
of an Event of Default, Mortgagor agrees to consent to a receiver if this is
believed necessary or desirable by Mortgagee to enforce its rights under this
Section. Notwithstanding anything contained herein to the contrary, if all
outstanding Events of Default are subsequently cured or waived prior to
Acceleration of Maturity (as defined in the Note), then Mortgagor automatically
shall have the same revocable license to collect the Rents and enjoy all of the
aforesaid rights, privileges, and benefits.
Mortgagor shall not otherwise assign or pledge, or contract, expressly
or by implication, to assign or pledge, any
Page 58
<PAGE>
lease of the Land or space in the Improvements or the rights to sue for, collect
and receive any Rents, or the rights to receive, hold and apply any bonds and
security in any of said leases provided to be furnished to the lessor
thereunder, or the rights to enforce any of the agreements, terms, covenants or
conditions of said leases or to give notices thereunder, unless in each instance
the written consent thereto of Mortgagee be first obtained.
Nothing in this Mortgage shall be construed to obligate Mortgagee,
expressly or by implication, to perform any of the covenants of Mortgagor as
lessor under any of the leases hereinabove assigned or to pay any sum of money
or damages therein provided to be paid by the lessor.
If, notwithstanding the occurrence of an Event of Default, Mortgagee
shall from time to time suffer or permit Mortgagor to sue for, collect or
receive any Rents, or to receive, hold or apply any bonds or security under any
of the leases hereinabove assigned, or to enforce any of the agreements, terms,
covenants or conditions thereunder or to give notices under said leases, after
the occurrence of an Event of Default, neither such sufferance nor permission
shall constitute a waiver or relinquishment by Mortgagee of the rights hereunder
and hereby assigned to Mortgagee with respect to any subsequent Rents, or
Page 59
<PAGE>
with respect to any subsequent receipt, holding or application of bonds or
security or any subsequent enforcement of such agreements, terms, covenants or
conditions or any subsequent notices; provided, however, notwithstanding the
foregoing, it is agreed by Mortgagee that if all outstanding Events of Default
are cured or waived prior to Acceleration of Maturity, then Mortgagor
automatically shall have the same revocable license to collect the Rents and to
otherwise deal with the leases as aforesaid.
22. Future Leases. Mortgagor will not hereafter make any lease to any
tenant or amend, modify, terminate (except for termination for default by the
tenant and then only if the Real Property is still owned by Center Plaza
Associates Limited Partnership and no Event of Default exists hereunder), accept
surrender of, renew or extend any lease (other than a renewal or extension to
which a tenant is entitled under the terms of an existing lease or contained in
a lease that is subsequently approved or deemed approved by Mortgagee),
affecting the Security unless Mortgagee shall first consent thereto in writing,
which consent shall not be unreasonably withheld.
Notwithstanding anything to the contrary contained herein, the aforesaid
approval requirements shall not apply with respect to (i) leases or amendments
to leases covering in each instance no more than 15,000 square feet of net
rentable area on the Real
Page 60
<PAGE>
Property, or (ii) non-default lease terminations unapproved by Mortgagee with
respect to leases covering in each instance no more than 15,000 square feet of
net rentable area and aggregating not more than 45,000 net rentable square feet
per calendar year. A lease termination incident to relocation of tenants to
other space within the Real Property shall not count toward said 45,000 net
rentable square feet per calendar year, except that any net loss in occupied
space between the old space and the new space shall be counted. Further, if a
terminated tenant is replaced with other tenant(s) in substantially the same
premises within sixty (60) days of termination, such termination shall not count
toward said 45,000 net rentable square feet per calendar year if, and only if,
in Mortgagor's good faith judgment, the economic condition of the Real Property,
after giving effect to said particular replacement, remains the same or better
than the prior situation; provided, however, that any net loss in occupied space
between the terminated tenant and the new tenant(s) shall be counted.
In addition, with respect to any new lease, amendment to lease or a
non-default lease termination as described in the immediately preceding
paragraph, all of the following conditions must be met:
Page 61
<PAGE>
(a) Mortgagor furnishes Mortgagee with certified copies of all such
leases or amendments or terminations promptly following the execution of
same by all the parties thereto, together with a detailed written breakdown
of any and all costs to be incurred in connection therewith;
(b) The Security must continue to be owned by Center Plaza Associates
Limited Partnership;
(c) Mortgagor shall not be in default under the Note, this Mortgage or
any other Loan Document beyond any applicable grace or cure period;
(d) All such leases or amendments or terminations must be entered into
in the ordinary course of business, and all such leases or amendments must
be (i) prepared and executed on the standard lease or amendment form
approved by Mortgagee, and (ii) consistent with such approved lease or
amendment form, except that minor and customary changes which do not
materially affect the value of the lease or the protections and assurances
granted to Mortgagee thereunder may be made;
(e) Any such lease or amendment or termination must be with a bona
fide arms-length third-party tenant (unaffiliated with Mortgagor or BPLP)
and negotiated in good faith;
Page 62
<PAGE>
(f) No such lease or amendment shall provide an ownership interest in
the Security to the tenant; and
(g) Any such lease or amendment must comply with the New Lease and
Amendment Requisites (defined hereinbelow).
In circumstances where Mortgagee's prior consent is required to a lease,
lease amendment, termination or other leasing matter, Mortgagee's consent shall
be deemed to have been given unless, within ten (10) business days after
Mortgagee receives copies of the proposed lease, amendment or termination in
final form, together with the written breakdown of costs as required in clause
(a) above (or as to other matters, after Mortgagee's receipt of Mortgagor's
request for approval, together with supporting documentation or information, as
appropriate), Mortgagee advises Mortgagor of its disapproval and the grounds
therefor. Mortgagor's request for Mortgagee's approval under this Section 22
must be accompanied by a notice from Mortgagor highlighted in bold-faced capital
letters stating that Mortgagee's failure to respond within ten (10) business
days will result in Mortgagee's deemed approval as aforesaid. If Mortgagor fails
to provide such notice to Mortgagee, then the automatic approval provision
provided hereinabove shall not be applicable.
Page 63
<PAGE>
In addition to the foregoing, Mortgagor promptly shall furnish to
Mortgagee (i) progress drafts and letters of intent, if any, concerning proposed
leases, and (ii) copies of all default and/or termination notices which
Mortgagor gives to or receives from tenants.
All future leases must expressly state that they are subordinate to
the lien of this Mortgage unless Mortgagee otherwise specifies. Unless otherwise
approved by Mortgagee, each future lease and each future amendment to leases
existing on the date hereof which extends the term by more than one (1) year
(other than pursuant to an extension or renewal option existing as of the date
hereof) must contain provisions that (i) upon notice to tenant by Mortgagee, the
lease shall become superior to the lien of the Mortgage, (ii) the tenant shall
attorn to any purchaser of the Real Property upon foreclosure of this Mortgage,
as amended from time to time, or in the event that a deed is given in lieu of
such foreclosure, and (iii) the tenant shall, upon receipt of notice from
Mortgagee under the separate Assignment of Rents and Leases given by Mortgagor
in favor of Mortgagee of even date herewith, commence paying its rents directly
to Mortgagee (collectively herein referred to as the "New Lease and Amendment
Requisites"). Notwithstanding the foregoing, with respect to future amendments
to leases existing on the date hereof, the New Lease and Amendment Requisites
need
Page 64
<PAGE>
not be met if they are already contained in the lease or the tenant shall have
previously entered into an SNDA (as hereinafter defined) with Mortgagee with
respect to the same lease.
Without limiting the foregoing, Mortgagee hereby reserves the right to
subordinate this Mortgage to any lease subsequently made by recording with the
Registry of Deeds in which this Mortgage is recorded a declaration to that
effect, executed by Mortgagee, which declaration once so recorded shall be
binding upon the tenant under such lease and its successors and assigns.
Mortgagee agrees, as to future leases and lease amendments, if requested to do
so by a tenant, to enter into a so-called subordination, non-disturbance and
attornment agreement ("SNDA"), on Mortgagee's standard form, with only such
changes as Mortgagee in its reasonable discretion agrees to (Mortgagee and
Mortgagor hereby agreeing with each other that they will each negotiate in good
faith with respect to changes to Mortgagee's standard form reasonably requested
by tenants), provided that Mortgagee shall have approved the lease or amendment
with such tenant.
Mortgagor will furnish to Mortgagee a true and complete copy of each
lease, amendment, modification, extension, termination, or renewal of lease,
hereafter made by Mortgagor with respect to the Land or space in the Security,
within ten (10) days after delivery of each such lease, amendment,
Page 65
<PAGE>
modification, extension, termination, or renewal by the parties thereto. After a
tenant takes occupancy, Mortgagor shall also furnish to Mortgagee a true and
complete copy of a letter agreement signed by such tenant confirming the
commencement date and expiration date of its lease, within ten (10) days after
execution and delivery thereof by such tenant and Mortgagor.
Mortgagor will from time to time upon demand of Mortgagee, confirm in
writing the assignment to Mortgagee of any or all leases of the Land and space
in the Improvements, and such written confirmation shall be in substantially the
same form as the Assignment of Rents and Leases of even date herewith given by
Mortgagor to Mortgagee and as shall be necessary to make the same recordable.
If Mortgagor receives an early termination fee from a tenant in excess of
$500,000 in connection with a lease termination agreement, then Mortgagor shall
deposit the entire fee into an interest-bearing escrow account to be established
with a mutually satisfactory escrow agent under a mutually satisfactory escrow
agreement, such escrowed funds to be released to Mortgagor (a) to pay for
leasing-related costs (e.g., tenant improvements, leasing commissions, space
planning, legal-leasing costs, and the like) and other capital improvements, and
(b) to the extent not used under (a) above, to reimburse Mortgagor ratably on a
monthly
Page 66
<PAGE>
basis for the lost rent from the terminated lease. In addition to the foregoing,
if in any calendar year cumulative termination fees exceed $500,000, Mortgagor
shall deposit those fees in excess of $500,000 into an interest-bearing escrow
account described above. Until such escrow agent is selected, such funds shall
be held by an agent of Mortgagee in an interest-bearing account.
23. Mortgagor's Obligations as Lessor. (a) Mortgagor shall, at Mortgagor's
cost and expense, perform in all material respects the obligations on the part
of the lessor to be performed pursuant to the terms of each and every lease or
letting, written or oral, now or hereafter made with respect to the Security or
any part or parts thereof, and shall not suffer or permit to exist any default
(beyond applicable notice and grace periods under said lease) in such
performance on the part of such lessor or permit any event to occur and continue
beyond the expiration of applicable notice and grace periods under the lease
which would give the tenant under any such lease the right to terminate the same
or to offset rent.
(b) Mortgagor shall give Mortgagee immediate notice of the receipt by
Mortgagor of any notice of default from the tenant or its successors or assigns
under a lease, and Mortgagor shall furnish to Mortgagee promptly any and all
information which
Page 67
<PAGE>
Mortgagee may request concerning the performance and observance of all material
covenants, agreements and conditions contained in the leases by the lessor
thereunder to be kept, observed and performed and concerning the compliance with
all terms and conditions of the leases. Mortgagor hereby authorizes Mortgagee
and its representatives, upon reasonable advance notice, to make investigations
and examinations concerning such performance, observance and compliance, and
Mortgagor, upon request, shall promptly deposit with Mortgagee any and all
documentary evidence relating to such performance, observance and compliance and
copies of any and all notices, communications, plans, specifications or other
instruments or documents received or given by Mortgagor in any way relating to
or affecting the leases which may concern or affect the estate of the lessor or
the tenant in or under the leases or in the premises thereby demised.
(c) In the event of any failure by Mortgagor to keep, observe or perform
any covenant, agreement or condition contained in the leases or to comply with
the terms and conditions of the leases, which continues beyond the applicable
notice and grace period contained in the lease, any performance, observance or
compliance by Mortgagee pursuant to this Mortgage on behalf of Mortgagor shall
not remove or waive, as between Mortgagor and Mortgagee, the corresponding Event
of Default under the terms of this Mortgage.
Page 68
<PAGE>
24. Leases; Foreclosure. Any proceedings or other steps taken by Mortgagee
to foreclose this Mortgage, or otherwise to protect the interests of Mortgagee
hereunder, shall not operate to terminate the rights of any present or future
tenant of space in the Improvements, notwithstanding that said rights may be
subject and subordinate to the lien of this Mortgage, unless (subject to the
terms of any SNDA now or hereafter executed by and between Mortgagee and a
particular tenant) Mortgagee specifically elects otherwise in the case of any
particular tenant. The failure to make any such tenant a defendant in any such
foreclosure proceeding and to foreclose such tenant's rights will not be
asserted by Mortgagor or any other defendant in such foreclosure proceeding as a
defense to any proceeding instituted by Mortgagee to foreclose this Mortgage or
otherwise protect the interests of Mortgagee hereunder.
25. Affiliate Subordinate Financing. Mortgagor has heretofore incurred
other indebtedness, in addition to the Indebtedness secured by, inter alia, this
Mortgage, which Mortgagor recognizes and agrees is expressly, absolutely and
unconditionally subordinate to the Indebtedness and which consists of the
following (herein collectively referred to as the "Affiliate Subordinate
Financing"): (i) A loan currently held by BPLP in the aggregate restated
principal amount of $61,000,000.00 (the "First Tier Loan") currently evidenced
by thirteen separate
Page 69
<PAGE>
promissory notes, eleven of which are dated as of June 10, 1993 and two of which
are dated as of November 30, 1994 (collectively, the "First Tier Notes"), and
secured by the Subordinate Secured Loan Documents (defined hereinbelow); (ii) a
loan currently held by NHT in the restated principal amount of $48,060,479.50
(the "Second Tier Loan") currently evidenced by a promissory note executed on
November 30, 1994 and effective as of June 10, 1993 (the "Second Tier Notes")
and secured by the Subordinate Secured Loan Documents; and (iii) an unsecured
loan currently held by BPLP in the restated principal amount of $7,500,000.00
(the "Beacon Loan") currently evidenced by a promissory note dated as of June
10, 1993 (the "Beacon Note").
The term "Subordinate Secured Loan Documents" as used herein shall
mean and include all instruments, documents and agreements evidencing, securing
or in any way relating to the First Tier Loan or the Second Tier Loan, or both,
including, but not limited to, each of the "Loan Documents" (as defined and
described in the Mortgage Assignment (as hereinafter defined and described)).
Mortgagor acknowledges and agrees that, as a condition precedent to
Mortgagee agreeing to make the Loan to Mortgagor, the following transactions are
being implemented, and documents and agreements are being provided for the
benefit of Mortgagee,
Page 70
<PAGE>
contemporaneously herewith: (A) Pursuant to a Subordination of Mortgage and Loan
Documents (the "Mortgage Subordination") of even date herewith, to be recorded
and filed herewith, BPLP has subordinated the Subordinate Secured Loan Documents
to this Mortgage and all of the other Loan Documents; (B) BPLP, NHT and
Mortgagee have entered into an Intercreditor and Subordination Agreement (First
and Second Mortgages) (the "Intercreditor Agreement") of even date herewith,
which addresses certain respective rights, covenants, obligations and remedies
of the parties thereto with respect to the Affiliate Subordinate Financing; (C)
pursuant to a Guaranty (the "Non-Recourse Guaranty") of even date herewith given
by BPLP to Mortgagee, BPLP has guaranteed the repayment of the Indebtedness to
Mortgagee, subject to the limitations on BPLP's liability set forth therein; (D)
pursuant to an unrecorded Assignment of Notes, Mortgage and Loan Documents and
Pledge Agreement (the "BPLP Pledge") of even date herewith by and between BPLP
and Mortgagee, BPLP has assigned and pledged to Mortgagee, inter alia, all of
BPLP's interest in the First Tier Loan and the Beacon Loan as collateral
security for the Non-Recourse Guaranty; and (E) pursuant to an Assignment of
Mortgage and Loan Documents (the "Mortgage Assignment") of even date herewith,
to be recorded and filed herewith, given by BPLP to Mortgagee, BPLP has assigned
to Mortgagee all of its right, title and interest in and to the Subordinate
Secured Loan Documents.
Page 71
<PAGE>
26. Events of Default. Each of the following shall constitute an
"Event of Default" hereunder and shall entitle the Mortgagee to exercise its
remedies hereunder and under any of the other Loan Documents or as otherwise
provided by law:
(a) (i) Any payment of any installment of principal or interest due
under the Note, or payment of any escrow deposits due under any of the Loan
Documents, is not received by Mortgagee within five (5) business days
following the date when such payment was due, (ii) any failure to pay the
outstanding Principal Indebtedness (as defined in the Note) on the Maturity
Date or when the maturity of the Note is accelerated in accordance with the
terms of the Note, this Mortgage or any other Loan Document, or (iii) any
failure in the performance of any payment obligation of Mortgagor under
this Mortgage or under any other Loan Document, other than the obligations
to make payments as described in clauses (i) and (ii) above, and such
failure continues uncured for a period of ten (10) business days after
Mortgagee gives written notice of such failure to Mortgagor;
(b) If there shall be a failure by Mortgagor to perform any duty of a
non-monetary nature under any of the Loan Documents, which failure to
perform is not cured within thirty (30) days after written notice from
Mortgagee to
Page 72
<PAGE>
Mortgagor of such failure to perform, except if such failure to perform is
not susceptible of cure within such thirty (30)day period and Mortgagor
commences to cure within such thirty (30) day period and thereafter
diligently pursues such cure, then such cure period shall be extended for
a reasonable period of time but in no event greater than one hundred
twenty (120) days after such notice of failure to perform from Mortgagee
to Mortgagor. Notwithstanding anything contained herein to the contrary,
the notice and cure period provided under this clause (b) shall not be
applicable to and shall not be in addition to any specific notice and cure
or performance period provided under any other provision of this Section
26, and the specific notice and cure or performance period provided for in
such provision of this Section 26 shall control, and a failure by
Mortgagor to cure a default under such provision of this Section 26 within
the applicable cure period shall be an Event of Default under this
Mortgage;
(c) if an "Event of Default" occurs under the Note or under any other
Loan Document (as defined therein);
(d) Any representation, warranty or statement of Mortgagor or BPLP, as
applicable, contained herein or in any of the other Loan Documents,
including without limitation the
Page 73
<PAGE>
Environmental Indemnification Agreement, which is actually known by
Mortgagor or BPLP, as applicable, to be untrue in any material respect as
of the date when made;
(e) Any representation, warranty, or statement of Mortgagor or BPLP,
as applicable, contained herein or in any of the other Loan Documents,
including without limitation the Environmental Indemnification Agreement,
which is not actually known by Mortgagor or BPLP, as applicable, to be
untrue in any material respect as of the date when made, but proves to be
untrue in any material respect as of the date when made and remains untrue
in any material respect for a period of thirty (30) days after Mortgagee
gives Mortgagor a notice of default with respect thereto; provided,
however, that if the nature of such representation, warranty or statement
is such that the same cannot be made true in all material respects within
such thirty (30) day period and any delay in Mortgagee's remedies would not
(in Mortgagee's sole judgment) cause any material harm to Mortgagee or any
of the Security, then the period required to make the same true in all
material respects shall be extended, but in no event more than one hundred
twenty (120) days in the aggregate, and such representation, warranty or
statement shall not be deemed an Event of Default if Mortgagor shall within
such thirty (30) day period commence to make the same true in all material
Page 74
<PAGE>
respects and thereafter diligently prosecute such cure to
completion within the time period allowed;
(f) Mortgagor, or a general partner of Mortgagor, if Mortgagor is a
partnership, or any of Mortgagor's controlling shareholders (if Mortgagor
shall in the future be a corporation), or any of Mortgagor's controlling
members (if Mortgagor shall in the future be a limited liability company)
or BPLP shall (i) file a petition or petitions seeking relief under Title
11, United States Code, (ii) seek or consent to the appointment of a
receiver or trustee for itself or for any of the Security, (iii) file a
petition or petitions or initiate a proceeding or proceedings under the
bankruptcy, insolvency, receivership, or similar laws of the United States,
any state or any other jurisdiction, (iv) make a general assignment or
assignments for the benefit of creditors, or (v) be generally unable to pay
its debts as they mature;
(g) A court shall enter an order, judgment or decree appointing,
without the consent of Mortgagor, a receiver or trustee for it or for any
of the Security or approving a petition filed against Mortgagor or against
BPLP which seeks relief under the bankruptcy, insolvency, receivership or
other similar laws of the United States, any state, or any
Page 75
<PAGE>
other jurisdiction, and such order(s), judgment(s) or decree(s) shall
remain in force, undischarged or unstayed, for ninety (90) days after the
entry thereof;
(h) Mortgagor shall voluntarily encumber the Land or the Improvements
with any lien other than the lien of this Mortgage and the Subordinate
Secured Loan Documents;
(i) The commencement of enforcement or foreclosure proceedings under
any of the Affiliate Subordinate Financing by BPLP or NHT, or their
successors or assigns (other than Mortgagee or its successors or assigns)
with respect to the Security;
(j) If BPLP or one of its affiliates (but not including, in any event,
the current owner, NHT) acquires the Second Tier Notes and within twenty
(20) days after written notice from Mortgagee to Mortgagor thereof fails to
either (1) completely discharge all of the Affiliate Subordinate Financing,
or (2) extend the maturity dates of the Second Tier Notes, the First Tier
Notes and the Beacon Note until at least November 30, 2009;
(k) If (1) BPLP or one of its affiliates (but not including, in any
event, the current owner, NHT) acquires the
Page 76
<PAGE>
Second Tier Notes and (2) BPLP or one of its affiliates (but not including,
in any event, the current owner, CP Holding Corp., a Massachusetts
corporation, as Trustee of the Partnership Holding Trust under Indenture of
Trust dated November 30, 1994 ("PHT")) acquires the partnership interest of
PHT in Mortgagor, and within thirty (30) days thereof fails to completely
discharge all of the Affiliate Subordinate Financing; and
(l) A Transfer not expressly permitted under the provisions of this
Section 26(l) shall occur without the prior written consent of Mortgagee. A
"Transfer" shall mean the sale, mortgage, encumbrance, pledge, assignment
or hypothecation or other transfer (collectively, "Dispositions") (i) of
legal or beneficial title to the Security or any portion thereof, excluding
the Permitted Encumbrances, (ii) of any direct or indirect legal or
beneficial interest in any partner or member of Mortgagor, if Mortgagor is
a partnership, joint venture, syndication, limited liability company or
other group, or (iii) of a controlling interest in the stock of Mortgagor,
if Mortgagor is a corporation; the liquidation or dissolution of Mortgagor
or revocation or expiration of Mortgagor's charter shall also be deemed a
Transfer.
Page 77
<PAGE>
Notwithstanding anything to the contrary herein contained, an
involuntary lien or encumbrance constituting a "Transfer" within the meaning set
forth above shall not be deemed a Transfer hereunder (1) if Mortgagor removes,
bonds or insures over the same to Mortgagee's reasonable satisfaction within
thirty (30) days after Mortgagor becomes aware of such lien or encumbrance and,
in any event, prior to the same being foreclosed upon by the party or parties
claiming such lien or encumbrance, or (2) if such involuntary lien or
encumbrance is being contested by Mortgagor in good faith and in accordance with
the provisions of Section 4 hereof, which shall be applicable to such
involuntary liens or encumbrances, mutatis mutandis.
Notwithstanding anything to the contrary contained herein, Mortgagee
agrees that, so long as Mortgagor (i.e., Center Plaza Associates Limited
Partnership) holds title to the Security and there is no Event of Default under
the Loan Documents, the following Transfers shall be permitted without
Mortgagee's consent: (a) Transfers of interests in Mortgagor or in any partner
of Mortgagor to Beacon Affiliates (as hereinafter defined) shall be permitted
provided Mortgagor remains a "Domestic Entity" (i.e., a corporation, partnership
or other entity organized or formed under the laws of the United States of
America or any state thereof) domiciled in the United States of America; and (b)
Beacon (as hereinafter defined) (or Beacon's
Page 78
<PAGE>
successors-in-interest as partners or members of Mortgagor or any partner of
Mortgagor, if applicable) shall be permitted to transfer from time to time all
or any part of its or their respective interests in Mortgagor or in any partner
of Mortgagor to a non-affiliate, provided that after each and every such
transfer is given effect: (x) a Beacon Affiliate continues to retain an
ownership interest in Mortgagor of greater than fifty percent (50%), (y)
Mortgagor remains a Domestic Entity domiciled in the United States of America,
and (z) BPLP or another Beacon Affiliate continues to be the managing general
partner or member of Mortgagor.
For the purposes hereof, "Beacon" shall mean and include BPLP and/or
Beacon Properties Corporation, a Maryland corporation (the "Public REIT"); and a
"Beacon Affiliate" shall mean and include BPLP, the Public REIT and/or any other
entity which is at least 95% owned (directly or indirectly) by BPLP and/or the
Public REIT.
Notwithstanding anything to the contrary contained herein, in no event
will any of the following Dispositions be prohibited or restricted under this
Mortgage: (x) Dispositions of stock interests in the Public REIT, (y)
Dispositions of limited partnership interests in BPLP, so long as the Public
REIT remains
Page 79
<PAGE>
the sole general partner of BPLP, and (z) Dispositions of PHT's interest in
Mortgagor and of interests in PHT.
Notwithstanding the provisions of this Section 26(l):
A. Mortgagor shall have the right to transfer the Security to a Beacon
Affiliate or any other entity the ownership and control of which is held by the
same persons or entities which are permitted, under the preceding provisions of
this Section 26(l), to own and control Center Plaza Associates Limited
Partnership (a "Permitted Transferee"); provided that (I) no Event of Default
exists under the Loan Documents at the time of transfer; (II) the Permitted
Transferee is a Domestic Entity domiciled in the United States of America; (III)
the Permitted Transferee assumes the obligations of Mortgagor under the Loan
Documents, subject to the limitations on liability contained therein; and (IV)
Mortgagor shall pay for all of Mortgagee's reasonable costs and expenses
associated with the transfer, including, without limitation, attorneys' fees
charged by Mortgagee's staff counsel and outside special counsel. Upon such
transfer, any provision of this Mortgage which, by its terms, applies solely to
"Mortgagor" or "Center Plaza Associates Limited Partnership" shall also apply to
such Permitted Transferee. Following any such transfer, all the restrictions on
transfers of ownership interests in Center Plaza Associates Limited
Page 80
<PAGE>
Partnership set forth in the preceding provisions of this Section 26(l) shall
apply to transfers of ownership interests in such Permitted Transferee.
B. Mortgagor shall also have the right to a one-time sale, transfer or
assignment in whole or in part of its interest in the Security to any party of
equal qualification and credit- worthiness provided:
(I) there is no monetary default or non-monetary default, notice of
which has been given by Mortgagee to Mortgagor, under the Loan
Documents at the time of transfer;
(II) a property inspection by Mortgagee or Mortgagee's designee shows
that all reasonably necessary maintenance on or damage or
destruction to the Real Property has been completed or repaired;
(III) the proposed transferee shall be a Domestic Entity or citizen of
the United States of America domiciled in the United States of
America;
(IV) the proposed transferee shall be a Qualified Real Estate Investor
(as hereinafter defined) which is
Page 81
<PAGE>
a Domestic Entity or controlled by, or under common control with,
a Qualified Real Estate Investor;
(V) the aggregate debt service coverage (based on Net Effective
Rents, as hereinafter defined) on the Loan exceeds 1.50;
(VI) the Qualified Real Estate Investor has specific related
commercial real estate experience;
(VII) the Qualified Real Estate Investor must own or manage a minimum
of Two Million (2,000,000) square feet of Class A office space;
(VIII) at least thirty (30) days prior to the transfer, Mortgagor must
provide Mortgagee with all of the material provisions of such
transfer including without limitation the proposed date of
transfer, and the name, net worth, background and address of the
proposed transferee and the purchase price;
(IX) Mortgagor shall provide Mortgagee with such evidence as Mortgagee
may reasonably require that
Page 82
<PAGE>
the proposed transferee shall assume and fulfill each and every
obligation of Mortgagor under the Loan Documents and such
transfer shall not affect or impair Mortgagee's security and
rights under the Loan Documents;
(X) a non-refundable fee in the amount of one percent (1%) of the
outstanding Principal Indebtedness shall be paid to Mortgagee at
the closing of the transfer in cash or certified check to be
retained by Mortgagee in order to induce Mortgagee to allow the
proposed transferee to assume the obligations of Mortgagor under
the Loan Documents;
(XI) the loan-to-value ratio of the Loan based on a then current
appraisal obtained at Mortgagor's expense and acceptable to
Mortgagee must not exceed 70%;
(XII) Mortgagor shall pay for all of Mortgagee's reasonable costs and
expenses associated with the transfer, including, without
limitation, attorneys' fees charged by Mortgagee's staff counsel
and outside special counsel; and
Page 83
<PAGE>
(XIII) the Affiliate Subordinate Financing shall be discharged
incident to the transfer.
"Qualified Real Estate Investor" is defined as any reputable
corporation, partnership, joint venture, joint-stock company, trust or one or
more individuals which (x) shall have a minimum net worth of at least One
Hundred Fifty Million Dollars ($150,000,000), real estate assets of at least
Three Hundred Million Dollars ($300,000,000), and short-term liquid assets of at
least Ten Million Dollars ($10,000,000) and (y) if a foreign entity or
person(s), shall be represented by a domestic real estate advisor, and in any
case shall be free from any bankruptcy, reorganization or insolvency proceedings
or any criminal charges or proceedings in the United States of America or any
foreign country which would, in Mortgagee's reasonable judgment, raise a
material question as to the reputation of the investor or its ability to own and
to operate the Real Property and shall not have been, at the time of transfer or
in the past, an adverse party in any suit or proceeding brought against or by
Mortgagee. Mortgagee agrees to be reasonable in the review of such
qualifications.
"Net Effective Rents" is defined as gross rent (including all rental
income for the twelve (12) month period immediately preceding the transfer)
minus operating expenses.
Page 84
<PAGE>
27. Remedies Upon Default. Immediately upon the occurrence of any Event of
Default, Mortgagee shall have the option, in addition to and not in lieu of or
substitution for all other rights and remedies provided in this Mortgage or any
other Loan Document or provided by law or in equity, and is hereby authorized
and empowered by Mortgagor, to do any or all of the following:
(a) Declare without notice the entire unpaid amount of the Indebtedness
immediately due and payable and, at Mortgagee's option, (i) to bring suit
therefor, or (ii) to bring suit for any delinquent payment of or upon the
Indebtedness, or (iii) to take any and all steps and institute any and all other
proceedings in law or in equity that Mortgagee deems necessary to enforce
payment of the Indebtedness and performance of other obligations secured
hereunder and to protect the lien of this Mortgage.
(b) Exercise the STATUTORY POWER OF SALE and commence foreclosure
proceedings against the Security, in a single parcel or in several parcels,
through judicial proceedings, by advertisement or as otherwise provided by law,
at the option of Mortgagee, pursuant to the statutes in such case made and
provided, and to sell the Security or to cause the same to be sold at public
sale, and to convey the same to the purchaser, in
Page 85
<PAGE>
accordance with said statutes in a single parcel or in several parcels at the
option of Mortgagee.
(c) Proceed against the Personal Property in accordance with Mortgagee's
rights and remedies with respect to the Personal Property including the right to
sell the Personal Property together with the Real Property or separately and
without regard to the remainder of the Security in accordance with the
Mortgagee's rights and remedies provided by the Massachusetts Uniform Commercial
Code as well as other rights and remedies available at law or in equity.
(d) Cause to be brought down to date a title examination and tax histories
of the Security, procure title insurance or title reports or, if necessary,
procure new abstracts and tax histories; procure an updated or entirely new
environmental audit of the Security including building, soil, ground water and
subsurface investigations; have the Improvements inspected by an engineer or
other qualified inspector and procure a building inspection report; procure an
MAI or other appraisal of the Security or any portion thereof; enter upon the
Security at any time and from time to time to accomplish the foregoing and to
show the Security to potential purchasers and potential bidders at foreclosure
sale; make available to potential purchasers and potential bidders all
information obtained pursuant to the
Page 86
<PAGE>
foregoing and any other information in the possession of Mortgagee regarding the
Security.
(e) Either by itself or by its agent to be appointed by it for that purpose
or by a receiver appointed by a court of competent jurisdiction, as a matter of
strict right, without notice and without regard to the adequacy or value of any
security for the Indebtedness or the solvency of any party bound for its
payment, to take possession of and to operate the Security, Mortgagor hereby
waiving any right Mortgagor might have to object to or oppose any such
possession and, whether or not Mortgagee has taken possession of the Security,
to collect and apply the Rents, including those past due and unpaid, after
payment of all necessary charges and expenses, in reduction of the Indebtedness.
The receiver shall have all of the rights and powers permitted under the laws of
the Commonwealth of Massachusetts. Except for damage caused by Mortgagee's gross
negligence or willful misconduct, Mortgagor hereby waives any claim Mortgagor
may have against Mortgagee for mismanagement of the Security during Mortgagee's
operation of the Security under this subparagraph or as mortgagee in actual
possession under applicable statutes.
(f) At its option without waiving any Event of Default, pay, perform or
observe any or all of Mortgagor's obligations
Page 87
<PAGE>
under the Loan Documents, and all payments made or costs or expenses incurred by
Mortgagee in connection therewith shall be secured hereby and shall be, upon
demand, immediately repaid by Mortgagor to Mortgagee with interest thereon at
the Default Rate from the date of demand. Mortgagee shall be the sole judge of
the necessity for any such actions and of the amounts to be paid. Mortgagee is
hereby empowered to enter and to authorize others to enter upon the Security or
any part thereof for the purpose of performing or observing any such defaulted
term, covenant or condition without thereby becoming liable to Mortgagor or any
person in possession holding under Mortgagor, except for damage caused by
Mortgagee's gross negligence or willful misconduct.
(g) Apply against the Indebtedness in such order as Mortgagee shall
determine any funds held for the benefit of Mortgagor in escrow by Mortgagee or
by any third-party escrow agent under any of the Loan Documents.
Upon any foreclosure sale, Mortgagee may bid for and purchase the Security
and shall be entitled to apply all or any part of the Indebtedness as a credit
to the purchase price. In the event of any sale of the Security by foreclosure,
through judicial proceedings, by advertisement or otherwise, the proceeds of any
such sale which are applied in accordance with this Mortgage shall be applied in
the order following to: (i) all
Page 88
<PAGE>
sums reasonably expended or incurred by Mortgagee in carrying out Mortgagor's
obligations under this Mortgage and any other Loan Documents, to the extent
Mortgagee is authorized to do so under the terms of this Mortgage or the other
Loan Documents, together with interest thereon as therein provided; (ii) all
accrued and unpaid interest upon the Indebtedness; (iii) the unpaid principal
amount of the Indebtedness; (iv) Foreclosure Costs (as hereinafter defined); and
(v) the surplus, if any, to the person or persons legally entitled thereto.
Mortgagor will pay to Mortgagee upon demand all costs and expenses
incurred by Mortgagee upon the occurrence of an Event of Default in the exercise
of Mortgagee's rights and remedies under this Mortgage and the other Loan
Documents for collection of the Indebtedness, foreclosure on the Security or
otherwise, including without limitation title insurance fees and premiums,
environmental consultant's charges and appraisal, engineering and inspection
fees under Section 27(d), receiver's fees, costs and agent's compensation under
Section 27(e), auctioneer's fees and foreclosure sale advertising costs, any
deed excise tax stamps required to be affixed to the foreclosure deed and court
filing fees, together with attorneys' fees and costs which shall include without
limitation all attorneys' fees and costs incurred in connection with (A) the
exercise of Mortgagee's rights and remedies as aforesaid, (B) any negotiations,
other services and
Page 89
<PAGE>
advice rendered regarding restructuring of the Indebtedness prior to any
foreclosure sale or deed in lieu of foreclosure, whether or not any such
restructuring or deed in lieu is actually accomplished, and (C) any petition
filed by or against Mortgagor under Title 11, United States Code. Any such
amounts incurred by Mortgagee shall be secured hereby and shall be immediately
repaid by Mortgagor to Mortgagee upon demand with interest thereon at the
Default Rate, from the date of demand, all of such amounts together with such
interest being collectively referred to as "Foreclosure Costs."
Mortgagor hereby agrees that after a foreclosure sale, Mortgagor will
have no right to possess or remain upon the Security, Mortgagor acknowledging
Mortgagor's status as a trespasser in such circumstances.
In the event of any acceleration of the Indebtedness pursuant to
paragraph (a) of this Section 27, Mortgagor shall pay to Mortgagee together with
the principal indebtedness and interest thereon an amount equal to the
prepayment fee provided for in the Note and such fee shall be included as part
of the Indebtedness.
Failure to exercise any option to accelerate in the event of a default
or other circumstance permitting the exercise of
Page 90
<PAGE>
such option, shall not constitute a waiver of the default or of the right to
exercise such option at a later time (so long as such default or other
circumstance continues to exist), or a waiver of the right to exercise such
option in the event of any other default or circumstance specified above.
28. Acceleration Interest. In addition to any late payment charge which may
be due under the Note, Mortgagor shall pay interest on all sums due hereunder at
a rate (the "Default Rate") equal to the lesser of (i) the interest rate set
forth in the Note plus four percent (4%) per annum, or (ii) the maximum rate
permitted by law, from and after the first to occur of the following events: (A)
Mortgagee elects in writing to cause the acceleration of the Indebtedness; (B) a
petition under Title 11, United States Code, shall be filed by Mortgagor or if
Mortgagor shall seek or consent to the appointment of a receiver or trustee for
itself or for any of the Security, file a petition seeking relief under the
bankruptcy or other similar laws of the United States, any state or any other
jurisdiction, make a general assignment for the benefit of creditors, or is
generally unable to pay its debts as they become due; (C) a court shall enter an
order, judgment or decree appointing, with or without the consent of Mortgagor,
a receiver or trustee for it or for any of the Security or approving a petition
filed against Mortgagor which seeks relief under the bankruptcy or other similar
laws of the
Page 91
<PAGE>
United States, any state or any other jurisdiction, and any such order, judgment
or decree shall remain in force, undischarged or unstayed, ninety (90) days
after it is entered; or (D) if all sums due hereunder are not paid on the
Maturity Date as set forth in the Note.
29. Late Charge. In the event any sums due under the Note (exclusive of
principal due at maturity of the Note or by reason of the acceleration of the
Note), this Mortgage or any other Loan Document, are not paid by Mortgagor when
due, without regard to any cure or grace period, Mortgagor shall pay to
Mortgagee for the month during which such payment is not made when due and for
each month or fraction thereof that such sum remains unpaid, a late charge equal
to the lesser of four percent (4%) of such installment or the maximum amount
allowed by law, as the reasonable estimate by Mortgagee and Mortgagor of a fair
average compensation for the loss that may be sustained by Mortgagee due to the
failure of Mortgagor to make timely payments, and such amount shall be secured
hereby. Such late charge shall be paid without prejudice to the right of
Mortgagee to collect any other amounts provided to be paid or (if applicable) to
declare an Event of Default under this Mortgage or any other Loan Document.
Page 92
<PAGE>
30. Waiver of Statutory Rights. Mortgagor agrees, to the full extent
permitted by law, that upon an Event of Default hereunder, neither Mortgagor nor
anyone claiming through or under Mortgagor will set up, claim, or seek to take
advantage of any moratorium, reinstatement, forbearance, appraisement,
valuation, stay, homestead, extension, exemption or (after a sale by
foreclosure) redemption laws now or hereafter in force, in order to prevent or
hinder the enforcement or foreclosure of this Mortgage, or the sale of the
Security or the delivery of possession thereof immediately after such sale to
the purchaser at such sale, and Mortgagor, for itself and all who may at any
time claim through or under it, hereby waives to the full extent that it may
lawfully do so, the benefit of all such laws, and any and all rights to have the
assets subject to the security interest of this Mortgage marshalled upon any
foreclosure or sale under the power granted herein.
31. Security Interest. This Mortgage shall, as to any equipment and other
Personal Property covered hereby, be deemed to constitute a security agreement,
and Mortgagor, as debtor, hereby grants to Mortgagee, as secured party, a
security interest therein pursuant to the Massachusetts Uniform Commercial Code.
Mortgagor agrees, upon request of Mortgagee, to furnish an inventory of Personal
Property owned by Mortgagor and subject to this Mortgage and, upon request by
Mortgagee, to execute any
Page 93
<PAGE>
supplements to this Mortgage, any separate security agreement and any financing
statements and continuation statements in order to include specifically said
inventory of Personal Property or otherwise to perfect the security interest
granted hereby, subject always to the limitation of liability provided for in
Section 16 of the Note. Upon any Event of Default, Mortgagee shall have all of
the rights and remedies provided in said Code or otherwise provided by law or by
this Mortgage, including but not limited to the right to require Mortgagor to
assemble such Personal Property and make it available to Mortgagee at a place to
be designated by Mortgagee which is reasonably convenient to both parties, the
right to take possession of the Personal Property with or without demand and
with or without process of law and the right to sell and dispose of the same and
distribute the proceeds according to law. The parties hereto agree that any
requirement of reasonable notice shall be met if Mortgagee sends such notice to
Mortgagor at least ten (10) days prior to the date of sale, disposition or other
event giving rise to the required notice, and that the proceeds of any
disposition of any such Personal Property may be applied by Mortgagee first to
the reasonable expenses in connection therewith, including reasonable attorneys'
fees and legal expenses incurred, and then to payment of the Indebtedness. With
respect to the Personal Property that has become so attached to the Real
Property that an interest therein arises under the real property law of the
Commonwealth of
Page 94
<PAGE>
Massachusetts, this Mortgage shall also constitute a financing statement and a
fixture filing under the Massachusetts Uniform Commercial Code. Mortgagor is the
record owner of the Real Property and the addresses of Mortgagor and Mortgagee
are as set forth on the first page of this Mortgage.
32. Right of Entry. Mortgagee and Mortgagee's representatives may at all
reasonable times and without notice to Mortgagor if there exists an Event of
Default (otherwise, upon reasonable advance notice) enter upon the Security and
inspect the same, or cause it to be inspected by agents, employees or
independent contractors of Mortgagee, and show the same to others, but Mortgagee
shall not be obligated to make any such entry or inspection.
33. Estoppel Certificate. Mortgagor, within fifteen (15) days after written
request from Mortgagee, will furnish a signed statement in writing, duly
acknowledged, of the amount then due or outstanding hereunder and, to the best
of its knowledge, whether or not any offsets or defenses exist against the
Indebtedness, and if so, specifying such offsets and defenses. Mortgagee, within
fifteen (15) days after written request from Mortgagor, will furnish a signed
statement in writing, duly acknowledged, of the amount then due and outstanding
hereunder and, to the best of its knowledge, whether or not any default
Page 95
<PAGE>
exists under this Mortgage or any of the other Loan Documents, and if so,
specifying such default. Mortgagor shall, within fifteen (15) days following
Mortgagee's request, execute and deliver a current landlord estoppel certificate
with respect to the leases at the Security. If required by law or regulatory
authority, Mortgagor shall, upon Mortgagee's request, exercise any right it may
have to request an estoppel certificate from any or all of the tenants at the
Security; and, in such event, Mortgagee shall pay Mortgagor's reasonable costs
of preparing, requesting and negotiating such tenant estoppel certificates.
34. Annual Statements. Mortgagor shall, within one hundred twenty (120)
days after the end of each fiscal year of Mortgagor, deliver to Mortgagee (a)
annual statements audited and certified (subject only to such qualifications as
are reasonably acceptable to Mortgagee) by Coopers & Lybrand or another
independent Certified Public Accountant reasonably satisfactory to Mortgagee,
together with any "Notes to Financial Statements" prepared by such accountant in
connection with such audit and certification, all prepared in accordance with
generally accepted accounting principles and showing in detail: (i) a balance
sheet for the Security as of the last day of such fiscal year; (ii) a statement
of earnings from the Security for such fiscal year showing, among other things,
all rents and other income therefrom and all expenses paid or incurred in
connection with the operation of the
Page 96
<PAGE>
Security, and (iii) a statement of operating cash flows for the Security; and
(b) a statement signed by Mortgagor listing all leases of space in the
Improvements as of the last day of such fiscal year, the respective areas
demised thereunder, the names of the tenants, the respective expiration dates of
the leases, the respective rentals provided for therein, accounts receivable and
such other information as may reasonably be requested by Mortgagee. In addition,
Mortgagor agrees to provide Mortgagee with unaudited quarterly cash flow reports
and a current rent roll. Mortgagor also agrees to provide Mortgagee with a pro
forma income statement and current expense statement for the current and prior
calendar year by January 31 of the current year.
If Mortgagor omits to prepare and deliver promptly any report required
by this Section, following notice and the expiration of the cure period provided
for in Section 26(b) hereof, Mortgagee may elect, in addition to exercising any
remedy for an Event of Default as provided for in this Mortgage, to make an
audit of all books and records of Mortgagor, including bank accounts, which in
any way pertain to the Security, and to prepare the statement or statements
which Mortgagor failed to procure and deliver. Such audit shall be made and such
statements shall be prepared by an independent Certified Public Accountant to be
selected by Mortgagee. Mortgagor shall pay all
Page 97
<PAGE>
expenses of such audit and related services, which expenses shall be secured
hereby as part of the Indebtedness and shall be immediately due and payable upon
demand with interest thereon at the Default Rate from the date of demand.
Mortgagee shall afford any information received pursuant to this
Section the same degree of confidentiality that Mortgagee affords similar
information proprietary to Mortgagee; provided, however, that Mortgagee does not
in any way warrant or represent that such information received from Mortgagor
will remain confidential; and, provided further, that Mortgagee shall have the
unconditional right to disclose, as necessary, any such information in the event
Mortgagee sells, transfers, conveys, or assigns the Mortgage or any portion of
the Indebtedness.
35. Rights Cumulative. Each right and remedy of Mortgagee
under this Mortgage, the Note and the other Loan Documents shall
be in addition to every other right and remedy of Mortgagee and
such rights and remedies may be enforced separately or in any
combination.
36. Subrogation. To the extent that proceeds of the Indebtedness are used
to pay any outstanding lien, charge or encumbrance affecting the Security, such
proceeds shall be deemed to have been advanced by Mortgagee at Mortgagor's
request, and
Page 98
<PAGE>
Mortgagee shall be subrogated to all rights, interest and liens owned or held by
any owner or holder of such outstanding liens, charges and encumbrances,
irrespective of whether such liens, charges or encumbrances are released of
record; provided, however, that the terms and provisions hereof (including,
without limitation, Section 40 of this Mortgage) shall govern the rights and
remedies of Mortgagee and shall supersede the terms, provisions, rights, and
remedies under the lien or liens to which Mortgagee is subrogated hereunder.
37. No Waiver. Any failure by Mortgagee to insist upon the strict
performance by Mortgagor of any of the terms and provisions hereof shall not be
deemed to be a waiver of any of the terms and provisions hereof, and Mortgagee,
notwithstanding any such failure, shall have the right thereafter to insist upon
the strict performance by Mortgagor of any and all of the terms and provisions
hereof to be performed by Mortgagor.
38. Mortgage Extension. The lien hereof shall remain in full force and
effect during any postponement or extension of the time of payment of the
Indebtedness, or of any part thereof, and any number of extensions or
modifications hereof, of the Note or of any additional notes taken by Mortgagee,
shall not affect the lien hereof or the liability of Mortgagor or of any
subsequent
Page 99
<PAGE>
obligor to pay the Indebtedness unless and until such lien or liability be
expressly released in writing by Mortgagee.
39. Indemnification. Mortgagor shall indemnify and hold Mortgagee harmless
from and against all obligations, liabilities, losses, costs, expenses, fines,
penalties or damages (including attorneys' fees) which Mortgagee may incur by
reason of injury to persons or damage to property arising out of (i) tenant
improvement work or other construction work in or upon the Security by Mortgagor
or others claiming by, through or under Mortgagor, (ii) the operation or
maintenance of the Security by Mortgagor, or (iii) any other action or inaction
by, or matter which is the responsibility of, Mortgagor. Mortgagor shall defend
Mortgagee against any claim or litigation involving Mortgagee for the same, and
should Mortgagee incur such obligation, liability, loss, cost, expense, fine,
penalty or damage, then Mortgagor shall reimburse Mortgagee upon demand. Any
amount owed Mortgagee under this Section 39 shall bear interest at the Default
Rate from the date of demand therefor and shall be secured hereby.
40. Scope of Liability. The provisions of Section 16 of the Note are hereby
incorporated by reference herein. As previously noted in Section 15 hereof, the
Indemnitors have executed a separate Environmental Indemnification Agreement to
reflect their
Page 100
<PAGE>
liability for environmental matters regarding the Security, subject to the
limitations of liability set forth therein.
41. Attorneys' Fees. Any reference to "attorney fees", "attorneys' fees",
or "attorney's fees" in this document includes but is not limited to both the
fees, charges and costs incurred by Mortgagee through its retention of outside
legal counsel and the allocable fees, costs and charges for services rendered by
Mortgagee's in-house counsel. Any reference to "attorney fees", "attorneys'
fees", or "attorney's fees" shall also include but not be limited to those
attorneys or legal fees, costs and charges incurred by Mortgagee in the
collection of any Indebtedness, the enforcement of any obligations hereunder,
the protection of the Security, the foreclosure of this Mortgage, the sale of
the Security in lieu of foreclosure, the defense of actions arising hereunder
and the collection, protection or setoff of any claim the Mortgagee may have in
a proceeding under Title 11, United States Code. Attorneys' fees provided for
hereunder shall accrue whether or not Mortgagee has provided notice of default
or of an intention to exercise its remedies for an Event of Default. All such
attorneys' fees, charges and costs shall be reasonable.
42. Administrative Fees. Mortgagee shall have the right to charge
reasonable administrative fees during the term of the Note
Page 101
<PAGE>
as Mortgagee may determine, in its reasonable discretion, in connection with any
servicing requests made by Mortgagor requiring Mortgagee's evaluation,
preparation and processing of any such requests. Administrative fees shall not
be charged for routine servicing matters contemplated by the Loan Documents
including, without limitation: processing payments; processing insurance and UCC
continuation documentation; processing escrow draws; review of tenant leases,
subordination, non-disturbance and attornment agreements and tenant estoppels on
standard forms approved by Mortgagee without material modifications. Such
administrative fees shall apply without limitation to requests for matters not
permitted or contemplated by the Loan Documents (including, without limitation:
requests for transfers or assignments, requests for partial releases; requests
for review of new easements), and to requests, which, while contemplated by the
Loan Documents, because of the nature of the request, will require significantly
more time than an institutional lender, acting reasonably, would contemplate for
such request (including without limitation, requests for the approval of tenant
leases, tenant estoppels and tenant subordination, non-disturbance and
attornment agreements which contain material differences from Mortgagor's or
Mortgagee's standard forms (including any standard changes approved by
Mortgagee, which for this purpose will be considered part of the standard
form)). Mortgagee shall also be entitled to reimbursement for professional fees
it incurs for
Page 102
<PAGE>
such administration, including without limitation, those of architects,
engineers and attorneys' fees (whether (i) employed by Mortgagee or its
affiliate or (ii) engaged by Mortgagee or its affiliates as independent
contractors).
43. Protection of Security; Costs and Expenses. Mortgagor shall appear in
and defend any action or proceeding purporting to affect the security hereof or
the rights or powers of Mortgagee, and shall pay all reasonable costs and
expenses, including without limitation cost of evidence of title and reasonable
attorneys' fees, in any such action or proceeding in which Mortgagee may appear,
and in any suit brought by Mortgagee to foreclose this Mortgage upon the
occurrence of an Event of Default or to enforce or establish any other rights or
remedies of Mortgagee hereunder upon the occurrence of an Event of Default. If
Mortgagor fails to perform any of the covenants or agreements contained in this
Mortgage, or if any action or proceeding is commenced which affects Mortgagee's
interest in the Security or any part thereof, including, but not limited to,
eminent domain, code enforcement, or proceedings of any nature whatsoever under
any federal or state law, whether now existing or hereafter enacted or amended,
relating to bankruptcy, insolvency, arrangement, reorganization or other form of
debtor relief, then if an Event of Default exists hereunder (or, if no Event of
Default exists hereunder, if Mortgagor fails, within
Page 103
<PAGE>
thirty (30) days after notice by Mortgagee to Mortgagor [or such shorter notice
period as the exigencies of the situation may require], to take appropriate
action to correct such failure, etc., subject, however, to Mortgagor's contest
rights under this Mortgage, to the extent applicable) Mortgagee may, but without
obligation to do so and without further notice to or demand upon Mortgagor and
without releasing Mortgagor from any obligation hereunder, make such
appearances, disburse such sums and take such action as Mortgagee reasonably
deems necessary or appropriate to protect Mortgagee's interest, including, but
not limited to, disbursement of reasonable attorneys' fees, entry upon the
Security to make repairs or take other action to protect the security hereof,
and payment, purchase, contest or compromise of any encumbrance, charge or lien,
other than the Permitted Encumbrances, which in the judgment of Mortgagee
appears to be prior or superior hereto. Mortgagor further agrees to pay all
reasonable expenses of Mortgagee (including without limitation attorneys' fees
and disbursements) incident to the protection of the rights of Mortgagee
hereunder, or to enforcement or collection of payment of the Indebtedness,
whether by judicial or non-judicial proceedings, or in connection with any
bankruptcy, insolvency, arrangement, reorganization or other debtor relief
proceeding of Mortgagor, or otherwise in connection with an Event of Default.
Any amounts disbursed by Mortgagee pursuant to this Section shall be additional
indebtedness of Mortgagor secured by
Page 104
<PAGE>
the Loan Documents as of the date of disbursement and shall bear interest at the
Default Rate from the date of demand therefor. All such amounts shall be payable
by Mortgagor immediately upon demand. Nothing contained in this Section shall be
construed to require Mortgagee to incur any expense, make any appearance, or
take any other action.
44. Notices. Any notice, demand, request, statement or consent made
hereunder shall be in writing, signed by the party giving such notice, request,
demand, statement, or consent, and shall be delivered personally or delivered to
a reputable overnight delivery service providing a receipt addressed as set
forth below or to such other address within the continental United States of
America as theretofore may have been designated in writing by such party in
accordance with the terms of this Section 44. The effective date of any notice
given as provided in this Section shall be the date of personal service or one
(1) business day after delivery to such overnight delivery service, whichever is
applicable. As used herein, the phrase "business day" or "business days" shall
mean any calendar day(s) other than a Saturday, a Sunday or a Federal or a State
holiday on which the U.S. Postal Service offices are closed for business. For
purposes hereof, the addresses are as follows:
If to Mortgagee: Connecticut General Life Insurance Company
c/o CIGNA Investments, Inc.
Page 105
<PAGE>
900 Cottage Grove Road
Hartford, Connecticut 06152
Attn: Investment Services, S-2313
With a copy to: CIGNA Corporation
Investment Law Department
900 Cottage Grove Road
Hartford, Connecticut 06152-2215
Attn: Real Estate Division, S-215A
If to Mortgagor: Center Plaza Associates Limited Partnership
c/o Beacon Properties Corporation
50 Rowes Wharf
Boston, Massachusetts 02110
Attn: Mr. Robert J. Perriello,
Chief Financial Officer
with a courtesy
copy to: Goulston & Storrs
400 Atlantic Avenue
Boston, Massachusetts 02110-3333
Attn: Harold Stahler, Esq.
Notwithstanding the foregoing agreement to provide courtesy copies,
such copies shall be courtesy copies only, and failure to provide such courtesy
copies shall have absolutely no effect or entitle Mortgagor to any remedy
whatsoever. Any notice duly given to Mortgagor shall be effective whether or not
the courtesy copies were given.
45. Release. Upon the satisfaction in full of the Indebtedness, Mortgagee
shall release of record the Security from the lien hereof and from the lien of
any other Loan Document securing the indebtedness and shall surrender this
Mortgage, the other Loan Documents and all notes evidencing indebtedness
Page 106
<PAGE>
secured by this Mortgage to Mortgagor. Mortgagor shall pay all costs of
recordation.
46. Applicable Law. The provisions hereof shall be construed in accordance
with the laws of the Commonwealth of Massachusetts.
47. Invalidity. If any provision of this Mortgage shall be held invalid or
unenforceable, the same shall not affect in any respect whatsoever the validity
of the remainder of this Mortgage, except that if such provision provides for
the payment of the Principal Indebtedness (as defined in the Note) and/or
interest payable under the Note or any escrow deposits payable under any of the
other Loan Documents, and such provision is rendered invalid or unenforceable in
a material respect, then Mortgagee may, at its option, declare the Indebtedness
due and payable upon one hundred eighty (180) days prior written notice to
Mortgagor and, provided there exists no Event of Default hereunder, without
prepayment fee.
48. Captions. The captions in this instrument are inserted only as a matter
of convenience and for reference, and are not and shall not be deemed to be any
part hereof.
Page 107
<PAGE>
49. Modifications. This Mortgage may not be changed or terminated except in
writing signed by both parties. The provisions of this Mortgage shall extend and
be applicable to all renewals, amendments, extensions, consolidations, and
modifications of the other Loan Documents, and any and all references herein to
the Loan Documents shall be deemed to include any such renewals, amendments,
extensions, consolidations or modifications thereof.
50. Bind and Inure. The provisions of this Mortgage shall be binding on
Mortgagor and its heirs, successors and assigns, and any subsequent owners of
the Security. The covenants of Mortgagor herein shall run with the land, and
this Mortgage and all of the covenants herein contained shall inure to the
benefit of Mortgagee, its successors and assigns.
51. Replacement of Note. Upon receipt of evidence reasonably satisfactory
to Mortgagor of the loss, theft, destruction or mutilation of the Note, and in
the case of any such loss, theft or destruction, upon delivery of an indemnity
agreement reasonably satisfactory to Mortgagor or, in the case of any such
mutilation, upon surrender and cancellation of the Note, Mortgagor will execute
and deliver, in lieu thereof, a replacement note, identical in form and
substance to the Note and dated as of the date of the Note and upon such
execution and
Page 108
<PAGE>
delivery all references in this Mortgage to the Note shall be deemed to refer to
such replacement note.
52. Time of the Essence. Time is of the essence with respect to the intent,
meaning, construction and enforcement of each and every covenant, agreement and
obligation of Mortgagor under this Mortgage, the Note and the other Loan
Documents subject to any force majeure exceptions provided for thereunder.
53. Statutory Condition; Statutory Power of Sale. This Mortgage is upon the
STATUTORY CONDITION for any breach of which, or upon the breach of any other of
Mortgagor's covenants and undertakings hereunder, in each case, following the
expiration of applicable notice and cure periods provided for in Section 26
hereof, Mortgagee shall have the STATUTORY POWER OF SALE.
Page 109
<PAGE>
IN WITNESS WHEREOF, Mortgagor has duly executed this Mortgage as a
sealed instrument on the day and year first above written.
MORTGAGOR:
CENTER PLAZA ASSOCIATES LIMITED PARTNERSHIP
By: BCN Center Plaza, LLC,
its General Partner
By: Beacon Properties Corporation, a Member
By: /s/ Robert J. Perriello
------------------------------
Name: Robert J. Perriello
Title: Senior Vice President
By: /s/ Nancy J. Broderick
------------------------------
Name: Nancy J. Broderick
Title: Treasurer
Page 110
<PAGE>
COMMONWEALTH OF MASSACHUSETTS
Suffolk, SS. February 9, 1996
Then personally appeared Robert J. Perriello and Nancy J. Broderick, the
Senior Vice President and Treasurer, respectively, of the above-named Beacon
Properties Corporation, a Member of BCN Center Plaza, LLC, General Partner of
Center Plaza Associates Limited Partnership as aforesaid, and acknowledged the
foregoing instrument to be their free act and deed and the free act and deed of
Beacon Properties Corporation, BCN Center Plaza, LLC and Center Plaza Associates
Limited Partnership, before me.
/s/ Deborah C. Rice
-------------------------------------
Notary Public
My Commission Expires: April 13, 2001
Exhibit 21.1
------------
BEACON PROPERTIES, L.P.
List of Subsidiaries
1. Beacon Construction Company, Inc. (DE)
2. Beacon Design Corporation (MA)
3. Beacon Design, L.P. (DE)
4. Beacon Property Management Corporation (DE)
5. Beacon Property Management, L.P. (DE)
6. Center Plaza Associates Limited Partnership (MA)
7. Crystal Holdings Limited Partnership(MA)
8. Rowes Wharf Holding, L.P. (DE)
9. Wellesley Holding, L.P. (DE)
10. Wellesley Holding II, L.P. (DE)
11. Wellesley Holding III, L.P. (DE)
12. 1333 H Street, L.P. (DE)
13. Burlington Holding, L.P. (DE)
14. BeaMetFed, Inc. (MD)
15. BCN Center Plaza, LLC (DE)
16. BCN Crystal, LLC (DE)
17. BCN Management, LLC (DE)
18. Beacon Properties Acquisition, LLC (DE)
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the incorporation by reference in the Registration Statements
on Form S-3 (File Nos. 333-05707, 333-21787 and 333-21769) and Form S-8 (File
Nos. 33-88606 and 333-19603) of Beacon Properties Corporation of our report
dated January 28, 1997 on our audits of the consolidated financial position of
Beacon Properties Corporation as of December 31, 1996 and 1995 and the
consolidated results of its operations and its cash flows for the years ended
December 31, 1996 and 1995 and the period May 26, 1994 to December 31, 1994 and
the combined results of operations and cash flows of The Beacon Group,
predecessor to Beacon Properties Corporation, for the period January 1, 1994 to
May 25, 1994, which report is included in this Annual Report on Form 10-K. We
also consent to the incorporation by reference of our report on the financial
statement schedules of Beacon Properties Corporation as of December 31, 1996.
COOPERS & LYBRAND L.L.P.
Boston, Massachusetts
March 26, 1997
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> DEC-31-1996
<CASH> 36,086
<SECURITIES> 0
<RECEIVABLES> 24,674
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 48,788
<PP&E> 1,691,530
<DEPRECIATION> 97,535
<TOTAL-ASSETS> 1,779,412
<CURRENT-LIABILITIES> 41,764
<BONDS> 605,212
0
0
<COMMON> 481
<OTHER-SE> 998,669
<TOTAL-LIABILITY-AND-EQUITY> 1,779,412
<SALES> 0
<TOTAL-REVENUES> 188,780
<CGS> 0
<TOTAL-COSTS> 109,934
<OTHER-EXPENSES> 5,988
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 30,300
<INCOME-PRETAX> 48,546
<INCOME-TAX> 0
<INCOME-CONTINUING> 48,546
<DISCONTINUED> (2,858)
<EXTRAORDINARY> (3,368)
<CHANGES> 0
<NET-INCOME> 36,332
<EPS-PRIMARY> 1.21
<EPS-DILUTED> 1.21
</TABLE>
