-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, TxQa728uhnrYFkX/l9LcGNDHEYKXpI/9Wp0x/GTjyhndRlgheIdC86765P17hE5U /TXDgE0sw/sVImJUpIU1qA== 0001029869-98-001269.txt : 19981116 0001029869-98-001269.hdr.sgml : 19981116 ACCESSION NUMBER: 0001029869-98-001269 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 19980930 FILED AS OF DATE: 19981113 FILER: COMPANY DATA: COMPANY CONFORMED NAME: HRPT PROPERTIES TRUST CENTRAL INDEX KEY: 0000803649 STANDARD INDUSTRIAL CLASSIFICATION: REAL ESTATE INVESTMENT TRUSTS [6798] IRS NUMBER: 046558834 STATE OF INCORPORATION: MD FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 001-09317 FILM NUMBER: 98748970 BUSINESS ADDRESS: STREET 1: 400 CENTRE ST CITY: NEWTON STATE: MA ZIP: 02158 BUSINESS PHONE: 6173323990 MAIL ADDRESS: STREET 1: 400 CENTRE STREET CITY: NEWTON STATE: MA ZIP: 02158 FORMER COMPANY: FORMER CONFORMED NAME: HEALTH & RETIREMENT PROPERTIES TRUST DATE OF NAME CHANGE: 19940811 FORMER COMPANY: FORMER CONFORMED NAME: HEALTH & REHABILITATION PROPERTIES TRUST DATE OF NAME CHANGE: 19920703 10-Q 1 QUARTERLY REPORT ON FORM 10-Q UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, DC 20549 FORM 10-Q (Mark One) [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended September 30, 1998 OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from ______________ to ______________ Commission File Number 1-9317 HRPT PROPERTIES TRUST --------------------- (Exact name of registrant as specified in its charter) Maryland 04-6558834 - ---------------------------------------------- ----------------------------------- (State or other jurisdiction of incorporation) (IRS Employer Identification No.)
400 Centre Street, Newton, Massachusetts 02458 ---------------------------------------- ----- (Address of principal executive offices) (Zip Code) 617-332-3990 ------------ (Registrant's telephone number, including area code) Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes [X] No [ ] Number of Common Shares outstanding at the latest practicable date November 9, 1998: 131,547,178 shares of beneficial interest, $.01 par value. HRPT PROPERTIES TRUST FORM 10-Q SEPTEMBER 30, 1998 INDEX
Page ---- PART I Financial Information --------------------- Item 1. Consolidated Financial Statements (Unaudited) Consolidated Balance Sheets - September 30, 1998 and December 31, 1997 1 Consolidated Statements of Income - Three and Nine Months Ended September 30, 1998 and 1997 2 Consolidated Statements of Cash Flows - Nine Months Ended September 30, 1998 and 1997 3 Notes to Consolidated Financial Statements 5 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 7 PART II Other Information ----------------- Item 2. Changes in Securities 10 Item 6. Exhibits and Reports on Form 8-K 10 Signatures 12
HRPT PROPERTIES TRUST CONSOLIDATED BALANCE SHEETS (dollars in thousands, except per share amounts) (unaudited)
September 30, December 31, 1998 1997 ------------ ------------ ASSETS - ------ Real estate properties, at cost (including properties leased to affiliates with a cost of $113,079 and $112,075, respectively): Land........................................................... $ 347,408 $ 256,582 Buildings and improvements..................................... 2,439,848 1,712,441 ---------- ----------- 2,787,256 1,969,023 Less accumulated depreciation.................................. 153,137 111,669 ---------- ----------- 2,634,119 1,857,354 Real estate mortgages and notes, net (including note from an affiliate of $1,000 and $2,365, respectively)................... 69,369 104,288 Investment in Hospitality Properties Trust......................... 111,345 111,134 Cash and cash equivalents.......................................... 46,942 22,355 Interest and rents receivable...................................... 29,557 20,455 Other assets, net.................................................. 34,764 20,377 ---------- ----------- $2,926,096 $ 2,135,963 ========== =========== LIABILITIES AND SHAREHOLDERS' EQUITY - ------------------------------------ Bank notes payable................................................. $ 95,000 $ 200,000 Senior notes payable, net.......................................... 659,402 349,900 Mortgage notes payable............................................. 25,399 26,329 Convertible subordinated debentures................................ 204,863 211,650 Accounts payable and accrued expenses.............................. 34,780 27,865 Deferred rents..................................................... 34,696 30,089 Security deposits.................................................. 18,143 18,767 Due to affiliates.................................................. 15,245 5,103 Shareholders' equity: Preferred shares of beneficial interest, $.01 par value: 50,000,000 shares authorized, none issued.................... -- -- Common shares of beneficial interest, $.01 par value: 150,000,000 shares and 125,000,000 shares authorized, 131,547,178 shares and 98,853,170 shares issued and outstanding, respectively ................................... 1,315 988 Additional paid-in capital..................................... 1,964,878 1,371,236 Cumulative net income.......................................... 525,602 420,298 Dividends...................................................... (653,227) (526,262) ---------- ----------- Total shareholders' equity................................... 1,838,568 1,266,260 ---------- ----------- $2,926,096 $2,135,963 ========== ===========
See accompanying notes 1 HRPT PROPERTIES TRUST CONSOLIDATED STATEMENTS OF INCOME (amounts in thousands, except per share amounts) (unaudited)
Three Months Ended September 30, Nine Months Ended September 30, -------------------------------- -------------------------------- 1998 1997 1998 1997 ---- ---- ---- ---- Revenues: Rental income............................... $ 93,301 $ 52,226 $239,045 $129,518 Interest and other income................... 3,659 5,078 13,158 16,177 --------- -------- -------- -------- Total revenues.......................... 96,960 57,304 252,203 145,695 --------- -------- -------- -------- Expenses: Operating expenses.......................... 21,449 8,205 51,535 16,961 Interest.................................... 16,355 9,209 45,788 24,955 Depreciation and amortization............... 16,366 10,395 43,093 26,633 General and administrative.................. 4,754 3,309 12,354 8,148 --------- -------- -------- -------- Total expenses.......................... 58,924 31,118 152,770 76,697 --------- -------- -------- -------- Income before equity in earnings of Hospitality Properties Trust, gain on sale of properties and extraordinary item........ 38,036 26,186 99,433 68,998 Equity in earnings of Hospitality Properties Trust....................................... 2,076 2,238 5,541 6,683 Gain on equity transaction of Hospitality Properties Trust............................ -- -- 2,470 -- --------- -------- -------- -------- Income before gain on sale of properties and extraordinary item.......................... 40,112 28,424 107,444 75,681 Gain on sale of properties..................... -- 2,898 -- 2,898 --------- -------- -------- -------- Income before extraordinary item.............. 40,112 31,322 107,444 78,579 Extraordinary item - early extinguishment of debt........................................ -- (1,102) (2,140) (1,102) --------- -------- -------- -------- Net income..................................... $ 40,112 $ 30,220 $105,304 $ 77,477 ========= ======== ======== ======== Weighted average shares outstanding............ 131,546 98,829 115,931 89,918 ========= ======== ======== ======== Basic and diluted earnings per common share: Income before gain on sale of properties and extraordinary item.......................... $0.30 $0.29 $0.93 $0.84 ========= ======== ======== ======== Income before extraordinary item............... $0.30 $0.32 $0.93 $0.87 ========= ======== ======== ======== Net income..................................... $0.30 $0.31 $0.91 $0.86 ========= ======== ======== ========
See accompanying notes 2 HRPT PROPERTIES TRUST CONSOLIDATED STATEMENTS OF CASH FLOWS (dollars in thousands) (unaudited)
For the Nine Months Ended September 30, 1998 1997 ---------- -------- Cash flows from operating activities: Net income............................................................ $ 105,304 $ 77,477 Adjustments to reconcile net income to cash provided by operating activities: Gain on sale of properties........................................ -- (2,898) Gain on equity transaction of Hospitality Properties Trust........ (2,470) -- Equity in earnings of Hospitality Properties Trust................ (5,541) (6,683) Dividends from Hospitality Properties Trust....................... 7,800 7,280 Extraordinary item - early extinguishment of debt................. 2,140 1,102 Depreciation ..................................................... 41,713 25,422 Amortization...................................................... 1,380 1,211 Amortization of deferred interest costs and bond discount......... 35 699 Change in assets and liabilities: Increase in interest and rents receivable and other assets.... (23,045) (4,068) Increase in accounts payable and accrued expenses............. 6,915 21,129 Increase (decrease) in deferred rents......................... 4,607 (531) Decrease in security deposits................................. (624) (5,515) Increase (decrease) in due to affiliates...................... 11,182 (648) ---------- -------- Cash provided by operating activities............................. 149,396 113,977 ---------- -------- Cash flows from investing activities: Real estate acquisitions and improvements............................. (592,188) (215,310) Acquisition of business, less cash acquired........................... -- (323,181) Investments in mortgage loans......................................... (226,000) (576) Proceeds from repayment of notes and mortgage loans, net.............. 33,404 33,690 Net proceeds from sale of real estate................................. 5,565 22,898 Repayment of loan by affiliate........................................ 1,365 -- ---------- -------- Cash used for investing activities................................ (777,854) (482,479) ---------- -------- Cash flows from financing activities: Proceeds from issuance of common shares................................ 580,306 483,153 Proceeds from borrowings............................................... 1,219,467 375,000 Payments on borrowings................................................. (1,015,930) (340,649) Deferred finance costs incurred........................................ (3,833) (3,581) Dividends paid......................................................... (126,965) (95,509) ---------- -------- Cash provided by financing activities.............................. 653,045 418,414 ---------- -------- Increase in cash and cash equivalents..................................... 24,587 49,912 Cash and cash equivalents at beginning of period.......................... 22,355 21,853 ---------- -------- Cash and cash equivalents at end of period................................ $ 46,942 $ 71,765 ========== ======== Supplemental cash flow information: Interest paid.......................................................... $ 41,451 $ 24,400 ========== ========
See accompanying notes 3 HRPT PROPERTIES TRUST CONSOLIDATED STATEMENTS OF CASH FLOWS (dollars in thousands) (unaudited)
For the Nine Months Ended September 30, 1998 1997 --------- --------- Non-cash investing activities: Real estate acquisitions........................................ $(237,404) $ (10,616) Investment in mortgage loans.................................... 226,000 -- Sale of real estate............................................. 11,404 10,616 Acquisition of business, less cash acquired: Real estate acquisitions........................................ $ 5,705 $ 422,920 Working capital, other than cash................................ -- 3,904 Liabilities assumed............................................. -- (27,588) Net cash used to acquire business............................... -- (323,181) --------- --------- Issuance of common shares....................................... $ 5,705 $ 76,055 ========= ========= Non-cash financing activities: Issuance of common shares....................................... $ 7,958 $ 16,578 Conversion of convertible subordinated debentures, net.......... (6,629) (15,765)
See accompanying notes 4 HPRT PROPERTIES TRUST NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (dollars in thousands, except per share data) Note 1. Basis of Presentation - ------------------------------ Effective July 1, 1998, Health and Retirement Properties Trust changed its name to HRPT Properties Trust. The financial statements of HRPT Properties Trust and its subsidiaries (the "Company") have been prepared in accordance with generally accepted accounting principles for interim financial information and with the instructions to Form 10-Q and Rule 10-01 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for interim periods are not necessarily indicative of the results that may be expected for the full year. Certain prior year amounts have been reclassified to conform to the current year's presentation. The Financial Accounting Standards Board issued Financial Accounting Standards Board Statement No. 130 "Reporting Comprehensive Income" ("FAS 130") and Statement No. 131 "Disclosure about Segments of an Enterprise and Related Information" ("FAS 131") in 1997 and Statement No. 133 "Accounting for Derivative Instruments and Hedging Activities ("FAS 133") in 1998. FAS 130 was adopted for the Company's financial statements in the first quarter of 1998 and had no impact on the Company's financial condition or results of operations. FAS 131 is effective for the Company's annual 1998 financial statements and FAS 133 must be adopted for the Company's year 2000 financial statements. The Company anticipates that FAS 131 and FAS 133 will have no impact on the Company's financial condition or results of operations. Note 2. Shareholders' Equity - ----------------------------- During the nine months ended September 30, 1998, the Company sold 25,000,000 common shares pursuant to a public offering and sold 6,977,575 common shares in four offerings to unit investment trusts sponsored by various investment banks, raising net proceeds of $580,306. The net proceeds were used to repay amounts outstanding under the Company's bank credit facility, to purchase real estate and for general business purposes. The Company also issued 286,400 common shares for the purchase of real estate and issued 362,217 common shares due to the conversion of $6,787 of its convertible subordinated debentures due in 2003. In July 1998, 13,000 common shares were granted to officers of the Company and certain employees of REIT Management & Research, Inc. ("RMR"), the Company's investment manager and advisor, pursuant to the 1992 Incentive Share Award Plan. During 1998, the three independent trustees were each granted 500 common shares as part of their annual fee, and 1,000 common shares were granted to a trust for the child of a deceased former trustee, Ralph J. Watts. The shares granted to the officers and certain employees of RMR vest over a three-year period. The shares granted to the trustees vest immediately. The Company also issued 52,316 common shares to HRPT Advisors, Inc., an affiliate, as the incentive fee earned for the year ended December 31, 1997. During the nine months ended September 30, 1998, the Company increased the number of common shares authorized from 125,000,000 to 150,000,000. On October 5, 1998, the trustees declared a dividend on the Company's common shares with respect to the quarter ended September 30, 1998 of $.38 per share, which will be distributed on or about November 20, 1998 to shareholders of record as of October 22, 1998. Note 3. Real Estate Properties - ------------------------------- During the nine months ended September 30, 1998, the Company purchased 28 commercial office properties, 10 medical office properties and five nursing properties for approximately $819,059, using cash on hand and borrowings under the Company's bank credit facility. In addition, during the nine-month period, the Company sold one office property and four nursing properties for $16,969; no gain or loss was recognized on the sale of these properties. 5 HPRT PROPERTIES TRUST NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (dollars in thousands, except per share data) Note 3. Real Estate Properties - continued - ------------------------------------------- During the nine months ended September 30, 1998, the Company funded $10,533 of improvements to its existing properties. At September 30,1998, the Company had outstanding commitments aggregating approximately $154,585 to acquire properties or to provide financing. The acquisition of these properties is subject to various closing conditions customary in real estate transactions and no assurances can be given as to when or if these properties will be acquired. Subsequent to September 30, 1998, the Company purchased seven commercial office properties for approximately $139,507, using cash on hand and by borrowing $103,500 on the Company's revolving credit facility. The office properties owned by the Company are managed by RMR. Note 4. Investment in Hospitality Properties Trust - --------------------------------------------------- At September 30, 1998, the Company owned four million shares of the common stock of Hospitality Properties Trust ("HPT") with a carrying value of $111,345 and a market value of $119,750. The Company's percentage ownership of HPT was reduced from 10.3% at December 31, 1997 to 9.3% at September 30, 1998 as a result of public stock offerings completed by HPT during 1998. As a result of these transactions, the Company recognized gains of $2,470 in 1998. Note 5. Real Estate Mortgages and Notes Receivable, net - -------------------------------------------------------- During the nine months ended September 30, 1998, the Company received regularly scheduled principal payments of $557, principal repayments of mortgages secured by three retirement facilities and five nursing facilities totaling $34,334, including principal repayment of $1,365 from a loan to an affiliate. In addition, the Company purchased a mortgage loan secured by a commercial office property for $226,000. Subsequent to the acquisition of the mortgage loan, the Company acquired the beneficial ownership of the property. Note 6. Indebtedness - --------------------- During February 1998, the Company issued $50,000 of Remarketed Reset Notes due 2007 and $100,000 unsecured 6.7% Senior Notes due 2005. In August 1998, the Company issued $160,000 unsecured 6 7/8% Senior Notes due 2002. Net proceeds from these issuances of $307,108 were used to repay amounts outstanding under the Company's revolving credit facility, to purchase real estate and for general business purposes. In April 1998, the Company entered into a new $500,000 unsecured revolving bank credit facility (the "New Credit Facility.") The New Credit Facility matures in 2002 and bears interest at LIBOR plus a premium. The Company recognized an extraordinary loss on the early extinguishment of debt in the second quarter of 1998 of $2,140, as a result of the write-off of deferred financing fees associated with the previous bank credit facility. In July 1998, the Company reset the terms of the Remarketed Reset Notes (the "Reset Notes") for a period of one year at LIBOR plus a premium. 6 HRPT PROPERTIES TRUST MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS RESULTS OF OPERATIONS - --------------------- Three Months Ended September 30, 1998 Versus 1997 - ------------------------------------------------- Total revenues for the three months ended September 30, 1998 increased to $97.0 million from $57.3 million for the three months ended September 30, 1997. Rental income increased by $41.1 million and interest and other income decreased by $1.4 million. Rental income increased because of new real estate investments subsequent to September 30, 1997. Interest and other income decreased primarily as a result of a decrease in mortgage interest income as the Company's mortgage loan investments are repaid. Total expenses for the three months ended September 30, 1998 increased to $58.9 million from $31.1 million for the three months ended September 30, 1997. Operating expenses increased by $13.2 million as a result of the Company's increased investment in "gross leased" real estate assets during the 1998 period as compared to the 1997 period. Interest expense increased by $7.1 million as a result of higher borrowings outstanding due to new real estate investments during the 1998 period. Depreciation and amortization, and general and administrative expense increased by $6.0 million and $1.4 million, respectively, primarily as a result of new real estate investments subsequent to September 30, 1997. Net income increased to $40.1 million, or $.30 per basic and diluted common share, for the 1998 period from $30.2 million, or $.31 per basic and diluted common share, for the 1997 period. The change in net income is due primarily to the increase in new real estate investments since September 30, 1997. Funds from operations for the three months ended September 30, 1998 were $58.2 million, or $.44 per basic common share, and $40.1 million, or $.41 per basic common share, for the 1997 period. Diluted funds from operations for the three months ended September 30, 1998 were $62.2 million, or $.44 per diluted common share, and $44.2 million, or $.40 per diluted common share, for the 1997 period. The dividends declared which relate to the three months ended September 30, 1998 and 1997 were $50.0 million, or $.38 per common share, and $36.6 million, or $.37 per common share, respectively. Nine Months Ended September 30, 1998 Versus 1997 - ------------------------------------------------ Total revenues for the nine months ended September 30, 1998 increased to $252.2 million from $145.7 million for the nine months ended September 30, 1997. Rental income increased by $109.5 million and interest and other income decreased by $3.0 million. Rental income increased because of new real estate investments subsequent to September 30, 1997. Interest and other income decreased primarily as a result of a decrease in mortgage interest income as the Company's mortgage loan investments are repaid. Total expenses for the nine months ended September 30, 1998 increased to $152.8 million from $76.7 million for the nine months ended September 30, 1997. Operating expenses increased by $34.6 million as a result of the Company's increased investment in "gross leased" real estate assets during the 1998 period as compared to the 1997 period. Interest expense increased by $20.8 million as a result of higher borrowings outstanding due to new real estate investments during the 1998 period. Depreciation and amortization, and general and administrative expense increased by $16.5 million and $4.2 million, respectively, primarily as a result of new real estate investments subsequent to September 30, 1997. Net income increased to $105.3 million, or $.91 per basic and diluted common share, for the 1998 period from $77.5 million, or $.86 per basic and diluted common share, for the 1997 period. Net income increased primarily as a result of new investments since September 30, 1997 and the recognition of a gain on an equity transaction of HPT, offset by a decrease in gain on sale of properties and an increase in extraordinary loss resulting from the early extinguishment of debt. 7 HRPT PROPERTIES TRUST MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Nine Months Ended September 30, 1998 Versus 1997 - continued - ------------------------------------------------------------ Funds from operations for the nine months ended September 30, 1998, were $153.2 million, or $1.32 per basic common share, and $105.2 million, or $1.17 per basic common share, for the 1997 period. Diluted funds from operations for the nine months ended September 30, 1998, were $165.4 million, or $1.30 per diluted common share, and $117.5 million, or $1.16 per diluted common share, for the 1997 period. The dividends declared which relate to the nine months ended September 30, 1998 and 1997 were $140.4 million, or $1.14 per common share, and $107.7 million, or $1.09 per common share, respectively. LIQUIDITY AND CAPITAL RESOURCES - ------------------------------- Total assets of the Company increased to $2.9 billion at September 30, 1998, from $2.1 billion at December 31, 1997. The increase is primarily attributable to new real estate acquisitions. During the nine months ended September 30, 1998, the Company purchased 28 commercial office properties, 10 medical office properties and five nursing properties for approximately $819.1 million, using cash on hand and borrowings under the Company's bank credit facility. In addition, during the nine-month period, the Company sold one office property and four nursing properties for $17.0 million; no gain or loss was recognized on the sale of these properties. Subsequent to September 30, 1998, the Company purchased seven commercial office properties for approximately $139.5 million, using cash on hand and by borrowing $103.5 million on the Company's revolving credit facility. During the nine months ended September 30, 1998, the Company funded $10.5 million of improvements to its existing properties, received $557,000 of regularly scheduled principal payments, received $33.0 million representing principal repayments of mortgages secured by three retirement facilities and five nursing facilities, and received $1.4 million from a loan to an affiliate. In addition, the Company purchased a mortgage loan secured by a commercial office property for $226.0 million. Subsequent to the acquisition of the mortgage loan, the Company acquired the beneficial ownership of the property. At September 30, 1998, the Company owned 4.0 million, or 9.3%, of the common shares of beneficial interest of HPT with a carrying value of $111.3 million and a market value of $119.8 million. During the nine months ended September 30, 1998, HPT completed public stock offerings of 3.9 million common shares of beneficial interest for total consideration of approximately $134.8 million. As a result of these transactions, the Company's ownership percentage decreased from 10.3% at December 31, 1997 to 9.3% at September 30, 1998 and the Company realized a gain of $2.5 million in 1998. During the nine months ended September 30, 1998, the Company sold 25 million common shares in a public offering and sold 6,977,575 common shares in four offerings to unit investment trusts sponsored by various investment banks, raising net proceeds of $580.3 million. Proceeds from these offerings were used to repay amounts outstanding under the Company's revolving bank credit facility, to purchase real estate and for general business purposes. In addition, the Company issued 362,217 common shares due to the conversion of $6.8 million of its convertible subordinated debentures and issued 286,400 common shares for the purchase of real estate. In April 1998, the Company amended and restated its unsecured revolving bank credit facility (the "New Credit Facility") and increased its amount to $500.0 million and extended its expiration. The New Credit Facility matures in 2002 and bears interest at LIBOR plus a premium. The Company recognized an extraordinary loss on the early extinguishment of debt in the second quarter of 1998 of $2.1 million as a result of the write-off of deferred financing fees associated with the previous bank credit facility. 8 HRPT PROPERTIES TRUST MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS LIQUIDITY AND CAPITAL RESOURCES - continued - ------------------------------------------- At September 30, 1998, the Company had $46.9 million of cash and cash equivalents, as well as $95.0 million outstanding and $405.0 million available for borrowing under its bank credit facility. During February 1998, the Company issued $50.0 million of Remarketed Reset Notes due 2007 and $100.0 million unsecured 6.7% Senior Notes due 2005. In August 1998, the Company issued $160.0 million unsecured 6 7/8% Senior Notes due 2002. Net proceeds of approximately $307.1 million were used to repay amounts outstanding under the Company's revolving credit facility, to purchase real estate and for general business purposes. In July 1998, the Company reset the terms of the Reset Notes for a period of one year at LIBOR plus a premium. At September 30, 1998, the Company had outstanding commitments to purchase properties or provide financing totaling approximately $154.6 million. The Company intends to fund these commitments with a combination of cash on hand and amounts available under its existing credit facility. The acquisition of these properties is subject to various closing conditions customary in real estate transactions, and no assurances can be given as to when and if these properties will be acquired. The Company continues to seek new investments to expand and diversify its portfolio of leased real estate. As of September 30, 1998, the Company's debt as a percentage of total market capitalization was approximately 32%. Year 2000 - --------- The Company's in-house computer systems environment is limited to software and hardware developed by third parties and installed, operated and monitored by the Company's investment advisor. All of the Company's computer systems (which are limited to financial reporting and accounting systems) were installed within the last two years and management believes such systems are Year 2000 compliant. All costs associated with the Company's computer systems are borne by the Company's investment advisor. Most of the Company's healthcare properties are leased on a triple net lease basis and are not managed by the Company. These triple net leased properties are dependent upon the efforts of the Company's third party tenants and their affiliates which operate such properties. The Company's leases and other contractual relationships require these operators to conduct the daily operations of the Company's properties and the scope of the operators' responsibilities includes ensuring preparedness for the year 2000. Because of this leasing arrangement, the only actions that the Company can take with respect to these properties are to inquire about and evaluate its operators' year 2000 preparedness plans. Some of the Company's triple net leased operators have responded to Company inquiries regarding their preparedness for issues related to the year 2000. Based on operator responses to the Company's inquiries, the Company believes that these operators are in the process of studying their systems and the systems of their vendors, suppliers and service providers to ensure preparedness. Current levels of preparedness are varied and include partially completed inventory and assessment of potential risks, testing, implementation of plans for remediation and reprogramming and compliance. While the Company believes the efforts of its tenants described in their responses will be or are adequate to address year 2000 concerns, there can be no guarantee that such systems will be year 2000 compliant on a timely basis and will not have a material effect on the Company. Most of the Company's commercial office properties and properties leased to the U.S. Government are leased on a gross or modified gross lease basis and are managed by the Company. In early 1998 the Company set out to identify issues associated with year 2000 compliance for such managed leased properties. The Company has been contacting and will continue to contact vendors to gather information to assess vendor readiness. In addition, managers and engineers at each of the Company's regional offices are responsible for gathering and assessing year 2000 issues affecting specific building systems including life safety, elevator, garage, security, and energy management systems. The Company will also request its major tenants to provide the Company with periodic updates of their year 2000 readiness. The Company expects to complete an overall assessment of year 2000 issues by first quarter 1999 and perform necessary system replacements or upgrades, including testing, by third quarter 1999. Overall financial risk to the Company associated with year 2000 readiness for these properties is not expected to be material, and most of the cost associated with correcting non-compliance is expected to be classified as an operating expense that is reimburseable to the Company under most tenant leases. If the efforts of the Company, its vendors, its customers and its tenants to prepare for the year 2000 were ineffective, the Company's properties could be subject to significant adverse effects, including, but not limited to, loss of business and growth opportunities, reduced revenues and increased expenses which might cause operating losses by the Company's tenants at their operating properties as well as operating losses at the Company's gross leased properties. Continued or severe operating losses may cause one or more of the Company's tenants to ultimately default on their leases. Numerous lease defaults could jeopardize the Company's ability to maintain its financial results of operations and meet its financial, operating and capital obligations. The Company does not currently have a contingency plan in place in the event it, or its operators, do not successfully remedy year 2000 compliance issues that are identified in a timely manner or fail to identify any year 2000 issues. The Company will evaluate the status of its year 2000 compliance plan in mid 1999 and determine whether such a plan is necessary. 9 HRPT PROPERTIES TRUST Part II Other Information - -------------------------- Item 2. Changes in Securities. On July 7, 1998, pursuant to the Company's Incentive Share Award Plan, one of the Company's independent trustees received a grant of 500 common shares and officers of the Company and certain employees of RMR received grants of 13,000 common shares, each valued at $18.625 per common share, the closing price of the common shares on the New York Stock Exchange on July 7, 1998. The grants were made pursuant to the exemption from registration contained in Section 4(2) of the Securities Act of 1933, as amended. Item 6. Exhibits and Reports on Form 8-K (a) Exhibits: 4.1 Indenture dated as of July 9, 1997 by and between HRPT Properties Trust and State Street Bank and Trust Company pertaining to Senior Debt Securities. (Incorporated by reference from the Company's Annual Report on Form 10-K for the year ended December 31, 1997.) 4.2 Supplemental Indenture dated as of August 26, 1998 by and between HRPT Properties Trust and State Street Bank and Trust Company pertaining to $160,000,000 in aggregate principal amount of 6 7/8% Senior Notes due 2002. 10.1 Agreement of Purchase and Sale among Blackstone/TCC Austin Partners L.P. and the Company dated July, 1998. 27. Financial Data Schedule (b) Reports on Form 8-K: 1. Current Report on Form 8-K, dated July 1, 1998 relating to (a) the change of the Company's name, (b) the election of a new trustee, and (c) the completion of the acquisition of beneficial ownership of 1735 Market Street (Items 5 and 7). 2. Current Report on Form 8-K, dated August 12, 1998 relating to the pro forma consolidated financial statements of the Company as of and for the six months ended June 30, 1998 and for the year ended December 31, 1997 (Item 7). 3. Current Report on Form 8-K, dated August 21, 1998 relating to (a) the purchase agreement dated as of August 21, 1998 by and among HRPT Properties Trust and the several underwriters named therein pertaining to $160,000,000 in aggregate principal amount of 6 7/8 % Senior Notes due 2002, and (b) form of supplemental indenture dated as of August 26, 1998 by and between HRPT Properties Trust and State Street Bank and Trust Company pertaining to $160,000,000 in aggregate principal amount of 6 7/8% Senior Notes due 2002 (Item 7). 10 HRPT PROPERTIES TRUST CERTAIN IMPORTANT FACTORS - ------------------------- The Company's Quarterly Report on Form 10-Q contains statements which constitute forward looking statements within the meaning of the Securities Exchange Act of 1934, as amended. Those statements appear in a number of places in this Form 10-Q and include statements regarding the intent, belief or expectations of the Company, its trustees or its officers with respect to the declaration or payment of dividends, the consummation of additional acquisitions, policies and plans of the Company regarding investments, financings or other matters, the Company's qualification and continued qualification as a real estate investment trust or trends affecting the Company's or any property's financial condition or results of operations. Readers are cautioned that any such forward looking statements are not guarantees of future performance and involve risks and uncertainties, and that actual results may differ materially from those contained in the forward looking statements as a result of various factors. Such factors include without limitation changes in financing terms, the Company's ability or inability to complete acquisitions and financing transactions, results of operations of the Company's properties and general changes in economic conditions not presently contemplated. The information contained in this Form 10-Q and the Company's Annual Report on Form 10-K for the year ended December 31, 1997, including the information under the heading "Management's Discussion and Analysis of Financial Condition and Results of Operations", identifies other important factors that could cause such differences. THE AMENDED AND RESTATED DECLARATION OF TRUST ESTABLISHING THE COMPANY, DATED JULY 1, 1994, A COPY OF WHICH, TOGETHER WITH ALL AMENDMENTS THERETO (THE "DECLARATION"), IS DULY FILED IN THE OFFICE OF THE DEPARTMENT OF ASSESSMENTS AND TAXATION OF THE STATE OF MARYLAND, PROVIDES THAT THE NAME "HRPT PROPERTIES TRUST" REFERS TO THE TRUSTEES UNDER THE DECLARATION COLLECTIVELY AS TRUSTEES, BUT NOT INDIVIDUALLY OR PERSONALLY, AND THAT NO TRUSTEE, OFFICER, SHAREHOLDER, EMPLOYEE OR AGENT OF THE COMPANY SHALL BE HELD TO ANY PERSONAL LIABILITY, JOINTLY OR SEVERALLY, FOR ANY OBLIGATION OF, OR CLAIM AGAINST, THE COMPANY. ALL PERSONS DEALING WITH THE COMPANY, IN ANY WAY, SHALL LOOK ONLY TO THE ASSETS OF THE COMPANY FOR THE PAYMENT OF ANY SUM OR THE PERFORMANCE OF ANY OBLIGATION. 11 SIGNATURES Pursuant to the requirements 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. HRPT PROPERTIES TRUST By: /s/ David J. Hegarty -------------------------------------- David J. Hegarty President and Chief Operating Officer Dated: November 12, 1998 By: /s/ Ajay Saini -------------------------------------- Ajay Saini Treasurer and Chief Financial Officer Dated: November 12, 1998 12 EX-4.2 2 SUPPLEMENTAL INDENTURE NO. 4 SUPPLEMENTAL INDENTURE NO. 4 by and between HRPT PROPERTIES TRUST and STATE STREET BANK AND TRUST COMPANY as of August 26, 1998 SUPPLEMENTAL TO THE INDENTURE DATED AS OF JULY 9, 1997 ------------------------------------ HRPT PROPERTIES TRUST $160,000,000 6-7/8% Senior Notes due 2002 This SUPPLEMENTAL INDENTURE NO. 4 (this "Supplemental Indenture") made and entered into as of August 26, 1998 between HRPT PROPERTIES TRUST, a Maryland real estate investment trust (the "Company"), and STATE STREET BANK AND TRUST COMPANY, a Massachusetts trust company, as Trustee (the "Trustee"). WITNESSETH THAT: WHEREAS, the Company and the Trustee have executed and delivered an Indenture dated as of July 9, 1997 (the "Indenture"), relating to the Company's issuance, from time to time, of various series of debt securities; and WHEREAS, the Company has determined to issue debt securities known as its $160,000,000 6-7/8% Senior Notes due 2002; and WHEREAS, the Indenture provides that certain terms and conditions for each series of debt securities issued by the Company thereunder may be set forth in an indenture supplemental to the Indenture; NOW, THEREFORE, THIS SUPPLEMENTAL INDENTURE WITNESSETH: ARTICLE 1 DEFINED TERMS Section 1.1 The following definitions supplement, and, to the extent inconsistent with, replace the definitions in Section 101 of the Indenture: "Acquired Debt" means Debt of a Person (i) existing at the time such Person becomes a Subsidiary or (ii) assumed in connection with the acquisition of assets from such Person, in each case, other than Debt incurred in connection with, or in contemplation of, such Person's becoming a Subsidiary or such acquisition. Acquired Debt shall be deemed to be incurred on the date of the related acquisition of assets from any Person or the date the acquired Person becomes a Subsidiary. "Annual Debt Service" as of any date means the maximum amount which is expensed in any 12-month period for interest on Debt of the Company and its Subsidiaries. "Business Day" means any day other than a Saturday or Sunday or a day on which banking institutions in The City of New York or in the city in which the Corporate Trust Office of the Trustee is located, are required or authorized to close. "Capital Stock" means, with respect to any Person, any capital stock (including preferred stock), shares, interests, participation or other ownership interests (however designated) of such Person and any rights (other than debt securities convertible into or exchangeable for capital stock), warrants or options to purchase any thereof. "Consolidated Income Available for Debt Service" for any period means Earnings from Operations of the Company and its Subsidiaries plus amounts which have been deducted, and minus amounts which have been added, for the following (without duplication): (i) interest on Debt of the Company and its Subsidiaries, (ii) provision for taxes of the Company and its Subsidiaries based on income, (iii) amortization of debt discount and deferred financing costs, (iv) provisions for gains and losses on properties and property depreciation and amortization, (v) the effect of any noncash charge resulting from a change in accounting principles in determining Earnings from Operations for such period and (vi) amortization of deferred charges. -1- "Debt" of the Company or any Subsidiary means, without duplication, any indebtedness of the Company or any Subsidiary, whether or not contingent, in respect of (i) borrowed money or evidenced by bonds, notes, debentures or similar instruments, (ii) indebtedness for borrowed money secured by any Encumbrance existing on property owned by the Company or any Subsidiary, (iii) the reimbursement obligations, contingent or otherwise, in connection with any letters of credit actually issued (other than letters of credit issued to provide credit enhancement or support with respect to other indebtedness of the Company or any Subsidiary otherwise reflected as Debt hereunder) or amounts representing the balance deferred and unpaid of the purchase price of any property or services, except any such balance that constitutes an accrued expense or trade payable, or all conditional sale obligations or obligations under any title retention agreement, (iv) the principal amount of all obligations of the Company or any Subsidiary with respect to redemption, repayment or other repurchase of any Disqualified Stock, or (v) any lease of property by the Company or any Subsidiary as lessee which is reflected on the Company's consolidated balance sheet as a capitalized lease in accordance with GAAP, to the extent, in the case of items of indebtedness under (i) through (iii) above, that any such items (other than letters of credit) would appear as a liability on the Company's consolidated balance sheet in accordance with GAAP, and also includes, to the extent not otherwise included, any obligation by the Company or any Subsidiary to be liable for, or to pay, as obligor, guarantor or otherwise (other than for purposes of collection in the ordinary course of business), Debt of another Person (other than the Company or any Subsidiary) (it being understood that Debt shall be deemed to be incurred by the Company or any Subsidiary whenever the Company or such Subsidiary shall create, assume, guarantee or otherwise become liable in respect thereof). "Disqualified Stock" means, with respect to any Person, any Capital Stock of such Person which by the terms of such Capital Stock (or by the terms of any security into which it is convertible or for which it is exchangeable or exercisable), upon the happening of any event or otherwise (i) matures or is mandatorily redeemable, pursuant to a sinking fund obligation or otherwise (other than Capital Stock which is redeemable solely in exchange for common stock or shares), (ii) is convertible into or exchangeable or exercisable for Debt or Disqualified Stock, or (iii) is redeemable at the option of the holder thereof, in whole or in part (other than Capital Stock which is redeemable solely in exchange for common stock or shares), in each case on or prior to the Stated Maturity of the Notes. "Earnings from Operations" for any period means net earnings excluding gains and losses on sales of investments, extraordinary items and property valuation losses, as reflected in the financial statements of the Company and its Subsidiaries for such period, determined on a consolidated basis in accordance with GAAP. "Encumbrance" means any mortgage, lien, charge, pledge or security interest of any kind. "Interest Payment Date" means any date on which interest is due and payable on the Notes in accordance with the terms thereof. "Issuance Date" means the closing date for the sale and original issuance of the Notes. "Make-Whole Amount" means, in connection with any optional redemption or accelerated payment of any Note, the excess, if any, of (i) the aggregate present value as of the date of such redemption or accelerated payment of each dollar of principal being redeemed or paid and the amount of interest (exclusive of interest accrued to the date of redemption or accelerated payment) that would have been payable in respect of such dollar if such redemption or accelerated payment had not been made, determined by discounting, on a semiannual basis, such principal and interest at the Reinvestment Rate (determined on the third Business Day preceding the date such notice of redemption is given or declaration of acceleration is made) from the respective dates on which such principal and interest would have been payable if such redemption or accelerated payment had not been made, over (ii) the aggregate principal amount of the Notes being redeemed -2- or paid. For purposes of this Supplemental Indenture and the Notes, references in the Indenture to the payment of the principal (and premium, if any) and interest on the Notes shall be deemed to include the payment of the Make-Whole Amount, if any, due upon redemption with respect to the Notes. "Notes" means the Company's $160,000,000 aggregate principal amount of 6-7/8% Senior Notes, due 2002, issued under this Indenture, as amended or supplemented from time to time. "Record Date" means the fifteenth calendar day, whether or not a Business Day, next preceding the applicable Interest Payment Date. "Reinvestment Rate" means a rate per annum equal to the sum of 0.25% (twenty-five one hundredths of one percent) plus the yield on treasury securities at constant maturity under the heading "Week Ending" published in the Statistical Release under the caption "Treasury Constant Maturities" for the maturity (rounded to the nearest month) corresponding to the remaining life to maturity, as of the payment date of the principal being redeemed or paid. If no maturity exactly corresponds to such maturity, yields for the two published maturities most closely corresponding to such maturity shall be calculated pursuant to the immediately preceding sentence and the Reinvestment Rate shall be interpolated or extrapolated from such yields on a straight-line basis, rounding in each of such relevant periods to the nearest month. For purposes of calculating the Reinvestment Rate, the most recent Statistical Release published prior to the date of determination of the Make-Whole Amount shall be used. "SEC" means the Securities and Exchange Commission. "Secured Debt" means Debt secured by any mortgage, lien, charge, pledge or security interest of any kind. "Securities Act" means the Securities Act of 1933, as amended. "Statistical Release" means the statistical release designated "H. 15(519)" or any successor publication which is published weekly by the Federal Reserve System and which establishes yields on actively traded United States government securities adjusted to constant maturities or, if such statistical release is not published at the time of any determination under this Supplemental Indenture, then any publicly available source of similar market data which shall be designated by the Company. "Subsidiary" means any corporation or other entity of which a majority of (i) the voting power of the voting equity securities or (ii) the outstanding equity interests of which are owned, directly or indirectly, by the Company or one or more other Subsidiaries of the Company. For the purposes of this definition, "voting equity securities" means equity securities having voting power for the election of directors, whether at all times or only so long as no senior class of security has such voting power by reason of any contingency. "Total Assets" as of any date means the sum of (i) the Undepreciated Real Estate Assets and (ii) all other assets of the Company and its Subsidiaries determined in accordance with GAAP (but excluding accounts receivable and intangibles). "Total Unencumbered Assets" means the sum of (i) those Undepreciated Real Estate Assets not subject to an Encumbrance for borrowed money and (ii) all other assets of the Company and its Subsidiaries not subject to an Encumbrance for borrowed money determined in accordance with GAAP (but excluding accounts receivable and intangibles). -3- "Undepreciated Real Estate Assets" as of any date means the cost (original cost plus capital improvements) of real estate assets of the Company and its Subsidiaries on such date, before depreciation and amortization determined on a consolidated basis in accordance with GAAP. "Unsecured Debt" means Debt which is not secured by any of the properties of the Company or any Subsidiary. ARTICLE 2 TERMS OF THE NOTES Section 2.1 Pursuant to Section 301 of the Indenture, the Notes shall have the following terms and conditions: (a) Title; Limitation on Aggregate Principal Amount; Form of Notes. The Notes shall be known as the Company's $160,000,000 6-7/8% Senior Notes due 2002. The Notes will be limited to an aggregate principal amount of $160,000,000. The Notes (together with the Trustee's certificate of authentication) shall be substantially in the form of Exhibit A hereto, which is hereby incorporated in and made a part of this Supplemental Indenture. The Notes will be issued in the form of single fully registered global security without coupons (the "Global Note") which will be deposited with, or on behalf of, The Depository Trust Company ("DTC"), and registered in the name of DTC's nominee, Cede & Co. Except under the circumstance described below, the Notes will not be issuable in a definitive form. Unless and until it is exchanged in whole or in part for the individual notes represented thereby, the Global Note may not be transferred except as a whole by DTC to a nominee of DTC or by a nominee of DTC to DTC or another nominee of DTC or by DTC or any nominee of DTC to a successor depository or any nominee of such successor. So long as DTC or its nominee is the registered owner of such Global Note, DTC or such nominee, as the case may be, will be considered the sole owner or holder of the Notes represented by such Global Note for all purposes under this Supplemental Indenture. Except as described below, owners of beneficial interest in Notes evidenced by the Global Note will not be entitled to have any of the individual Notes represented by such Global Note registered in their names, will not receive or be entitled to receive physical delivery of any such Notes in definitive form and will not be considered the owners or holders thereof under the Indenture or this Supplemental Indenture. If DTC is at any time unwilling, unable or ineligible to continue as depository and a successor depository is not appointed by the Company within 90 days, the Company will issue individual Notes in exchange for the Global Note representing such Notes and the Trustee, upon receipt of an authentication order pursuant to [Section] 303 of the Indenture, shall authenticate and deliver such Notes. In addition, the Company may at any time and in its sole discretion, subject to certain limitations set forth in the Indenture, determine not to have any of such Notes represented by one or more Global Notes and in such event will issue individual Notes in exchange for the Global Note or Notes representing such debt Securities. Individual Notes so issued will be issued in such names as DTC should instruct and in denominations of $1,000 and integral multiples thereof and will be issued in registered form only, without coupons. (b) Principal Repayment; Currency. The Stated Maturity of the Notes is August 26, 2002, provided, however, the Notes may be earlier redeemed at the option of the Company as provided in paragraph (c) below. The principal of each Note payable on its maturity date shall be paid against presentation and surrender thereof at the Corporate Trust Office of the Trustee, located initially at Two International Place, -4- Boston, Massachusetts 02110, in such coin or currency of the United States of America as at the time of payment is legal tender for the payment of public or private debts. The Company will not pay Additional Amounts (as defined in the Indenture) on the Notes. (c) Redemption at the Option of the Company; Acceleration. The Notes will be subject to redemption at any time at the option of the Company, in whole or in part, upon not less than 30 nor more than 60 days' notice to each Holder of Notes to be redeemed at its address appearing in the Security Register, at a price equal to the sum of (i) the principal amount of the Notes being redeemed, plus accrued and unpaid interest to but excluding the applicable redemption date and (ii) the Make-Whole Amount. Upon the acceleration of the Notes in accordance with Section 502 of the Indenture, the principal amount of the Notes, plus accrued and unpaid interest thereon and the Make-Whole Amount shall become due and payable immediately. (d) Notices. All notices and other communications hereunder shall be in writing and shall be deemed to have been duly given if mailed or transmitted by any standard form of telecommunication. Notices to the Company shall be directed to it at 400 Centre Street, Newton, Massachusetts 02458, Attention: David J. Hegarty, President; notices to the Trustee shall be directed to it at Two International Place, Boston, Massachusetts 02110, Attention: Corporate Trust Department, Re: HRPT Properties Trust 6-7/8% Senior Notes due 2002. (e) Global Note Legend. The Global Note shall bear the following legend on the face thereof: UNLESS THIS NOTE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION ("DTC"), TO THE COMPANY OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY NOTE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR IN SUCH OTHER NAME AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT IS MADE TO CEDE & CO. OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN. ARTICLE 3 ADDITIONAL COVENANTS Section 3.1 In addition to the covenants of the Company set forth in Article Ten of the Indenture, for the benefit of the holders of the Notes: (a) Limitations on Incurrence of Debt. (i) The Company will not, and will not permit any Subsidiary to, incur any Debt if, immediately after giving effect to the incurrence of such additional Debt and the application of the proceeds thereof, the aggregate principal amount of all outstanding Debt of the Company and its Subsidiaries on a consolidated basis determined in accordance with GAAP is greater than 60% of the sum ("Adjusted Total Assets") of (without duplication) (i) the Total Assets of the Company and its Subsidiaries as of the end of the calendar quarter covered in the Company's Annual Report on Form 10-K, or the Quarterly Report on Form 10-Q, as the case may be, most recently filed with the Securities and Exchange Commission (or, if such filing is not permitted under the Securities Exchange Act of 1934, as amended (the "Exchange Act"), with the Trustee) prior to the incurrence of such -5- additional Debt and (ii) the purchase price of any real estate assets or mortgages receivable acquired, and the amount of any securities offering proceeds received (to the extent that such proceeds were not used to acquire real estate assets or mortgages receivable or used to reduce Debt), by the Company or any Subsidiary since the end of such calendar quarter, including those proceeds obtained in connection with the incurrence of such additional Debt. (ii) In addition to the foregoing limitations on the incurrence of Debt, the Company will not, and will not permit any Subsidiary to, incur any Secured Debt if, immediately after giving effect to the incurrence of such additional Secured Debt and the application of the proceeds thereof, the aggregate principal amount of all outstanding Secured Debt of the Company and its Subsidiaries on a consolidated basis is greater than 40% of Adjusted Total Assets. (iii) In addition to the foregoing limitations on the Incurrence of Debt, the Company will not, and will not permit any Subsidiary to, incur any Debt if the ratio of Consolidated Income Available for Debt Service to the Annual Debt Service for the four consecutive fiscal quarters most recently ended prior to the date on which such additional Debt is to be incurred shall have been less than 1.5x, on a pro forma basis after giving effect thereto and to the application of the proceeds therefrom, and calculated on the assumption that (i) such Debt and any other Debt incurred by the Company and its Subsidiaries since the first day of such four-quarter period and the application of the proceeds therefrom, including to refinance other Debt, had occurred at the beginning of such period; (ii) the repayment or retirement of any other Debt by the Company and its Subsidiaries since the first date of such four-quarter period had been repaid or retired at the beginning of such period (except that, in making such computation, the amount of Debt under any revolving credit facility shall be computed based upon the average daily balance of such Debt during such period); (iii) in the case of Acquired Debt or Debt incurred in connection with any acquisition since the first day of such four-quarter period, the related acquisition had occurred as of the first day of such period with appropriate adjustments with respect to such acquisition being included in such pro forma calculation; and (iv) in the case of any acquisition or disposition by the Company or its Subsidiaries of any asset or group of assets since the first day of such four-quarter period, whether by merger, stock purchase or sale, or asset purchase or sale, such acquisition or disposition or any related repayment of Debt had occurred as of the first day of such period with the appropriate adjustments with respect to such acquisition or disposition being included in such pro forma calculation. (b) Maintenance of Total Unencumbered Assets. The Company and its Subsidiaries will maintain Total Unencumbered Assets of not less than 200% of the aggregate outstanding principal amount of the Unsecured Debt of the Company and its Subsidiaries on a consolidated basis. (c) Applicability of Discharge, Defeasance and Covenant Defeasance Provisions. The Discharge, Defeasance and Covenant Defeasance provisions in Article Fourteen of the Indenture will apply to the Notes. ARTICLE 4 ADDITIONAL EVENTS OF DEFAULT For purposes of this Supplemental Indenture and the Notes, in addition to the Events of Default set forth in Section 501 of the Indenture, it shall also constitute an "Event of Default" if an event of default under any bond, debenture, note or other evidence of indebtedness of the Company (including an event of default with respect to any other series of securities), or under any mortgage, indenture or other instrument of the Company under which there may be issued or by which there may be secured or evidenced any indebtedness of the Company (or by any Subsidiary, the repayment of which the Company has guaranteed or for which the -6- Company is directly responsible or liable as obligor or guarantor), whether such indebtedness now exists or shall hereafter be created, shall happen and shall result in an aggregate principal amount exceeding $20,000,000 becoming or being declared due and payable prior to the date on which it would otherwise have become due and payable, without such indebtedness having been discharged, or such acceleration having been rescinded or annulled, within a period of ten days after there shall have been given, by registered or certified mail, to the Company by the Trustee or to the Company and the Trustee by the holders of at least 25% in principal amount of the outstanding Notes, a written notice specifying such default and requiring the Company to cause such indebtedness to be discharged or cause such acceleration to be rescinded or annulled and stating that such notice is a "Notice of Default" hereunder. ARTICLE 5 EFFECTIVENESS This Supplemental Indenture shall be effective for all purposes as of the date and time this Supplemental Indenture has been executed and delivered by the Company and the Trustee in accordance with Article Nine of the Indenture. As supplemented hereby, the Indenture is hereby confirmed as being in full force and effect. ARTICLE 6 MISCELLANEOUS Section 6.1 In the event any provision of this Supplemental Indenture shall be held invalid or unenforceable by any court of competent jurisdiction, such holding shall not invalidate or render unenforceable any other provision hereof or any provision of the Indenture. Section 6.2 To the extent that any terms of the Notes are inconsistent with the terms of the Indenture, the terms of the Notes shall govern and supersede such inconsistent terms. Section 6.3 This Supplemental Indenture shall be governed by and construed in accordance with the laws of The Commonwealth of Massachusetts. Section 6.4 This Supplemental Indenture may be executed in several counterparts, each of which shall be an original and all of which shall constitute but one and the same instrument. -7- IN WITNESS WHEREOF, the Company and the Trustee have caused this Supplemental Indenture to be executed as an instrument under seal in their respective corporate names as of the date first above written. HRPT PROPERTIES TRUST By: /s/ David J. Hegarty David J. Hegarty President STATE STREET BANK AND TRUST COMPANY, as Trustee By: /s/ Ruth A. Smith Name: Ruth A. Smith Title: Vice President -8- EXHIBIT A (Face of Note) 6-7/8% Senior Notes due 2002 No. $__________ HRPT PROPERTIES TRUST promises to pay to _______________________________________ or registered assigns, the principal sum of _____________________________________ Dollars on August 26, 2002. Interest Payment Dates: February 26 and August 26. Record Dates: February 11 and August 11. CUSIP No.: 40426WAF8 HRPT PROPERTIES TRUST By: ___________________________________ Name: Title: [SEAL] Dated: This is one of the Notes referred to in the within-mentioned Indenture: STATE STREET BANK AND TRUST COMPANY, as Trustee By: ________________________________ Authorized Signatory A - 1 (Back of Note) HRPT PROPERTIES TRUST 6-7/8% Senior Notes due 2002 Capitalized terms used herein have the meanings assigned to them in the Indenture (as defined below) unless otherwise indicated. 1. Interest. HRPT Properties Trust, a Maryland real estate investment trust (the "Company"), promises to pay interest on the principal amount of this Note at the rate and in the manner specified below. The Company shall pay in cash interest on the principal amount of this Note at the rate per annum of 6-7/8%. The Company will pay interest semi-annually in arrears on February 26 and August 26 of each year, commencing on February 26, 1999 or if any such day is not a Business Day (as defined in the Indenture), on the next succeeding Business Day (each an "Interest Payment Date"), to Holders of record on the immediately preceding February 11 and August 11. Interest will be computed on the basis of a 360-day year consisting of twelve 30-day months. Interest shall accrue from the most recent date to which interest has been paid or, if no interest has been paid, from the date of the original issuance of the Notes. 2. Method of Payment. The Company will pay interest on the Notes (except defaulted interest) to the Persons who are registered Holders of Notes at the close of business on the record date next preceding the Interest Payment Date, even if such Notes are canceled after such record date and on or before such Interest Payment Date. The Company will pay principal and interest in money of the United States that at the time of payment is legal tender for payment of public and private debts. The Company, however, may pay principal, premium, if any, and interest by check payable in such money. It may mail an interest check to a Holder's registered address. 3. Indenture. The Company issued the Notes under an Indenture dated as of July 9, 1997, as supplemented by a Supplemental Indenture dated as of August 26, 1998 (the "Indenture") between the Company and the Trustee. The terms of the Notes include those stated in the Indenture and those made part of the Indenture by reference to the Trust Indenture Act of 1939 (15 U.S. Code[Sections]77aaa-77bbbb) as in effect on the date of the Indenture. The Notes are subject to all such terms, and Holders of the Notes are referred to the Indenture and such act for a statement of such terms. The terms of the Indenture shall govern any inconsistencies between the Indenture and the Notes. The Notes are unsecured general obligations of the Company limited to $160,000,000 in aggregate principal amount. 4. Optional Redemption. The Notes will be subject to redemption at any time at the option of the Company, in whole or in part, upon not less than 30 nor more than 60 days' notice, at a redemption price equal to the sum of (i) the principal amount of the Notes being redeemed, plus accrued and unpaid interest to but excluding the applicable redemption date and (ii) the Make-Whole Amount. As used herein the term "Make-Whole Amount" means, in connection with any optional redemption or accelerated payment of any Note, the excess, if any, of (i) the aggregate present value as of the date of such redemption or accelerated payment of each dollar of principal being redeemed or paid and the amount of interest (exclusive of interest accrued to the date of redemption or accelerated payment) that would have been payable in respect of such dollar if such redemption or accelerated payment had not been made, determined by discounting, on a semiannual basis, such principal and interest at the Reinvestment Rate (as defined herein) (determined on the third Business Day preceding the date such notice of redemption is given or declaration A - 2 of acceleration is made) from the respective dates on which such principal and interest would have been payable if such redemption or accelerated payment had not been made, over (ii) the aggregate principal amount of the Notes being redeemed or paid. As used herein the term "Reinvestment Rate" means a rate per annum equal to the sum of 0.25% (twenty-five one hundredths of one percent) plus the yield on treasury securities at constant maturity under the heading "Week Ending" published in the Statistical Release (as defined herein) under the caption "Treasury Constant Maturities" for the maturity (rounded to the nearest month) corresponding to the remaining life to maturity, as of the payment date of the principal being redeemed or paid. If no maturity exactly corresponds to such maturity, yields for the two published maturities most closely corresponding to such maturity shall be calculated pursuant to the immediately preceding sentence and the Reinvestment Rate shall be interpolated or extrapolated from such yields on a straight-line basis, rounding in each of such relevant periods to the nearest month. For purposes of calculating the Reinvestment Rate, the most recent Statistical Release published prior to the date of determination of the Make-Whole Amount shall be used. As used herein the term "Statistical Release" means the statistical release designated "H. 15(519)" or any successor publication which is published weekly by the Federal Reserve System and which establishes yields on actively traded United States government securities adjusted to constant maturities or, if such statistical release is not published at the time of any determination under the Supplemental Indenture, then such other reasonably comparable index which shall be designated by the Company. 5. Mandatory Redemption. The Company shall not be required to make sinking fund or redemption payments with respect to the Notes. 6. Notice of Redemption. Notice of redemption shall be mailed at least 30 days but not more than 60 days before the redemption date to each Holder of Notes to be redeemed at its registered address. Notes may be redeemed in part but only in whole multiples of $1,000, unless all of the Notes held by a Holder are to be redeemed. On and after the redemption date, interest ceases to accrue on Notes or portions of them called for redemption. 7. Denominations, Transfer, Exchange. The Notes are in registered form without coupons in denominations of $1,000 and integral multiples thereof. The transfer of Notes may be registered and Notes may be exchanged as provided in the Indenture. The Registrar and the Trustee may require a Holder, among other things, to furnish appropriate endorsements and transfer documents and to pay any taxes and fees required by law or permitted by the Indenture. The Registrar need not exchange or register the transfer of any Note or portion of a Note selected for redemption. Also, it need not exchange or register the transfer of any Notes for a period of 15 days before the mailing of a notice of redemption of Notes, or during the period between a record date and the corresponding Interest Payment Date. 8. Defaults and Remedies. In case an Event of Default (as defined in the Indenture) with respect to the Notes shall have occurred and be continuing, the principal hereof may be declared, and upon such declaration shall become, due and payable, in the manner, with the effect and subject to the provisions provided in the Indenture. 9. Actions of Holders. The Indenture contains provisions permitting the holders of not less than a majority of the aggregate principal amount of the outstanding Notes, on behalf of the holders of all such Notes at a meeting duly called and held as provided in the Indenture, to make, give or take any request, demand, authorization, direction, notice, consent, waiver or other action provided in the Indenture to be made, given or taken by the holders of the Notes, including without limitation, waiving (a) compliance by the Company with certain provisions of the Indenture, and (b) certain past defaults under the Indenture and their consequences. Any resolution passed or decision taken at any meeting of the holders of the Notes in A - 3 accordance with the provisions of the Indenture shall be conclusive and binding upon such holders and upon all future holders of this Note and other Notes issued upon the registration of transfer hereof or in exchange heretofore or in lieu hereof 10. Persons Deemed Owners. The Company, the Trustee, and any agent of the Company or the Trustee may deem and treat the Person in whose name this Note is registered on the Security Register as its absolute owner for all purposes. 11. Authentication. This Note shall not be valid until authenticated by the manual signature of the Trustee or an authenticating agent. 12. Governing Law. THE INTERNAL LAW OF THE COMMONWEALTH OF MASSACHUSETTS SHALL GOVERN AND BE USED TO CONSTRUE THE INDENTURE AND THE NOTES. 13. No Personal Liability. THE AMENDED AND RESTATED DECLARATION OF TRUST OF THE COMPANY, DATED JULY 1, 1994, A COPY OF WHICH, TOGETHER WITH ALL AMENDMENTS THERETO (THE "DECLARATION"), IS DULY FILED IN THE OFFICE OF THE DEPARTMENT OF ASSESSMENTS AND TAXATION OF THE STATE OF MARYLAND, PROVIDES THAT THE NAME "HRPT PROPERTIES TRUST" REFERS TO THE TRUSTEES UNDER THE DECLARATION COLLECTIVELY AS TRUSTEES, BUT NOT INDIVIDUALLY OR PERSONALLY, AND THAT NO TRUSTEE, OFFICER, SHAREHOLDER, EMPLOYEE OR AGENT OF THE COMPANY SHALL BE HELD TO ANY PERSONAL LIABILITY, JOINTLY OR SEVERALLY, FOR ANY OBLIGATION OF, OR CLAIM AGAINST, THE COMPANY. ALL PERSONS DEALING WITH THE COMPANY, IN ANY WAY, SHALL LOOK ONLY TO THE ASSETS OF THE COMPANY FOR THE PAYMENT OF ANY SUM OR THE PERFORMANCE OF ANY OBLIGATION. The Company will furnish to any Holder upon written request and without charge a copy of the Indenture. Request may be made to: HRPT Properties Trust 400 Centre Street Newton, MA 02458 Telecopier No.: (617) 332-2261 Attention: President A - 4 ASSIGNMENT FORM To assign this Note, fill in the form below: (I) or (we) assign and transfer this Note to (Insert assignee's soc. sec. or tax I.D. no.) (Print or type assignee's name, address and zip code) and irrevocably appoint to transfer this Note on the books of the Company. The agent may substitute another to act for him. Date: Your Signature: (Sign exactly as your name appears on the face of this Note) Signature Guarantee: EX-10.1 3 AGREEMENT OF PURCHASE AND SALE AGREEMENT OF PURCHASE AND SALE among BLACKSTONE/TCC AUSTIN PARTNERS L.P., the SELLER and HRPT PROPERTIES TRUST, the BUYER As of July __, 1998 TABLE OF CONTENTS ARTICLE I DEFINITIONS.........................................................................6 Section 1.1 Defined Terms. .....................................................6 ARTICLE II SALE, PURCHASE PRICE AND CLOSING...................................................12 Section 2.1 Sale of Asset......................................................12 Section 2.2 Earnest Money......................................................13 Section 2.3 The Closing........................................................14 ARTICLE II REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE SELLER............................14 Section 3.1 General Seller Representations and Warranties. ...................14 Section 3.2 Representations and Warranties of the Seller as to the Asset. .....15 Section 3.3 Covenants of the Seller Prior to Closing. .......................17 Section 3.4 Industrial Building 2. ...........................................19 ARTICLE IV REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE BUYER.............................20 Section 4.1 Representations, Warranties and Covenants of the Buyer. ..........20 ARTICLE V CONDITIONS PRECEDENT TO CLOSING....................................................25 Section 5.1 Conditions Precedent To Seller's Obligations.......................25 Section 5.2 Conditions to the Buyer's Obligations. ...........................26 ARTICLE VI CLOSING DELIVERIES.................................................................27 ARTICLE VII INSPECTIONS........................................................................30 Section 7.1 Right of Inspection................................................30 Section 7.2 Due Diligence Period...............................................30 ARTICLE VIII TITLE AND PERMITTED EXCEPTIONS.....................................................31 Section 8.1 Permitted Exceptions. ............................................31 Section 8.2 Title Report. ....................................................31 Section 8.3 Use of Purchase Price to Discharge Title Exceptions................31 Section 8.4 Inability to Convey................................................32 Section 8.5 Rights in Respect of Inability to Convey. .........................32 Section 8.6 Voluntary Title Exceptions.........................................33 Section 8.7 The Buyer's Right to Accept Title..................................33
i Section 8.8 Cooperation........................................................33 ARTICLE IX TRANSACTION COSTS; RISK OF LOSS....................................................33 Section 9.1 Transaction Costs. ...............................................33 Section 9.2 Risk of Loss.......................................................34 ARTICLE X ADJUSTMENTS........................................................................35 Section 10.1 Fixed Rents........................................................35 Section 10.2 Overage Rents......................................................36 Section 10.3 Taxes and Assessments. ...........................................38 Section 10.4 Water and Sewer Charges. .........................................38 Section 10.5 Utility Charges....................................................39 Section 10.6 Material Contracts.................................................39 Section 10.7 Miscellaneous Revenues.............................................39 Section 10.8 Security Deposits. ...............................................39 Section 10.9 Other..............................................................39 Section 10.10 Re-Adjustment......................................................40 ARTICLE XI INDEMNIFICATION....................................................................40 Section 11.1 Indemnification by the Seller......................................40 Section 11.2 Indemnification by the Buyer.......................................40 Section 11.3 Limitations on Indemnification. ..................................40 Section 11.4 Survival...........................................................41 Section 11.5 Indemnification as Sole Remedy.....................................41 ARTICLE XII TAX CERTIORARI PROCEEDINGS.........................................................41 Section 12.1 Prosecution and Settlement of Proceedings.........................41 Section 12.2 Application of Refunds or Savings. ..............................42 Section 12.3 Survival..........................................................42 ARTICLE XIII DEFAULT............................................................................42 Section 13.1 Default............................................................42 ARTICLE XIV MISCELLANEOUS......................................................................43 Section 14.1 Use of Blackstone Name and Address.................................43 Section 14.2 Exculpation of the Seller..........................................43 Section 14.3 Brokers. .........................................................43 Section 14.4 Confidentiality; Press Release; IRS Reporting Requirements. .......44 Section 14.5 Escrow Provisions. ...............................................45 Section 14.6 Successors and Assigns; No Third-Party Beneficiaries...............45 Section 14.7 Assignment. ......................................................46 Section 14.8 Further Assurances. ..............................................46
ii Section 14.9 Notices............................................................46 Section 14.10 Entire Agreement. ................................................47 Section 14.11 Amendments. ......................................................47 Section 14.12 No Waiver. .....................................................47 Section 14.13 Governing Law......................................................47 Section 14.14 Submission to Jurisdiction. ......................................47 Section 14.15 Severability.......................................................48 Section 14.16 Section Headings...................................................48 Section 14.17 Counterparts.......................................................48 Section 14.18 Acceptance of Deed. ..............................................48 Section 14.19 Construction.......................................................48 Section 14.20 Recordation........................................................48 Section 14.21 Waiver of Jury Trial...............................................48 Section 14.22 Financials.........................................................48 Section 14.23 Nonliability of Trustees...........................................49 Section 14.24 Independent Contract Consideration.................................49 Section 14.25 Tax Free Exchange. ...............................................49
iii Exhibits Exhibit A - Assignment of Leases Exhibit B - Assignment of Contracts Exhibit C - Tenant Notices Exhibit D - Special Warranty Deed Exhibit E - Bill of Sale Exhibit F - FIRPTA Certificate Exhibit G - Estoppel Certificates Schedules Schedule I - Asset Schedule Schedule II - Existing Title Policy and Survey Schedule III - Phase II Schedule IV - Seller SDP Deposits Schedule V - Material Contracts Schedule VI - Space Leases Schedule VI-1 - Landlord's Work in Progress Schedule VII - Brokerage Commissions Schedule VIII - Litigation Schedule IX - Space Leases in Progress Schedule X - Security Deposits Held By Seller iv AGREEMENT OF PURCHASE AND SALE AGREEMENT OF PURCHASE AND SALE (this "Agreement"), made as of the ____________________ day of July, 1998 by and between the entity (the "Seller") listed in the column entitled "Seller" on Schedule I attached hereto and made a part hereof (the "Asset Schedule") and HRPT Properties Trust, a Maryland real estate investment trust (the "Buyer"). Background A. The Seller is the owner of the land, buildings and other improvements (or leasehold interest therein) constituting the "Property" listed in the column entitled "Property" opposite its name on the Asset Schedule (the "Property"). The Property listed on the Asset Schedule, together with the Asset-Related Property (as defined below) with respect to the Property, shall be referred to herein, collectively, as the "Asset". B. The Seller desires to sell to the Buyer, and the Buyer desires to purchase from the Seller, the Asset on the terms and conditions hereinafter set forth. AGREEMENT NOW, THEREFORE, in consideration of the mutual covenants and agreements set forth in this Agreement, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereby agree as follows: ARTICLE I DEFINITIONS Section 1.1 Defined Terms. The capitalized terms used herein will have the following meanings. "Agreement" shall mean this Agreement of Purchase and Sale and all amendments hereto, together with the exhibits and schedules attached hereto, as the same may be amended, restated, supplemented or otherwise modified. "Asset" shall have the meaning assigned thereto in "Background" paragraph A. "Asset File" shall mean the materials with respect to the Property v previously delivered to the Buyer or its representatives by or on behalf of the Seller. "Asset Manager" shall mean the person identified on the Asset Schedule as the Asset Manager with respect to the Property, such person being the individual responsible for management of the Asset on behalf of the Seller. "Asset-Related Property" shall have the meaning assigned thereto in subsection 2.1(b). "Asset Schedule" shall have the meaning assigned thereto in the Preamble to this Agreement. "Assignment of Contracts" shall have the meaning assigned thereto in Article VI. "Assignment of Leases" shall have the meaning assigned thereto in Article VI. "Basket Limitation" shall mean (i) with respect to Phase I, an amount equal to one percent (1%) of the Phase I Purchase Price Portion and (ii) with respect to Phase II, an amount equal to one percent (1%) of the Phase II Purchase Price Portion. "Bill of Sale" shall have the meaning assigned thereto in Article VI. "BREA" shall mean Blackstone Real Estate Acquisitions L.L.C. "Business Day" shall mean any day other than a Saturday, Sunday or other day on which banks are authorized or required by law to be closed in New York City, New York or Boston, Massachusetts. "Buyer" shall have the meaning assigned thereto in the Preamble to this Agreement. "Buyer-Related Entities" shall have the meaning assigned thereto in subsection 11.1. "Cap Limitation" shall mean (i) with respect to Phase I, an amount equal to three percent (3%) of the Phase I Purchase Price Portion and (ii) with respect to Phase II, an amount equal to three percent (3%) of the Phase II Purchase Price Portion. "Cisco" shall mean Cisco Systems, Inc., a California corporation. "Cisco Lease" shall mean that certain lease dated as of April 10, 1998 between the Seller and Cisco with respect to Industrial Building 3 and Industrial Building 4, as amended by that certain First Amendment to Lease Agreement dated as of June 16, 2 1998. "Closing" shall mean the Phase I Closing or the Phase II Closing; collectively the "Closings". "Closing Date" shall mean the Phase I Closing Date or the Phase II Closing Date. "Condition of the Assets" shall have the meaning assigned thereto in subsection 4.1(e)(ii). "Deed" shall have the meaning assigned thereto in Article VI. "Due Diligence Expiration Date" shall have the meaning assigned thereto in subsection 7.2(a). "Earnest Money" shall have the meaning assigned thereto in subsection 2.2(b). "Eastdil" shall mean Eastdil Realty Company, L.L.C. "Escrow Account" shall have the meaning assigned thereto in subsection 14.5(a). "Escrow Agent" shall have the meaning assigned thereto in subsection 2.2(b)(i). "Estoppel Condition" shall mean the closing conditions set forth in paragraph 5.2(g). "Existing Survey" shall mean the survey with respect to the Property listed on Schedule II attached hereto. "Existing Title Commitment" shall mean the title commitment with respect to the Property attached hereto as part of Schedule II. "Fixed Rents" shall have the meaning assigned thereto in subsection 10.1(a). "Hazardous Materials" shall have the meaning assigned thereto in subsection 4.1(e)(ii)(A). "Independent Contract Consideration" shall have the meaning assigned thereto in Section 14.24. "Industrial Building 2": shall mean the single story, service center type 3 building to be constructed in Phase II containing approximately 29,425 gross square feet. "Industrial Building 3": shall mean the single story, service center type building located in Phase II containing approximately 55,388 gross square feet. "Industrial Building 4": shall mean the single story, service center type building located in Phase II containing approximately 93,188 gross square feet. "IRS" shall mean the Internal Revenue Service. "IRS Reporting Requirements" shall have the meaning assigned thereto in subsection 14.4(b). "Losses" shall have the meaning assigned thereto in subsection 11.1. "Material Contracts" shall have the meaning assigned thereto in subsection 3.2(b). "Overage Rent" shall have the meaning assigned thereto in subsection 10.2(a). "Permitted Exceptions" shall mean (i) the matters set forth on the Existing Title Commitment which have not been marked out or the Existing Survey, (ii) the Space Leases, Material Contracts and other contracts affecting the Property and any Space Leases, Material Contracts or other contracts entered into after the date, and in accordance with the terms, of this Agreement, (iii) liens for current real estate taxes which are not yet due and payable, (iv) standard pre-printed jacket exceptions and provisions contained in forms of title insurance policies, (v) subject to the adjustments provided for herein, any service, installation, connection or maintenance charge due after Closing and charges for sewer, water, electricity, telephone, cable television or gas, (vi) rights of vendors and holders of security interests on personal property installed on the Property by tenants and rights of tenants to remove trade fixtures at the expiration of the term of the Space Leases of such tenants, (vii) matters contained in the updated title commitment or survey with respect to the Property obtained by the Buyer as required under Section 8.2 which matters do not qualify as Permitted Exceptions under one of the other clauses of this definition and with respect to which either (A) the Buyer has not raised an objection within the time period required in Section 8.2 or (B) the Buyer has raised an objection within the time period required in Section 8.2 (the Buyer being deemed to have raised an objection with respect to each item which has been marked out in the Existing Title Commitment attached hereto as Schedule II) and the Seller has not agreed to cause such title exception to be removed prior to Closing and (viii) any other restrictions, easements, encumbrances and other exceptions encumbering the Property which do not individually materially interfere with the continued use of the relevant Property. 4 "Person shall mean a natural person, partnership, limited partnership, limited liability company, corporation, trust, estate, association, unincorporated association or other entity. "Phase I" shall mean the Asset less and except Phase II. "Phase I Closing" shall have the meaning assigned thereto in subsection 2.3(a). "Phase I Closing Date" shall have the meaning assigned thereto in subsection 2.3(a). "Phase I Earnest Money Portion" shall mean a portion of the Earnest Money in the amount of Two Million Six Hundred and Ten Thousand Dollars ($2,610,000). "Phase I Purchase Price Portion" shall mean a portion of the Purchase Price in the amount of Eighty-Nine Million Three Hundred Ninety-Nine Thousand, Nine Hundred Twenty-Five Dollars ($89,399,925) as the same may be reduced pursuant to subsection 2.3(c). "Phase II" shall mean that portion of the Asset described on Schedule III attached hereto. "Phase II Closing" shall have the meaning assigned thereto in subsection 2.3(a). "Phase II Closing Date" shall mean the Phase II Scheduled Closing Date, as the same may be extended pursuant to subsection 2.3(c). "Phase II Closing Condition" shall mean the condition that Cisco has commenced the payment of rent under the Cisco Lease. "Phase II Earnest Money Portion" shall mean a portion of the Earnest Money in the amount of Three Hundred and Ninety Thousand Dollars ($390,000). "Phase II Liquidated Damages Amount" shall mean $6,000,000 provided that if the Phase II Purchase Price Portion is reduced pursuant to paragraph 2.2(c), then the Phase II Liquidated Damages Amount shall be reduced to $4,234,500. "Phase II Purchase Price Portion" shall mean a portion of the Purchase Price in the amount of $13,350,075. "Phase II Scheduled Closing Date" shall have the meaning assigned thereto in subsection 2.3(a). 5 "Pre-Leasing Requirement" shall mean the requirement that one or more leases for all of the leasable space in Industrial Building 2 have been entered into between the Seller and Radian or another tenant (or tenants) which other tenant or tenants are no less creditworthy, in the Buyer's reasonable discretion, than Cisco and which leases have been approved or deemed approved by the Buyer pursuant to paragraph 3.3(d) or Section 3.4. "Property" shall have the meaning assigned thereto in "Background" paragraph A. "Purchase Price" shall have the meaning assigned thereto in subsection 2.2(a). "Radian" shall mean Radian International. "Reporting Person" shall have the meaning assigned thereto in subsection 14.4(b). "Seller" shall have the meaning assigned thereto in the Preamble to this Agreement. "Seller Closing Documents" shall mean the documents to be executed and delivered by the Seller pursuant to Article VI of this Agreement. "Seller-Related Entities" shall have the meaning assigned thereto in subsection 10.2. "Seller SDP Deposits" shall mean the deposits and/or bonds more particularly described on Schedule IV attached hereto which have been delivered or posted by the Seller with the City of Austin in connection with the issuance of certain site development permits for the Property. "Seller's Knowledge" shall mean the actual knowledge of the Seller based upon the actual knowledge of Gary M. Sumers and the Asset Manager, without any duty on the part of any such executive officer or other Person to conduct any independent investigation or make any inquiry of any Person. "Solectron T/I Allowance" shall mean the tenant improvement allowance in the aggregate amount of $5,763,450 payable by the Seller to Solectron Texas, L.P. pursuant to the provisions of the Space Lease with Solectron Texas, L.P. more particularly described as item 2 on Schedule VI attached hereto. "Space Lease" shall have the meaning assigned thereto in subsection 3.2(c)(i). 6 "Tenant Notices" shall have the meaning assigned thereto in Article VI. "Title Company" shall mean Title Associates, as agent for Chicago Title Insurance Company. "UCC" shall mean the Uniform Commercial Code. "Voluntary Title Exceptions" shall mean with respect to the Property, title exceptions affecting the Property that are knowingly and intentionally created by the Seller after the date of this Agreement through the execution by the Seller of one or more instruments creating or granting such title exceptions; provided, however, that the term "Voluntary Title Exceptions" as used in this Agreement shall not include the following: (a) any Permitted Exceptions; (b) Space Leases for the Property or any title exception created pursuant to a Space Lease for the Property by the tenant thereunder; (c) any title exceptions that are approved, waived or deemed to have been approved or waived by the Buyer or that are created in accordance with the provisions of this Agreement; (d) any title exceptions which, pursuant to a Space Lease for the Property or otherwise, are to be discharged by a tenant or occupant of the Property; (e) mechanic's or materialman's liens or (f) any federal tax liens. ARTICLE II SALE, PURCHASE PRICE AND CLOSING Section 2.1 Sale of Asset. (a) On the Closing Dates and pursuant to the terms and subject to the conditions set forth in this Agreement, the Seller shall sell to the Buyer, and the Buyer shall purchase from the Seller, the Asset. (b) The transfer of the Asset to the Buyer shall include the transfer of all Asset-Related Property with respect to the Asset. For purposes of this Agreement, "Asset-Related Property" shall mean all of the Seller's right, title and interest in and to (A) all easements, covenants and other rights appurtenant to the Property and all right, title and interest of the Seller, if any, in and to any land lying in the bed of any street, road, avenue or alley, open or closed, in front of or adjoining the Property and to the center line thereof, (B) all furniture, fixtures, equipment and other personal property (except items owned or leased by tenants or which are leased by the Seller) which are now, or may hereafter prior to the Closing Date be, placed in or attached to the Property, (C) to the extent they may be transferred under applicable law, all licenses, permits and authorizations presently issued in connection with the operation of all or any part of the Property as it is presently being operated, (D) to the extent assignable, all warranties, if any, issued to the Seller by any manufacturer or contractor in connection with construction or installation of equipment or any component of the improvements included as part of the Property, (E) to the extent assignable, all service, supply and maintenance contracts (if any) held by the Seller with respect to the Property and its mechanical 7 equipment, elevators and other elements, (F) to the extent assignable, all trade names and general intangibles relating to the Property and (G) all leases, licenses, contracts and other agreements, to the extent transferable, for the use and occupancy of all or any part of the Property and all security and escrow deposits held by the Seller in connection with any such leases, licenses, contracts and other agreements. Section 2.2 Earnest Money. (a) The aggregate consideration for the Asset shall be equal to One Hundred and Two Million Seven Hundred Fifty Thousand Dollars ($102,750,000) (as the same may be reduced pursuant to subsection 2.2(c) below) (the "Purchase Price") which consists of the Phase I Purchase Price Portion and the Phase II Purchase Price Portion. The Purchase Price shall be paid by the Buyer to the Seller as set forth in subsection 2.2(c) below by wire transfer of funds and adjusted for Closing adjustments as described in Article X below. (b) The Purchase Price shall be paid to the Seller as follows: (i) upon execution of this Agreement, the Buyer shall deposit with Title Associates, as agent for Chicago Title Insurance Company, as escrow agent ("Escrow Agent"), the amount of Three Million Dollars ($3,000,000) (together with any interest earned thereon, the "Earnest Money") in immediately available funds by wire transfer to such account as Escrow Agent shall designate to the Buyer; the Earnest Money shall be held in escrow in accordance with the provisions of Section 14.5 and shall be nonrefundable to the Buyer except if all of the conditions set forth in Section 5.2 have not been met by the Closing Date or otherwise as set forth in Article VII or subsection 2.2(d) below; and (ii) on the Phase I Closing Date, the Buyer shall deliver the Phase I Purchase Price Portion as reduced by the Phase I Earnest Money Portion to the Seller in immediately available funds by wire transfer to such account or accounts that BREA, as agent for the Seller, shall designate to the Buyer. (iii) on the Phase II Closing Date, the Buyer shall deliver the Phase II Purchase Price Portion (as the same may be reduced pursuant to subsection 2.2(c) below) less the Phase II Earnest Money Portion to the Seller in immediately available funds by wire transfer to such account or accounts that BREA, as agent for the Seller, shall designate to the Buyer. By execution of this Agreement, the Seller acknowledges that the Purchase Price and all other amounts payable to the Seller hereunder may be wired, to BREA as its agent hereunder unless otherwise explicitly stated in this Agreement. (c) In the event that the Pre-Leasing Requirement has not been satisfied as of the Phase I Closing Date and, pursuant to Section 3.4, Industrial Building 2 will not be constructed, the Phase II Purchase Price Portion shall be reduced by the amount of One Million Seven Hundred Sixty-Five Thousand Five Hundred Dollars 8 ($1,765,500). No adjustment shall be made to the Purchase Price except as explicitly set forth in this subsection 2.2(c) or elsewhere in this Agreement. Section 2.3 The Closing. (a) The closing of the sale and purchase of (i) Phase I (the "Phase I Closing") shall take place on September 18, 1998 or such earlier date as the parties may agree, (the "Phase I Closing Date") and (ii) Phase II (the "Phase II Closing") shall take place on April 1, 1999 (the "Phase II Scheduled Closing Date"). (b) The Closings shall be held on the respective Closing Dates at 10:00 A.M. at the offices of Simpson Thacher & Bartlett, 425 Lexington Avenue, New York, New York, or at such other location agreed upon by the parties hereto. (c) Notwithstanding the foregoing, in the event that, (i) as of the Phase II Scheduled Closing Date, the Phase II Closing Condition has not been satisfied, the Seller may, upon written notice to the Buyer, adjourn the Phase II Closing Date until the date which is five (5) Business Days after the Phase II Closing Condition has been satisfied; provided, however if the Phase II Closing Condition has not been satisfied by July 1, 1999, then upon written notice from the Buyer to the Seller delivered at any time after such date, the Buyer may terminate this Agreement with respect to Phase II or (ii) as of the Phase I Scheduled Closing Date or the Phase II Scheduled Closing Date, the Estoppel Condition with respect to the portion of the Property to be transferred on such date has not been satisfied or waived by the Buyer, the Seller may, upon written notice to the Buyer, adjourn the relevant Closing Date until the Estoppel Condition has been satisfied; provided, however that any adjournment of the Phase I Closing Date or the Phase II Closing Date pursuant to this clause (ii) shall not exceed 60 days. Upon receipt of such termination notice, the Phase II Earnest Money Portion shall be returned to the Buyer, the provisions of this Agreement relating to Phase II shall be terminated and neither party shall have any further rights or obligations hereunder with respect to Phase II. ARTICLE III REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE SELLER Section 3.1 General Seller Representations and Warranties. The Seller hereby represents, warrants and covenants to the Buyer as of the date hereof and as of the Closing Date as follows: (a) Formation; Existence. It is a limited partnership, limited liability company or corporation, as applicable, duly formed, validly existing and in good standing under the laws of the state of Delaware. (b) Power and Authority. It has all requisite power and authority to enter into this Agreement, to perform its obligations hereunder and to consummate the transactions contemplated hereby. The execution, delivery and performance of 9 this Agreement and the consummation of the transactions provided for in this Agreement have been duly authorized by all necessary action on its part. This Agreement has been duly executed and delivered by it and constitutes its legal, valid and binding obligation, enforceable against it in accordance with its terms, except as such enforceability may be limited by bankruptcy, insolvency, reorganization, moratorium or other laws affecting creditors' rights and by general principles of equity (whether applied in a proceeding at law or in equity). (c) No Consents. Except for any consent, license, approval, order, permit, authorization, registration, filing or declaration, the failure of which to obtain will not materially adversely effect (A) the Seller's ability to consummate the transactions contemplated by this Agreement, (B) the ownership of the Asset or (C) the operation of the Property, no consent, license, approval, order, permit or authorization of, or registration, filing or declaration with, any court, administrative agency or commission or other governmental authority or instrumentality, domestic or foreign, is required to be obtained or made in connection with the execution, delivery and performance of this Agreement or any of the transactions required or contemplated hereby. (d) No Conflicts. To the Seller's Knowledge, the execution, delivery and compliance with, and performance of the terms and provisions of, this Agreement, and the sale of the Asset, will not (i) conflict with or result in any violation of its organizational documents, (ii) conflict with or result in any violation of any provision of any bond, note or other instrument of indebtedness, contract, indenture, mortgage, deed of trust, loan agreement, lease or other agreement or instrument to which it is a party in its individual capacity, or (iii) violate any existing term or provision of any order, writ, judgment, injunction, decree, statute, law, rule or regulation applicable to it or its assets or properties except, in each case, for any conflict or violation which (A) will not materially adversely effect (1) the Seller's ability to consummate the transactions contemplated by this Agreement, (2) the ownership of the Asset or (3) the operation of the Property or (B) arises under the documents evidencing or securing the Third Party Loans. (e) Foreign Person. The Seller is not a "foreign person" as defined in Internal Revenue Code Section 1445 and the regulations issued thereunder. Section 3.2 Representations and Warranties of the Seller as to the Asset. The Seller hereby represents, warrants and covenants to the Buyer as of the date hereof and as of the Closing Date, as follows: (a) Ownership of the Asset. It is the owner and holder of the Asset and the Asset is held by it free and clear of any lien, pledge, charge, security interest, encumbrance, title retention agreement, adverse claim or restriction except for the Permitted Exceptions and possible security interests which will be terminated prior to the Closing. It has the right to sell the Asset pursuant to the terms of this 10 Agreement. Upon transfer of the Property by it to the Buyer and upon delivery by the Buyer to the Seller of the Purchase Price, the Buyer will receive the Property free and clear of any encumbrances (other than the Permitted Exceptions and any encumbrances arising from acts of the Buyer or its affiliates). It has not prior to the date hereof sold (or entered into an agreement to sell) the Asset (except for the possible granting of security interests, all of which will be terminated prior to the Closing). (b) Material Contracts. To the Seller's Knowledge, all material service, maintenance, supply, construction, development and management contracts ("Material Contracts") affecting the Property are set forth on Schedule V attached hereto and the same have not been modified or amended, except as shown in such documents. (c) Space Leases. With respect to the leases listed on Schedule VI attached hereto (the "Space Leases"), to the Seller's Knowledge (A) such Space Leases constitute all the leases relating to the Property under which the Seller is the holder of the landlord's interest, (B) such Space Leases have not been modified except as stated in Schedule VI, (C) such Space Leases contain the entire agreement between the relevant landlord and the tenants named therein and (D) except as set forth in Schedule VI, fixed rent and additional rent are currently being collected under such Space Leases without offset, counterclaim or deduction. True copies of the Space Leases have been delivered to the Buyer. If any Space Lease so delivered contains provisions that are inconsistent with the foregoing representations and warranties, such representations and warranties shall be deemed modified to the extent necessary to eliminate such inconsistencies and to conform such representations and warranties to the provisions of the Space Leases. Except (i) as set forth on Schedule VI, (ii) for the obligation to construct Industrial Building 3 and Industrial Building 4 pursuant to the Cisco Lease and (iii) the obligation to fund the Solectron T/I Allowance, all tenant improvements or other construction work relating to the initial occupancy of the tenants under the Space Leases) or payments by the landlord relating thereto) have been fully completed or made. To the Seller's Knowledge, Seller has not received any written notices of default under the Space Leases (which defaults remain uncured). To the Seller's Knowledge, the Seller has not received written notice that a tenant has filed a petition in bankruptcy or for the approval of a plan of reorganization or management under the Federal Bankruptcy Code or under any other similar state law, made an admission in writing as to the relief therein provided, or otherwise become the subject of any proceeding under any federal or state bankruptcy law or insolvency law, or admitted in writing its inability to pay its debts as they become due or made an assignment for the benefit of creditors, or petitioned for the appointment of or has had appointed a receiver, trustee or custodian for any of its property. Except as set forth on Schedule VI, the Seller has not delivered a notice of default to any tenant under the Space Leases. No tenant is in arrears in the payment of base or additional rent or any other material 11 sum and no tenant has paid any base or additional rent more than one month in advance. (d) Brokerage Commissions. To the Seller's Knowledge, there are no brokerage commissions of finders' fees payable by the landlord with respect to the current or any renewal term of any of the Space Leases other than those set forth on Schedule VII attached hereto and the Seller has no agreement with any broker with respect to any renewal term of any Space Lease except as set forth in Schedule VII. (e) Condemnation. To the Seller's Knowledge, the Seller knows of no pending condemnation or similar proceedings affecting the Property, nor does the Seller have knowledge that any such action is threatened or contemplated. (f) Litigation. To the Seller's Knowledge, except as disclosed in Schedule VIII attached hereto, there are no actions, suits or proceedings pending against or affecting the Asset in any court or before or by an arbitration tribunal or regulatory commission, department or agency which, if adversely determined, would materially adversely effect (1) the Seller's ability to consummate the transactions contemplated by this Agreement, (2) the ownership of the Asset or (3) the operation of the Property. (g) Compliance With Law. To the Seller's Knowledge, the Seller has not received written notice of (i) a violation of any material federal, state or municipal or other governmental statute, ordinance, by-law, rule, regulation or any other legal requirements, including, without limitation, those relating to construction, occupancy, zoning, adequacy of parking, environmental protection, occupational health and safety and fire safety applicable thereto or (ii) any request, application, proceeding, plan or study which would materially adversely affect the present use or zoning of the Property or which would result in the material modification or realignment of any street or highway adjacent to the Property. (h) The Seller has not received written notice from any insurance carrier which has issued a policy insuring the Property, which notice (i) identifies defects or inadequacies in the Property and (ii) indicates that if such defects or inadequacies are uncorrected, then the relevant policy will be terminated. Section 3.3 Covenants of the Seller Prior to Closing. Until Closing, the Seller or the Seller's agents shall: (a) Insurance. Keep the Property insured against fire and other hazards covered by the insurance policies maintained by the Seller on the date of this Agreement. (b) Operation. Operate and maintain the Property in a businesslike 12 manner and substantially in accordance with the Seller's past practices with respect to the Property. (c) New Contracts. Enter into third party contracts relating to the Property, provided that, without the prior written consent of the Buyer, which consent shall not be unreasonably withheld, the Seller will not enter into any new third party contracts unless any such contract (i) is necessary as a result of an emergency at the Property, (ii) does not require the payment of more than $10,000 in each calendar year or (iii) is entered into in the course of customary maintenance and repairs at the Property and, in each case, is terminable upon no more than 30 days prior notice without payment of premium or penalty. If the Seller enters into any third party contracts after the date of this Agreement, then the Seller shall promptly provide written notice and a copy thereof to the Buyer and unless such contract required the Buyer's approval pursuant to this paragraph and such approval was not obtained, the Buyer shall assume such contract at Closing, such contract shall be deemed added to Schedule V attached hereto and Schedule V shall be deemed amended at the Closing to include such contracts. If a new contract requires the Buyer's approval and the Buyer does not object within seven (7) Business Days after receipt of a copy of such contract, then the Buyer shall be deemed to have approved such contract. (d) New Space Leases. (i) Continue its present rental program and efforts at the Property to rent vacant space, provided that without the prior consent of the Buyer, which consent shall not be unreasonably withheld, the Seller will not execute any new lease or amend, terminate or accept the surrender of any existing tenancies or approve any subleases except that the Seller is authorized to (i) accept the termination of Space Leases at the end of their existing terms, (ii) enter into Space Leases with any of the tenants listed on Schedule IX with respect to the specified space in the Property on substantially the same material terms as set forth on Schedule IX and (iii) amend, extend or renew any existing Space Lease provided that such amendment, extension or renewal is with any of the tenants listed on Schedule IX on substantially the same material terms as set forth on Schedule IX. If a new Space Lease or an amendment, renewal or extension of an existing Space Lease requires the Buyer's consent and the Buyer does not object in writing (which writing shall include the specific basis or bases for such objection) within seven (7) Business Days after receipt of a copy of such lease, amendment, extension or renewal, then the Buyer shall be deemed to have approved such space lease. Notwithstanding the foregoing, with respect to leases for space in Industrial Building 2, if the Buyer has approved or is deemed to have approved a letter of intent with respect to such lease pursuant to Section 3.4, then the Buyer's prior approval of the relevant lease shall be limited to those terms of the lease which were not included in, or are inconsistent with, the terms of the letter of intent. (ii) If the Seller enters into any Space Leases after the date of this 13 Agreement, then unless such Space Lease required the Buyer's approval pursuant to this paragraph and such approval was not obtained, the Buyer shall assume such Space Lease at Closing, such Space Lease shall be shall be deemed added to Schedule VI attached hereto and Schedule VI shall be deemed amended at the Closing to include such Space Lease. (e) Litigation. The Seller will advise the Buyer promptly of any litigation, arbitration proceeding or administrative hearing (including condemnation) before any governmental agency of which the Seller has Knowledge, which affects the Asset in any respect. (f) Sale of Personal Property. The Seller will not transfer or dispose of, or permit to be sold, transferred or otherwise disposed of, any item or group of items constituting personal property associated with the Property, except for the use and consumption of inventory, office and other supplies and spare parts, and the replacement of worn out, obsolete and defective tools, equipment and appliances, in the ordinary course of business. (g) Performance Under Space Leases. The Seller will perform, or cause its agents to perform, all obligations of landlord or lessor under the Space Leases. (h) Estoppel Certificates. Immediately upon execution of this Agreement, the Seller and the Buyer will cooperate in preparing as expeditiously as possible an estoppel certificate (each an "Estoppel Certificate") with respect to each Space Lease substantially in the relevant form attached hereto as Exhibit G, in each case revised to be addressed to Purchaser and to reflect the facts of the transactions contemplated by this Agreement and, in the case of the estoppel certificate for Cisco, further revised to include a statement by the tenant that "substantial completion" (as defined in the Cisco Lease and the related workletter) has occurred. (i) Delivery of Notices. The Seller agrees to issue default notices under the Material Contracts and the Space Leases in a commercially reasonable manner consistent with the Seller's past practices of operation of the Property. Section 3.4 Industrial Building 2. (a) The Seller intends to construct Industrial Building 2 on a portion of Phase II. However, the Seller agrees that such construction will not be commenced by the Seller unless and until the Pre-Leasing Requirement has been met. The Seller agrees to keep the Buyer apprised of the status of negotiations with respect to the Pre-Leasing Requirement and shall submit to the Buyer for its approval any letter of intent which the Seller intends to enter into with respect to leases which will satisfy the Pre-Leasing Requirement. The Buyer shall either approve or disapprove such letter of intent within five (5) Business Days after the same has been received by the Buyer. The failure of the Buyer to respond within such five Business Day period shall be deemed approval of the letter of intent by the Buyer. Upon execution 14 of leases pursuant to which all of Industrial Building 2 will be leased which leases (i) include material terms consistent with letters of intent approved or deemed approved by the Buyer or (ii) are otherwise approved by the Buyer, the Pre-Leasing Requirement shall be deemed satisfied. (b) If the Pre-Leasing Requirement is not satisfied by the Phase I Closing Date, then the Seller shall not commence construction of Industrial Building 2 and the Phase II Purchase Price Portion shall be reduced pursuant to subsection 2.2(d). If the Pre-Leasing Requirement has been satisfied as of the Phase I Closing Date, then the Seller shall cause Industrial Building 2 to be constructed in accordance with the lease or leases for Industrial Building 2. The lease or leases with respect to Industrial Building 2 shall be subject to the provisions of subsection 3.3(d). ARTICLE IV REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE BUYER Section 4.1 Representations, Warranties and Covenants of the Buyer. The Buyer hereby represents, warrants and covenants to the Seller as of the date hereof and as of the Closing Date as follows: (a) Formation; Existence. Buyer is a real estate investment trust duly organized, validly existing and in good standing under the laws of the State of Maryland. (b) Power; Authority. The Buyer has all requisite power and authority to enter into this Agreement, to perform its obligations hereunder and to consummate the transactions contemplated hereby. The execution, delivery and performance of this Agreement, the purchase of the Asset and the consummation of the transactions provided for herein have been duly authorized by all necessary action on the part of the Buyer. This Agreement has been duly executed and delivered by the Buyer and constitutes the legal, valid and binding obligation of the Buyer enforceable against the Buyer in accordance with its terms, except as such enforceability may be limited by bankruptcy, insolvency, reorganization, moratorium or other laws affecting creditors' rights and by general principles of equity (whether applied in a proceeding at law or in equity). (c) No Consents. No consent, license, approval, order, permit or authorization of, or registration, filing or declaration with, any court, administrative agency or commission or other governmental authority or instrumentality, domestic or foreign, is required to be obtained or made in connection with the execution, delivery and performance of this Agreement or any of the transactions required or contemplated hereby. 15 (d) No Conflicts. The execution, delivery and compliance with, and performance of the terms and provisions of, this Agreement, and the purchase of the Asset, will not (a) conflict with or result in any violation of its organizational documents, (b) conflict with or result in any violation of any provision of any bond, note or other instrument of indebtedness, contract, indenture, mortgage, deed of trust, loan agreement, lease or other agreement or instrument to which it is a party in its individual capacity, or (c) violate any existing term or provision of any order, writ, judgment, injunction, decree, statute, law, rule or regulation applicable to it or its assets or properties. (e) Examination; No Contingencies. (i) Except as provided in Article VII below, before entering into this Agreement, the Buyer has made such examination of the Asset and all other matters affecting or relating to the transactions contemplated hereunder as the Buyer has deemed necessary. In entering into this Agreement, the Buyer has not been induced by and has not relied upon any written or oral representations, warranties or statements, whether express or implied, made by BREA, the Seller, any partner of BREA or the Seller, or any agent, employee, or other representative of any of the foregoing or by any broker or any other person representing or purporting to represent BREA or the Seller, with respect to the Asset, the Condition of the Asset or any other matter affecting or relating to the transactions contemplated hereby, other than those expressly set forth in this Agreement. The Buyer's obligations under this Agreement shall not be subject to any contingencies, diligence or conditions except as expressly set forth in this Agreement. The Buyer acknowledges and agrees that, except as expressly set forth herein, the Seller makes no representations or warranties whatsoever, whether express or implied or arising by operation of law, with respect to the Asset or the Condition of the Asset. The Buyer agrees that the Asset will be sold and conveyed to (and accepted by) the Buyer at the Closing in the then existing condition of the Asset, AS IS, WHERE IS, WITH ALL FAULTS, AND WITHOUT ANY WRITTEN OR VERBAL REPRESENTATIONS OR WARRANTIES WHATSOEVER, WHETHER EXPRESS OR IMPLIED OR ARISING BY OPERATION OF LAW, other than representations and warranties of the Seller expressly set forth in this Agreement. Without limiting the generality of the foregoing, except for the representations and warranties of the Seller contained in this Agreement, the transactions contemplated by this Agreement are without statutory, express or implied warranty, representation, agreement, statement or expression of opinion of or with respect to (A) the Condition of the Asset or any aspect thereof, including, without limitation, any and all statutory, express or implied representations or warranties related to the suitability for habitation, merchantability, or fitness for a particular purpose, (B) the nature or quality of construction, structural design or engineering of the improvements included in the Property, (C) the quality of labor or materials included in the improvements included in the Property, (D) the soil conditions, drainage, topographical features, flora, fauna, or other conditions of or which affect the Property, (E) any conditions at or which affect the Property with respect 16 to a particular use, purpose, development, potential or otherwise, (F) areas, size, shape, configuration, location, access, capacity, quantity, quality, cash flow, expenses, value, condition, make, model, composition, accuracy, completeness, applicability, assignability, enforceability, exclusivity, usefulness, authenticity or amount, (G) any statutory, express or implied representations or warranties created by any affirmation of fact or promise, by any description of the Asset or by operation of law, (H) any environmental, botanical, zoological, hydrological, geological, meteorological, structural, or other condition or hazard or the absence thereof heretofore, now or hereafter affecting in any manner the Property and (I) all other statutory, express or implied representations or warranties by the Seller whatsoever. The Buyer acknowledges that the Buyer has knowledge and expertise in financial and business matters that enable the Buyer to evaluate the merits and risks of the transactions contemplated by this Agreement. (ii) For purposes of this Agreement, the term "Condition of the Asset" means the following matters: (A) Physical Condition of the Property. The quality, nature and adequacy of the physical condition of the Property, including, without limitation, the quality of the design, labor and materials used to construct the improvements included in the Property; the condition of structural elements, foundations, roofs, glass, mechanical, plumbing, electrical, HVAC, sewage, and utility components and systems; the capacity or availability of sewer, water, or other utilities; the geology, flora, fauna, soils, subsurface conditions, groundwater, landscaping, and irrigation of or with respect to the Property, the location of the Property in or near any special taxing district, flood hazard zone, wetlands area, protected habitat, geological fault or subsidence zone, hazardous waste disposal or clean-up site, or other special area, the existence, location, or condition of ingress, egress, access, and parking; the condition of the personal property and any fixtures; and the presence of any asbestos or other Hazardous Materials, dangerous, or toxic substance, material or waste in, on, under or about the Property and the improvements located thereon. "Hazardous Materials" means (A) those substances included within the definitions of any one or more of the terms "hazardous substances," "toxic pollutants", "hazardous materials", "toxic substances", and "hazardous waste" in the Comprehensive Environmental Response, Compensation and Liability Act, 42 U.S.C. [Section]9601 et seq. (as amended), the Hazardous Materials Transportation Act, as amended, 49 U.S.C. Sections 1801 17 et seq., the Resource Conservation and Recovery Act of 1976 as amended, 42 U.S.C. Section 6901 et seq., Section 311 of the Clean Water Act and any similar state laws or any regulations issued under any such laws and (B) petroleum, radon gas, lead based paint, asbestos or asbestos containing material and polychlorinated biphenyls. (B) Adequacy of the Asset. The economic feasibility, cash flow and expenses of the Asset, and habitability, merchantability, fitness, suitability and adequacy of the Property for any particular use or purpose. (C) Legal Compliance of the Asset. The compliance or non-compliance of the Seller or the operation of the Property or any part thereof in accordance with, and the contents of, (i) all codes, laws, ordinances, regulations, agreements, licenses, permits, approvals and applications of or with any governmental authorities asserting jurisdiction over the Property, including, without limitation, those relating to zoning, building, public works, parking, fire and police access, handicap access, life safety, subdivision and subdivision sales, and Hazardous Materials, dangerous, and toxic substances, materials, conditions or waste, including, without limitation, the presence of Hazardous Materials in, on, under or about the Property that would cause state or federal agencies to order a clean up of the Property under any applicable legal requirements and (ii) all agreements, covenants, conditions, restrictions (public or private), condominium plans, development agreements, site plans, building permits, building rules, and other instruments and documents governing or affecting the use, management, and operation of the Property. (D) Matters Disclosed in the Scheduled Documents and Asset File. Those matters referred to in this Agreement and the documents listed on the Schedules attached hereto and the matters disclosed in the Asset File. (E) Insurance. The availability, cost, terms and coverage of liability, hazard, comprehensive and any other insurance of or with respect to the Property. (F) Condition of Title. The condition of title to the Property, including, without limitation, vesting, legal 18 description, matters affecting title, title defects, liens, encumbrances, boundaries, encroachments, mineral rights, options, easements, and access; violations of restrictive covenants, zoning ordinances, setback lines, or development agreements; the availability, cost, and coverage of title insurance; leases, rental agreements, occupancy agreements, rights of parties in possession of, using, or occupying the Property; and standby fees, taxes, bonds and assessments. (f) Leasing Costs. (i) The Buyer will be responsible for all capital costs, tenant improvement costs, relocation costs, temporary leasing costs, leasing commissions, legal, design and other professional fees, and other expenses set forth on Schedule VI-1 attached hereto and made a part hereof and shall assume the economic effect of any "free rent" or other concessions pertaining to the period from and after the Closing Date relating to the Space Leases: (ii) To the extent that the Seller has paid any of the items set forth on Schedule VI-1 prior to Closing, the Purchase Price will be increased at Closing by the aggregate amount of such expenditures upon presentation of an invoice therefor marked paid. The Buyer will pay all other costs and expenses described in this subsection 4.1(f) as and when the same are due. (iii) In the event that any Space Leases are identified on Schedule IX hereto, or the Seller executes any new Space Lease after the date of this Agreement in accordance with subsection 3.3(d), and in either event such Space Lease requires the construction of tenant fixtures or improvements or the payment of leasing or brokerage commission(s) at the expense of the landlord, the Buyer shall assume the obligation to pay and/or at Closing to reimburse the Seller for the paid portion of the cost of such improvements and leasing or brokerage commission(s) and any other costs associated with such Space Lease. (iv) In the event that the Solectron T/I Allowance has not been fully funded by the Seller as of the Phase I Closing Date, the Buyer will assume all obligations of the Seller to fund the balance of the Solectron T/I Allowance and the Buyer shall receive a credit at Closing in the amount of the balance of the Solectron T/I Allowance remaining to be funded. (g) Brokerage Commissions. Effective upon the Closing, the Buyer assumes all obligations of the Seller to pay the brokerage commissions listed on Schedule VII, which obligation shall survive the Closing and shall be confirmed in writing by the Buyer upon request by the Seller. (h) Seller SDP Deposits. To the extent that the work necessary for the return of the Seller SDP Deposits relating to the portion of the Property to be 19 transferred on a Closing Date will not be completed prior to such Closing Date, the Buyer shall deliver replacement bonds or deposits to the City of Austin and cause the Seller SDP Deposits to be returned to the Seller. To the extent that, on a Closing Date, one or more Seller SDP Deposits relating to the portion of the Property to be transferred on such Closing Date have not been returned to the Seller, the relevant portion of the Purchase Price payable on such Closing Date shall be increased by the aggregate amount of the relevant outstanding Seller SDP Deposits and, if such amounts are subsequently remitted by the City of Austin to the Seller, then the Seller shall pay such amount, upon receipt, to the Buyer, which payment obligation shall survive the Closing. ARTICLE V CONDITIONS PRECEDENT TO CLOSING Section 5.1 Conditions Precedent To Seller's Obligations. The obligation of the Seller to consummate the transfer of the relevant portion of the Asset to the Buyer on the relevant Closing Date is subject to the satisfaction (or waiver by the Seller) as of the relevant Closing of the following conditions; provided that the condition shall be deemed satisfied if it has been satisfied as of the relevant Closing Date with respect to the portion of the Asset to be transferred on such Closing Date: (a) Each of the representations and warranties made by the Buyer in this Agreement shall be true and correct in all material respects when made and on and as of the Closing Date as though such representations and warranties were made on and as of the Closing Date. (b) The Buyer shall have performed or complied in all material respects with each obligation and covenant required by this Agreement to be performed or complied with by the Buyer on or before the Closing. (c) No order or injunction of any court or administrative agency of competent jurisdiction nor any statute, rule, regulation or executive order promulgated by any governmental authority of competent jurisdiction shall be in effect as of the Closing which restrains or prohibits the transfer of the Asset or the consummation of any other transaction contemplated hereby. (d) No action, suit or other proceeding shall be pending which shall have been brought by any person or entity (other than the parties hereto and their affiliates) (i) to restrain, prohibit or change in any material respect the purchase and sale of the Asset or the consummation of any other transaction contemplated hereby or (ii) seeking material damages with respect to such purchase and sale or any other transaction contemplated hereby. 20 (e) The Seller shall have received all of the documents required to be delivered by the Buyer under Article VI. (f) The Seller shall have received the relevant portion of the Purchase Price in accordance with subsection 2.2(b) and all other amounts due to the Seller hereunder. Section 5.2 Conditions to the Buyer's Obligations. The obligation of the Buyer to purchase and pay for the Asset is subject to the satisfaction (or waiver by the Buyer) as of the Closing of the following conditions; provided that the condition shall be deemed satisfied if it has been satisfied as of the relevant Closing Date with respect to the portion of the Asset to be transferred on such Closing Date: (a) Each of the representations and warranties made by the Seller in this Agreement shall be true and correct in all material respects when made and on and as of the Closing Date as though such representations and warranties were made on and as of Closing Date. (b) The Seller shall have performed or complied in all material respects with each obligation and covenant required by this Agreement to be performed or complied with by the Seller on or before the Closing. (c) No order or injunction of any court or administrative agency of competent jurisdiction nor any statute, rule, regulation or executive order promulgated by any governmental authority of competent jurisdiction shall be in effect as of the Closing which restrains or prohibits the transfer of the Asset or the consummation of any other transaction contemplated hereby. (d) No action, suit or other proceeding shall be pending which shall have been brought by any person or entity (other than the parties hereto and their affiliates) (i) to restrain, prohibit or change in any material respect the purchase and sale of the Asset or the consummation of any other transaction contemplated hereby or (ii) seeking material damages with respect to such purchase and sale or any other transaction contemplated hereby. (e) Title to the Property shall be delivered to the Buyer in the manner required under Section 8.1. (f) The Buyer shall have received all of the documents required to be delivered by the Seller under Article VI. (g) The Buyer shall have received (i) with respect to the Phase I Closing, Estoppel Certificates from all tenants of the Phase I Property and (ii) with respect to the Phase II Closing, Estoppel Certificates from all tenants of the Phase II Property. 21 (h) (i) No notice of default shall have been given by the Seller under any Material Contract or under any Space Lease, in each case, which Material Contract or Space Lease (A) relates to, affects or benefits the portion of the Property to be transferred on the relevant Closing Date and (B) will be assumed by the Buyer as part of the relevant Closing and (ii) all such Material Contracts and Space Leases shall be in full force and effect, except in each case, to the extent that such notice of default or failure of such Material Contract or Space Lease to continue in full force and effect, would not materially adversely effect the value or continued operation of the portion of the Property to be transferred on the relevant Closing Date. ARTICLE VI CLOSING DELIVERIES (a) The Buyer shall deliver the following documents at each Closing: (i) with respect to the relevant portion of the Property: (A) an assignment and assumption of landlord's interest in leases (an "Assignment of Leases") duly executed by the Buyer in substantially the form of Exhibit A hereto; (B) an assignment and assumption of contracts (an "Assignment of Contracts") duly executed by the Buyer in substantially the form of Exhibit B hereto; and (C) notice letters ("Tenant Notices") duly executed by the Buyer, in the form of Exhibit C attached hereto. Such notice letters shall be retained by the Seller and delivered by the Seller to each tenant and other such entity promptly following Closing. (ii) with respect to the transactions contemplated hereunder: (A) such other assignments, instruments of transfer, and other documents as the Seller may reasonably require in order to complete the transactions contemplated hereunder or to evidence compliance by the Buyer with the covenants, agreements, representations and warranties made by it hereunder, in each case, duly executed by the Buyer; 22 (B) a duly executed and sworn Secretary's Certificate from the Buyer (or the general partners of the Buyer, where appropriate) certifying that the Buyer has taken all necessary action to authorize the execution of all documents being delivered hereunder and the consummation of all of the transactions contemplated hereby and that such authorization has not been revoked, modified or amended; (C) an executed and acknowledged Incumbency Certificate from the Buyer (or the general partners of the Buyer, where appropriate) certifying the authority of the officers of the Buyer (or the general partner of the Buyer, where appropriate) to execute this Agreement and the other documents delivered by the Buyer to the Seller at the Closing; and (D) all transfer tax returns which are required by law and the regulations issued pursuant thereto in connection with the payment of all state or local real property transfer taxes that are payable or arise as a result of the consummation of the transactions contemplated by this Agreement, in each case, as prepared by the Seller and duly executed by the Buyer. (b) The Seller shall deliver the following documents at Closing: (i) with respect to the relevant portion of the Property: (A) a special warranty deed (a "Deed") in substantially the form of Exhibit D (with any necessary modifications in order to conform with the local laws for recording in the land records in the jurisdiction in which the Property is located), duly executed by the Seller, without recourse, which deed, upon proper recording by the Buyer, shall be sufficient to transfer and convey to the Buyer whatever rights in the relevant portion of the Property the Seller has acquired subject only to the Permitted Exceptions (as defined below); (B) an Assignment of Leases duly executed by the Seller, together with copies, and if available, originals of the Space Leases referred to in such assignment; 23 (C) a bill of sale (a "Bill of Sale") duly executed by the Seller in substantially the form of Exhibit E hereto, relating to all fixtures, chattels, equipment and articles of personal property owned by the relevant Seller which are currently located upon or attached to the relevant portion of the Property; (D) an Assignment of Contracts duly executed by the Seller; (E) all keys to the relevant portion of the Property which are in the Seller's possession; (F) an affidavit that the Seller is not a "foreign person" within the meaning of the Foreign Investment in Real Property Tax Act of 1980, as amended, in substantially the form of Exhibit F hereto; and (G) with respect to the Phase II Closing only, the Phase II CO. (ii) with respect to the transactions contemplated hereunder: (A) such other assignments, instruments of transfer, and other documents as the Buyer may reasonably require in order to complete the transactions contemplated hereunder or to evidence compliance by the Seller with the covenants, agreements, representations and warranties made by it hereunder; (B) a duly executed and sworn Secretary's Certificate from the Seller (or the general partners of the Seller, where appropriate) certifying that the Seller has taken all necessary action to authorize the execution of all documents being delivered hereunder and the consummation of all of the transactions contemplated hereby and that such authorization has not been revoked, modified or amended; (C) an executed and acknowledged Incumbency Certificate from the Seller (or the general partners of the Seller, where appropriate) certifying the authority of the officers of the Seller (or the general partner of the Seller, where appropriate) to execute this Agreement and the other documents delivered by the Seller to the Buyer at the 24 Closing; and (D) all transfer tax returns which are required by law and the regulations issued pursuant thereto in connection with the payment of all state or local real property transfer taxes that are payable or arise as a result of the consummation of the transactions contemplated by this Agreement, in each case, as prepared and duly executed by the Seller. (iii) In the event any Asset-Related Property is not assignable (such as a letter of credit that is not transferable), the Seller shall use commercially reasonable efforts to provide the Buyer, at no cost to the Seller, with the economic benefits of such property by enforcing such property (solely at the Buyer's direction) for the benefit and at the expense of the Buyer. ARTICLE VII INSPECTIONS Section 7.1 Right of Inspection. Prior to the Closing, the Buyer and its agents shall have the right to inspect the Property during business hours on Business Days, including the right to interview the tenants under Space Leases, provided that (a) the Buyer shall first give the Seller reasonable advance notification of its intention to conduct any such inspection or interview, (b) the Buyer shall permit a representative of the Seller to accompany the Buyer and/or its agents during any such inspection or interview if the Seller shall make such a representative available and (c) such inspection or interview shall not unreasonably impede the normal day-to-day business operation of the Property. The Buyer's right of inspection of the Property shall be subject to the rights of tenants. The Buyer hereby indemnifies and agrees to defend and hold the Seller harmless from all loss, cost (including, without limitation, reasonable attorneys' fees), claim or damage arising in connection with or from any such inspection by the Buyer or its agents. The provisions of this Article shall survive the Closing. Section 7.2 Due Diligence Period. (a) The Buyer confirms to the Seller that the Buyer has conducted a detailed inspection of the Asset File, has made multiple site visits and in certain instances consulted with third party professionals in satisfying itself that the Property is appropriate for the Buyer's acquisition. Notwithstanding the foregoing, in order to confirm preliminary information with third party professionals, review materials requested but not delivered, clarify certain discrepancies, conduct more complete Phase I environmental and engineering analyses and complete its investigation, the Buyer, for the period ending on July 25 31, 1998 (the "Due Diligence Expiration Date"), shall have the right to conduct or cause to be conducted, at the Buyer's sole cost, risk and expense, such inspections, tests, examinations and studies of the Property as the Buyer deems necessary or appropriate; to further examine all applicable records relating to the income, operation and maintenance of the Property; to determine compliance of the Property with applicable laws and regulations, including, without limitation, zoning, building, land use and environmental protection laws; and to further confirm certain title matters. The provisions of Section 7.1 above shall apply to any on-site investigations or inspections to be made by the Buyer. (b) If the Buyer, in its judgment reasonably exercised, determines that the Asset is not an acceptable investment for the Buyer, then the Buyer shall have the right to terminate this Agreement by written notice given to the Seller prior to 5:00 p.m. (E.D.T) on the Due Diligence Expiration Date (TIME BEING OF THE ESSENCE). If the Buyer shall elect to terminate this Agreement in the time and manner set forth in this subsection 7.2(b), then the Earnest Money shall be returned to the Buyer, this Agreement shall be deemed terminated and neither party shall have any further rights or obligations to the other, except for those expressly stated to survive the termination of this Agreement. If the Buyer shall fail to terminate this Agreement in the time and manner set forth in this subsection 7.2(b), then the Buyer shall be deemed to have irrevocably waived its right to terminate this Agreement pursuant to this subsection 7.2(b). ARTICLE VIII TITLE AND PERMITTED EXCEPTIONS Section 8.1 Permitted Exceptions. The Property shall be sold and is to be conveyed, and the Buyer agrees to purchase the Property, subject to the Permitted Exceptions. Section 8.2 Title Report. The Buyer has received and/or reviewed a copy of the Existing Title Commitment and the Existing Survey. Promptly after the date of this Agreement the Seller shall order from the Title Company an updated title commitment and survey with respect to the Property and the Seller shall (a) instruct the Title Company to furnish copies of all updated commitments and surveys to the Buyer's counsel at the address set forth in Section 14.9 hereof. Within five (5) Business Days after issuance of any such updated documents, the Buyer shall give notice to the Seller specifying all title exceptions set forth in such updated documents which the Buyer claims are not Permitted Exceptions. Section 8.3 Use of Purchase Price to Discharge Title Exceptions. With respect to the Property, if, at the Closing, there are any title exceptions applicable to the Property which are not Permitted Exceptions and which the Seller is obligated by this 26 Agreement or elects to pay and discharge, the Seller may use any portion of the Purchase Price to satisfy the same, provided that the Seller shall have delivered to the Buyer at the Closing instruments in recordable form sufficient to satisfy such title exceptions of record, together with the cost of any applicable recording or filing fees. The existence of any such liens or encumbrances shall not be deemed objections to title if the Seller shall comply with the foregoing requirements. Any unpaid liens for taxes, water charges and assessments applicable to the period prior to the Closing Date shall not be objections to title, but the amount thereof plus any interest and penalties thereon shall be deducted from the Purchase Price, subject to the provisions for apportionment of taxes, water charges and assessments contained in Article X of this Agreement. Section 8.4 Inability to Convey. Except as expressly set forth in Section 8.6, nothing contained in this Agreement shall be deemed to require the Seller to take or bring any action or proceeding or any other steps to remove any title exception or to expend any moneys therefor, nor shall the Buyer have any right of action against the Seller, at law or in equity, for the Seller's inability to convey title subject only to the Permitted Exceptions. Section 8.5 Rights in Respect of Inability to Convey. Subject to the Seller's obligations to remove Voluntary Title Exceptions pursuant to Section 8.6 below, in the event that the Seller shall be unable to deliver title to the Property in the condition required under Section 8.1 and the Buyer shall not, prior to the Closing Date (as it may have been adjourned in accordance with this Agreement), give notice to the Seller that the Buyer is willing to waive objection to each title exception which is not a Permitted Exception and close this transaction without abatement of the Purchase Price, credit or allowance of any kind or any claim or right of action against the Seller for damages or otherwise, the Seller shall have the right, at the Seller's sole election, to either (l) take such action as the Seller shall deem advisable to discharge each such title exception which is not a Permitted Exception or (2) terminate this Agreement. In the event the Seller shall elect to take action to discharge each such title exception which is not a Permitted Exception, the Seller shall be entitled to one or more adjournments of the Closing Date for a period not to exceed ninety (90) days in the aggregate (inclusive of any adjournments made by the Seller pursuant to Section 8.6 below) and the Closing shall be adjourned to a date specified by the Seller not beyond such ninety (90) day period. If, for any reason whatsoever, the Seller shall not have succeeded in discharging each such title exception at the expiration of such adjournment(s) and if the Buyer shall not, prior to the expiration of the last of such adjournments, give notice to the Seller that the Buyer is willing to waive objection to each such title exception and to close this transaction without abatement of the Purchase Price, credit or allowance of any kind or any claim or right of action against the Seller for damages or otherwise, this Agreement shall be deemed to be terminated as of the last date to which the Closing Date was adjourned by the Seller pursuant to this Article VIII. Upon any termination of this Agreement pursuant to this Section, (I) the Earnest Money shall be refunded to the Buyer and (II) neither party shall have any further rights or obligations hereunder other than those which expressly survive the termination of this Agreement. No action taken by the Seller to discharge, or 27 attempt to discharge, any purported title exception shall be an admission that any such purported title exception is not a Permitted Exception. The provisions of this Section 8.5 shall be subject to the Seller's and the Buyer's rights and obligations with respect to Voluntary Title Exceptions set forth in Section 8.6. Section 8.6 Voluntary Title Exceptions. If, from time to time prior to the Closing, the Buyer shall become aware of any Voluntary Title Exceptions, then the Buyer shall promptly notify the Seller thereof, which notice shall describe in reasonable detail the Voluntary Title Exceptions(s). The Seller shall discharge all Voluntary Title Exceptions on or prior to Closing. The Seller shall be entitled to one or more adjournments of the Closing Date not to exceed ninety (90) days in the aggregate (inclusive of any adjournments made by the Seller pursuant to Section 8.5 hereof) to discharge Voluntary Title Exceptions. Section 8.7 The Buyer's Right to Accept Title. Notwithstanding the foregoing provisions of this Article VIII, the Buyer may, by notice given to the Seller at any time prior to the Closing Date (as it may have been adjourned by the Seller pursuant to this Article VIII), elect to accept such title as the Seller can convey, notwithstanding the existence of any title exceptions which are not Permitted Exceptions. In such event, this Agreement shall remain in effect and the parties shall proceed to Closing but, except to the extent set forth in Section 8.6, the Buyer shall not be entitled to any abatement of the Purchase Price, any credit or allowance of any kind or any claim or right of action against the Seller for damages or otherwise by reason of the existence of any title exceptions which are not Permitted Exceptions. Section 8.8 Cooperation. The Buyer and the Seller shall cooperate with the title company chosen by the Buyer in connection with obtaining title insurance insuring title to the Property subject only to the Permitted Exceptions. In furtherance and not in limitation of the foregoing, at or prior to the Closing, the Buyer and the Seller shall deliver to the title company chosen by the Buyer such affidavits, certificates and other instruments as are reasonably requested by such title company and customarily furnished in connection with the issuance of owner's policies of title insurance, including, without limitation, (i) evidence sufficient to establish (x) the legal existence of the Buyer and the Seller and (y) the authority of the respective signatories of the Seller and the Buyer to bind the Seller and the Buyer, as the case may be, and (ii) a certificate of good standing of the Seller. ARTICLE IX TRANSACTION COSTS; RISK OF LOSS Section 9.1 Transaction Costs. The Buyer and the Seller agree to comply with all real estate transfer tax laws applicable to the sale of the Asset. Except as specifically set forth below, at Closing, the real property transfer taxes, deed stamps, 28 conveyance taxes, documentary stamp taxes and other taxes or charges payable as a result of the conveyance of the Asset to the Buyer pursuant to this Agreement shall be split equally between the Buyer and the Seller. In addition to the foregoing and their respective apportionment obligations hereunder, (a) the Seller and the Buyer shall each be responsible for the payment of the costs of their respective legal counsel, advisors and other professionals employed thereby in connection with the sale of the Asset, (b) the Buyer shall be responsible for all costs and expenses associated with (i) the Buyer's due diligence (other than the title costs described in clause (c)(i) below), (ii) all survey and search costs and updates related thereto, whether commissioned by the Buyer, the Seller or the Title Company provided that if such survey update is not commissioned by the Buyer, the Buyer's prior approval has been obtained for the commissioning of such survey update, (iii) the policy premiums and all other costs in respect of any mortgage title insurance obtained by the Buyer (if any) and the costs of any endorsements, coinsurance, reinsurance or affirmative coverage requested by the Buyer in connection with the fee title insurance (if any), (iv) all costs and expenses of obtaining any financing the Buyer may elect to obtain (including any fees, financing costs, transfer taxes, mortgage and recordation taxes and intangible taxes in connection therewith) and (v) all other costs which are the responsibility under applicable law for the Buyer to pay (including, without limitation, all sales and use taxes due as a result of the sale of the Asset) and (c) the Seller shall be responsible for all costs and expenses associated with (i) the policy premiums in respect of any fee title insurance obtained by the Buyer (if any) but the Seller shall not be responsible for the costs of any endorsements, coinsurance, reinsurance or affirmative coverage requested by the Buyer in connection with such fee title insurance, (iv) payment, at the Closing, of the recording charges and fees and recordation taxes for the documents necessary to transfer the Asset,. Each party to this Agreement shall indemnify the other parties and their respective successors and assigns from and against any and all loss, damage, cost, charge, liability or expense (including court costs and reasonable attorneys' fees) which such other party may sustain or incur as a result of the failure of either party to timely pay any of the aforementioned taxes, fees or other charges for which it has assumed responsibility under this Section. Section 9.2 Risk of Loss. If, on or before the Closing Date, the Property or any portion thereof shall be (i) damaged or destroyed by fire or other casualty or (ii) taken as a result of any condemnation or eminent domain proceeding, the Seller shall promptly notify the Buyer. (b) As soon as practicable after the occurrence of such casualty or condemnation, the Seller shall notify the Buyer of (i) the estimated cost of restoration of the Property with respect to any casualty as determined by written estimate of an independent construction contracting firm chosen by the Seller and reasonably acceptable to the Buyer or (ii) the estimated loss in value of the Property as a result of such condemnation as determined by written estimate of an independent appraisal firm chosen by the Seller and reasonably acceptable to the Buyer. If the estimated cost of restoration arising from a casualty or the loss in value of the Property arising from a condemnation exceeds $10,000,000 or one of the Space Leases is terminated by the tenant thereunder as 29 a result of such casualty or condemnation, then the Buyer shall have the option to either (i) terminate this Agreement upon notice to the Seller and upon receipt of such notice, the Seller shall allow the return of the Earnest Money, together with interest thereon, and thereupon this Agreement shall terminate and be of no further force or effect except for the obligations specified to survive termination or (ii) accept the Property "as is" together with an assignment of the insurance or condemnation proceeds in accordance with the following sentence. If (x)(1) the estimated cost of restoration arising out of a casualty or estimated loss of value arising out of a condemnation, shall be $10,000,000 or less and (2) no Space Leases are terminated by the tenants thereunder as result of such casualty or condemnation or (y) (1)(A) the estimated cost of restoration arising from a casualty or the loss in value of the Property arising from a condemnation exceeds $10,000,000 or (B) one of the Space Leases is terminated by the tenant thereunder as a result of such casualty or condemnation and (2) the Buyer elects, pursuant to clause (ii) of the preceding sentence, to accept the Property "as is" together with an assignment of the insurance or condemnation proceeds, then notwithstanding any provision in this Agreement to the contrary, the Seller will credit against the Purchase Price payable by the Buyer at the Closing an amount equal to the net proceeds, if any, received by the Seller from such casualty or condemnation less any amounts spent by the Seller prior to the Closing with respect to the restoration of the Property plus, in the case of clause (x) only, the amount of any deductible and/or deficiency with respect to such insurance proceeds or condemnation award. If as of the Closing Date, the Seller has not received any such insurance or condemnation proceeds, then the parties shall nevertheless consummate on the Closing Date the conveyance of the Asset (without any deduction for such insurance or condemnation proceeds) and the Seller will at Closing assign to the Buyer all rights of the Seller, if any, to the insurance or condemnation proceeds and to all other rights or claims arising out of or in connection with such casualty or condemnation. ARTICLE X ADJUSTMENTS Unless otherwise provided below, the following are to be adjusted and prorated between the Sellers and the Buyer as of 11:59 P.M. on the day preceding the Closing Date, based upon a 365 day year, and the net amount thereof shall be added to (if such net amount is in the Seller's favor) or deducted from (if such net amount is in the Buyer's favor) the Purchase Price payable at Closing: Section 10.1 Fixed Rents. (a) Fixed rents (collectively, "Fixed Rents") paid or payable by tenants under the Space Leases in connection with their occupancy of the Property shall be adjusted and prorated on an if, as and when collected basis. Any Fixed Rents collected by the Buyer or the Seller after the Closing from any tenant who owes Fixed Rents for periods prior to the Closing, shall be applied (i) first, in payment of Fixed Rents owed by 30 such tenant for the month in which the Closing Date occurs, (ii) second, in payment of Fixed Rents owed by such tenant for the period (if any) after the month in which the Closing Date occurs but not beyond the then current month and (iii) third, in payment of Fixed Rents owed by such tenant for the period prior to the month in which the Closing Date occurs. Each such amount, less any costs of collection (including reasonable counsel fees) reasonably allocable thereto, shall be adjusted and prorated as provided above, and the party who receives such amount shall promptly pay over to the other party the portion thereof to which it is so entitled. (b) The Buyer shall bill tenants who owe Fixed Rents for periods prior to the Closing on a monthly basis for a period of six consecutive months following the Closing Date and shall use good faith efforts to collect such past due Fixed Rents. Any payment by a tenant in an amount less than the full amount of Fixed Rents and Overage Rent (as defined below) then due and payable by such tenant shall be applied first to Fixed Rents (in the order of priority as to time periods as is set forth above) to the extent of all such Fixed Rents then due and payable by such tenant, and thereafter to Overage Rents (in the order of priority as to time periods as is set forth in Section 10.2 below). Section 10.2 Overage Rents. (a) With respect to any Space Lease that provides for (i) the payment of additional rent based upon a percentage of the tenant's business during a specified annual or other period (sometimes referred to as "percentage rent"), (ii) so-called common area maintenance or "CAM" charges or (iii) so-called "escalation rent" or additional rent based upon increases in real estate taxes or operating expenses or labor costs or cost of living or porter's wages or otherwise (such percentage rent, CAM charges, escalation rent and additional rent being collectively called "Overage Rent"), such Overage Rent shall be adjusted and prorated on an if, as and when collected basis. (b) As to any Overage Rent in respect of an accounting period that shall have expired prior to the Closing but which shall be paid after the Closing, the Buyer agrees that it will pay the entire amount over to the Seller upon receipt thereof, less any costs of collection (including reasonable counsel fees) reasonably allocable thereto. The Buyer agrees that it shall (i) promptly render bills for any Overage Rent in respect of an accounting period that shall have expired prior to the Closing but which shall be paid after the Closing, (ii) bill tenants such Overage Rent attributable to an accounting period that shall have expired prior to the Closing on a monthly basis for a period of six consecutive months thereafter and (iii) use good faith best efforts to collect Overage Rent. The Seller shall furnish to the Buyer all information relating to the period prior to the Closing that is reasonably necessary for the billing of such Overage Rent and the Buyer will deliver to the Seller, concurrently with the delivery to tenants, copies of all statements relating to Overage Rent for a period prior to the Closing. The Buyer shall bill tenants for Overage Rents for accounting periods prior to the Closing in accordance with and on the basis of such information furnished by the Seller. 31 (c) If, prior to the Closing, the Seller shall have received any installments of Overage Rent attributable to Overage Rent for periods from and after the Closing Date, such sum shall be apportioned at the Closing. If, after the Closing, the Buyer shall receive any installments of Overage Rent attributable to Overage Rent for periods prior to the Closing, such sum (less any costs and expenses (including reasonable counsel fees) incurred by the Buyer in the collection of such Overage Rent) shall be paid by the Buyer to the Seller promptly after the Buyer receives payment thereof. (d) Any payment by a tenant on account of Overage Rent (to the extent not applied against Fixed Rents due and payable by such tenant in accordance with subsection 10.1(b) above) shall be applied to Overage Rents then due and payable in the following order of priority, (i) first, in payment of Overage Rent for the accounting period in which the Closing Date occurs, (ii) second, in payment of Overage Rent for accounting periods following the Closing Date, in the chronological order in which such payments are due for such accounting period pursuant to the applicable Space Lease, but not beyond the then current accounting period and (iii) third, in payment of Overage Rent for the accounting period preceding the accounting period in which the Closing Date occurs, in the chronological order in which such payments are due for such accounting period pursuant to the applicable Space Lease. (e) To the extent that any portion of Overage Rent is required to be paid monthly by tenants on account of estimated amounts for any calendar year (or, if applicable, any lease year or tax year or any other applicable accounting period), and at the end of such calendar year (or lease year, tax year or other applicable accounting period, as the case may be), such estimated amounts are to be recalculated based upon the actual expenses, taxes and other relevant factors for that calendar (lease or tax) year or other applicable accounting period, with the appropriate adjustments being made with such tenants, then such portion of the Overage Rent shall be prorated between the Seller and the Buyer at the Closing based on such estimated payments actually paid by tenants (i.e., with the Seller entitled to retain all monthly or other periodic installments of such amounts paid by tenants with respect to periods prior to the calendar month or other applicable installment period in which the Closing occurs, the Seller to pay to the Buyer at the Closing all monthly or other periodic installments of such amounts theretofore received by the Seller with respect to periods following the calendar month or other applicable installment period in which the Closing occurs and the Seller and the Buyer to apportion as of the Closing Date all monthly or other periodic installments of such amounts paid by tenants with respect to the calendar month or other applicable installment period in which the Closing occurs). At the time(s) of final calculation and collection from (or refund to) each tenant of the amounts in reconciliation of actual Overage Rent for a period for which estimated amounts paid by such tenant have been prorated, there shall be a re-proration between the Seller and the Buyer. If, with respect to any tenant, the recalculated Overage Rent exceeds the estimated amount paid by such tenant, upon collection from the tenant, (i) the entire excess shall be paid by the Buyer to the Seller, if the accounting period for which such recalculation was made expired prior to the Closing and (ii) such excess shall be apportioned between the Seller and the Buyer 32 as of the Closing Date (on the basis described in the first sentence of subsection 10.2 above), if the Closing occurred during the accounting period for which such recalculation was made, with the Buyer paying to the Seller the portion of such excess which the Seller is so entitled to receive. If, with respect to any tenant, the recalculated Overage Rent is less than the estimated amount paid by such tenant, (1) the entire shortfall shall be paid by the Seller to the Buyer (or, at the Seller's option, directly to the tenant in question), if the accounting period for which such recalculation was made expired prior to the Closing and (2) such shortfall shall be apportioned between the Seller and the Buyer as of the Closing Date (on the basis described in the first sentence of subsection 10.2(c) above), if the Closing occurred during the accounting period for which such recalculation was made, with the Seller paying to the Buyer (or, at the Seller's option, directly to the tenant in question) the portion of such shortfall so allocable to the Seller. (f) Until such time as all amounts required to be paid to the Seller by the Buyer pursuant to Section 10.1 and this Section 10.2 shall have been paid in full, the Buyer shall furnish to the Seller not less frequently than monthly a reasonably detailed accounting of such amounts payable by the Buyer, which accounting shall be delivered to the Seller on or prior to the 15th day following the last day of each calendar month from and after the calendar month in which the Closing occurs. The Seller shall have the right from time to time following the Closing, on prior notice to the Buyer, during ordinary business hours on Business Days, to review the Buyer's rental records with respect to the Property to ascertain the accuracy of such accountings. Section 10.3 Taxes and Assessments. Real estate taxes and assessments assessed with respect to the year in which the Closing occurs shall be adjusted and prorated based on (a) the periods of ownership by the Seller and the Buyer during such year and (b) the most current official real property tax information available from the county assessor's office where the Property is located or other assessing authorities. If real property tax and assessment figures for the taxes or assessments to be apportioned between the Buyer and the Seller pursuant to this Section are not available, real property taxes shall be prorated based on the most recent assessment, subject to further and final adjustment when the tax rate and/or assessed valuation for such taxes and assessments for the Property is fixed. In the event that the Property or any part thereof shall be or shall have been affected by an assessment or assessments, whether or not the same become payable in annual installments, the Seller shall, at the Closing, be responsible for any installments due prior to the Closing and the Buyer shall be responsible for any installments due on or after the Closing. Section 10.4 Water and Sewer Charges. Water rates, water meter charges, sewer rents and vault charges, if any (other than any such charges, rates or rents which are payable by tenants of the Property pursuant to such tenants' Space Leases), shall be adjusted and prorated on the basis of the fiscal period for which assessed. If there be a water meter, or meters, on the Property, the Seller agrees that they shall at the Closing furnish a reading of same to a date not more than 30 days prior to the Closing and the unfixed meter charges and the unfixed sewer rent thereon for the time intervening from 33 the date of the last reading shall be apportioned on the basis of such last reading, and shall be appropriately readjusted after the Closing on the basis of the next subsequent bills. Unmetered water charges shall be apportioned on the basis of the charges therefor for the same period of the preceding calendar year, but applying the current rate thereto. As to any unpaid water charges or sewer rents payable directly by tenants, the Buyer shall consummate the Closing subject to such unpaid charges and rents and any lien resulting therefrom, without credit against the Purchase Price or any claim or right of action against the Seller. Section 10.5 Utility Charges. Gas, steam, electricity and other public utility charges (other than any such charges which are payable by tenants of the Property pursuant to such tenants' Space Leases) will be paid by the Seller to the utility company to the Closing Date. The Seller shall arrange for a final reading of all utility meters (covering gas, water, steam and electricity) as of the Closing, except meters the charges of which are payable by tenants of the Property pursuant to such tenants' Space Leases. The Seller and the Buyer shall jointly execute a letter to each of such utility companies advising such utility companies of the termination of the Seller's responsibility for such charges for utilities furnished to the Property as of the date of the Closing and commencement of the Buyer's responsibilities therefor from and after such date. If a bill is obtained from any such utility company as of the Closing, the Seller shall pay such bill on or before the Closing. If such bill shall not have been obtained on or before the Closing, the Seller shall, upon receipt of such bill, pay all such utility charges as evidenced by such bill or bills pertaining to the period prior to the Closing, and the Buyer shall pay all such utility charges pertaining to the period thereafter. Any bill which shall be rendered which shall cover a period both before and after the date of Closing shall be apportioned between the Buyer and the Seller as of the Closing. Section 10.6 Material Contracts. Charges and payments under all Material Contracts. Section 10.7 Miscellaneous Revenues. Revenues, if any, arising out of telephone booths, vending machines, or other income-producing agreements. Section 10.8 Security Deposits. The actual amounts of the security deposits provided for under the Space Leases being held by the Seller as set forth on Schedule X shall be assigned to the Buyer by, at the Seller's option, (i) payment of the amount thereof to the Buyer, (ii) a credit to the Buyer against the balance of the Purchase Price and/or (iii) assignment to the Buyer of the bank accounts (or other security) in which same are held, which assignment shall be in form reasonably acceptable to the Buyer and the depositary bank. Any such tenants' securities in form other than cash shall be transferred to the Buyer by way of appropriate instruments of transfer or assignment. Section 10.9 Other. If applicable, the Purchase Price shall be adjusted at Closing in accordance with subsection 4.1(f)(ii), subsection 4.1(f)(iv), subsection 4.1(h) and Section 9.2 and to reflect the adjustment of any other item which, under the terms of 34 this Agreement, is to be apportioned at Closing. Section 10.10 Re-Adjustment. Except for re- adjustments of Overage Rent to be made pursuant to subsection 10.2(e), if any such items are not determinable at the Closing, the adjustment shall be made subsequent to the Closing when the charge is determined. Any errors or omissions in computing adjustments at the Closing shall be promptly corrected, provided that the party seeking to correct such error or omission shall have notified the other party of such error or omission on or prior to the date that is 180 days following the Closing Date. The provisions of this Article X shall survive the Closing. ARTICLE XI INDEMNIFICATION Section 11.1 Indemnification by the Seller. The Seller shall indemnify and hold the Buyer, its affiliates, members and partners, and the partners, shareholders, officers, directors, employees, representatives and agents of each of the foregoing (collectively, "Buyer-Related Entities") harmless from and against any and all costs, fees, expenses, damages, deficiencies, interest and penalties (including, without limitation, reasonable attorneys' fees and disbursements) suffered or incurred by any such indemnified party in connection with any and all losses, liabilities, claims, damages and expenses ("Losses"), arising out of, or in any way relating to, (i) any breach of any representation or warranty of the Seller contained in this Agreement or in any Schedule, certificate, instrument or other document delivered pursuant hereto and (ii) any breach of any covenant of the Seller contained in this Agreement or in any Schedule, certificate, instrument or other document delivered pursuant hereto, such obligation to survive the Closing subject to Section 11.4. Section 11.2 Indemnification by the Buyer. The Buyer shall indemnify and hold the Seller, its affiliates, members and partners, and the partners, shareholders, officers, directors, employees, representatives and agents of each of the foregoing (collectively, "Seller-Related Entities") harmless from any and all Losses arising out of, or in any way relating to, (i) any breach of any representation or warranty by the Buyer contained in this Agreement or in any Schedule, certificate, instrument or other document delivered pursuant hereto or in connection herewith and (ii) any breach of any covenant of the Buyer contained in this Agreement or in any Schedule, certificate, instrument or other document delivered pursuant hereto, such obligation to survive the Closing or termination of this Agreement subject to Section 11.4. Section 11.3 Limitations on Indemnification. Notwithstanding the foregoing provisions of Section 11.1 or the provisions of any Seller Closing Document, (a) the Seller shall not be required to indemnify the Buyer or any Buyer-Related Person under this Agreement or under any Seller Closing Document unless (i) the aggregate of all amounts for which an indemnity would otherwise be payable by the Seller under this 35 Agreement or under any Seller Closing Document, in each case, with respect to Phase I or Phase II exceeds the relevant Basket Limitation and, in such event, Sellers shall be responsible for only the amount in excess of the relevant Basket Limitation and (ii) the Seller received written notice of such claim prior to the expiration of the survival period, if any, under Section 11.4, of the representation, warranty, indemnity or covenant which is the basis for such claim and (b) in no event shall the liability of the Seller with respect to the indemnification provided for in Section 11.1 above or in any Seller Closing Document, in each case, with respect to Phase I or Phase II exceed in the aggregate the relevant Cap Limitation. Without limitation of the foregoing, the payment of the Phase II Liquidated Damages Amount shall not be subject to the Cap Limitation or the Basket Limitation and shall not be taken into consideration in determining whether such limitations have been exceeded. Section 11.4 Survival. The representations and warranties of Seller contained in this Agreement and any indemnity contained in any Seller Closing Document shall survive for a period of 180 days after the Closing. The covenants contained in this Agreement to the extent to be performed prior to or at Closing shall not survive after the Closing. All other covenants, indemnities and provisions of this Agreement shall survive the Closing unless otherwise provided herein. Section 11.5 Indemnification as Sole Remedy. If the Closing has occurred, the sole and exclusive remedy available to a party in the event of a breach by the other party to this Agreement of any representation, warranty, covenant or other provision of this Agreement or in any Schedule, certificate, instrument or other document delivered pursuant hereto which survives the Closing shall be the indemnifications provided for under this Article XI. ARTICLE XII TAX CERTIORARI PROCEEDINGS Section 12.1 Prosecution and Settlement of Proceedings. If any tax reduction proceedings in respect of the Property, relating to any fiscal years ending prior to the fiscal year in which the Closing occurs, are pending at the time of the Closing, the Seller reserves and shall have the right to continue to prosecute and/or settle the same. If any tax reduction proceedings in respect of the Property, relating to the fiscal year in which the Closing occurs, are pending at the time of Closing, then the Seller reserves and shall have the right to continue to prosecute and/or settle the same; provided, however, that the Seller shall not settle any such proceeding without the Buyer's prior written consent, which consent shall not be unreasonably withheld or delayed. The Buyer shall reasonably cooperate with the Seller in connection with the prosecution of any such tax reduction proceedings. The Seller represents that, as of the date of this Agreement, no such tax reduction proceedings are pending and the Seller agrees not to initiate any such proceedings after the date of this Agreement without the prior consent of the Buyer, such 36 consent not to be unreasonably withheld. Section 12.2 Application of Refunds or Savings. Any refunds or savings in the payment of taxes resulting from such tax reduction proceedings applicable to taxes payable during the period prior to the date of the Closing shall belong to and be the property of the Seller, and any refunds or savings in the payment of taxes applicable taxes payable from and after the date of the Closing shall belong to and be the property of the Buyer; provided, however, that if any such refund creates an obligation to reimburse any tenants under Space Leases for any rents or additional rents paid or to be paid, that portion of such refund equal to the amount of such required reimbursement (after deduction of allocable expenses as may be provided in the Space Lease to such tenant) shall, at the Seller's election, either (a) be paid to the Buyer and the Buyer shall disburse the same to such tenants or (b) be paid by the Seller directly to the tenants entitled thereto. All attorneys' fees and other expenses incurred in obtaining such refunds or savings shall be apportioned between the Seller and the Buyer in proportion to the gross amount of such refunds or savings payable to the Seller and the Buyer, respectively (without regard to any amounts reimbursable to tenants). Section 12.3 Survival. The provisions of this Article XII shall survive the Closing. ARTICLE XIII DEFAULT Section 13.1 Default. (a) If the Buyer shall default in the performance of its obligations under this Agreement to purchase the Asset by the Closing Date, the Seller, as its sole and exclusive remedy hereunder (except as set forth in the last sentence of this subsection (a)), shall be entitled to terminate this Agreement, to direct the Escrow Agent to deliver the Earnest Money to the Seller, and to retain the Earnest Money as liquidated damages, at which time this Agreement shall be terminated and of no further force and effect except for the provisions which explicitly survive such termination. The Buyer agrees that the Seller shall have the right to retain the Earnest Money as liquidated damages without the necessity of proving actual damages due to the difficulty of proving actual damages resulting from the Buyer's default hereunder. Nothing in this Section shall be deemed to limit the Seller's remedies with respect to a breach by the Buyer of any of its obligations which survive the Closing but such remedies shall be limited as provided in Section 11.5. (b) If the Seller shall default in the performance of its obligations under this Agreement to cause the sale of the Asset by the Closing Date, the Buyer, as its sole and exclusive remedy, shall be entitled at its option, either (i) to terminate this Agreement, direct Escrow Agent to deliver the Earnest Money to the Buyer and retain the Earnest Money, at which time this Agreement shall be terminated and of no further force 37 and effect except for the provisions which explicitly survive such termination or (ii) specifically enforce the terms and conditions of this Agreement; provided, however, if the Seller shall default in the performance of its obligations to cause the sale of Phase II on the Phase II Closing Date, then, in the event the Buyer elects to terminate this Agreement pursuant to clause (i) above, the Buyer shall also be entitled to receive from the Seller the Phase II Liquidated Damages Amount, as liquidated damages without the necessity of proving actual damages due to the difficulty of proving actual damages resulting from the Seller's default hereunder with respect to the Phase II Closing. Nothing in this Section shall be deemed to limit the Buyer's remedies with respect to a breach by the Seller of any of the Seller's obligations which survive the Closing but such remedies shall be limited as provided in Section 11.5. ARTICLE XIV MISCELLANEOUS Section 14.1 Use of Blackstone Name and Address. The Buyer hereby acknowledges and agrees that neither the Buyer nor any affiliate, successor, assignee or designee of Buyer shall be entitled to use the name "Blackstone" in any way whatsoever. Section 14.2 Exculpation of the Seller. Notwithstanding anything to the contrary contained herein, the Seller's shareholders, partners, the partners of such partners, the shareholders of such partners, and the trustees, officers, directors, employees, agents and security holders of the Seller and the partners of the Seller assumes no personal liability for any obligations entered into on behalf of the Seller and its individual assets shall not be subject to any claims of any person relating to such obligations. The foregoing shall govern any direct and indirect obligations of the Seller under this Agreement. Section 14.3 Brokers. (a) The Seller represents and warrants to the Buyer that it has dealt with no broker, salesman, finder or consultant with respect to this Agreement or the transactions contemplated hereby other than Eastdil. The Seller agrees to indemnify, protect, defend and hold the Buyer harmless from and against all claims, losses, damages, liabilities, costs, expenses (including reasonable attorneys' fees and disbursements) and charges resulting from the Seller's breach of the foregoing representation in this subsection (a). The provisions of this subsection (a) shall survive the Closing and any termination of this Agreement. (b) The Buyer represents and warrants to the Seller that it has dealt with no broker, salesman, finder or consultant with respect to this Agreement or the transactions contemplated hereby other than Eastdil. The Buyer agrees to indemnify, protect, defend and hold the Seller harmless from and against all claims, losses, damages, liabilities, costs, expenses (including reasonable attorneys' fees and disbursements) and charges resulting from the Buyer's breach of the foregoing representations in this 38 subsection (b). The provisions of this subsection (b) shall survive the Closing and any termination of this Agreement. Section 14.4 Confidentiality; Press Release; IRS Reporting Requirements. (a) The Buyer and the Seller shall hold as confidential all information disclosed in connection with the transaction contemplated hereby and concerning each other, the Asset, this Agreement and the transactions contemplated hereby and shall not release any such information to third parties without the prior written consent of the other parties hereto, except (i) any information which was previously or is hereafter publicly disclosed (other than in violation of this Agreement or other confidentiality agreements to which affiliates of the Buyer are parties), (ii) to their partners, advisers, underwriters, analysts, employees, affiliates, officers, directors, consultants, lenders, accountants, legal counsel or other advisors of any of the foregoing, provided that they are advised as to the confidential nature of such information and are instructed to maintain such confidentiality and (iii) to comply with any law, rule or regulation. The foregoing shall constitute a modification of any prior confidentiality agreement that may have been entered into by the parties. The provisions of this Section shall survive the termination of this Agreement for a period of 180 days but shall not survive the Closing. (b) The Seller or the Buyer may issue a press release with respect to this Agreement and the transactions contemplated hereby, provided that the content of any such press release shall be subject to the prior written consent of the other party hereto and in no event shall any such press release (i) issued by the Buyer disclose the identity of the Seller's direct or indirect beneficial owners by name or the consideration paid to the Seller for the Asset or (ii) issued by the Seller disclose the identity of the Buyer's direct or indirect beneficial owners by name. (c) For the purpose of complying with any information reporting requirements or other rules and regulations of the IRS that are or may become applicable as a result of or in connection with the transaction contemplated by this Agreement, including, but not limited to, any requirements set forth in proposed Income Tax Regulation Section 1.6045-4 and any final or successor version thereof (collectively, the "IRS Reporting Requirements"), the Seller and the Buyer hereby designate and appoint the Escrow Agent to act as the "Reporting Person" (as that term is defined in the IRS Reporting Requirements) to be responsible for complying with any IRS Reporting Requirements. The Escrow Agent hereby acknowledges and accepts such designation and appointment and agrees to fully comply with any IRS Reporting Requirements that are or may become applicable as a result of or in connection with the transaction contemplated by this Agreement. Without limiting the responsibility and obligations of the Escrow Agent as the Reporting Person, the Seller and the Buyer hereby agree to comply with any provisions of the IRS Reporting Requirements that are not identified therein as the responsibility of the Reporting Person, including, but not limited to, the requirement that the Seller and the Buyer each retain an original counterpart of this Agreement for at least four (4) years following the calendar year of the Closing. 39 Section 14.5 Escrow Provisions. (a) The Escrow Agent shall hold the Earnest Money in escrow in an interest-bearing bank account at Morgan Guaranty Trust Company of New York (the "Escrow Account"). (b) The Escrow Agent shall hold the Earnest Money in escrow in the Escrow Account until the Closing or sooner termination of all or a portion of this Agreement and shall hold or apply such proceeds in accordance with the terms of this paragraph (b). The Seller and the Buyer understand that no interest is earned on the Earnest Money during the time it takes to transfer into and out of the Escrow Account. At the relevant Closing, the relevant portion of the Earnest Money shall be paid by the Escrow Agent to, or at the direction of, the Seller. If for any reason a Closing does not occur and either party makes a written demand upon the Escrow Agent for payment of such amount, the Escrow Agent shall, within 24 hours give written notice to the other party of such demand. If the Escrow Agent does not receive a written objection within five business days after the giving of such notice, the Escrow Agent is hereby authorized to make such payment. If the Escrow Agent does receive such written objection within such five day period or if for any other reason the Escrow Agent in good faith shall elect not to make such payment, the Escrow Agent shall continue to hold such amount until otherwise directed by joint written instructions from the parties to this Agreement or a final judgment of a court of competent jurisdiction. However, the Escrow Agent shall have the right at any time to deposit the Earnest Money with the clerk of the court of New York County. The Escrow Agent shall give written notice of such deposit to the Seller and the Buyer. Upon such deposit the Escrow Agent shall be relieved and discharged of all further obligations and responsibilities hereunder. (c) The parties acknowledge that the Escrow Agent is acting solely as a stakeholder at their request and for their convenience, that the Escrow Agent shall not be deemed to be the agent of either of the parties, and the Escrow Agent shall not be liable to either of the parties for any act or omission on its part, other than for its gross negligence or willful misconduct. The Seller and the Buyer shall jointly and severally indemnify and hold the Escrow Agent harmless from and against all costs, claims and expenses, including attorneys' fees and disbursements, incurred in connection with the performance of the Escrow Agent's duties hereunder. (d) The Escrow Agent has acknowledged its agreement to these provisions by signing this Agreement in the place indicated following the signatures of the Seller and the Buyer. Section 14.6 Successors and Assigns; No Third-Party Beneficiaries. The stipulations, terms, covenants and agreements contained in this Agreement shall inure to the benefit of, and shall be binding upon, the parties hereto and their respective permitted successors and assigns (including any successor entity after a public offering of stock, merger, consolidation, purchase or other similar transaction involving a party hereto) and nothing herein expressed or implied shall give or be construed to give to any person or entity, other than the parties hereto and such assigns, any legal or equitable rights 40 hereunder. Section 14.7 Assignment. This Agreement may not be assigned by the Buyer without the consent of the prior written consent of the Seller. The Buyer may designate an affiliate to which the Asset will be assigned at the Closing, provided that the Buyer will continue to remain primarily liable under this Agreement notwithstanding any such designation. Section 14.8 Further Assurances. From time to time, as and when requested by any party hereto, the other party shall execute and deliver, or cause to be executed and delivered, all such documents and instruments and shall take, or cause to be taken, all such further or other actions as such other party may reasonably deem necessary or desirable to consummate the transactions contemplated by this Agreement. Section 14.9 Notices. (a) To the Seller: c/o Blackstone Real Estate Advisors L.P. 345 Park Avenue New York, New York 10154 Attention: Mr. Thomas J. Saylak Facsimile: 212-754-8726 with copies thereof to: Simpson Thacher & Bartlett 425 Lexington Avenue New York, New York 10017 Attention: Gregory J. Ressa, Esq. Facsimile: 212-455-2502 (b) To the Buyer: HRPT Properties Trust 400 Centre Street Newton, Massachusetts 02458 Attention: Mr. John A. Mannix Facsimile: 617-928-1305 with copies thereof to: Sullivan & Worcester LLP One Post Office Square 41 Boston, Massachusetts 02109 Attention: Jennifer B. Clark, Esq. Facsimile: 617-338-2880. All notices (i) shall be deemed to have been given on the date that the same shall have been delivered in accordance with the provisions of this Section and (ii) may be given either by a party or by such party's attorneys. Any party may, from time to time, specify as its address for purposes of this Agreement any other address upon the giving of 10 days' notice thereof to the other parties. Section 14.10 Entire Agreement. This Agreement, along with the Exhibits and Schedules hereto contains all of the terms agreed upon between the parties hereto with respect to the subject matter hereof, and all understandings and agreements heretofore had or made among the parties hereto are merged in this Agreement which alone fully and completely expresses the agreement of the parties hereto. Section 14.11 Amendments. This Agreement may not be amended, modified, supplemented or terminated, nor may any of the obligations of the Seller or the Buyer hereunder be waived, except by written agreement executed by the party or parties to be charged. Section 14.12 No Waiver. No waiver by either party of any failure or refusal by the other party to comply with its obligations hereunder shall be deemed a waiver of any other or subsequent failure or refusal to so comply. Section 14.13 Governing Law. This Agreement shall be governed by, interpreted under, and construed and enforced in accordance with, the laws of the State of New York. Section 14.14 Submission to Jurisdiction. Each of the Buyer and the Seller irrevocably submits to the jurisdiction of (a) the Supreme Court of the State of New York, New York County and (b) the United States District Court for the Southern District of New York for the purposes of any suit, action or other proceeding arising out of this Agreement or any transaction contemplated hereby. Each of the Buyer and the Seller further agrees that service of any process, summons, notice or document by U.S. registered mail to such party's respective address set forth above shall be effective service of process for any action, suit or proceeding in New York with respect to any matters to which it has submitted to jurisdiction as set forth above in the immediately preceding sentence. Each of the Buyer and the Seller irrevocably and unconditionally waives trial by jury and irrevocably and unconditionally waives any objection to the laying of venue of any action, suit or proceeding arising out of this Agreement or the transactions contemplated hereby in (a) the Supreme Court of the State of New York, New York County and (b) the United States District Court for the Southern District of New York, and hereby further irrevocably and unconditionally waives and agrees not to plead or claim in any such court that any such action, suit or proceeding brought in any such court 42 has been brought in an inconvenient forum. Section 14.15 Severability. If any term or provision of this Agreement or the application thereof to any person or circumstances shall, to any extent, be invalid or unenforceable, the remainder of this Agreement or the application of such term or provision to persons or circumstances other than those as to which it is held invalid or unenforceable shall not be affected thereby, and each term and provision of this Agreement shall be valid and enforceable to the fullest extent permitted by law. Section 14.16 Section Headings. The headings of the various Sections of this Agreement have been inserted only for purposes of convenience, are not part of this Agreement and shall not be deemed in any manner to modify, explain, expand or restrict any of the provisions of this Agreement. Section 14.17 Counterparts. This Agreement may be executed in two or more counterparts, each of which shall be deemed an original, and it shall not be necessary in making proof of this Agreement to produce or account for more than one such counterpart. Section 14.18 Acceptance of Deed. The acceptance of the Deed by the Buyer shall be deemed full compliance by the Seller of all of the Seller's obligations under this Agreement except for those obligations of the Seller which are specifically stated to survive the delivery of the Deed hereunder. Section 14.19 Construction. The parties acknowledge that the parties and their counsel have reviewed and revised this Agreement and that the normal rule of construction to the effect that any ambiguities are to be resolved against the drafting party shall not be employed in the interpretation of this Agreement or any exhibits or amendments hereto. Section 14.20 Recordation. Neither this Agreement nor any memorandum or notice of this Agreement may be recorded by any party hereto without the prior written consent of the other party hereto. The provisions of this Section shall survive the Closing or any termination of this Agreement. Section 14.21 Waiver of Jury Trial. The Seller and the Buyer hereby waive trial by jury in any action, proceeding or counterclaim brought by any party against another party on any matter arising out of or in any way connected with this Agreement. Section 14.22 Financials. The Seller shall provide the Buyer with access to the books and records of the Seller for the purpose of preparing audited financial statements for the Asset with respect to the 1996 and 1997 calendar years and the stub 1998 period, such financial statements to be prepared at the Buyer's sole cost and expense. The Seller shall provide the Buyer and its accountants with such reasonable certifications with respect to the Seller's books and records as they shall require from time 43 to time in their reasonable discretion in connection with the preparation of such financial statements. The provisions of this Section shall survive the Closing. Section 14.23 Nonliability of Trustees. THE DECLARATION OF TRUST ESTABLISHING THE BUYER, A COPY OF WHICH, TOGETHER WITH ALL AMENDMENTS THERETO (THE "DECLARATION"), IS DULY FILED WITH THE STATE OF MARYLAND, PROVIDES THAT THE NAME "HRPT PROPERTIES TRUST" REFERS TO THE TRUSTEES UNDER THE DECLARATION COLLECTIVELY OR PERSONALLY, BUT NOT INDIVIDUALLY OR PERSONALLY, AND THAT NO TRUSTEE, OFFICER, SHAREHOLDER, EMPLOYEE OR AGENT OF THE BUYER SHALL BE HELD TO ANY PERSONAL LIABILITY, JOINTLY OR SEVERALLY, FOR ANY OBLIGATION OF, OR CLAIM AGAINST, THE BUYER. ALL PERSONS DEALING WITH THE BUYER, IN ANY WAY, SHALL LOOK ONLY TO THE ASSETS OF THE BUYER FOR THE PAYMENT OF ANY SUM OR THE PERFORMANCE OF ANY OBLIGATION. THE PROVISIONS OF THIS SECTION SHALL SURVIVE THE CLOSING. Section 14.24 Independent Contract Consideration. In addition to the Earnest Money Deposit, the sum of one hundred dollars ($100) (the "Independent Contract Consideration") has been paid and delivered by the Buyer to the Seller along with the Buyer's executed originals of this Agreement, which amount has been bargained for and agreed to by the parties hereto as consideration for the Buyer's exclusive right to purchase the Property pursuant to the terms of this Agreement. It is agreed and understood by the parties hereto that the Independent Contract Consideration shall be in addition to and independent of any and all other consideration payable pursuant to this Agreement and is nonrefundable upon Closing. Section 14.25 Tax Free Exchange. Notwithstanding any terms in the Agreement to the contrary, Seller shall have the right to consummate the transactions contemplated by this Agreement in a manner which qualifies as a tax-deferred exchange, in whole or in part, under the provisions of Section 1031 of the Internal Revenue Code, and the Treasury Regulations thereunder. Purchaser agrees to cooperate with Seller with respect to any tax-deferred exchange pursuant to the provisions of Section 1031 of the Code and the Treasury Regulations thereunder and to execute any and all documents reasonably requested by Seller in connection therewith; provided, however that in no event shall Purchaser be required to take title to any exchange property. Without limiting the foregoing, Seller shall have the right to (i) transfer interests in the Property or this Agreement to one or more of its direct or indirect members or partners, (ii) transfer all or any portion of Seller's (or its transferee's) interests under this Agreement to a qualified intermediary (the "Intermediary") in accordance with the provisions of Section 1031 of the Internal Revenue Code and the Treasury Regulations thereunder (and, as a result of the transfer, the Intermediary will acquire an equitable interest in the title to the Property) provided that Seller shall simultaneously with such transfer confirm its continued obligations under this Agreement and (iii) cause all or any portion of the Purchase Price to be transferred to a qualified escrow or qualified trust in accordance with the provisions 44 of Section 1031 of the Internal Revenue Code and the Treasury Regulations thereunder. Seller shall indemnify and hold Purchaser, its assignees and nominees harmless from and against all cost, loss and damage, including, without limitation, reasonable attorneys' fees, incurred in connection with the matters described in this Section 14.25. The preceding sentence shall survive the Closings and shall not be subject to the Basket Limitation or Cap Limitation set forth elsewhere in this Agreement. IN WITNESS WHEREOF, this Agreement has been duly executed by the parties hereto as of the day and year first above written. SELLER: BLACKSTONE/TCC AUSTIN PARTNERS L.P. By: BRE/AUSTIN L.L.C. By: /s/ William J. Stein ------------------------ Name: William J. Stein Title: Vice President BUYER: HRPT PROPERTIES TRUST By: John A. Manning ------------------------ Name: John A. Manning Title: Executive Vice President 45 Schedule I Asset Schedule Seller: Blackstone/TCC Austin Partners L.P. Property: Lot 1, 3-16, Research Park Subdivision, a subdivision in Travis and Williamson Counties, according to the maps or plats of record in Volume 101, Page 214, Plat Records of Travis County, Texas and Cabinet P, Slide 383, Plat Records of Williamson County, Texas. Asset Manager: William J. Stein Schedule II Existing Title Commitment and Survey Existing Survey Plat of Survey dated and certified June 10, 1998 prepared by Survcon Inc., Job Number 417-588. Existing Title Commitment See attached [attachment not included and available on request] 47 Schedule III Phase II Lots 8, 9, and 10 of Block A, Research Park, a resubdivision of Research Technology Subdivision, as recorded in Book 1, Pages 214 through 217 of the plat records of Travis County, Texas and as recorded in Cabinet P, slides 383 through 386 of the plat records of Williamson County, Texas. 48 Schedule IV Seller SDP Deposits RESEARCH PARK - COA REFUNDABLE DEPOSITS
Solectron Industrial 2 Industrial 3 & 4 Office 1, 2 & 3 ========================================================================================================= E/S Fiscal $93,761.00 E/S Fiscal Bonds $6,108.00 $193,315.00 $162,540.00 Environmental Fiscal Deposit $44,000.00 PW/Water/Wastewater Inspection $34,993.25 $34,129.68 Fee Landscape Inspection Fee $80.00 $1,180.00 $1,540.00 ========================================================================================================= TOTAL DEPOSITS $137,761.00 $6,188.00 $229,488.25 $198,209.68 =========================================================================================================
TOTAL REFUNDABLE COA DEPOSITS - $571,646.93 SCHEDULE V MATERIAL CONTRACTS FOR RESEARCH PARK
DOCUMENT DATE OF PARTIES DOCUMENT Roofing System Limited Warranty & Service Agreement, Warranty 6/27/94 Texas Instruments, Inc. and GE Silicones No. 10-11386-01 Corporation Dow Corning 3-7000 Silicone Roof Coating Silicone/Polyurethane 8/26/91 Texas Instruments, Inc. and Dow Corning Foam System Warranty, Warranty No. 2510 Silicone/Polyurethane Foam System Warranty, Warranty No. 1914 6/20/89 Texas Instruments, Inc. and Dow Corning Corporation Full System Limited Warranty Dow Corning Silicone/Polyurethane 8/11/95 Texas Instruments, Inc. and Dow Corning Corporation Foam Roofing System, Warranty No. 1764 Full System Limited Warranty Dow Corning Silicone/Polyurethane 11/9/96 Texas Instruments, Inc. and Dow Corning Corporation Foam Roofing System, Warranty No. 3737 Full System Limited Warranty Dow Corning Silicone/Polyurethane 8/11/95 Texas Instruments, Inc. and Dow Corning Corporation Foam Roofing System, Warranty No. 3324 Roofing System Limited Warranty, Warranty No. 10-11845-01 11/8/97 Blackstone/TCC Austin Partners, L.P. and GE Full System Limited Warranty Dow Corning Silicone/Polyurethane 8/8/96 Texas Instruments, Inc. and Dow Corning Corporation Roof System, Warranty No. 3621 Gas Sales Agreement, Contract #GS 05291 5/1/98 Blackstone/TCC Austin Partners, L.P. and Mercado Gas Services Inc. Gas Transportation Agreement, Contract #GT 18112 4/18/97 Blackstone/TCC Austin Partners, L.P. and Southern Union Gas Company 4 Amendment to Gas Agreement Contract #GT 18112 9/2/97 Blackstone/TCC Austin Partners, L.P. and Southern Union Gas Company Document Management Services Agreement #2911127 5/16/97 Blackstone/TCC Austin Partners, L.P. and Xerox Business Services Amendment to Document Management Services Agreement 10/10/97 Blackstone/TCC Austin Partners, L.P. and Xerox #2911127 Business Services Cleaning Services Contract 4/1/98 Blackstone/TCC Austin Partners, L.P. (by Trammell Crow Central Texas, Ltd., its manager) and Border Maintenance Services, Inc. Equipment Acceptance for Equipment Schedule No TCCT-01 7/21/97 Blackstone/TCC Austin Partners, L.P. and M&SD Solectron Voice Mail Lease Financial Services Equipment Acceptance for Equipment Schedule No TCCT-02P 11/1/97 Blackstone/TCC Austin Partners, L.P. and M&SD Solectron Building 2 (McNeil 11) Phone Switch Financial Services Equipment Schedule and Acceptance Form No.: TCCT-03P 11/1/97 Blackstone/TCC Austin Partners, L.P. and Southern Research Park main phone switch lease Union Gas Company and MS&D Financial Services Food Service/Management Services Contract 4/7/97 Marriott Management Services/and Blackstone Evaporated Loss Adjustment Application to City of Austin 4/3/97 Per COA Letter assigning from Texas Instruments to Blackstone/TCC Austin Partners, L.P. Landscape Maintenance Contract 4/1/98 Blackstone/TCC Austin Partners, L.P. (by Trammell Crow Central Texas) and Clean Cut Telephone Maintenance Contract for Research Park Main Switch 10/31/97 Blackstone/TCC Austin Partners, L.P. and Williams Telecommunications Systems (WilTel) 5 Amendment to Gas Agreement Contract #GT 18112 9/2/97 Blackstone/TCC Austin Partners, L.P. and Southern Union Gas Company Document Management Services Agreement #2911127 5/16/97 Blackstone/TCC Austin Partners, L.P. and Xerox Business Services Amendment to Document Management Services Agreement 10/10/97 Blackstone/TCC Austin Partners, L.P. and Xerox #2911127 Business Services Cleaning Services Contract 4/1/98 Blackstone/TCC Austin Partners, L.P. (by Trammell Crow Central Texas, Ltd., its manager) and Border Maintenance Services, Inc. Equipment Acceptance for Equipment Schedule No TCCT-01 7/21/97 Blackstone/TCC Austin Partners, L.P. and M&SD Solectron Voice Mail Lease Financial Services Equipment Acceptance for Equipment Schedule No TCCT-02P 11/1/97 Blackstone/TCC Austin Partners, L.P. and M&SD Solectron Building 2 (McNeil 11) Phone Switch Financial Services Equipment Schedule and Acceptance Form No.: TCCT-03P 11/1/97 Blackstone/TCC Austin Partners, L.P. and Southern Research Park main phone switch lease Union Gas Company and MS&D Financial Services Food Service/Management Services Contract 4/7/97 Marriott Management Services/and Blackstone Evaporated Loss Adjustment Application to City of Austin 4/3/97 Per COA Letter assigning from Texas Instruments to Blackstone/TCC Austin Partners, L.P. Landscape Maintenance Contract 4/1/98 Blackstone/TCC Austin Partners, L.P. (by Trammell Crow Central Texas) and Clean Cut Telephone Maintenance Contract for Research Park Main Switch 10/31/97 Blackstone/TCC Austin Partners, L.P. and Williams Telecommunications Systems (WilTel) APS - Security Contract 4/1/98 Blackstone/TCC Austin Partners, L.P. and American Protective Services, Inc. 5 Security Pay Schedule Change and Amendment 5/27/98 Letter dated 5/27/98 for new rates effective 6/1/98 Fire System monitoring for Solectron expansion market 5/14/98 Trammell Crow Company and ADT Security Services, Inc. (in the process of being assigned to Blackstone/TCC Austin Partners, L.P.) Window Cleaning Contract 4/15/98 Blackstone/TCC Austin Partners, L.P. and Sparkling Clean Window Company City of Austin Water and Wastewater Utility Service Extension 9/21/97 Trammell Crow Company and Turner Collie & Braden, request for Administrative Approval Inc./City of Austin Declaration of Covenants, Conditions and Restrictions for 6/23/98 Blackstone/TCC Austin Partners, L.P. Research Park, Travis County Volume 13210, Page 109 Declaration of Covenants, Conditions and Restrictions for 6/24/98 Research Park, Williamson County Document Number 9034423, Page 109
Schedule VI Space Leases 1. Lease Agreement Between Trammell Crow Central Texas, Ltd. ("TCCT"), as Landlord, and Texas Instruments Incorporated ("TI"), as Tenant, dated December 30, 1996. a. Assignment of Leases from TCCT to Blackstone/TCC Austin Partners L.P. dated March 17, 1997. b. Amendment To Assignment of Leases between TCCT and Blackstone/TCC Austin Partners L.P. dated March 17, 1997. c. Amendment To Lease Agreement dated March 17, 1997 between Blackstone/TCC Austin Partners L.P. and TI. d. Second Amendment to Lease Agreement dated May 22, 1997 between Blackstone/TCC Austin Partners L.P. and TI. e. Assignment of Lease from TI to Raytheon TI Systems, Inc. dated July 11, 1997. f. Raytheon Guarantee executed by Raytheon Corporation dated July 2, 1997. 2. Lease Agreement By and Between TI and Solectron Texas, L.P. ("Solectron") dated March 29, 1996. a. First Amendment to Lease Agreement By and Between TI and Solectron dated May 6, 1996. b. Second Amendment to Lease Agreement By and Between TI and Solectron dated July 16, 1996. c. Third Amendment to Lease Agreement By and Between TI and Solectron dated August 8 and August 20, 1996. d. Assignment of Leases from TI to TCCT dated December 30, 1996. e. Assignment of Leases from TCCT to Blackstone/TCC Austin Partners L.P. dated March 17, 1997. f. Amendment To Assignment of Leases between TCCT and Blackstone/TCC Austin Partners L.P. dated March 17, 1997. 3. Lease Agreement Between Blackstone/TCC Austin Partners L.P. and Solectron dated September 25, 1997. a. Amendment to Lease Agreement Between Blackstone/TCC Austin Partners L.P. and Solectron dated as of July 23, 1998. b. Letter dated June 24, 1998 Between Blackstone/TCC Austin Partners L.P. and Solectron. 4. Lease Agreement Between Blackstone/TCC Austin Partners, L.P. and Netspeed, Inc. dated April 10, 1998. a. Assignment Letter dated April 23, 1998 from Netspeed, Inc. to Cisco Systems, Inc. b. First Amendment to Lease Agreement Between Blackstone/TCC Austin Partners, L.P. and Cisco Systems, Inc. dated June 16, 1998. Schedule VI-1 Landlord Work in Progress None Schedule VII Brokerage Commissions
DOCUMENT DATE OF PARTIES COMMENTS DOCUMENT Lease Commission Agreement 4/14/98 Blackstone/TCC Austin Commission Agreement Partners, L.P., and for Cisco Systems, Inc. The Staubach Company Lease Commission Agreement 5/8/97 Blackstone/TCC Austin Commission Agreement Partners, L.P., and CB for Solectron Texas Commercial Landlord is not obligated to pay any commission on future expansions or renewals First Amendment to CB Not dated Blackstone/TCC Austin Amendment to the Commercial Agreement Partners, L.P. and CB Solectron Texas Commercial Commission Agreement
Schedule VIII Litigation None Schedule IX Space Leases in Progress None Schedule X Security Deposits Held By The Seller
TENANT AMOUNT PARTIES Cisco Systems, Inc. $20,000 in cash Blackstone/TCC Austin Partners, L.P. and Cisco Systems, Inc.
13 Exhibit A ASSIGNMENT AND ASSUMPTION OF LANDLORD'S INTEREST IN LEASES ASSIGNMENT AND ASSUMPTION OF LANDLORD'S INTEREST IN LEASES dated _____ __, 1998, between ____________, a _________________ having an address at 345 Park Avenue, New York, New York 10154 ("Assignor") and ___________, a _____________ having an address at _______________ ("Assignee"). Background This Assignment and Assumption of Landlord's Interest in Leases is being executed and delivered pursuant to that certain Purchase and Sale Agreement dated as of July __, 1998 (the "Purchase Agreement") among Assignor, as seller, and Assignee, as buyer. All capitalized terms used but not defined herein shall have the meanings ascribed to them in the Purchase Agreement. Assignment and Assumption In consideration of Ten ($10.00) Dollars in hand paid by Assignee, the receipt and sufficiency of which is hereby acknowledged, Assignor does hereby assign, transfer and set over unto Assignee, all of Assignor's right, title and interest in and to: All leases, occupancy agreements, license agreements, rental agreements, concession agreements and other written agreements entered into with any tenants relating to the Property and the buildings and other improvements located thereon, or any portion thereof, including, without limitation, the leases, occupancy agreements, license agreements, rental agreements, concession agreements and other written agreements set forth on Schedule A attached hereto (all of the foregoing leases, collectively, the "Space Leases"). TO HAVE AND TO HOLD, the same unto Assignee, its successors and assigns, from and after the date hereof, subject to the terms, covenants, conditions and provisions contained in the Space Leases. Assignee hereby assumes the performance of all of the terms, covenants and conditions of the Space Leases described on Schedule A attached hereto on the Assignor's part to be performed thereunder from and after the date hereof and will well and truly perform all of the terms, covenants and conditions of such Leases from and after the date hereof, all with the same force and effect as though the Assignee had signed such Space Leases as a party named therein. Assignee does hereby agree for itself, its legal representatives, successors and assigns to indemnify, defend and save the Assignor, its legal representatives, successors and assigns, harmless from and against any and all claims, losses, suits and expenses (including, but not limited to, reasonable legal fees and litigation expenses) asserted or arising in connection with the performance by Assignee under the Space Leases described on Schedule A attached hereto from and after the date hereof. Assignor does hereby agree for itself, its legal representatives and its successors and assigns, to indemnify, defend and save the Assignee, its legal representatives and its successors and assigns, harmless from and against any and all claims, losses, suits and expenses (including, but not limited to, reasonable legal fees and litigation expenses) asserted or arising in connection with the performance by Assignor under the Space Leases prior to the date hereof. IN WITNESS WHEREOF, the Assignor and Assignee have duly executed this instrument as of the day first above written. ASSIGNOR: [SELLER] By:___________________________ Name: Title: ASSIGNEE: [BUYER] By:___________________________ Name: Title: Schedules: Schedule A Space Leases [APPROPRIATE ACKNOWLEDGEMENT TO BE ADDED] Exhibit B ASSIGNMENT AND ASSUMPTION OF CONTRACTS ASSIGNMENT AND ASSUMPTION OF CONTRACTS dated __, 1998, between ____________, a _________________ having an address at 345 Park Avenue, New York, New York 10154 ("Assignor") and ___________, a _____________ having an address at _______________ ("Assignee"). Background This Assignment and Assumption of Contracts is being executed and delivered pursuant to that certain Purchase and Sale Agreement dated as of July __, 1998 (the "Purchase Agreement") among Assignor, as seller, and Assignee, as buyer. All capitalized terms used but not defined herein shall have the meanings ascribed to them in the Purchase Agreement. Assignment and Assumption In consideration of Ten ($10.00) Dollars in hand paid by Assignee, the receipt and sufficiency of which is hereby acknowledged, Assignor does hereby assign, transfer and set over unto Assignee, all of Assignor's right, title and interest in and to: (i) All agreements, contracts or understandings of Assignor relating to ownership, operation, maintenance, and management of the Property and the buildings and other improvements located thereon, or any portion thereof, including, without limitation, the contracts set forth on Schedule A attached hereto (collectively, the "Contracts"); (ii) All equipment leases and rental agreements relating to the equipment, services, vehicles, furniture or other type of personal property with regard to the Property and the buildings and other improvements located thereon, or any portion thereof, including, without limitation, the leases set forth on Schedule B attached hereto (collectively, the "Equipment Leases"); (iii) All of Assignor's right, title and interest in and to all licenses, registrations, certificates, permits, approvals and other governmental authorizations relating to the construction, operation, use or occupancy of the Property and the buildings and other improvements located thereon, or any portion thereof (collectively, the "Permits"); (iv) all of Assignor's right, title and interest in and to all warranties and guarantees, if any, relating to the personal property located on the Property or in the buildings and other improvements located thereon (collectively, the "Warranties"; the Contracts, the Equipment Leases, the Permits and the Warranties are collectively referred to herein as the "Agreements"). TO HAVE AND TO HOLD, the same unto Assignee, its successors and assigns, from and after the date hereof, subject to the terms, covenants, conditions and provisions contained in the Agreements. Assignee hereby assumes the performance of all of the terms, covenants and conditions of the Contracts described on Schedule A attached hereto and the Equipment Leases described on Schedule B attached hereto on the Assignor's part to be performed thereunder from and after the date hereof and will perform all of the terms, covenants and conditions of such Contracts and Equipment Leases arising or accruing from and after the date hereof, all with the same force and effect as though the Assignee had signed such Contracts and Equipment Leases as a party named therein. Assignee does hereby agree for itself, its legal representatives, and its successors and assigns to indemnify, defend and save the Assignor, its legal representatives, successors and assigns, harmless from and against any and all claims, losses, suits and expenses (including, but not limited to, reasonable legal fees and litigation expenses) asserted or arising in connection with the performance by Assignee under the Contracts described on Schedule A attached hereto and the Equipment Leases described on Schedule B attached hereto from and after the date hereof. Assignor does hereby agree for itself, its legal representatives and its successors and assigns, to indemnify, defend and save the Assignee, its legal representatives and its successors and assigns, harmless from and against any and all claims, losses, suits and expenses (including, but not limited to, reasonable legal fees and litigation expenses) asserted or arising in connection with the performance by Assignor under the Contracts described on Schedule A attached hereto and the Equipment Leases described on Schedule B attached hereto prior to the date hereof. IN WITNESS WHEREOF, the Assignor and Assignee have duly executed this instrument as of the day first above written. ASSIGNOR: [SELLER] By:___________________________ Name: Title: ASSIGNEE: [BUYER] By:___________________________ Name: Title: Schedules: Schedule A Contracts Schedule B Equipment Leases Exhibit C [SELLER] c/o The Blackstone Group 345 Park Avenue New York, New York 10154 _____ ___, 1998 BY CERTIFIED MAIL [Name and Address of Tenant] Premises: [__________________________] Gentlemen and Ladies: Please be advised that effective the date set forth above, the Premises have been conveyed to _________________, a ____ ______________, whose mailing address is ________________________________________. You are hereby irrevocably and unconditionally directed that, effective immediately, all future communications, rents and payments are to be directed as follows: [TBD] Very truly yours, [SELLER] By: __________________________ Title: Exhibit D SPECIAL WARRANTY DEED Date: Grantor: Blackstone/TCC Austin Partners L.P. Grantor's Mailing Address: c/o The Blackstone Group 345 Park Avenue, 32nd Floor New York County New York, New York 10154 Grantee: HRPT Properties Trust Grantee's Mailing Address: Consideration: $10 and other good and valuable consideration Property: Reservations From and Exceptions From Conveyance: Grantor, for the consideration and subject to the reservations from and exceptions to conveyance and warranty, grants, sells and conveys to Grantee the property, together with all and singular the rights and appurtenances thereto in any wise belonging, to have and to hold it to Grantee, Grantee's heirs, executors, administrators, successors, or assigns forever. Grantor binds Grantor and Grantor's heirs, executors, administrators and successor to warrant and forever defend all and singular the property to Grantee and Grantee's heir, executors, administrators, successors and assigns against every person whomsoever lawfully claiming or to claim the same or any part thereof, except as to the reservations from and exceptions to conveyance and warranty, when the claim is by, through, or under Grantor or otherwise. When the context requires, singular nouns and pronouns include the plural. Blackstone/TCC Austin Partners L.P. By: BRE/Austin L.L.C., its general partner By: ______________________________ Name: Title: ACKNOWLEDGMENT STATE OF ____________ ) ) COUNTY OF ___________ ) This instrument was acknowledged before me on the __ day of _________, 199_ by _______________________, the of BRE/Austin L.L.C., a Delaware limited liability company and general partner of Blackstone/TCC Austin Partners L.P., a Delaware limited partnership on behalf of said limited liability company and said partnership. My Commission Expires: __________________________________ Notary Public, State of __________ _____________________ Notary Name Printed: __________________________________ AFTER RECORDING RETURN TO: DOCUMENT PREPARED BY: Exhibit E BILL OF SALE ________________________________, a __________________________, whose address is 345 Park Avenue, New York, New York 10154 (hereinafter referred to as "Seller"), in consideration of Ten ($10.00) Dollars in hand paid by __________________ ___________________, a ___________________________, whose mailing address is _____________________________ (hereinafter referred to as "Buyer"), the receipt and sufficiency of which is hereby acknowledged, does hereby sell, grant, assign, convey, transfer, set over, and quit-claim unto Purchaser, its successors and assigns, all of Seller's right, title and interest in and to any and all fixtures, chattels and articles of personal property that are attached to or located in or upon the premises described on Schedule A attached hereto and the buildings and other improvements located thereon, or any portion thereof (all of the property and interests hereinbefore described are hereinafter referred to as the "Property"). TO HAVE AND TO HOLD the Property unto Buyer, its successors and assigns forever. This Bill of Sale is made without warranty or representation, express or implied, by or recourse against Seller of any kind or nature whatsoever except as set forth in that certain Purchase and Sale Agreement dated as of July , 1998 between Seller as seller, and Buyer, as buyer. This Bill of Sale has been duly executed by Seller as of the ____ day of ________________, 1998. [SELLER] By: _________________________ Name: Title: Schedules: Schedule A Description of Premises Exhibit F ENTITY TRANSFEROR FOREIGN INVESTORS REAL PROPERTY TAX ACT CERTIFICATION AND AFFIDAVIT Section 1445 of the Internal Revenue Code of 1986, as amended (the "Code"), provides that a transferee of a U.S. real property interest must withhold tax if the transferor is a foreign person. To inform [ ] (the "Transferee") that withholding of tax is not required upon disposition of a U.S. real property interest by [Property owner], a ___________________ _____________________ (the "Transferor"), the undersigned hereby certifies the following on behalf of the Transferor: [bullet] Transferor is not a foreign corporation, foreign partnership, foreign trust or foreign estate (as those terms are defined in the Code and Income Tax Regulations); [bullet] The U.S. employer identification number of Transferor is ___________; [bullet] Transferor has an address at 345 Park Avenue, New York, New York 10154. [bullet] The address of the subject property is ________________, . Transferor understands that this Certification may be disclosed to the Internal Revenue Service by Transferee and that any false statement contained herein could be punished by fine, imprisonment or both. Under penalties of perjury, I declare that I have examined this Certification and to the best of my knowledge and belief it is true, correct and complete, and I further declare that I have the authority to sign this document on behalf of Transferor. __________________ ___, 1998 [SELLER] By: ____________________________ Name: Title: Exhibit G [Tenant's Estoppel Certificate not included and available upon request] EX-27 4 FINANCIAL DATA SCHEDULE
5 0000803649 HRPT PROPERTIES TRUST 1,000 U.S. DOLLARS 9-MOS DEC-31-1997 JAN-01-1998 SEP-30-1998 1 46,942 0 69,369 0 0 0 2,787,256 153,137 2,926,096 0 984,664 0 0 1,315 1,837,253 2,926,096 0 252,203 0 152,770 0 0 45,788 107,444 0 107,444 0 (2,140) 0 105,304 0.91 0.91
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