-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: keymaster@town.hall.org Originator-Key-Asymmetric: MFkwCgYEVQgBAQICAgADSwAwSAJBALeWW4xDV4i7+b6+UyPn5RtObb1cJ7VkACDq pKb9/DClgTKIm08lCfoilvi9Wl4SODbR1+1waHhiGmeZO8OdgLUCAwEAAQ== MIC-Info: RSA-MD5,RSA, EImhKMI+0KMgj44l6lwHo8qbUq3irf2XgK0WemIum5xnhlKY3bivGJ9dKkGOgB0m h33DrusXYcyrcE6Y1VNS6Q== 0000912057-95-001498.txt : 19950615 0000912057-95-001498.hdr.sgml : 19950615 ACCESSION NUMBER: 0000912057-95-001498 CONFORMED SUBMISSION TYPE: 10-K405 PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19941231 FILED AS OF DATE: 19950320 SROS: NYSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: ROCKEFELLER CENTER PROPERTIES INC CENTRAL INDEX KEY: 0000773652 STANDARD INDUSTRIAL CLASSIFICATION: REAL ESTATE INVESTMENT TRUSTS [6798] IRS NUMBER: 133280472 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-K405 SEC ACT: 1934 Act SEC FILE NUMBER: 001-08971 FILM NUMBER: 95521795 BUSINESS ADDRESS: STREET 1: 1270 AVENUE OF THE AMERICAS STREET 2: STE 2410 CITY: NEW YORK STATE: NY ZIP: 10020 BUSINESS PHONE: 2128417760 10-K405 1 10-K405 SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 ----------------------------- FORM 10-K ----------------------------- (MARK ONE) [X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE FISCAL YEAR ENDED DECEMBER 31, 1994 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 1-8971 ROCKEFELLER CENTER PROPERTIES, INC. (Exact name of registrant as specified in its charter) DELAWARE 13-3280472 (State or other jurisdiction (I.R.S. Employer of incorporation or Identification No.) organization) 1270 AVENUE OF THE AMERICAS 10020 NEW YORK, N.Y. (Zip Code) (Address of principal executive offices) REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: 212-698-1440 SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT: Name of each exchange Title of each class on which registered ------------------- ------------------- Common stock, $.01 Par Value, all New York of one class (38,260,704 shares Stock Exchange outstanding as of March 14, 1995)* ------------------------- Securities registered pursuant to Section 12(g) of the Act: None Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No --- ---- Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of Registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. [ ] - --------------------------- * The aggregate market value of Registrant's voting stock held by non- affiliates as of March 14, 1995, based on the closing price on the New York Stock Exchange composite tape on that date, was approximately $248,695,000. DOCUMENTS INCORPORATED BY REFERENCE Registrant has incorporated in this Annual Report on Form 10-K the information required in Part III from its Proxy Statement, to be filed with the Securities and Exchange Commission in connection with its 1995 Annual Meeting of Stockholders. ROCKEFELLER CENTER PROPERTIES, INC. TABLE OF CONTENTS ----------------- PART I PAGE ------ Item 1. Business 1 Item 2. Properties 9 Item 3. Legal Proceedings 9 Item 4. Submission of Matters to a Vote of Security Holders 9 PART II ------- Item 5. Market for the Registrant's Common Equity and Related Stockholder Matters 10 Item 6. Selected Financial Data 10 Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations 10 Item 8. Financial Statements and Supplementary Data 10 Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure 10 PART III -------- Item 10. Directors and Executive Officers 11 of the Registrant Item 11. Executive Compensation 11 Item 12. Security Ownership of Certain Beneficial Owners and Management 11 Item 13. Certain Relationships and Related Transactions 11 PART IV ------- Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K 12 Signatures 17 (i) ROCKEFELLER CENTER PROPERTIES, INC. PART I ITEM 1. BUSINESS. Rockefeller Center Properties, Inc. (the "Company") was incorporated in Delaware on July 17, 1985. Its principal executive offices are located at 1270 Avenue of the Americas, New York, New York 10020, and its telephone number is (212) 698-1440. The Company qualifies and has elected to be treated, for Federal income tax purposes, as a real estate investment trust (a "REIT") under the Internal Revenue Code of 1986, as amended (the "Code"). On September 19, 1985, the Company issued 37,500,000 shares of common stock (the "Common Stock") in an initial public offering registered under the Securities Act of 1933 (the "Act"). Simultaneously with the offering of the Common Stock, the Company issued Current Coupon Convertible Debentures due 2000 and Zero Coupon Convertible Debentures due 2000 (collectively, the "Convertible Debentures"). In December 1994 the Company issued $150 million of Floating Rate Notes ("Floating Rate Notes") due December 31, 2000 to Goldman Sachs Mortgage Company, as agent and as lender, and $75 million of 14% Debentures ("14% Debentures") due December 31, 2007 to Whitehall Street Real Estate Limited Partnership V. In conjunction with the issuance of the 14% Debentures the Company also issued 4,155,927 warrants ("Warrants") to acquire newly issued common stock exercisable at $5 per share and 5,349,541 Stock Appreciation Rights ("SARs") convertible into 14% Debentures or, under certain circumstances, Warrants. THE LOAN AND THE EQUITY OPTION. The net proceeds of the initial Common Stock offering and the offerings of Convertible Debentures were used by the Company to make a convertible, participating mortgage loan (the "Loan") to two partnerships (collectively, the "Borrower") which together own (except as described under "NBC Tenancy") most of the land and buildings known as Rockefeller Center. The partners of the Borrower are Rockefeller Group, Inc. ("RGI") and a wholly-owned subsidiary of RGI. The real property interests owned by the Borrower and included in the transaction (the "Property") are described below. The Loan, in the face amount of $1.3 billion, was made pursuant to a loan agreement between the Company and the Borrower, dated September 19, 1985 (as amended, the "Loan Agreement"), and is evidenced by two notes (collectively, as amended, the "Note"). The Note matures on December 31, 2007 and provides for both base interest ("Base Interest") and additional interest ("Additional Interest") through December 31, 2000 and for floating interest rates thereafter. At the Company's option (the "Equity Option"), the Loan is convertible on December 31, 2000 (the "Equity Conversion Date") or, if an event of default under the Loan Agreement has occurred and is continuing, any earlier date specified by the Company into a 71.5% general partnership interest in the partnership (the "Partnership") which will then own the Property. RGI or a permitted successor will be the managing partner of the Partnership and will generally have the power to make business decisions for the Partnership without the consent of the other partners. The Partnership will terminate on September 30, 2169 unless previously dissolved pursuant to the terms of the agreement under which the Partnership will be formed (the "Partnership Agreement"). Base Interest is payable quarterly at stated annual interest rates ranging from 7.215% (for 1985 and 1986) to 8.43% (for the year 2000). For each year beginning with 1988 through 2000 in which Gross Revenues (as defined in the Note) of the Property exceed $312.5 million, Additional Interest would accrue in an amount equal to the sum of (i) 31.5% of such excess plus (ii) $42.95 million. If Additional Interest is earned by the Company, but cash is unavailable to the Borrower to pay it, then such Additional Interest would be deferred (without interest) until the Equity Conversion Date or such earlier time as cash became available. No Additional Interest has been earned by the Company through December 31, 1994 and, based on present conditions in the Midtown Manhattan rental market, the Company does not currently expect that it will earn Additional Interest. While the Loan is outstanding, the Company may transfer participations in the Loan (but not in the Equity Option), pledge interests in the Loan (subject to the Borrower's reasonable consent if interests representing more than 20% of the Loan are pledged during any 12-month period), and in certain limited circumstances transfer the Loan itself (including the right to exercise the Equity Option) subject to a right of first refusal in favor of the Borrower. The Company has, with the consent of the Borrower, pledged the Note -1- and certain other collateral as security for the repayment of the Floating Rate Notes and the 14% Debentures, together with the Convertible Debentures. So long as the Floating Rate Notes or the 14% Debentures are outstanding, the terms thereof prohibit the Company from encumbering, with certain exceptions, its property or assets or selling or otherwise disposing of its property or assets. RGI has indicated that, in its capacity as managing partner of the Partnership, it intends to refinance the Property if there is an exercise of the Equity Option and to distribute the proceeds of such refinancing to the partners, including the Company. The Partnership Agreement provides that the Company will have the right, subject to certain limitations, to require the Partnership to use its best efforts to refinance the Property and distribute to the Company an amount equal to the Company's percentage interest in the then fair market value of the Property (but in no event more than $4.5 billion or a lesser amount if the Loan has been partially prepaid). However, if such a distribution would exceed the Company's percentage interest of the refinancing proceeds, then the other partners may elect to purchase the Company's interest in the Partnership for an amount equal to what the Company would receive if the Property were sold for its fair market value and the Partnership dissolved. THE MORTGAGE. The Loan is secured by leasehold mortgages in the aggregate amount of approximately $44.8 million which were assigned to the Company, consolidated, spread and recorded as a first mortgage lien against the Property. Through September 6, 1994, the Loan also was secured by an unrecorded mortgage in the amount of approximately $1,255.2 million. On September 6, 1994 the Company recorded this mortgage. The related recording tax was paid by the Borrower. THE CREDIT SUPPORT FACILITIES. In accordance with the provisions of the Loan Agreement, the Borrower is required to maintain for the benefit of the Company credit support facilities ("Credit Support Facilities") to secure payment of (i) the Base Interest and (ii) the unexpended portion of the cost of making certain required capital improvements to the Property. During 1994 the level at which such Credit Support Facilities were required to be maintained was $200 million. On January 1, 1995, the required level of this support decreased from $200 million to approximately $70 million and on April 1, 1995 will decrease to $50 million which is the minimum level that must be maintained through the Equity Conversion Date unless Net Operating Income (as defined) of the Property for any year exceeds $150 million and the Borrower has delivered to the Company an Accountant's Certificate (as defined) stating that no deficits in Net Cash Flow (as defined) of the Property for any subsequent year are forecasted. Subject to certain conditions, the Loan Agreement requires the Borrower, until the Equity Conversion Date, to maintain in effect Credit Support Facilities in the form of letters of credit issued by commercial banks whose letters of credit are rated AA or better by a nationally recognized rating agency (or a lower rating if satisfactory to the Company) and/or pledges of cash or specified investment-grade collateral having a fair market value equal to the required amount of the Credit Support Facilities. If the Borrower fails to provide Credit Support Facilities in the required amounts, or if the Company shall have accelerated the Loan, the Company may draw or apply the full amount of the Credit Support Facilities. -2- THE PROPERTY. Rockefeller Center is among the best-known commercial real estate complexes in the world, offering an architecturally renowned combination of office, retail and public space. Occupying most of the three blocks (approximately 12 acres) between 48th and 51st Streets and Fifth Avenue and Avenue of the Americas in midtown Manhattan, the Property includes 12 buildings, all but one of which were completed between 1932 and 1940, having approximately 6.2 million square feet of rentable office, retail, storage and studio space as measured in accordance with the measurement standards promulgated by the Real Estate Board of New York in 1968. The Borrower owns (except as described under "NBC Tenancy-The Property") the fee interest in the entire Property, excepting the land (which is owned by an unrelated party and leased to the Borrower through the year 2000 at an annual rent of $650,000) underlying a portion of the building at 600 Fifth Avenue. This lease (the "Church Lease") provides for three renewal periods of 21 years each at annual rents of 6%, 7% and 8%, respectively, of the value of the land (exclusive of improvements and unencumbered by the Church Lease) appraised for its highest and best use, determined at the beginning of each such renewal term. The Borrower's leasehold interest under the Church Lease is subordinate to any mortgage placed on the land, the principal amount of which does not exceed $750,000 and the aggregate payment of principal and interest on which does not exceed the fixed rent payable under the Church Lease. The Church Lease, however, contains a non- disturbance provision which provides that any foreclosure of a superior mortgage will not result in termination of the Church Lease so long as the tenant is not in default thereunder. If the opportunity to purchase the land underlying the Church Lease arises, RGI has agreed to allow the Company to participate with the Borrower in such purchase (if such opportunity arises during the term of the Loan) and to allow such opportunity to the Partnership (if such opportunity arises thereafter). Also included in the Property is Radio City Music Hall (the "Music Hall"), which has been leased by the Borrower to Radio City Music Hall Productions, Inc. ("RCMHP") at a nominal rent through December 31, 2000. RCMHP is a wholly-owned subsidiary of RGI. RCMHP is obligated under the lease to pay for the expenses of maintaining the interior of the Music Hall and the property taxes assessed against the portion of the building housing the Music Hall. The Borrower is responsible for the expenses of exterior maintenance. Following the initial term, RCMHP will have rights to renew the Music Hall lease for ten successive 15-year periods at fair market rents established at the beginning of each such period. The following table provides summary information furnished by the Borrower regarding the buildings included in the Property.
At December 31, 1994 ------------------------------------- Rentable area Year Number of ------------- Occupancy Building opened stories (sq.ft.)(1) percentage ------- ------ --------- ---------- ---------- GE..................................... 1933 69 1,875,779 99.4% NBC Studio............................. 1933 10 384,592 100.0 GE West................................ 1933 16 151,687 100.0 1270 Avenue of the Americas (2)........ 1932 32 389,091 75.9 Associated Press....................... 1938 16 400,417 68.7 International.......................... 1935 40 1,034,139 88.0 British Empire......................... 1933 9 102,669 96.7 La Maison Francaise.................... 1933 9 104,794 96.0 One Rockefeller Plaza.................. 1937 35 470,729 93.7 Ten Rockefeller Plaza.................. 1939 17 291,495 52.9 Simon & Schuster 1940 and Addition......................... 1955 21 600,374 89.5 600 Fifth Avenue....................... 1952 29 355,312 95.7 Additional Property (3)................ -- -- 28,421 100.0 --------- ------ Total.............................. 6,189,499 90.2% --------- ------ --------- ------ - -------------- (1) Measured in accordance with the standard for measurement promulgated by the New York Real Estate Board in 1968. Includes office, retail and storage space. (2) Radio City Music Hall is included as part of this building but excluded from the rentable area and occupancy percentage data. (3) Includes the underground concourse and lower plaza and includes the Lindy's and Hurley's restaurant buildings.
-3- Rockefeller Center is one of the world's largest privately-owned business and entertainment complexes. In addition to the buildings described above, the Property contains a wide range of amenities including the Channel Gardens landscaped promenade, the lower plaza used as an ice skating rink during colder weather and otherwise for outdoor dining, a six-story 725-car parking garage and extensive off-street truck delivery areas, an underground retail and pedestrian concourse connecting all buildings and providing access to an on-site subway station, roof gardens and the Music Hall. Retail space within the Property includes approximately 200 shops and 35 restaurants. The murals and statuary which are an integral part of the Property include over one hundred major works by more than thirty artists, including the renowned sculpture "Prometheus". A private street, Rockefeller Plaza, parallels Fifth Avenue and the Avenue of the Americas and bisects the Property. Under the existing zoning regulations, there is allocable to the Property the right to develop up to approximately 2.0 million square feet of floor area in excess of the floor area presently constructed thereon. These excess development rights may be transferred to other properties or, with the approval of the New York City Landmarks Preservation Commission (the "Landmarks Commission"), used to construct additional floor area within the Property. The Borrower has reserved the right to transfer these rights. In 1993, as part of the settlement of a lawsuit, 100,000 square feet of these rights were added to the Mortgage. The Borrower has also reserved the right to transfer all of the Borrower's rights to the air space above the Music Hall, together with easements for support, operations and access. In April 1985, the Landmarks Commission granted landmark status to the exterior of all of the buildings in the Property. The Landmarks Commission has also designated as landmarks portions of the interiors of the GE and International Buildings and the interior of the Music Hall. As a result of these designations, alteration, demolition and reconstruction of the Property will under most circumstances be subject to approval of the Landmarks Commission. APPRAISAL VALUE. During 1994, the Company engaged Douglas Elliman Appraisal and Consulting Division ("Douglas Elliman"), an independent appraisal firm, to appraise the value assigned to the Property. Douglas Elliman, in a report dated January 11, 1995, concluded that, as of December 31, 1994, the value assigned to the various fee and leasehold interests comprising the Property, subject to existing leases, was $1.25 billion, an increase of $100 million from the value assigned in an appraisal conducted by that same firm as of December 31, 1993. During 1994 the Company also engaged The Weitzman Group, Inc. ("The Weitzman Group"), an independent real estate consulting firm, to review the Douglas Elliman report. On February 21, 1995 the Company received a review and concurrence report dated February 15, 1995 prepared by The Weitzman Group stating that, based upon the review described in such report, The Weitzman Group concurred with the Douglas Elliman estimate of the aggregate market value of the Property and that, in the opinion of The Weitzman Group, the aggregate market value estimated by Douglas Elliman does not vary by more that 5 percent from the aggregate market value The Weitzman Group would estimate in a full and complete appraisal of the same interests. Copies of the 1994 appraisal and concurrence report have been filed as exhibits to the Company's Current Report on Form 8-K filed on February 22, 1995 and a copy of the 1993 appraisal was filed as an exhibit to the Company's Current Report on Form 8-K filed on February 22, 1994. Appraisals are only estimates of value and should not be relied upon as measures of realizable value because the current market value of a property is not indicative of the value such property may have at any time in the future. Future value of an appraised property will depend on a variety of factors, including the economic success of the property, the impact of inflation on property values, local competitive conditions, prevailing interest rates and general economic circumstances. The Property will be reappraised annually by an independent appraisal firm and the results will be furnished to the Company's stockholders. CAPITAL IMPROVEMENT PROGRAM. In connection with the making of the Loan, independent consulting firms conducted structural, mechanical, systems and engineering analyses of the Property. Their reports (collectively, the "Engineering Reports") indicated that the Property was in generally good condition and recommended a program of capital improvements over the term of the Loan. The Borrower agreed to make all of the improvements recommended in the Engineering Reports, as well as other major capital improvements to the Property. At the time of the Company's initial public offerings, the Borrower projected for its capital improvement program an aggregate expenditure (after adjusting for inflation) of approximately $260 million for the period from 1985 through the year 2000, which amount substantially exceeds the cost of -4- the capital improvements recommended in the Engineering Reports ($197.6 million). On a cumulative basis since the inception of the Loan and through December 31, 1994, the Borrower has spent $215.7 million in connection with the capital improvements required in the Engineering Reports and an additional $103.0 million for other capital improvements. In 1994, 1993 and 1992, the Borrower spent approximately $14 million, $27 million and $25 million, respectively, under its capital improvement program. Progress continued on elevator replacements and upgrades, roof repairs, and fire safety systems. During 1994, the renovation of the lobby of the Simon & Schuster Building was completed and renovation continued on the emergency power systems. NBC TENANCY. In December 1988, the Borrower and National Broadcasting Company, Inc. ("NBC") signed lease agreements extending NBC's lease at Rockefeller Center. NBC currently leases approximately 1.3 million square feet of space in three interconnected Rockefeller Center buildings (the GE Building, the Studio Building and the GE West Building) and will continue to occupy its space through September 1997 under the terms of its lease existing prior to the extension. NBC's lease has been extended through the year 2022. In addition, NBC has options for three successive ten-year renewal periods after 2022 and has rights to lease certain additional space. The lease agreement calls for NBC to pay rent on a "net" basis, that is, without including amounts normally payable with regard to real estate taxes and certain operating expenses, which NBC would pay directly. The method for computing the Additional Interest payable to the Company under the Loan has been amended so that the Additional Interest would not be reduced by reason of certain rights and privileges granted to NBC in connection with the NBC transaction. Certain provisions of the NBC lease renewal are currently in effect and consequently, a portion of NBC's rent for 1994 was calculated on the "net" basis. The Borrower has advised the Company that it estimates that if NBC had paid all of its rent in 1994 on the "gross" basis, gross revenue of the Property for the purpose of computing Additional Interest would have been increased by approximately $8.3 million. LEASING. The average annual office rent (base rent plus escalations) at the Property at December 31, 1994 was $31.35 per square foot, while 1994 leases for office space in the Property have been signed and have taken effect at average net effective rents of $30.78 per square foot and with lease terms which generally range from 5 to 15 years. These rents are comparable with current midtown Manhattan asking market rents for office buildings. See "Competitive Market". Recent leases for space in the Property typically provide for proportionate pass-throughs of 100% to 110% of increases in certain operating expenses and 100% of increases in real estate taxes and electricity recoveries at the wholesale rate plus a 9% administrative charge. For lease expiration information for the Property, see RESULTS OF OPERATIONS - THE PROPERTY. At December 31, 1994, the occupancy rate for the Property was approximately 90.2%. The following table shows the historical occupancy rates, average annual rent per square foot (base rent plus escalations) and average net effective new and renewal rates for all leases (office, retail and storage) at the Property for the past fourteen years. While the average net effective rental rates for new and renewal space were generally consistent with those prevailing in the midtown Manhattan market during this period, the Property's occupancy rates were higher. -5-
Average net effective rent Occupancy Average annual rent per sq. ft. for Year percentage per sq.ft. for all leases new and renewal leases ---- ---------- ------------------------- -------------------------- 1981 99.5% $16.84 $32.44 1982 99.4 20.28 17.19* 1983 98.6 21.36 37.12 1984 98.3 23.37 41.98 1985 98.0 27.05 43.42 1986 98.3 28.53 40.65 1987 98.2 29.34 42.70 1988 98.4 30.98 42.04 1989 96.2 31.99 45.82 1990 95.7 33.98 43.43 1991 95.9 34.57 41.34 1992 94.0 33.47 33.76 1993 94.6 32.97 35.93 1994 90.2 31.99 31.98 - -------------- *Includes a substantial amount of space leased to NBC and RCA at below market rates on exercise of renewal options.
COMPETITIVE MARKET. The information set forth in this section is based upon data supplied by Cushman & Wakefield, Inc. ("C&W") and publicly available sources. The statements with respect to real estate markets and market trends made in this section and elsewhere in this Report are based upon the conclusions of C&W as experts. C&W is an affiliate of RGI. New York City is the largest office real estate market in the United States. Its central business district has two primary concentrations, midtown and downtown Manhattan. The Property is located in Manhattan's midtown office market. The midtown market comprises approximately 251 million square feet of rentable office space, of which 176 million square feet of existing space is considered prime. The market principally serves corporate headquarters and financial, legal, communications, advertising and other service firms, as well as foreign businesses and governments, for which prestige, central location and amenities are factors justifying the higher rental rates charged for prime office space. The midtown Manhattan office space market has historically been cyclical. Following a low point in 1975, the market rebounded sharply at the end of the decade because of the low level of new construction and improvement in the local and national economies. During the period 1975-1979, vacancies decreased sharply from approximately 15% to approximately 2% and average asking rents doubled to approximately $20.50 per square foot at the start of 1980. By 1985, rents had reached $38 per square foot, and vacancies had risen to over 9%. An unprecedented amount of new construction accounted for approximately 22 million square feet added to the market from 1986 to 1992. The level of new construction activity has since decreased, with 210,616 square feet and 170,000 square feet added in 1993 and 1994, respectively. For prime space, vacancy levels reached 17.2% and average asking rents topped $40 per square foot in 1990; by December 1994, the vacancy rate had decreased to 13.4%, while average asking rents had softened to $33.60 per square foot. The Property competes with a large number of existing prime office properties in the midtown Manhattan market, including other buildings in which RGI has an interest. RGI and its affiliates have ownership interests in and manage (or, in the case of two buildings, manage without having an ownership interest) the four other buildings which are a part of the entire Rockefeller Center complex but are not included in the Property. One of these four buildings, Time & Life Building, is primarily occupied under a long-term lease and in recent years has had little or no vacant space; the McGraw-Hill Building, 1251 Avenue of the Americas and 1211 Avenue of the Americas Buildings had vacancy levels which ranged from 11.9% to .9% at December 31, 1994. Rockefeller Center Management Corporation ("RCMC"), a wholly-owned subsidiary of RGI, performs services for these buildings and C&W performs services for other office buildings. Depending on the nature of their interests in these other properties, RGI and its affiliates might have an incentive to favor them. In addition, RGI owns property adjacent to the 1251 Avenue of the Americas Building, on which it may construct a building (which would be an addition to the Rockefeller Center complex, but which would not be included in the Property) of up to 1.5 million rentable square feet. RGI and the Borrower have agreed, however, that -6- RCMC, and any successor or replacement management company which is an affiliate of the Borrower, will not favor the leasing of other buildings over the Property. The Borrower makes periodic reports to the Company regarding space leased in buildings other than those included in the Property in which RGI and its affiliates have ownership interests. The Property will be subject to competition in the future from continuing new office construction in midtown Manhattan. As of December 31, 1994, 110,000 square feet of additional rentable space was under construction in the midtown market. RGI might in the future (including by use of the development rights and air rights excluded from the Property) build, acquire or expand, and RCMC or C&W might perform leasing and management services for other properties in the midtown market. Within the midtown market, certain high quality office buildings have historically achieved above-average rents and rent rate stability due to various factors including their location, amenities and name recognition. Changes in local, national and international economic conditions will continue to affect the midtown Manhattan office space market, so it is anticipated that there will be fluctuations of both occupancy levels and rental rates. REAL ESTATE TAXES. The targeted and actual assessed valuation of the Property and the real estate taxes payable by the Property are set forth in the following schedule for the fiscal year periods encompassing the years ended December 31, 1991, 1992, 1993 and 1994. Increases in targeted assessed valuation are required to be phased-in over a five-year period commencing with the fiscal year for which it is first increased. Accordingly, the actual assessed valuation for any given fiscal year is the result of layers of phased-in increases. The Borrower has filed appeals for reduction of targeted assessed valuation with the Tax Commission of the City of New York for the fiscal years 1990/91, 1991/92, 1992/93, 1993/94 and 1994/95.
($ in millions) FISCAL YEAR TARGETED ASSESSED ACTUAL ASSESSED REAL ESTATE JULY 1-JUNE 30 VALUATION(1) VALUATION(1) TAXES PAYABLE(1) - -------------- ----------------- --------------- ----------------- 1991/92 $430.8(2) $413.8(2) $44.0(2) 1992/93 $433.5(2) $432.8(2) $46.3(2) 1993/94 $393.9(2) $393.8(2) $42.2(2) 1994/95 $370.3(2) $370.3(2) $39.3(2) - ------------------ (1) Excludes amounts applicable to Radio City Music Hall. Real estate taxes assessed against the Music Hall portions of the Property are not charged to the Property. (2) Excludes amounts applicable to the NBC space, see "NBC Tenancy".
PROPERTY MANAGEMENT. The Borrower has entered into a Management and Rental Agreement, dated as of September 1, 1985 (the "Property Management Agreement"), engaging RCMC to manage the Property and appointing RCMC as the Borrower's exclusive rental agent for the Property. RCMC was organized by RGI in 1973 to manage Rockefeller Center and has 1,055 employees. RCMC's duties include, among other things, the management of the Property and the supervision of its maintenance, repair, alteration and operation and the preparation of operating and capital improvement budgets. As exclusive rental agent, RCMC is required to use reasonable efforts to keep the Property at all times fully rented. RCMC has agreed not to favor the leasing of other buildings managed by RCMC over the Property. The Property Management Agreement will expire on the Equity Conversion Date, unless terminated prior to such date, and thereafter may be renewed by agreement of the Borrower and RCMC for successive three-year periods. During the 15-year term of the Property Management Agreement, RCMC will be reimbursed for Property operating costs and will be paid a fee at the initial rate of approximately $1.8 million (or $.30 per square foot of rentable area) escalating as of each December 1st thereafter (commencing December 1, 1986) with the Consumer Price Index. RCMC's fee for the period December 1, 1994 through November 30, 1995 will be approximately $2.7 million. RCMC also receives leasing commissions for rental services payable at rates and in accordance with terms set forth in the Property Management Agreement. For the year ended December 31, 1994, RCMC earned such leasing commissions in the approximate amount of $22.4 million. -7- REPURCHASE OF CONVERTIBLE DEBENTURES. Between 1987 and 1992, the Company repurchased and retired a portion of its Convertible Debentures and financed these repurchases with unsecured short term nonconvertible borrowings subsequently replaced with Floating Rate Notes and 14% Debentures in December 1994. The Company under the terms of the 14% Debentures and Floating Rate Notes is not permitted to repurchase any of its Convertible Debentures. At December 31, 1994, Current Coupon and Zero Coupon Convertible Debentures with face values of $121,830,000 and $366,065,000, respectively, had been cumulatively repurchased at an aggregate cost of $217,295,000. At December 31, 1994, the Company had $150,000,000 of Floating Rate Notes and $75,000,000 of 14% Debentures outstanding. The Company has in place interest rate swap agreements that establish fixed rates of interest payable on a portion of the Floating Rate Notes. INCOME TAX MATTERS. The Company qualifies and has elected to be treated as a REIT under the Code, commencing with its taxable year ending December 31, 1985. The election to be a REIT continues unless terminated or revoked. In brief, if the Code requirements for qualification as a REIT continue to be met, the Company (which would otherwise be subject to taxation as a corporation) is, with limited exceptions, not taxed at the corporate level on taxable income that is currently distributed to its stockholders. In any taxable year for which the Company would not qualify as a REIT, the Company would be subject to Federal income tax as an ordinary corporation without any deduction for distributions to stockholders, and generally would not be eligible again to elect REIT status for four years following the year in which such qualification is lost. To the extent that the Company would as a consequence be subject to significant tax liability for any such year, the amount of cash available for satisfaction of its liabilities and distributions to its stockholders would be reduced or eliminated, and the Company could be required to borrow to pay such liabilities and make such distributions. The Company must meet and maintain certain requirements in order to qualify as a REIT. These requirements relate principally to the Company's organizational structure, the nature of its assets, the sources of its income, and the distribution of its income to its stockholders. The statutory provisions relating to REIT qualification are highly technical and complex. While management of the Company believes that the Company will continue to remain qualified as a REIT, no assurance of continuing qualification can be given. POLICIES. BUSINESS ACTIVITY. The Company's Certificate of Incorporation precludes it from engaging in any business other than as lender under the Loan Agreement and holding the Equity Option and activities related thereto. The provision to this effect in the Certificate of Incorporation may be amended only by the holders of at least 80% of the Common Stock entitled to vote thereon. DISTRIBUTIONS FROM OPERATIONS. The Company intends to make four distributions annually to its stockholders during the months of April, July, October and December. To the extent that such distributions exceed annual net income as computed for tax purposes, the excess will be treated as a return of capital. The Company also has made and intends to continue to make sufficient distributions to meet the requirements for being treated as a REIT for federal income tax purposes. Since the applicable distribution requirements are calculated after inclusion of certain non-cash income and deduction of certain non-cash charges, including amortization of original issue discount in connection with the Convertible Debentures, Floating Rate Notes and 14% Debentures, distributions by the Company may exceed such distribution requirements. INVESTMENTS. The Company may make investments which will not result in the Company's being disqualified as a REIT. The Company invests in short- term (maturing in less than six months) instruments with only the highest credit ratings. DILUTION. Other than issuances of shares of Common Stock on conversion of Convertible Debentures or exercise of Warrants, the Company does not intend to issue any additional capital stock or other -8- than Warrants issuable in exchange for SARs, any rights, warrants or options to purchase any additional Common Stock. BORROWINGS. The Company may borrow, on an unsecured basis or on a secured basis, to participate in the development of certain improvements at the Property, refinance debt, make any distributions to stockholders (including distributions to stockholders in order to maintain its qualification as a REIT), obtain working capital, and pay any taxes which might become due if the Company failed to qualify as a REIT. The terms of the Floating Rate Notes and the 14% Debentures restrict the Company's ability to incur additional indebtedness. OTHER ACTIVITIES AND INVESTMENTS. It is the policy of the Company not to (i) invest in the securities of other issuers for the purpose of exercising control, (ii) underwrite securities of other issuers, or (iii) offer securities in exchange for property. INVESTMENT BY MITSUBISHI ESTATE COMPANY, LIMITED IN RGI. In 1990, Mitsubishi Estate Company, Limited acquired a controlling interest in the outstanding stock of RGI. RGI, through affiliate partnerships, is the equity owner of the Property. RCPI has no interest in RGI and this change in the ownership of RGI has no effect on RCPI's rights under its mortgage on the Property. ITEM 2. PROPERTIES. None. The principal assets of the Company are the mortgage loan receivable secured by the Property and the Equity Option described in Item 1. BUSINESS above. ITEM 3. LEGAL PROCEEDINGS. On January 23, 1995, Bear, Stearns & Co., Inc., and Donaldson, Lufkin & Jenrette Securities Corporation commenced an action against the Company in the Supreme Court of New York, County of New York. The plaintiffs allege that the Company breached a contract relating to the plaintiffs' provision of investment banking services to the Company. The plaintiffs seek $5,062,500 in damages, plus costs, attorneys' fees and interest. The case is in the initial pleading stage. The Company is vigorously contesting the plaintiffs' allegations and on February 15, 1995 counsel to the Company filed a notice of a motion for an order dismissing the complaint for failure to state a cause of action and granting such other and further relief as the Court deems just and proper. The Company does not expect the outcome of this litigation to have a material effect on the financial condition of the Company. Other than the action described above, the Company is not a party to any material legal proceeding or environmental litigation. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS. None. -9- PART II ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS. The principal market for the Company's Common Stock is the New York Stock Exchange. For quarterly price information with respect to the Company's Common Stock for the two years ended December 31, 1994, see "Quarterly Stock Information" at page F-35 herein, which information is incorporated herein by reference. As of March 8, 1995, there were 11,448 stockholders of record. For information on the frequency and amount of dividends paid with respect to the Company's Common Stock during the two years ended December 31, 1994, see Note 7 "Income Taxes and Distributions" at page F-17 herein, which information is incorporated herein by reference. ITEM 6. SELECTED FINANCIAL DATA. Selected financial information of the Company for the five years ended December 31, 1994 is set forth at page F-21 herein and is incorporated herein by reference. ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS. The information set forth under the caption "Management's Discussion and Analysis of Financial Condition and Results of Operations" on pages F-22 through F-34 herein is incorporated herein by reference. ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA. The financial statements and supplementary data of the Company and the report of independent auditors thereon are set forth at pages F-2 through F-20 herein and are incorporated herein by reference. ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE. None. -10- PART III ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT. The information required by this item is hereby incorporated by reference from the Company's definitive Proxy Statement for the 1995 Annual Meeting of Stockholders (to be filed). ITEM 11. EXECUTIVE COMPENSATION. The information required by this item is hereby incorporated by reference from the Company's definitive Proxy Statement for the 1995 Annual Meeting of Stockholders (to be filed). ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT. The information required by this item is hereby incorporated by reference from the Company's definitive Proxy Statement for the 1995 Annual Meeting of Stockholders (to be filed). ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS. The information required by this item is hereby incorporated by reference from the Company's definitive Proxy Statement for the 1995 Annual Meeting of Stockholders (to be filed). -11- PART IV ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K. (A) DOCUMENTS FILED AS PART OF THE REPORT. 1. Financial Statements and Report of Independent Auditors. A. Registrant-See Item 8. B. Rockefeller Center Properties and RCP Associates. (1) Report of Independent Auditors. (2) Combined Balance Sheets at December 31, 1994 and 1993. (3) Combined Statements of Operations and Partners' Capital Deficiency for the years ended December 31, 1994, 1993 and 1992. (4) Combined Statements of Cash Flows for the years ended December 31, 1994, 1993 and 1992. (5) Notes to Combined Financial Statements. 2. Financial Statement Schedule. A. No schedules have been included since the required information is not present or is not present in amounts sufficient to require submission of the schedules, or because the information required is included in the financial statements and notes thereto. 3. Exhibits. Documents Incorporated by Reference: (3.1) Restated Certificate of Incorporation of the registrant, as amended June 15, 1988, is incorporated by reference to Exhibit 3.4 to the registrant's Annual Report on Form 10-K for the year ended December 31, 1988. (4.1) Debenture Purchase Agreement dated as of December 18, 1994 between Rockefeller Center Properties, Inc. (the "Company") and Whitehall Real Estate Limited Partnership V ("Whitehall") is incorporated by reference to Exhibit 4.9 to the registrant's Current Report on Form 8-K dated December 30, 1994. (4.2) Warrant Agreement dated as of December 18, 1994 between the Company and Chemical Bank, agent, relating to the issuance and sale to Whitehall of warrants to purchase shares of the Company's common stock is incorporated by reference to Exhibit 4.6 to the registrant's Current Report on Form 8-K dated December 22, 1994. (4.3) Stock Appreciation Rights Agreement dated as of December 18, 1994 between the Company and Chemical Bank, agent, relating to the issuance and sale to Whitehall of stock appreciation rights exchangeable for warrants of the Company and exercisable for the Company's 14% Debentures due 2007 is incorporated by reference to Exhibit 4.7 to the registrants' Current Report on Form 8-K dated December 22, 1994. (4.4) Letter Agreement dated December 18, 1994 among the Company, Whitehall and Goldman, Sachs & Co. relating to board representation and other matters is incorporated by reference to Exhibit 4.8 to the registrant's Current Report on Form 8-K dated December 22, 1994. -12- (4.5) Collateral Trust Agreement dated as of December 29, 1994 among the Company, Bankers Trust Company and Gary R. Vaughan, Trustees, is incorporated by reference to Exhibit 4.10 to the registrant's Current Report on Form 8-K dated December 30, 1994. (4.6) Registration Rights Agreement dated as of December 29, 1994 among the Company, Goldman Sachs Mortgage Company ("GSMC") and Whitehall is incorporated by reference to Exhibit 4.11 to the registrant's Current Report on Form 8-K dated December 30, 1994. (4.7) Letter amendment dated as of December 29, 1994 between the Company and Chemical Bank, warrant agent, amending the Warrant Agreement dated as of December 18, 1994 between the Company and Chemical Bank, warrant agent, is incorporated by reference to Exhibit 4.12 to the registrant's Current Report on Form 8-K dated December 30, 1994. (4.8) Letter amendment dated as of December 29, 1994 between the Company and Chemical Bank, SAR agent, amending the SAR Agreement dated as of December 18, 1994 between the Company and Chemical Bank, SAR agent, is incorporated by reference to Exhibit 4.13 to the registrant's Current Report on Form 8-K dated December 30, 1994. (4.9) Indenture dated as of September 15, 1985 between the registrant and Manufacturers Hanover Trust Company, as Trustee (the "Trustee"), including the forms of Current Coupon Convertible Debenture, Zero Coupon Convertible Debenture and Floating Rate Note, is incorporated by reference to Exhibit 4 to the registrant's Quarterly Report on Form 10-Q for the period ended September 30, 1985. (4.10) First Supplemental Indenture dated as of December 15, 1985 between the registrant and the Trustee, is incorporated by reference to the registrant's Annual Report on Form 10-K for the year ended December 31, 1985. (4.11) Form of definitive share certificate for Common Stock, is incorporated by reference to Exhibit 4.3 to the registrant's Annual Report on Form 10-K for the year ended December 31, 1985. (4.12) Instrument of Resignation, Appointment and Acceptance dated as of December 1, 1993 among the Registrant, Chemical Bank, successor by merger to Manufacturers Hanover Trust Company, and United States Trust Company of New York is incorporated by reference to Exhibit 4.21 to the registrant's Annual Report on Form 10-K for the year ended December 31, 1993. (10.1) Loan Agreement dated as of December 18, 1994 among the Company, the lenders parties thereto and GSMC, as agent, is incorporated by reference to Exhibit 10.35 to the registrant's Current Report on Form 8-K dated December 30, 1994. (10.2) Loan Agreement dated as of September 19, 1985 among the registrant, RCP Associates ("Associates") and Rockefeller Center Properties ("RCP"), is incorporated by reference to Exhibit 19.1 to the registrant's Quarterly Report on Form 10-Q for the period ended September 30, 1985. (10.3) Consolidated Mortgage Note of Associates and RCP dated September 19, 1985, is incorporated by reference to Exhibit 19.4 to the registrant's Quarterly Report on Form 10-Q for the period ended September 30, 1985. (10.4) Mortgage Note of Associates and RCP dated September 19, 1985, is incorporated by reference to Exhibit 19.5 to the registrant's Quarterly Report on Form 10-Q for the period ended September 30, 1985. -13- (10.5) Letter Agreement dated September 12, 1985 among Rockefeller Group, Inc. ("RGI"), Radio City Music Hall Productions, Inc. ("RCMHP"), the registrant, Goldman, Sachs & Co. and Shearson Lehman Brothers Inc., as representatives of the several Underwriters with respect to the registrant's Common Stock, and Goldman Sachs International Corp. and certain other Representatives, as representatives of the several Underwriters with respect to the registrant's Convertible Debentures, is incorporated by reference to Exhibit 19.8 to the registrant's Quarterly Report on Form 10-Q for the period ended September 30, 1985. (10.6) Management and Rental Agreement dated as of September 1, 1985 among RCP, Associates and Rockefeller Center Management Corporation, is incorporated by reference to Exhibit 19.9 to the registrant's Quarterly Report on Form 10-Q for the period ended September 30, 1985. (10.7) Administrative Services Agreement dated September 11, 1985 between the registrant and Cushman & Wakefield Realty Advisors, Inc., is incorporated by reference to Exhibit 19.10 to the registrant's Quarterly Report on Form 10-Q for the period ended September 30, 1985. (10.8) Form of Amended and Restated Partnership Agreement of RCP among RGI, RCMHP and the registrant, is incorporated by reference to Exhibit 19.11 to the registrant's Quarterly Report on Form 10-Q for the period ended September 30, 1985. (10.9) Form of Amended and Restated Agreement of Limited Partnership of Associates among RGI, RCMHP and the registrant, is incorporated by reference to Exhibit 19.12 to the registrant's Quarterly Report on Form 10-Q for the period ended September 30, 1985. (10.10) Dividend Reinvestment Plan of the registrant, is incorporated by reference to Exhibit 10.14 to the registrant's Annual Report on Form 10-K for the year ended December 31, 1985. (10.11) Amended and Restated Consolidated Mortgage and Security Agreement, dated as of December 1, 1988 among Associates, RCP and the registrant, is incorporated by reference to Exhibit 10.15 to the registrant's Annual Report on Form 10-K for the year ended December 31, 1988. (10.12) Amended and Restated Mortgage and Security Agreement, dated as of December 1, 1988 among Associates, RCP and the registrant, is incorporated by reference to Exhibit 10.16 to the registrant's Annual Report on Form 10-K for the year ended December 31, 1988. (10.13) Amended and Restated Assignment of Rents, dated as of December 1, 1988 among Associates, RCP and the registrant, is incorporated by reference to Exhibit 10.17 to the registrant's Annual Report on Form 10-K for the year ended December 31, 1988. (10.14) Amended and Restated Purchase Option, dated as of December 1, 1988 among Associates, RCP and the registrant, is incorporated by reference to Exhibit 10.18 to the registrant's Annual Report on Form 10-K for the year ended December 31, 1988. (10.15) Consent and Agreement, dated as of December 1, 1988 among Associates, RCP and the registrant, is incorporated by reference to Exhibit 10.19 to the registrant's Annual Report on Form 10-K for the year ended December 31, 1988. (10.16) Second Amendment dated April 6, 1993 to the Loan Agreement is incorporated by reference to Exhibit 10.22 to the registrant's Current Report on Form 8-K dated April 23, 1993. (10.17) Third Amendment dated April 6, 1993 to the Loan Agreement is incorporated by reference to Exhibit 10.23 to the registrant's Current Report on Form 8-K dated April 23, 1993. -14- (10.18) Amendment to Amended and Restated Consolidated Mortgage dated as of April 6, 1993 by the Borrowers to the Company is incorporated by reference to Exhibit 10.24 to the registrant's Current Report on Form 8-K dated April 23, 1993. (10.19) Amendment to Amended and Restated Mortgage dated as of April 6, 1993 by the Borrowers to the Company is incorporated by reference to Exhibit 10.25 to the registrant's Current Report on Form 8-K dated April 23, 1993. (10.20) Amendment to Amended and Restated Purchase Option dated as of April 6, 1993 by the Borrowers to the Company is incorporated by reference to Exhibit 10.26 to the registrant's Current Report on Form 8-K dated April 23, 1993. (10.21) Amendment to Amended and Restated Assignment of Rents dated as of April 6, 1993 by the Borrowers to the Company is incorporated by reference to Exhibit 10.27 to the registrant's Current Report on Form 8-K dated April 23, 1993. (10.22) Letter of Credit dated April 8, 1993 from The Mitsubishi Bank, Limited to the Company is incorporated by reference to Exhibit 10.28 to the registrant's Current Report on Form 8-K dated April 23, 1993. (10.23) Letter of Credit dated April 8, 1993 from The Mitsubishi Trust and Banking Corporation, New York Branch, to the Company, as beneficiary is incorporated by reference to Exhibit 10.29 to the registrant's Current Report on Form 8-K dated April 23, 1993. (10.24) Letter Agreement dated February 17, 1994 between the Company and RGI concerning temporary relinquishment by RGI of its right to nominate 40% of the Company's Board of Directors is incorporated by reference to Exhibit 10.33 to the registrant's Current Report on Form 8-K dated February 22, 1994. (10.25) Fourth Amendment dated February 22, 1994 to the Loan Agreement is incorporated by reference to Exhibit 10.33 to the registrant's Annual Report on Form 10-K for the year ended December 31, 1993. (99.1) Appraisal of Real Property as of December 31, 1994 prepared by Douglas Elliman Appraisal and Consutling Division dated January 11, 1995 is incorporated by reference to Exhibit 99.1 to the registrant's Current Report on Form 8-K dated February 22, 1995. (99.2) Review and Concurrence Report prepared by the Weitzman Group, Inc. dated February 15, 1995 is incorporated by reference to Exhibit 99.2 to the registrant's Current Report on Form 8-K dated February 22, 1995. Exhibits submitted herewith: (3.2) By-laws of the registrant, as amended through February 22, 1995. (B) REPORTS ON FORM 8-K. A report on Form 8-K was filed on November 18, 1994 reporting events under Item 5 of Form 8-K. A report on Form 8-K was filed on December 22, 1994 reporting events under Item 5 of Form 8-K. -15- A report on Form 8-K was filed on December 30, 1994 reporting events under Item 5 of Form 8-K. A report on Form 8-K was filed on February 22, 1995 reporting events under Item 5 of Form 8-K. -16- SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. ROCKEFELLER CENTER PROPERTIES, INC. /s/RICHARD M. SCARLATA ---------------------- Richard M. Scarlata President and Chief Executive Officer (Principal Financial Officer and Principal Accounting Officer) Date: March 16, 1995 Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated. /S/RICHARD M. SCARLATA ---------------------- Richard M. Scarlata President and Chief Executive Officer (Principal Executive Officer) /s/PETER D. LINNEMAN -------------------- Peter D. Linneman Director and Chairman of the Board /s/BENJAMIN D. HOLLOWAY ---------------------- Benjamin D. Holloway Director /s/WILLIAM F. MURDOCH, JR. -------------------------- William F. Murdoch, Jr. Director /s/DANIEL M. NEIDICH -------------------- Daniel M. Neidich Director /s/PETER G. PETERSON -------------------- Peter G. Peterson Director Date: March 16, 1995 -17- INDEX TO FINANCIAL STATEMENTS Page ---- ROCKEFELLER CENTER PROPERTIES, INC. ("THE COMPANY") Financial Statements F-2 Report of Independent Auditors F-2 Balance Sheets F-3 Statements of Income F-4 Statements of Changes in Stockholders' Equity F-5 Statements of Cash Flows F-6 Notes to Financial Statements F-7 Report of Management F-20 Selected Financial Information F-21 Management's Discussion and Analysis F-22 Liquidity and Capital Resources - The Company F-22 Results of Operations - The Company F-26 Financial Condition and Outlook - The Property F-28 Results of Operations - The Property F-30 Cash Flow - The Property F-32 Appraised Value - The Property F-34 Quarterly Stock Information F-35 ROCKEFELLER CENTER PROPERTIES AND RCP ASSOCIATES ("THE BORROWER") Financial Statements F-36 Report of Independent Auditors F-36 Combined Balance Sheets F-37 Combined Statements of Operations and Partners' Capital Deficiency F-38 Combined Statements of Cash Flows F-39 Notes to Combined Financial Statements F-40 F-1 REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS Board of Directors and Stockholders Rockefeller Center Properties, Inc. We have audited the accompanying balance sheets of Rockefeller Center Properties, Inc. as of December 31, 1994 and 1993, and the related statements of income, changes in stockholders' equity and cash flows for each of the three years in the period ended December 31, 1994. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. As more fully described in Note 1 to the Company's financial statements, the financial statements of the borrowers under the mortgage note ("Borrower"), the Company's principal asset, as of December 31, 1994 and for the year then ended, indicate the Borrower has experienced and expects to continue to experience significant cash shortfalls which make it unlikely that the Borrower will be able to fulfill all financial commitments to the Company for the foreseeable future from its own resources. Such financial statements of the Borrower also indicate that the Borrower does not have commitments from its partners to continue to fund these cash shortfalls. In the event that the Borrower were to default on its obligations and the Company were to take possession of the property underlying the mortgage note (the Property), the Company would become responsible for the Property's operations. In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Rockefeller Center Properties, Inc. at December 31, 1994 and 1993, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 1994, in conformity with generally accepted accounting principles. /s/ ERNST & YOUNG LLP New York, New York February 3, 1995 F-2 BALANCE SHEETS (Dollars in thousands)
DECEMBER 31, 1994 1993 ---------- ---------- ASSETS Loan receivable, net of unamortized discount of $36,101 and $40,636 (Notes 2 and 3) $1,263,899 $1,259,364 Portfolio securities (Notes 2 and 4) 14,300 Interest receivable (Notes 2 and 3) 36,321 38,063 Deferred debt issuance costs, net (Note 2) 16,709 4,936 Cash and cash equivalents 2,897 252 Other assets 169 594 ---------- ---------- $1,319,995 $1,317,509 ---------- ---------- ---------- ---------- LIABILITIES AND STOCKHOLDERS' EQUITY Liabilities: Current coupon convertible debentures due 2000 (Notes 2 and 5) $213,170 $213,170 Zero coupon convertible debentures due 2000, net of unamortized discount of $259,322 and $289,642 (Notes 2 and 5) 326,863 296,543 Floating rate notes due 2000 (Notes 2 and 5) 150,000 14% Debentures due 2007, net of unamortized discount of $4,639 (Notes 2 and 5) 70,361 Accrued interest payable (Notes 2 and 5) 37,338 33,662 Stock appreciation rights (Note 5) 2,611 Commercial paper outstanding, net of unamortized discount of $427 (Notes 2 and 5) 247,223 Accounts payable and accrued expenses 2,185 1,746 ---------- ---------- 802,528 792,344 ---------- ---------- Contingencies (Note 9) Stockholders' equity: Common stock, $.01 par value: 150,000,000 shares authorized; 38,260,704 shares issued and outstanding (Notes 1 and 7) 383 383 Additional paid-in capital (Note 5) 707,545 705,517 Distributions to stockholders in excess of net income (Note 7) (190,461) (180,735) ---------- ---------- Total stockholders' equity 517,467 525,165 ---------- ---------- $1,319,995 $1,317,509 ---------- ---------- ---------- ----------
See notes to financial statements. F-3 STATEMENTS OF INCOME (Dollars in thousands, except per share data)
YEARS ENDED DECEMBER 31, 1994 1993 1992 -------- -------- -------- Revenues Loan interest income (Notes 2 and 3) $108,732 $108,363 $107,873 Portfolio income (Notes 2, 4 and 5) 553 5,177 14,415 Short term investment income 20 126 -------- -------- -------- 109,285 113,560 122,414 -------- -------- -------- -------- -------- -------- Expenses Interest expense: Current coupon convertible debentures (Notes 2 and 5) 22,478 22,020 21,793 Zero coupon convertible debentures (Notes 2 and 5) 30,320 27,507 24,956 14% Debentures (Notes 2 and 5) 87 Floating rate notes (Notes 2 and 5) 166 Commercial paper, bank loan and other (Notes 2 and 5) 24,450 28,816 34,050 -------- -------- -------- 77,501 78,343 80,799 General and administrative (Note 8) 4,170 3,728 4,299 Cost of evaluating alternative financings (Note 8) 1,942 Amortization of deferred debt issuance costs (Note 2) 705 705 705 -------- -------- -------- 84,318 82,776 85,803 -------- -------- -------- Income before non-recurring income and extraordinary (loss) gain on debt extinguishment 24,967 30,784 36,611 Non-recurring income (gain on sales of portfolio securities) (Note 4) 31 8,593 -------- -------- -------- Income before extraordinary (loss) gain on debt extinguishment 24,998 39,377 36,611 Extraordinary (loss) gain on debt extinguishment (Note 5) (9,855) (3,451) 2,537 -------- -------- -------- Net income (Note 7) $15,143 $35,926 $39,148 -------- -------- -------- -------- -------- -------- Income per share (Note 2): Income before extraordinary (loss) gain on debt extinguishment $0.66 $1.05 $0.97 Extraordinary (loss) gain on debt extinguishment (0.26) (0.09) 0.07 -------- -------- -------- Net income per share $0.40 $0.96 $1.04 -------- -------- -------- -------- -------- --------
See notes to financial statements. F-4 STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY (Dollars in thousands, except per share data) YEARS ENDED DECEMBER 31, 1994, 1993 and 1992
Distributions Additional to stockholders Total Common Stock paid-in in excess of stockholders' Shares Amount capital net income equity ---------- ------ ---------- -------------- ------------- Balance at December 31, 1991 37,510,000 $375 $700,439 ($154,720) $546,094 Net income 39,148 39,148 Distributions to stockholders ($1.69 per share) (63,392) (63,392) ----------------------------------------------------------------------------------------- Balance at December 31, 1992 37,510,000 375 700,439 (178,964) 521,850 Issuance of Common Stock 750,704 8 5,078 5,086 Net Income 35,926 35,926 Distributions to stockholders ($1.00 per share) (37,697) (37,697) ----------------------------------------------------------------------------------------- Balance at December 31, 1993 38,260,704 383 705,517 (180,735) 525,165 Issuance of warrants 2,028 2,028 Net income 15,143 15,143 Distributions to stockholders ($0.65 per share) (24,869) (24,869) ----------------------------------------------------------------------------------------- Balance at December 31, 1994 38,260,704 $383 $707,545 ($190,461) $517,467 ----------------------------------------------------------------------------------------- -----------------------------------------------------------------------------------------
See notes to financial statements. F-5 STATEMENTS OF CASH FLOWS (Dollars in thousands)
YEARS ENDED DECEMBER 31, 1994 1993 1992 -------- -------- -------- Cash flows from operating activities: Loan interest received $105,495 $103,545 $101,660 Portfolio and other interest received 998 6,553 13,924 Interest paid on commercial paper, bank loan and other (27,020) (31,016) (31,633) Interest paid on current coupon convertible debentures (17,053) (17,053) (17,209) Payments for accounts payable, accrued expenses and other assets (5,222) (3,798) (4,007) -------- -------- -------- Net cash provided by operating activities 57,198 58,231 62,735 -------- -------- -------- Cash flows from investing activities: Sales of portfolio securities 8,031 102,518 Portfolio maturities and redemptions 6,300 24,150 23,560 -------- -------- -------- Net cash provided by investing activities 14,331 126,668 23,560 -------- -------- -------- Cash flows from financing activities: Maturities of commercial paper, net (246,682) (128,717) (12,545) (Repayment of) proceeds from bank loans payable, net (20,000) 20,000 Dividends paid (24,869) (37,697) (63,392) Proceeds from issuance of floating rate notes, 14% debentures, warrants and SARs net of issuance costs 212,522 Proceeds from issuance of common stock 5,086 Payments to terminate (1994) and reduce duration (1993) of interest rate swaps (9,855) (3,451) Repurchase of convertible debentures (30,410) -------- -------- -------- Net cash used in financing activities (68,884) (184,779) (86,347) -------- -------- -------- Net increase (decrease) in cash 2,645 120 (52) Cash and cash equivalents at the beginning of the year 252 132 184 -------- -------- -------- Cash and cash equivalents at the end of the year $2,897 $252 $132 -------- -------- -------- -------- -------- -------- RECONCILIATION OF NET INCOME TO NET CASH PROVIDED BY OPERATING ACTIVITIES: Net Income $15,143 $35,926 $39,148 Adjustments to reconcile net income to net cash provided by operating activities: Gain on sales of portfolio securities (31) (8,593) Loss (gain) on debt extinguishment 9,855 3,451 (2,537) Amortization of discount: Zero coupon convertible debentures 30,320 27,507 24,956 Loan receivable (4,535) (4,178) (3,840) Portfolio securities (383) (1,368) Decrease in deferred debt issuance costs and other assets, net 1,130 415 593 Decrease (increase) in interest receivable 1,742 891 (1,582) Increase in accrued interest payable and amortized unpaid discount on commercial paper 3,135 3,517 6,678 Increase (decrease) in accounts payable and accrued expenses 439 (322) 687 -------- -------- -------- Net cash provided by operating activities $57,198 $58,231 $62,735 -------- -------- -------- -------- -------- --------
See notes to financial statements. F-6 NOTES TO FINANCIAL STATEMENTS 1. ORGANIZATION AND PURPOSE Rockefeller Center Properties, Inc. (the "Company") was incorporated in Delaware on July 17, 1985. The Company qualifies and has elected to be treated, for Federal income tax purposes, as a real estate investment trust (a "REIT") under the Internal Revenue Code of 1986, as amended (the "Code"). The Company was formed to permit public investment in a portion of Rockefeller Center. From the proceeds of its offering of Common Stock and the offerings of its Current Coupon Convertible Debentures due 2000 and Zero Coupon Convertible Debentures due 2000 (collectively, the "Convertible Debentures"), the Company made a convertible, participating mortgage loan (the "Loan") to two partnerships, Rockefeller Center Properties and RCP Associates (collectively, the "Borrower"). The Borrower owns the real property interests comprising most of the land and buildings known as Rockefeller Center (the "Property"). The Loan, in the face amount of $1.3 billion, matures on December 31, 2007 and provides for payments of both base interest ("Base Interest") at stated rates (See Note 3) and additional interest ("Additional Interest") based on Gross Revenues (as defined) of the Property through December 31, 2000, and floating interest rates thereafter. The Loan is convertible at the Company's option on December 31, 2000 (the "Equity Conversion Date") or, if an event of default under the Loan Agreement has occurred and is continuing, any earlier date specified by the Company, into a 71.5% (subject to reduction in the event of certain prepayments) general partnership interest in the partnership which will own the Property (the "Partnership") on that date. In December 1994 the Company issued Floating Rate Notes ("Floating Rate Notes") due December 31, 2000 and 14% Debentures ("14% Debentures") due December 31, 2007 and Warrants ("Warrants") and Stock Appreciation Rights ("SARs") expiring December 31, 2007, the proceeds from which were used to retire all of its commercial paper borrowings and certain of its interest rate swap agreements. As of June 3, 1993, the Company became a self-administered REIT managing its own day-to-day operations and affairs (Note 8). STATUS OF THE BORROWER Note 4 of the Notes to the audited combined Balance Sheets of the partnerships comprising the Borrower as of December 31, 1994 and 1993 and the related Combined Statements of Operations and Partners' Capital Deficiency and Cash Flows for each of the three years in the period ended December 31, 1994 which are reproduced at pages F-36 through F-47 of the Company's Annual Report on Form 10-K for the year ended December 31, 1994 states that "the Partnerships [comprising the Borrower] have experienced significant cash shortfalls and, based upon management's projections, will continue to experience significant cash shortfalls through the Equity Conversion Date. These cash shortfalls have occurred primarily as a result of changes in the real estate market from levels anticipated when the Loan was initiated. These factors include lower rental rates, greater rent abatements granted to tenants upon initiation or renewal of lease commitments, and higher other expenditures associated with obtaining new and renewal tenants. These cash flow conditions have made it unlikely that the Partnerships will be able to fulfill all financial commitments to RCPI [the Company] for the foreseeable future from their own resources. The Partnerships do not have a commitment from the Partners [of the Partnerships comprising the Borrower] to fund these cash shortfalls. These conditions raise substantial doubt about the Partnerships' ability to continue as going concerns. The combined financial statements of the Partnerships do not contain any adjustments to reflect the possible future effects from the outcome of this uncertainty." Management of the Company believes that as of December 31, 1994 the fair value of the collateral supporting F-7 the Loan, (the sum of (a) the value of the Property as appraised as of December 31, 1994 and (b) the value of the additional collateral required to be maintained by the Borrower as of that date and thereafter) approximates the value at which the Loan is carried on the Company's Balance Sheet. If the parents and affiliates of the Borrower continue to support the Borrower through the funding of cash shortfalls as they have through December 31, 1994, although not legally obligated to do so, the Borrower will be able to satisfy its obligations under the Loan Agreement. If the Borrower were to default on its obligations under the Loan Agreement, there could be a significant change in the nature of the Company's operations. If the Company were to foreclose on the Property and related collateral and acquire title to the Property, it would be required to operate the Property and to fund cash shortfalls of the Property. If the Company were to acquire title to the Property, management of the Company believes, that the value of the Property (appraised at approximately $1.25 billion at December 31, 1994) would be significantly in excess of the Company's obligations (approximately $760 million at December 31, 1994), and that therefore the Company should be able to obtain sufficient financing to fund cash shortfalls of the Property as well as to satisfy the Company's existing obligations until such time (1996) as the Company, on the basis of the projections contained in the December 31, 1994 appraisal, anticipates that the Property will become cash flow positive. Such financing would be subject to the consent of the holders of the Floating Rate Notes and 14% Debentures. However, because of the Company's inability to estimate when, if ever, a potential foreclosure would occur (if the Borrower were to default on its obligations) and what prevailing conditions in the New York real estate market and financial markets might be at such time, no assurance can be given that the Company would have access to sufficient financial resources to fund cash shortfalls of the Property and to meet its other obligations. The Borrower has informed the Company that as of December 31, 1994 it has complied with all of its covenants under the Loan Agreement. 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES FAIR VALUES OF FINANCIAL INSTRUMENTS (NOTES 3, 4 AND 5): FASB Statement No. 107, "Disclosures about Fair Value of Financial Instruments", requires disclosure of fair value information about financial instruments, whether or not recognized in the balance sheet, for which it is practicable to estimate that value. In cases where quoted market prices are not available, fair values are based on estimates using present value and other techniques. Such techniques are significantly affected by the assumptions used, including the discount rate and estimates of future cash flows. Derived fair value estimates cannot be substantiated by comparison to independent markets and may not reflect the values that could be realized in any immediate settlement of the instrument or otherwise. Statement 107 excludes certain financial instruments and all non-financial instruments from its disclosure requirements. Accordingly, the aggregate fair value amounts may not necessarily represent the underlying value of the Company. The following methods and assumptions were used by the Company in estimating its fair value disclosures for financial instruments: CASH AND CASH EQUIVALENTS: The carrying amounts of cash and cash equivalents approximate their fair value. LOAN RECEIVABLE: As the Loan receivable is the Company's principal asset, fair value has been estimated based on the sum of (a) the appraised value of the Property at December 31, 1994 ($1.25 billion) and (b) the value of the additional collateral required to be maintained by the Borrower. As noted below, the aggregate amount of such additional collateral was reduced from $200 million to $70 million as of January 1, 1995 and will be further reduced to $50 million on April 1, 1995. F-8 DEBT: The carrying amounts of the Company's 14% Debentures and Floating Rate Notes approximate their fair value. The fair values of the Company's Current Coupon Convertible Debentures and Zero Coupon Convertible Debentures are estimated using quoted market prices. OFF-BALANCE-SHEET FINANCIAL INSTRUMENTS: Fair values for the Company's off- balance-sheet financial instruments (interest rate swaps) are based on current settlement values with the applicable counterparties based on information supplied by such counterparties. The Company uses interest rate swaps to manage interest rate risk on floating rate debt. Through the December 1994 retirement of Commercial Paper borrowings, the interest expense associated with such swap agreements is included with interest expense on commercial paper, bank loan and other. The interest payable associated with such swap agreements is classified as accrued interest payable. The following are the Company's significant accounting policies: LOAN INTEREST INCOME (NOTE 3): Interest recognized on the Loan is calculated on the basis of the average yield on the notes evidencing the Loan from the date of issuance through December 31, 2000 (the date at which the Loan will, if not converted, begin to bear floating rates of interest). The average yield is 8.51% per annum and combines (using the effective interest method) the differing coupon rates of Base Interest with the amortization of original issue discount applicable to the Loan. DEBT ISSUANCE COSTS: Issuance costs of $10,690,000, pertaining to the outstanding Convertible Debentures, at December 31, 1994 and 1993 have been deferred and are being amortized straight-line over the period ending December 31, 2000, the maturity date of the Convertible Debentures. The unamortized balance at December 31, 1994 was $4,231,000. Issuance costs of $9,192,000 and $3,286,000 relating to the Floating Rate Notes and 14% Debentures, respectively, issued on December 29, 1994 have been deferred and are being amortized using the effective interest method and straight-line method, respectively, over the expected life of the Floating Rate Notes and 14% Debentures, respectively. INTEREST EXPENSE (NOTE 5): Interest expense recognized on the Convertible Debentures is based on the average yields from the date of issuance through the maturity date, December 31, 2000. The average yields are computed (using the effective interest method) by (1) combining the differing coupon rates on the Current Coupon Convertible Debentures and (2) amortizing the original issue discount related to the Zero Coupon Convertible Debentures. The resultant effective annual interest rates are 9.23% and 10.23% for the Current Coupon and Zero Coupon Convertible Debentures, respectively. Interest expense on the Floating Rate Notes is based on the three-month London Interbank Offered Rate (LIBOR) reset 2 days prior to each payment due date plus 4%. The interest rate at December 31, 1994 was 10.375%. Interest expense including the amortization of the related original issue discount on the 14% Debentures, arising from the allocation of a portion of the proceeds of the Warrants and SARs, is computed using the straight-line method through the maturity date, December 31, 2007. INTEREST RATE SWAP AGREEMENTS (NOTE 5): The fair value of interest rate swaps which are used for hedging purposes is not reflected in the balance sheets. The incremental revenue or expense associated with an interest rate swap is recognized over the term of the swap arrangement and through March 31, 1993 had been presented in the statements of income as a component of the interest revenue of the related asset or the interest expense of the related liability. In connection with the reduction of commercial paper outstanding in April 1993 and the sale of a substantial portion of its portfolio of investment securities in order to fund that reduction, beginning in the second quarter of 1993 and through the F-9 retirement of Commercial Paper borrowings in December 1994, the Company presented interest rate swaps on a net basis as a component of interest expense on commercial paper, bank loan and other. Prior periods have not been restated. Since the retirement of the Company's commercial paper, the Company presents interest rate swaps on a net basis as a component of interest expense on Floating Rate Notes. NET INCOME PER SHARE: Net income per share is based upon 38,260,704, 37,567,746 and 37,510,000, average shares of Common Stock outstanding during 1994, 1993 and 1992, respectively. For such periods of operations, fully diluted net income per share is not presented since the effect of the assumed conversion of the Convertible Debentures and Warrants and SARs would either be anti-dilutive in 1994 and 1993 or not materially different from net income per share as reported in 1992. CASH EQUIVALENTS: Cash equivalents are highly liquid investments with the highest credit rating which mature within three months or less. 3. LOAN RECEIVABLE AND INTEREST INCOME The Loan, which is in the face amount of $1.3 billion, was made pursuant to a Loan Agreement between the Company and the Borrower dated September 19, 1985 (as amended, the "Loan Agreement"), and is evidenced by two notes (collectively, as amended, the "Note"). The Loan is secured by leasehold mortgages in the aggregate amount of approximately $44.8 million which were assigned to the Company, consolidated, spread and recorded as a first mortgage lien against the entire Property. Through September 6, 1994, the Loan also was secured by an unrecorded mortgage in the amount of approximately $1,255.2 million. On September 6, 1994 the Company recorded this mortgage. The related recording tax was paid by the Borrower. The Loan is further secured by a recorded assignment of rents pursuant to which the Borrower has assigned to the Company, as security for repayment of the Loan, the Borrower's rights to collect certain rents with respect to the Property. The Company is the beneficiary of standby irrevocable letters of credit subject to specified reductions and which, among other things, provide support for the Borrower's payment of Base Interest (as defined) on the Loan. Subject to certain conditions, the Borrower is required to maintain in effect similar letters of credit, or to pledge collateral with a fair market value equal to the required amount of such letters of credit until the Equity Conversion Date. In April 1993, pursuant to agreements between the Borrower and the Company, the level at which such letters of credit or other collateral must be maintained was increased to $200 million until December 31, 1994. On January 1, 1995, the level of this support decreased from $200 million to approximately $70 million and on April 1, 1995 will decrease to $50 million which is the minimum level that must be maintained through the Equity Conversion Date unless Net Operating Income (as defined) of the Property for any year exceeds $150 million and the Borrower has delivered to the Company an Accountant's Certificate (as defined) stating that no deficits in Net Cash Flow (as defined) of the Property for any subsequent year are forecasted. The Loan Agreement also contains covenants with respect to the operation and maintenance of the Property and limitations on the Borrower's right to dispose of the Property and to incur debt or liens. The Note provides for specified quarterly Base Interest payments during its term resulting in the following equivalent annualized coupon rates for each of the following years ending December 31: 1992: 7.820% 1997: 8.410% 1993: 7.965% 1998: 8.410% 1994: 8.115% 1999: 8.420% 1995: 8.390% 2000: 8.430% 1996: 8.400% F-10 In addition, for each year through 2000 in which Gross Revenues (as defined) of the Property exceed $312.5 million, Additional Interest would accrue in an amount equal to the sum of (i) 31.5% of such excess plus (ii) $42.95 million and would be payable currently only to the extent of available cash of the Borrower. If cash were not available, the payment of Additional Interest would be deferred (without interest) until the Equity Conversion Date or such earlier time as cash became available. No Additional Interest has been earned by the Company to date. If the Loan is not converted on the Equity Conversion Date, the Loan will mature on December 31, 2007, and nonconvertible floating rate notes will be issued in exchange for any Convertible Debenture not converted on the maturity date. The nonconvertible floating rate notes would mature on December 31, 2007, would be prepayable at the Company's option at any time at par, and would bear interest at the three-month LIBOR plus 1/4% or such greater spread (not in excess of 1%) as is expected to result in such notes trading at par. The loan will bear interest payable quarterly in arrears at the same rate as the nonconvertible floating rate notes and will be prepayable at the option of the Borrower in whole or in part, at any time, at 100% of its principal amount plus accrued interest. The fair value of the Company's loan receivable at December 31, 1994, computed on the basis described in Note 2, approximates $1.3 billion. 4. PORTFOLIO SECURITIES The Company liquidated its portfolio securities during the years ended December 31, 1993 and 1994, which resulted in non-recurring gains of $8,593,000 and $31,000, respectively. Proceeds from the sales of portfolio securities were used to fund scheduled reductions in commercial paper outstanding. 5. DEBT CONVERTIBLE DEBENTURES: The Convertible Debentures were issued pursuant to an Indenture dated as of September 15, 1985 (as amended, the "Indenture") between the Company and Manufacturers Hanover Trust Company (now Chemical Bank), as Trustee. As of December 31, 1993, United States Trust Company replaced Chemical Bank as Trustee. As of December 29, 1994, the Convertible Debentures together with the Floating Rate Notes and the 14% Debentures are secured by a pledge of the Note and certain other collateral pursuant to the Collateral Trust Agreement dated as of December 29, 1994 (the "Collateral Trust Agreement") among the Company, Bankers Trust Company and Gary R. Vaughan (collectively, the "Collateral Trustee"). Prior to December 29, 1994 the Convertible Debentures were general unsecured obligations of the Company. The Convertible Debentures mature, and are convertible into shares of Common Stock of the Company, on the Equity Conversion Date. Any Convertible Debentures not converted at maturity will be exchanged in accordance with the terms of the Indenture for nonconvertible floating rate notes (Note 3). The Current Coupon Convertible Debentures bore interest from the date of issuance until December 31, 1994 at the rate of 8% per annum, and from January 1, 1995 until December 31, 2000 will bear interest at the rate of 13% per annum, payable annually on December 31 of each year. Between 1987 and 1992, the Company repurchased and retired a portion of its Convertible Debentures. The cost of such repurchases, the face values repurchased and retired and the gain or loss resulting from such repurchases for 1992, the last year in which such repurchases were made, and on a cumulative basis are as follows: F-11
- --------------------------------------------------------------------------- (In thousands) Year Ended December 31, Cumulative 1992 - --------------------------------------------------------------------------- Cost of debenture repurchases $217,295 $30,410 Face value repurchased and retired: Current Coupon Convertible Debentures $121,830 $30,410 Zero Coupon Convertible Debentures $366,065 Gain resulting from extinguishment of debt $11,085 $2,537 - ---------------------------------------------------------------------------
At December 31, 1994, the Company had repurchased and retired 36.4% of the Current Coupon Convertible Debentures and 38.4% of the Zero Coupon Convertible Debentures. At December 31, 1994 and 1993, $213,170,000 of the Current Coupon Convertible Debentures were outstanding and $586,185,000 face amount of the Zero Coupon Convertible Debentures were outstanding. The proceeds from issuances of commercial paper, were used by the Company to finance its repurchases of its Convertible Debentures. Commercial paper borrowings were repaid in 1993 and 1994 with proceeds from sales of the Company's investment portfolio, operating cash flow and the issuance of 14% Debentures and Floating Rate Notes (see below) in December 1994. Under the terms of the 14% Debentures and Floating Rate Notes the Company is not permitted to repurchase any of its Convertible Debentures. The Current Coupon Convertible Debentures are convertible at maturity at the rate of 84.59 shares of Common Stock per $1,000 principal amount (subject to anti-dilution adjustments). If the Current Coupon Convertible Debentures outstanding as of December 31, 1994 are converted, 18,032,050 shares of Common Stock of the Company would be issued. The fair value, based on quoted market prices at December 31, 1994, of the Company's outstanding Current Coupon Convertible Debentures was approximately $195,000,000. The Zero Coupon Convertible Debentures are convertible at maturity at the rate of 46.06 shares of Common Stock per $1,000 principal amount (subject to anti-dilution adjustments). If the Zero Coupon Convertible Debentures outstanding as of December 31, 1994 are converted, 26,999,681 shares of Common Stock of the Company would be issued. The fair value, based on quoted market prices at December 31, 1994, of the Company's outstanding Zero Coupon Convertible Debentures was approximately $245,000,000. Upon the occurrence of an Event of Default as defined, the Trustee may declare the unpaid principal of the Convertible Debentures and any accrued interest thereon immediately due and payable. In addition, the Convertible Debentures would become convertible at special conversion rates (subject to anti-dilution adjustments) in the event that such Convertible Debentures were called for redemption or became redeemable at the option of the holder, or at any time that an Event of Default were to occur and be continuing. The Convertible Debentures may be redeemed by the Company at par plus accrued interest in the event of the imposition of certain withholding taxes or certain certification requirements, in the event of an acceleration of the Loan or an exercise of the option to convert the Loan, or out of the proceeds from a sale or pledge by the Company of an interest in the Loan or from a substantial casualty or condemnation in respect to the Property. The Indenture provides that, with certain exceptions, the Company will not pay dividends on or purchase shares of its Common Stock if funds used for all such dividends or purchases would exceed cumulative aggregate Distributable Cash (cash receipts from operations less operating expenses and interest) to that date. The Indenture also imposes certain restrictions on the Company's ability to consent to amendments of or grant waivers under the Loan Agreement or the Mortgage. FLOATING RATE NOTES: Pursuant to a Loan Agreement between the Company and Goldman Sachs Mortgage Company, as Agent and as Lender, dated December 18, 1994, the Company issued Floating Rate Notes totaling $150,000,000. The Floating Rate Notes together with the Convertible Debentures and the 14% Debentures are secured by a pledge of the Note and certain other collateral and mature on December 31, 2000. Debt issuance costs of $9,192,000 F-12 are being deferred and amortized using the effective interest method over the expected life of the Floating Rate Notes. Interest is based on 90-day LIBOR plus 4% reset two business days prior to each interest payment date. At December 31, 1994 the interest rate in effect was 10.375%. Interest payment dates ("Interest Payment Dates") are March 1, June 1, September 1, and December 1 of each year. Required principal payments are to be made on each Interest Payment Date beginning on June 1, 1995. Mandatory principal payments shall be made of net cash flow ("Net Cash Flow") (calculated as of the most recent fiscal quarter) which is defined as all gross receipts minus actual operating expenses paid; interest paid or accrued (on a straight line basis) on the Floating Rate Notes, 14% Debentures, and Current Coupon Convertible Debentures; dividends paid or accrued; and distributions paid or accrued on the Warrants and SARs. However, the minimum principal repayments required for each year are as follows:
Year Principal Repayment ---- ------------------- 1995 $3,000,000 1996 9,000,000 1997 10,000,000 1998 12,000,000 1999 15,000,000 ----------- $49,000,000 ----------- -----------
The Company may prepay the Floating Rate Notes in whole or in part on any Interest Payment Date; however, any prepayment made during the first and second years the Floating Rate Notes are outstanding (except mandatory prepayments) would be subject to a 3% and 1.5% penalty, respectively, of the principal amount prepaid. Upon the occurrence of an Event of Default, as defined, the Agent may declare the unpaid principal of the Floating Rate Notes and any accrued interest thereon immediately due and payable. 14% DEBENTURES: The 14% Debentures were issued pursuant to a Debenture Purchase Agreement dated as of December 18, 1994 ("Debenture Agreement") between the Company and Whitehall Street Real Estate Limited Partnership V. The 14% Debentures together with the Convertible Debentures and the Floating Rate Notes are secured by a pledge of the Note and certain other collateral and mature on December 31, 2007. Debt issuance costs of $3,286,000 are being deferred and amortized using the straight-line method through December 31, 2007. The 14% Debentures bear interest from the date of issuance until December 31, 2007 at a rate of 14% per annum, payable semi-annually on June 2 and December 2 of each year. If an Event of Default were to occur and be continuing, the 14% Debentures would bear interest at 18% per annum. Upon the occurrence of an Event of Default, as defined, the holders of the 14% Debentures ("Holders") may declare the unpaid principal thereof and accrued interest thereon due and payable. The 14% Debentures are redeemable in whole or in part at any time after December 30, 2000 provided the Floating Rate Notes have been paid in full. The penalties for early redemption are as follows: Penalty Redemption period (% of principal amount redeemed) -------------------------------------- -------------------------------- December 30, 2000 to December 31, 2001 5% January 1, 2002 to December 31, 2002 3% January 1, 2003 to December 31, 2003 1.5% January 1, 2004 to December 31, 2007 0% F-13 Pursuant to the Warrant Agreement dated December 18, 1994 between the Company and Chemical Bank, as Warrant Agent, and in connection with the issuance of the 14% Debentures, the Company issued Warrants to acquire 4,155,927 shares of newly issued common stock. Since the Warrants are separate from the 14% Debentures, the Company is required to assign a value to the Warrants and reflect that value in stockholders' equity. The value assigned to the Warrants of $2,028,000 has been recorded as a debt discount and corresponding increase in stockholders' equity. Such discount is being amortized using the straight-line method through the expiration date of the Warrants, December 31, 2007. Each warrant is exercisable at $5.00 per share. Beginning on January 15, 1996 each warrant is entitled to an annual distribution payable on January 15 for the prior calendar year in an amount equal to any positive difference between the total amount of dividends paid per share of common stock in the preceding year and $0.60. Beginning on January 1, 2001 the annual distribution will be in an amount equal to any positive difference between the total amount of dividends paid per share of common stock in the preceding year and the exercise price multiplied by 90- day LIBOR in effect on the preceding December 31 plus 1%. Also in connection with the issuance of the 14% Debentures, the Company issued 5,349,541 SARs, pursuant to the SAR Agreement between the Company and Chemical Bank, as SAR Agent. Since the SARs are separate from the 14% Debentures, the Company is required to assign a value to the SARs and reflect that value as a liability. The value assigned to the SARs of $2,611,000 has been recorded as a debt discount and corresponding liability. Such discount is being amortized using the straight-line method through the expiration date of the SARs, December 31, 2007. Beginning on January 15, 1996 each stock appreciation right is entitled to an annual distribution payable on January 15 for the prior calendar year in an amount equal to any positive difference between the total amount of dividends paid per share of common stock in the preceding year and $0.60. Beginning on January 1, 2001 the annual distribution will be in an amount equal to any positive difference between the total amount of dividends paid per share of common stock in the preceding year and the exercise price multiplied by 90- day LIBOR in effect on the preceding December 31 plus 1%. The SARs are exchangeable for 14% Debentures or under certain circumstances for Warrants on a one-for-one basis. Each SAR is exchangeable for a principal amount of 14% Debentures equal to the product of the average daily market prices of the common stock for the 30 consecutive trading days immediately preceding the date of exchange minus the exercise price per share of the Warrants into which the SARs are exchangeable times the number of Warrants exchanged. However, 14% Debentures will not be issued for amounts less than $1,000, but cash will be paid in lieu of such amounts. Following adoption and filing of an amendment to the Certificate of Incorporation, which requires stockholder approval, and adoption by the Board of any necessary implementing resolutions that would permit Whitehall or an affiliate of Whitehall to hold the Warrants for which the SARs would be exchangeable, the SARs shall automatically be exchanged for Warrants on a one-for-one basis and the SARs liability will be reclassified to paid in capital. Until such time as the Certificate of Incorporation is amended, the Company will be required to adjust the SARs' liability for future changes in the market price of the common stock. Additional Warrants and SARs are issuable under certain circumstances to prevent dilution. SECURITY Subject to the terms of the Collateral Trust Agreement, upon notice to the Collateral Trustee of non-payment at maturity, or the acceleration of the maturity, of the Convertible Debentures, the Floating Rate Notes or the 14% Debentures, the holders of not less than 50% of the then outstanding aggregate principal amount of any of the Convertible Debentures, the Floating Rate Notes or the 14% Debentures shall have the right to direct the Collateral Trustee to initiate the exercise of remedies under the Collateral Trust Agreement with respect to the Note and the other collateral granted under the Collateral Trust Agreement. COMMERCIAL PAPER OUTSTANDING: As of December 31, 1994 the Company has eliminated its commercial paper program. The proceeds from the F-14 issuance of the Floating Rate Notes and 14% Debentures were used to retire all remaining commercial paper outstanding as of December 30, 1994. As of December 31, 1993 there was $247,650,000 face amount of commercial paper outstanding, at a weighted average interest rate of 3.50% and with a weighted average maturity of 40 days. INTEREST RATE SWAP AGREEMENTS: In connection with its issuance of commercial paper (subsequently replaced with Floating Rate Notes and 14% Debentures) and its portfolio of investment securities which was liquidated in 1993 and 1994, the Company entered into interest rate swap agreements with financial institutions that were intended either to fix a portion of the Company's interest rate risk on floating rate debt ("Liability Swaps"), or to fix the yield on its floating rate portfolio securities ("Asset Swaps"). The Company does not use interest rate swaps for trading purposes. Under the Liability Swaps, the Company pays a fixed rate of interest semi-annually and receives a variable rate of interest semi-annually based on 180-day LIBOR. Under the Asset Swaps, the Company received a fixed rate of interest semi-annually and paid a variable rate of interest quarterly based on 90-day LIBOR. In connection with the issuance of the Floating Rate Notes and 14% Debentures in December 1994, the Company retired all of its Asset Swaps (notional principal $35,000,000) and certain of its Liability Swaps (notional principal $180,000,000). The Company would be exposed to credit- related losses in the event of non-performance by the counterparties to the swap agreements; however, it does not expect any counterparties to fail to meet their obligations given their current high credit ratings. The Company's credit- related risk and market-related risk would be that the Floating Rate Notes would no longer be partially hedged, and therefore the Company would not receive the benefit of fixing the interest rate on a portion of its floating rate debt. The amount to be paid or received from interest rate swap agreements is accrued as floating interest rates are reset semi-annually and, through the December 1994 retirement date of the Commercial Paper borrowings, is included as a component of interest expense on commercial paper, bank loan and other. Since the retirement of the Company's commercial paper, the Company presents the financial effect of interest rate swaps as a component of interest expense on floating rate notes. The net amount payable to or receivable from the counterparties is recorded as a component of accrued interest payable. Approximately 70% of the Company's exposure to interest rate fluctuations on its Floating Rate Notes was hedged by interest rate swaps at December 31, 1994. F-15 The notional amounts, fixed and variable interest rates and expiration dates relating to such contracts are summarized below:
- ------------------------------------------------------------------------------------------------------------------------------ (In thousands) at December 31, 1994 - ------------------------------------------------------------------------------------------------------------------------------ Weighted Notional Average Type Expiring during the Year Amount Interest Rates ---- ------------------------ -------- -------------- INTEREST RATE SWAPS (3 contracts) 1998 $105,000 Pay fixed rates 9.64% Receive variable rates 5.56% - ------------------------------------------------------------------------------------------------------------------------------ (In thousands) at December 31, 1993 - ------------------------------------------------------------------------------------------------------------------------------ Weighted Notional Average Type Expiring during the Year Amount Interest Rates ---- ------------------------ -------- -------------- LIABILITY SWAPS (9 contracts) 1997 $30,000 1998 125,000 1999 130,000 -------- Total Liability Swaps Notional Amount $285,000 Pay fixed rates 9.73% Receive variable rates 3.43% ASSET SWAPS (8 contracts) 1994 $5,000 1995 5,000 1996 20,000 1997 5,000 1998 5,000 -------- Total Asset Swaps Notional Amount $40,000 Pay variable rates 3.40% Receive fixed rates 9.47%
The net notional principal, weighted average interest rate of net swaps outstanding and annualized net payment relating to interest rate swap contracts, as of December 31, are as follows:
1994 1993 ------------ ------------ Net notional prinicpal $105,000,000 $245,000,000 ------------ ------------ ------------ ------------ Weighted average interest rate of net swaps outstanding 4.08% 6.33% ------------ ------------ ------------ ------------ Annualized net payment $4,284,000 $15,508,000 ------------ ------------ ------------ ------------
The current aggregate settlement values of all swaps outstanding (the fair value of the Company's off-balance sheet financial instruments), based on information supplied by the counterparties to the swap contracts, was a liability of approximately $5.6 million at December 31, 1994 and an asset of $5 million and a liability of $57 million at December 31, 1993. Generally, the settlement values of outstanding swaps would decrease with an increase in LIBOR rates and would increase as a result of a decrease in LIBOR rates. F-16 In connection with the Company's retirement of commercial paper borrowings in 1993 and 1994, the Company exchanged payments with certain counterparties to retire all of the Asset Swaps and certain of the Liability Swaps in 1994 and made payments to certain counterparties to reduce the duration of certain Liability Swaps in 1993 which thereby reduced the Company's net swap liability. The Company recorded extraordinary losses of $9,855,000 and $3,451,000 for the years ended December 31, 1994 and 1993, respectively, as a result of these transactions. The 1993 payments were made pursuant to agreements between the Company and certain of its lenders whereby the Company had agreed to apply a portion of the proceeds from the issuance of common stock. As of December 30, 1994 these agreements were terminated. 6. STOCKHOLDERS' EQUITY In December of 1994, the Company issued Warrants and SARs in connection with the issuance of its 14% Debentures. As of December 31, 1994, no Warrants or SARs had been converted to common stock (Note 5). In December of 1993, 750,704 warrants issued in connection with the settlement of litigation (Note 9) were exercised and a like number of shares of Common Stock were issued, the proceeds of this issuance totaled $5,086,000. 7. INCOME TAXES AND DISTRIBUTIONS No provisions for current or deferred income taxes have been made by the Company on the basis that it has qualified under the Code as a REIT and has distributed at least 95% of its annual net income as computed for tax purposes to stockholders. To the extent that such distributions exceed such income, the excess will be treated as a return of capital. Net capital gains generated by the Company are proportionately distributed to the stockholders as net capital gains dividends. During the years ended December 31, 1994, 1993 and 1992, the Company made per share distributions to stockholders of $0.65, $1.00, and $1.69, respectively, of which approximately $0.26, $0.07, and $0.65, respectively, represented returns of capital. Through December 31, 1994, the cumulative return of capital paid was $5.12 per share. Of the December, 1994 and 1993 total distribution amounts of $5,739,106 and $9,564,430, respectively, the Company has designated that $789,362 and $7,893,468, respectively, constitute a net capital gain dividend, amounting to approximately $.021 and $.206 per share, respectively, or approximately 13.75% and 82.53% of the fourth quarter dividends, respectively. Dividends were paid in April, July, October and December of each year. No significant difference exists between financial statement income and taxable income. Beginning on January 15, 1996 each warrant and stock appreciation right is entitled to an annual distribution payable on January 15 for the prior calendar year in an amount equal to any positive difference between the total amount of dividends paid per share of common stock in the preceding year and $0.60. Beginning on January 1, 2001 the annual distribution will be in an amount equal to any positive difference between the total amount of dividends paid per share of common stock in the preceding year and the exercise price multiplied by 90- day LIBOR in effect on the preceding December 31 plus 1%. 8. GENERAL AND ADMINISTRATIVE AND OTHER EXPENSES General and administrative expense includes compensation and benefits for the Company's employees, and rent and related facility costs for 1994 and the period June 3, 1993 through December 31, 1993. Cushman & Wakefield Realty Advisors, Inc. ("C&W Realty"), a company affiliated with the Borrower through common ownership, acted as administrator for the Company, performing certain administrative and other services pursuant to an administrative services agreement through June 2, 1993, when such agreement was terminated by the Company. Fees paid to C&W Realty under this agreement amounted to $476,000 for the year ended December 31, 1993 and $1 million for the year ended December 31, 1992. Also included in general and administrative expenses for each of the years ended December 31, 1994, 1993 and 1992 are the following: directors and officers liability insurance premiums, registrar and transfer agent fees, debenture trustee fees, legal, audit and appraisal fees, financial advisory fees and stockholder reporting costs. F-17 During the year ended December 31, 1994 the Company incurred $1,942,000 of expenses in connection with its evaluation of alternative financings. 9. LEGAL MATTERS On December 13, 1985, a stockholder commenced an action against the Company and other defendants in the Supreme Court of the State of New York, New York County alleging that the offering materials relating to the Company's initial public offerings were false and misleading and seeking rescission and damages on behalf of all purchasers of common stock of the Company during the period commencing September 12, 1985 to and including December 13, 1985. On February 23, 1993 the judge before whom this litigation was pending signed a Final Order and Judgment approving the terms of a Stipulation and Agreement of Settlement dated as of May 31, 1992, as supplemented (the "Settlement Agreement"), settling this litigation. In accordance with the terms of the Settlement Agreement, on November 3, 1993 the Company issued warrants to purchase 3,000,098 shares of the Company's common stock to persons eligible under provisions of the Settlement Agreement. The warrants were exercisable during the 30-day period ending December 3, 1993 at an exercise price of $7.00 per share of common stock. The Company is not a party to any material legal proceeding or environmental litigation. For a description of a proceeding filed against the Company see Note 11 - Subsequent Events. 10. THE PROPERTY Summarized financial information of the Property provided by the Borrower is as follows:
(In thousands) Years Ended December 31, 1994 1993 1992 -------- -------- -------- Gross revenue $220,851 $226,597 $229,000 Less: Operating expenses (161,890) (165,456) (160,698) Interest expense, net (117,328) (114,599) (114,040) -------- -------- -------- Net loss ($58,367) ($53,458) ($45,738) -------- -------- -------- -------- -------- --------
The cumulative cash flow shortfall of the Borrower since the inception of the Loan in September 1985 ($572.6 million), has been funded by capital contributions ($185.2 million), loans from its partners ($126.7 million) and non-interest bearing advances from an affiliate ($260.7 million). The Loan Agreement provides for the establishment of loans for the cumulative portion of capital improvements made by the Borrower in excess of amounts specified in the Loan Agreement. The cumulative amounts of excess capital improvements totaled $126.7 million, $123 million and $107.5 million at December 31, 1994, 1993 and 1992, respectively. These excess capital improvement loans are deemed to be made to the Borrower by its partners and bear interest at 80% of the prime rate (as defined), compounded quarterly, which is added to the loan principal at the end of each year. At December 31, 1994, 1993 and 1992, the amount of such excess capital improvement loans (including accrued interest) totaled $160.7 million, $149.7 million and $127.9 million, respectively. Cumulative interest accrued as of December 31, 1994 was $34 million. The results of operations of the Property for 1994, 1993 and 1992 reflect non-cash interest charges of $7.3 million, $6.3 million and $6.2 million, respectively, relating to interest on these excess capital improvement loans. Both the excess capital improvement loans and the non-interest bearing advances are subordinate to the Company's Loan; however, if the Company exercises its option to convert the Loan into an equity interest in the Partnership, any outstanding loans for excess capital improvements (including accrued interest) will become the obligation of the Partnership. F-18 11. SUBSEQUENT EVENTS LEGAL MATTERS: On January 23, 1995, Bear, Stearns & Co., Inc. and Donaldson, Lufkin & Jenrette Securities Corporation commenced an action against the Company in the Supreme Court of New York, County of New York. The plaintiffs allege that the Company breached a contract relating to the plaintiffs' provision of investment banking services to the Company. The plaintiffs seek $5,062,500 in damages, plus costs, attorneys' fees and interest. The case is in the initial pleading stage. The Company is vigorously contesting the plaintiffs' allegations and on February 15, 1995 counsel to the Company filed a notice of a motion for an order dismissing the complaint for failure to state a cause of action and granting such other and further relief as the Court deems just and proper. The Company does not expect the outcome of this litigation to have a material effect on the financial condition of the Company. 12. INTERIM FINANCIAL INFORMATION (UNAUDITED)
(In thousands, except per share data) - ------------------------------------------------------------------------------- 1994 1Q 2Q 3Q 4Q - ------------------------------------------------------------------------------- Revenues $27,270 $27,262 $27,417 $27,336 Net income (loss) $6,667 $6,551 $3,321 ($1,396) Net income (loss) per share $0.17 $0.17 $0.09 ($0.03) - ------------------------------------------------------------------------------- 1993 1Q 2Q 3Q 4Q - ------------------------------------------------------------------------------- Revenues $30,164 $27,715 $27,815 $27,866 Net income $14,301 $10,417 $6,878 $4,330 Net income per share $0.38 $0.28 $0.18 $0.12
F-19 REPORT OF MANAGEMENT Board of Directors and Stockholders March 15, 1995 Rockefeller Center Properties, Inc. The management of Rockefeller Center Properties, Inc. (the Company) has the responsibility for preparing the accompanying financial statements and for their integrity and objectivity. The statements were prepared in accordance with generally accepted accounting principles applied on a consistent basis and are not misstated due to material fraud or error. The financial statements include amounts that are based on management's best estimates and judgments. Management also prepared the other information in the annual report and is responsible for its accuracy and consistency with the financial statements. The financial statements have been audited by Ernst & Young LLP. Management has made available to Ernst & Young LLP all the Company's financial records and related data. Furthermore, management believes that all representations made to Ernst & Young LLP during its audit were valid and appropriate. Management has established and maintains a system of internal accounting control that provides reasonable assurance as to the integrity and reliability of the financial statements, the protection of assets from unauthorized use or disposition, and the prevention and detection of fraudulent financial reporting. Management continually monitors the system of internal accounting control for compliance. In addition, as part of its audit of the Company's financial statements, Ernst & Young LLP evaluated selected internal accounting controls to establish a basis for reliance thereon in determining the nature, timing, and extent of audit tests to be applied. Management believes that, as of December 31, 1994, the system of internal accounting control is adequate to accomplish the objectives discussed herein. Management also recognizes its responsibility for fostering a strong ethical climate so that the Company's affairs are conducted according to the highest standards of personal and corporate conduct. This responsibility is characterized and reflected in the Company's code of business conduct. The code addresses, among other things, potential conflicts of interest; business conduct; political activities; and confidentiality of information. The Company maintains a program to assess compliance with these policies. The Audit Committee of the Board of Directors is directly responsible for assuring that management fulfills its financial reporting responsibilities. The Audit Committee met twice during 1994 with management and Ernst & Young LLP to discuss audit activities, internal accounting controls, and financial reporting matters. Ernst & Young LLP has unrestricted access to the Audit Committee. /s/RICHARD M. SCARLATA Richard M. Scarlata President & Chief Executive Officer F-20 SELECTED FINANCIAL INFORMATION (Dollars in thousands, except per share data)
1994 1993 1992 1991 1990 - --------------------------------------------------------------------------------------------------------------------------- FOR THE YEAR Revenues $109,285 $113,560 $122,414 $123,182 $123,513 Net income 15,143 35,926 39,148 38,327 37,339 Net cash provided by operating activities 57,198 58,231 62,735 57,909 56,356 Net cash provided by investing activities 14,331 126,668 23,560 17,200 23,162 Net cash used in financing activities Excluding dividends paid 44,015 147,082 22,955 3,041 9,063 Dividends paid 24,869 37,697 63,392 72,019 70,894 - --------------------------------------------------------------------------------------------------------------------------- AT YEAR END Total assets $1,319,995 $1,317,509 $1,432,210 $1,450,103 $1,460,617 Debt: Short term debt 247,223 397,078 389,299 384,443 Long term debt, including current portion 760,394 509,713 482,206 487,660 475,019 ---------- ---------- --------- ---------- ---------- Total debt 760,394 756,936 879,284 876,959 859,462 Total liabilities 802,528 792,344 910,360 904,009 880,831 Total stockholders' equity 517,467 525,165 521,850 546,094 579,786 - --------------------------------------------------------------------------------------------------------------------------- PER SHARE Net income per share $0.40 $0.96 $1.04 $1.02 $1.00 Dividends per share 0.65 1.00 1.69 1.92 1.89 Portion of dividends representing a return of capital 39.4% 7.4% 38.2% 46.8% 46.7% Book value per share $13.52 $13.73 $13.91 $14.56 $15.46 Book value per share assuming exercise of Warrants and SARs $11.88
F-21 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS LIQUIDITY AND CAPITAL RESOURCES - THE COMPANY In September 1985, Rockefeller Center Properties, Inc. (the "Company") issued 37,500,000 shares of Common Stock at $20 per share in an initial public offering. Simultaneously with the offering of the Common Stock, the Company issued Current Coupon Convertible Debentures in the principal amount of $335,000,000 and Zero Coupon Convertible Debentures in the face amount of $952,250,000 (collectively, the "Convertible Debentures"). The Company received net proceeds of $1,233,770,000 from such offerings. Such funds were used to make a convertible, participating mortgage loan (the "Loan") in the face amount of $1,300,000,000 to two partnerships (collectively, the "Borrower"). The partners of the Borrower are Rockefeller Group, Inc. ("RGI") and a wholly-owned subsidiary of RGI. The Loan, which is secured by the real property interests owned by the Borrower comprising most of the land and buildings known as Rockefeller Center (the "Property"), was made pursuant to a loan agreement between the Company and the Borrower (as amended, the "Loan Agreement"). The Loan is convertible at the Company's option on December 31, 2000 (the "Equity Conversion Date") or, if an event of default under the Loan Agreement has occurred and is continuing, any earlier date specified by the Company into a 71.5% (subject to reduction in the event of certain prepayments) general partnership interest in the partnership which will own the Property (the "Partnership") on that date. During December 1993, the Company issued an additional 750,704 shares of Common Stock for a cash consideration of $7.00 per share as the result of an exercise of an equivalent number of warrants which were issued pursuant to a court- ordered class action settlement. The Company received proceeds of $5,086,000 from this Common Stock issuance. At December 31, 1994 and 1993 the Company had 38,260,704 shares of Common Stock outstanding. On December 29, 1994 the Company issued $150,000,000 of Floating Rate Notes and $75,000,000 of 14% Debentures and Warrants and SARs. The net proceeds from these issuances of approximately $212,522,000 were used to retire commercial paper borrowings of $193,100,000, and to retire interest rate swaps with a net notional principal of $145,000,000 at a cost of $9,855,000. The balance of the proceeds from this transaction has been applied to general corporate purposes. The following table sets forth certain information regarding the Company's outstanding debt as of December 31,1994:
- -------------------------------------------------------------------------------------------------------------------------------- Principal Balance Interest Rate as of as of December 31, 1994 Description Maturing December 31, 1994 (000 s) - -------------------------------------------------------------------------------------------------------------------------------- Current Coupon Convertible Debentures 12/31/2000 (1) 8% (2) $213,170 Zero Coupon Convertible Debentures 12/31/2000 (1) 0% (3) 326,863 (4) Floating Rate Notes 12/31/2000 (5) 10.375% (6) 150,000 14% Debentures 12/31/2007 14% 70,361 (7) -------- $760,394 -------- -------- - -------------------------------------------------------------------------------------------------------------------------------- - ---------------- (1) If not converted into common stock on 12/31/2000 become floating rate notes due 12/31/2007. (2) Rate effective 1/1/95 is 13%. Annual effective rate is 9.23% (see Note 2 to the Financial Statements). (3) Annual effective rate is 10.23% (see Note 2 to the Financial Statements). (4) Accreted value at 12/31/2000 - $586,185,000. (5) See Note 5 to the Financial Statements for a description of mandatory prepayments. (6) Rate = 90-day LIBOR +4%, reset quarterly (exclusive of swap agreements, see Note 5 to the Financial Statements). (7) Accreted value at 12/31/2007 - $75,000,000.
F-22 The Company's primary source of liquidity is interest income received on the Loan. During the years ended December 31, 1994, 1993 and 1992, cash generated from interest income on the Loan was $105,495,000, $103,545,000 and $101,660,000, respectively. The increase in each year over that of the preceding year is attributable to the scheduled increase in the annualized coupon rate on the Loan. The rate of Base Interest on the Loan increases according to a fixed schedule. Following is a schedule of the rate of Base Interest and the amount of Base Interest expected to be received by the Company in each of the following years ending December 31:
Rate Amount Rate Amount ---- ------ ---- ------ 1995: 8.390% $109,070,000 1998: 8.410% $109,330,000 1996: 8.400% 109,200,000 1999: 8.420% 109,460,000 1997: 8.410% 109,330,000 2000: 8.430% 109,590,000
The Loan also provides for Additional Interest (as defined) to be earned by the Company under certain circumstances. For each year through 2000 in which Gross Revenues (as defined) of the Property exceed $312.5 million, Additional Interest would accrue in an amount equal to the sum of (i) 31.5% of such excess plus (ii) $42.95 million and would be payable currently only to the extent of available cash of the Borrower. If cash were not available, the payment of Additional Interest would be deferred (without interest) until the Equity Conversion Date or such earlier time as cash became available. No Additional Interest has been earned by the Company to date. Based on present conditions in the Midtown Manhattan rental market, the Company does not currently expect that it will earn Additional Interest. Note 4 of the Notes to the audited combined Balance Sheets of the partnerships comprising the Borrower as of December 31, 1994 and 1993 and the related Combined Statements of Operations and Partners' Capital Deficiency and Cash Flows for each of the three years in the period ended December 31, 1994 which are reproduced at pages F-36 through F-47 of the Company's Annual Report on Form 10-K for the year ended December 31, 1994 states that "the Partnerships [comprising the Borrower] have experienced significant cash shortfalls and, based upon management's projections, will continue to experience significant cash shortfalls through the Equity Conversion Date. These cash shortfalls have occurred primarily as a result of changes in the real estate market from levels anticipated when the Loan was initiated. These factors include lower rental rates, greater rent abatements granted to tenants upon initiation or renewal of lease commitments, and higher other expenditures associated with obtaining new and renewal tenants. These cash flow conditions have made it unlikely that the Partnerships will be able to fulfill all financial commitments to RCPI [the Company] for the foreseeable future from their own resources. The Partnerships do not have a commitment from the Partners [of the] Partnerships comprising the Borrower] to fund these cash shortfalls. These conditions raise substantial doubt about the Partnerships' ability to continue as going concerns. The combined financial statements of the Partnerships do not contain any adjustments to reflect the possible future effects from the outcome of this uncertainty." Management of the Company believes that as of December 31, 1994 the fair value of the collateral supporting the Loan, (the sum of (a) the value of the Property as appraised as of December 31, 1994 and (b) the value of the additional collateral required to be maintained by the Borrower as of that date and thereafter) approximates the value at which the Loan is carried on the Company's Balance Sheet. If the parents and affiliates of the F-23 Borrower continue to support the Borrower through the funding of cash shortfalls as they have through December 31, 1994, although not legally obligated to do so, the Borrower will be able to satisfy its obligations under the Loan Agreement. If the Borrower were to default on its obligations under the Loan Agreement, there could be a significant change in the nature of the Company's operations. If the Company were to foreclose on the Property and related collateral and acquire title to the Property, it would be required to operate the Property and to fund cash shortfalls of the Property. If the Company were to acquire title to the Property, management of the Company believes, that the value of the Property (appraised at approximately $1.25 billion at December 31, 1994) would be significantly in excess of the Company's obligations (approximately $760 million at December 31, 1994), and that therefore the Company should be able to obtain sufficient financing to fund cash shortfalls of the Property as well as to satisfy the Company's existing obligations until such time (1996) as the Company, on the basis of the projection contained in the December 31, 1994 appraisal, anticipates that the Property will become cash flow positive. Such financing would be subject to the consent of the holders of the Floating Rate Notes and 14% Debentures. However, because of the Company's inability to estimate when, if ever, a potential foreclosure would occur (if the Borrower were to default on its obligations) and what prevailing conditions in the New York real estate market and financial markets might be at such time, no assurance can be given that the Company would have access to sufficient financial resources to fund cash shortfalls of the Property and to meet its other obligations. As required by the Loan Agreement the Borrower has furnished to the Company a certificate signed by the chief accounting officer of RGI stating that, to the best of such officer's knowledge, after reasonable investigation, the Borrower has observed or performed all of its covenants in the Loan Agreement for the year ended December 31, 1994 and that such officer has obtained no knowledge of any Default or Event of Default. Such covenants include the covenant in the Loan Agreement prohibiting the Borrower from permitting Net Operating Income (as defined) for any calendar year to be less than 80% of the Base Interest payable for such year. As reported in the Company's Quarterly Report on Form 10-Q for the quarter ended September 30, 1994 the Borrower had advised the Company in the Fall of 1994 that the Borrower had anticipated that the Borrower would breach this covenant for calendar 1994. As a consequence of the Company's recording on September 6, 1994, at the expense of the Borrower, the Company's $1.25 billion unrecorded mortgage on the Property this covenant and the covenants in the Loan Agreement prohibiting the Borrower from making distributions in any calendar year to its partners in excess of Net Cash Flow (as defined) for such year, from making certain investments and from incurring certain contingent liabilities will be deemed terminated and to be of no further force and effect one year after the date of such recordation. Portfolio and other interest received during 1994, 1993 and 1992 was $998,000, $6,553,000 and $13,924,000, respectively. The decreases in each year from that of the preceding year were due to portfolio sales and maturities, the proceeds from which were used with operating cash to reduce the Company's short term debt during the years ended December 31, 1994 and 1993 (see Note 5). The Company completed the liquidation of its investment portfolio during 1994 realizing $14,331,000 from sales of securities with a net carrying value of $14,300,000, resulting in a net gain of $31,000. During the years ended December 31, 1994, 1993 and 1992, interest paid on commercial paper, bank loan and other was $27,020,000, $31,016,000 and $31,633,000, respectively. The following schedule presents the components of such interest paid:
1994 1993 1992 ----------- ----------- ----------- Interest rate swap agreements $15,252,000 $16,620,000 $14,608,000 Commercial paper (including commercial paper fees and 11,768,000 14,178,000 16,282,000 expenses) Bank loans 218,000 743,000 ----------- ----------- ----------- $27,020,000 $31,016,000 $31,633,000 ----------- ----------- ----------- ----------- ----------- -----------
F-24 In December 1994 the Company concluded a study of its overall capital structure. As a result of this study the Company issued $150,000,000 in Floating Rate Notes and $75,000,000 in 14% Debentures, the proceeds from which were used by the Company to retire its commercial paper and a portion of its interest rate swaps (see Note 5). The Company retained $105,000,000 notional principal amount of interest rate swaps to hedge a portion of its interest rate exposure on the Floating Rate Notes. For the year ended December 31, 1994 the Company recorded an extraordinary loss on debt extinguishment of $9,855,000 to retire a portion of its interest rate swaps. The Company recorded a charge for uncovered swaps of $3,125,000 in the third quarter of 1994 relating to swaps which no longer served as hedges. This charge has been reclassified as an extraordinary loss on debt extinguishment in the results for the year ended December 31, 1994 in conjunction with the retirement of a portion of the Company's swaps. As discussed in Note 5, the annualized net payment relating to interest rate swaps outstanding at December 31, 1994 was $4,284,000. This amount may change in 1995 and subsequent years as the floating rates receivable under the Company's swaps are periodically reset. As discussed in Note 5, the Company terminated its commercial paper program in December, 1994. During the years ended December 31, 1994, 1993 and 1992, interest paid on the Current Coupon Convertible Debentures was $17,053,000, $17,053,000 and $17,209,000, respectively. The decrease from 1992 to 1993 is a result of the repurchase of a portion of such convertible debentures in 1992. Coupon payments on outstanding Current Coupon Convertible Debentures are made annually on December 31. The interest rate payable for 1994 on the $213,170,000 Current Coupon Convertible Debentures outstanding as of December 31, 1994 was 8% per annum. Effective January 1, 1995 the rate payable increased to 13% per annum through December 31, 2000. As a result of this increase in rate, the Company's annual disbursement for interest on these debentures, assuming that all such debentures outstanding on December 31, 1994 remain outstanding, will increase by $10,658,500 for 1995 and each subsequent year through the year 2000. In December 1994 the Company issued $150,000,000 Floating Rate Notes and $75,000,000 14% Debentures and warrants ("Warrants") and stock appreciation rights ("SARs") resulting in net proceeds of $212,522,000. These net proceeds were used to retire the Company's commercial paper and certain interest rate swap agreements. The first interest payment dates for the Floating Rate Notes and 14% Debentures are March 1 and June 2, 1995, respectively (see Note 5); accordingly, no interest was paid on this debt during 1994. Combined net cash flow provided by operating and investing activities during 1994 was $71,529,000, from which the Company paid $24,869,000 in dividends. The balance was applied by the Company to reduce short term debt. In order to maintain its qualification as a real estate investment trust (a "REIT") under the Internal Revenue Code of 1986, the Company is obligated to distribute to its stockholders at least 95% of its annual net income as computed for tax purposes. Through 1992, the Company had distributed to its stockholders substantially all of its annual cash flow in excess of interest and operating expenses, reserves and investments, resulting in a substantial return of capital to stockholders. Through December 31, 1994, cumulative distributions paid of $14.85 per share included a cumulative return of capital of $5.12 per share. Distributions are made in April, July, October and December of each year. The Company is the beneficiary of standby irrevocable letters of credit, subject to specified reductions, which, among other things, provide support for the Borrower's payment of Base Interest (as defined) on the Loan. Subject to certain conditions, the Borrower is required to maintain in effect similar letters of credit or to pledge collateral with a fair market value equal to the required amount of such letters of credit, until the Equity Conversion Date. During 1994 the level at which such letters of credit or other collateral were required to be F-25 maintained was $200 million. On January 1, 1995, the required level of this support decreased from $200 million to approximately $70 million and on April 1, 1995 will decrease to $50 million which is the minimum level that must be maintained through the Equity Conversion Date unless Net Operating Income (as defined) of the Property for any year exceeds $150 million and the Borrower has delivered to the Company an Accountant's Certificate (as defined) stating that no deficits in Net Cash Flow (as defined) of the Property for any subsequent year are forecasted. If an event of default were to occur under the Loan and the Loan were to be accelerated, the Company would be entitled to make drawings under the letters of credit. The Company has executed non-disturbance agreements with tenants that occupy at least a full floor in any of the buildings comprising a part of the Property and certain other tenants upon request. Such agreements provide that in the event of a foreclosure of the Loan, such tenant's possession of space within the Property will not be disturbed so long as such tenant is in compliance with the terms of its lease. In addition, certain of these tenants, under their leases, may offset fixed rent otherwise payable to the Borrower (up to specified maximum amounts) in the event that the Borrower has failed to pay for certain alterations to the leased property as provided for in such tenants' leases. In the event the aggregate amount that all such tenants may offset (the "Rent Offset Amount") exceeds $37.5 million the Borrower is required to maintain credit support facilities to provide additional security in an amount equal to at least 50% of the excess. As of December 31, 1994, the Company had executed seven rent offset agreements with tenants. The total Rent Offset Amount at such date was $39,314,000, and accordingly $907,000 had as of that date been placed in a rent offset escrow account. As of January 31, 1995 the Rent Offset Amount has decreased to below $37.5 million and, accordingly, as of such date, the Borrower is not required to maintain credit support facilities for these Rent Offsets. RESULTS OF OPERATIONS - THE COMPANY The Company's principal source of income during each of the years ended December 31, 1994, 1993 and 1992 was loan interest income recognized on the Loan. Loan interest income exceeded loan interest received in each of those years by approximately $3.2 million, $4.8 million and $6.2 million, respectively. The difference in each year is attributable partially to the amortization of original issue discount applicable to the Loan and partially to the recognition of interest income on the Loan according to the effective interest method by which interest is calculated on the basis of the average yield on the notes evidencing the Loan through the Equity Conversion Date. Loan interest income accounted for 99.5%, 95.4% and 88.1% of total revenues during the years ended December 31, 1994, 1993 and 1992, respectively. Portfolio income earned in 1994 was $553,000 or 0.5% of total revenues. In 1993 and 1992, portfolio income accounted for 4.6% and 11.8% of total revenues, respectively. The decline of $4,624,000 in portfolio income from 1993 to 1994 is a result of sales and maturities of portfolio securities as discussed above. The Company liquidated its portfolio of investment securities during 1993 and 1994; accordingly, the Company will receive no portfolio income in 1995. Interest expense on the Current Coupon Convertible Debentures during the years ended December 31, 1994, 1993 and 1992 was $22,478,000, $22,020,000 and $21,793,000, respectively. The yearly increases are attributable to the recognition of interest expense according to the effective interest method by which interest is calculated on the basis of the average interest expense on the Current Coupon Convertible Debentures through the maturity date, December 31, 2000. Interest expense on Zero Coupon Convertible Debentures during the years ended December 31, 1994, 1993 and 1992 was $30,320,000, $27,507,000 and $24,956,000, respectively. The increase of $2,813,000 or 10.2% from 1993 to 1994 was a result of accruals of interest on the increasing accretion of the principal amount of the Zero Coupon Convertible Debentures. Such accruals of interest grow at the annual rate of 10.2%. F-26 Interest expense on 14% Debentures and Floating Rate Notes (which were issued on December 29, 1994) for the year ended December 31, 1994 was $217,000. Interest expense on commercial paper, bank loan and other for each of the years ended December 31, 1994 1993 and 1992 was $24,486,000, $28,816,000 and $34,050,000, respectively. The decline of $4,330,000 in such interest expense from 1993 to 1994 principally reflects a combination of lower average commercial paper borrowings outstanding during the year, the repayment of bank loans in 1993, and the lower cost of servicing interest rate swaps due to higher variable interest rates received on certain swaps. These savings were partially offset by the higher cost of commercial paper due to higher interest rates. Combined interest expense on all debt totaled $77,501,000, $78,343,000 and $80,799,000 for each of the years ending December 31, 1994, 1993 and 1992, respectively. These amounts accounted for 90.8%, 94.6% and 94.2% of total expenses in each of the respective years. General and administrative expenses for the years ended December 31, 1994, 1993 and 1992 were $4,170,000, $3,728,000 and $4,299,000, respectively. The increase of $442,000 in general and administrative expenses from 1993 to 1994 is principally due to increased financial advisory fees. During the year ended December 31, 1994 the Company incurred $1,942,000 of expenses in connection with its evaluation of alternative financings. During the years ended December 31, 1994 and 1993 the Company recognized non- recurring income of $31,000 and $8,593,000, respectively, consisting of gains on sales of portfolio securities. In connection with the Company's retirement of commercial paper borrowings in 1993 and 1994, the Company exchanged payments with certain counterparties to retire all of the Asset Swaps and certain of the Liability Swaps in 1994 and made payments to certain counterparties to reduce the duration of certain Liability Swaps in 1993 which thereby reduced the Company's net swap liability. The Company recorded extraordinary losses of $9,855,000 and $3,451,000 for the years ended December 31, 1994 and 1993, respectively, as a result of these transactions. The 1993 payments were made pursuant to agreements between the Company and certain of its lenders whereby the Company had agreed to apply a portion of the proceeds from the issuance of common stock (see Note 5). The Company recognized an extraordinary gain of $2,537,000 in 1992 in connection with extinguishment of debt. The extraordinary gain was the result of repurchases of Current Coupon Convertible Debentures made at discounts under carrying value. Carrying value of the Current Coupon Convertible Debentures includes interest which has been accrued at the effective annual interest rate of 9.23%, the average yield to the maturity date. The average yield is computed, using the effective interest method, by combining the differing coupon rates on the Current Coupon Convertible Debentures. There have been no repurchases of convertible debentures since the first quarter of 1992. Net income during the years ended December 31, 1994, 1993 and 1992 was $15,143,000, $35,926,000 and $39,148,000 reflecting the matters discussed above. F-27 THE PROPERTY The financial information and analysis included in the following discussions of the "Financial Condition and Outlook - The Property", "Results of Operations - The Property", and "Cash Flow - The Property" have been furnished to the Company by the Borrower. FINANCIAL CONDITION AND OUTLOOK - THE PROPERTY For the year ended December 31, 1994, the Property experienced a net cash outflow of $139.4 million consisting of an operating cash deficit of $41.7 million (including interest payments of $105.5 million to the Company), a mortgage recording tax payment of $34.5 million, and disbursements totaling $63.2 million for tenant improvements, leasing commissions and capital improvements. This amount compared with a net cash outflow of $61.4 million for the year ended December 31,1993, which was comprised of a cash outflow from operations of $17.7 million (including interest payments of $103.5 million to the Company) and expenditures aggregating $43.7 million for capital and leasing disbursements. These cash outflows brought the cumulative cash flow shortfall to $572.6 million at December 31, 1994. To date, these shortfalls have been funded by capital contributions ($185.2 million), non-interest-bearing advances from an affiliate ($260.7 million), and loans, excluding accrued interest, from the Borrower's partners ($126.7 million). Note 4 of the Notes to the audited combined Balance Sheets of the partnerships comprising the Borrower as of December 31, 1994 and 1993 and the related Combined Statements of Operations and Partners' Capital Deficiency and Cash Flows for each of the three years in the period ended December 31, 1994 which are reproduced at pages F-36 through F-47 of the Company's Annual Report on Form 10-K for the year ended December 31, 1994 states that "the Partnerships [comprising the Borrower] have experienced significant cash shortfalls and, based upon management's projections, will continue to experience significant cash shortfalls through the Equity Conversion Date. These cash shortfalls have occurred primarily as a result of changes in the real estate market from levels anticipated when the Loan was initiated. These factors include lower rental rates, greater rent abatements granted to tenants upon initiation or renewal of lease commitments, and higher other expenditures associated with obtaining new and renewal tenants. These cash flow conditions have made it unlikely that the Partnerships will be able to fulfill all financial commitments to RCPI [the Company] for the foreseeable future from their own resources. The Partnerships do not have a commitment from the Partners [of the] Partnerships comprising the Borrower] to fund these cash shortfalls. These conditions raise substantial doubt about the Partnerships' ability to continue as going concerns. The combined financial statements of the Partnerships do not contain any adjustments to reflect the possible future effects from the outcome of this uncertainty." Management of the Company believes that as of December 31, 1994 the fair value of the collateral supporting the Loan, (the sum of (a) the value of the Property as appraised as of December 31, 1994 and (b) the value of the additional collateral required to be maintained by the Borrower as of that date and thereafter) approximates the value at which the Loan is carried on the Company's Balance Sheet. If the parents and affiliates of the Borrower continue to support the Borrower through the funding of cash shortfalls as they have through December 31, 1994, although not legally obligated to do so, the Borrower will be able to satisfy its obligations under the Loan Agreement. If the Borrower were to default on its obligations under the Loan Agreement, there could be a significant change in the nature of the Company's operations. If the Company were to foreclose on F-28 the Property and related collateral and acquire title to the Property, it would be required to operate the Property and to fund cash shortfalls of the Property. If the Company were to acquire title to the Property, management of the Company believes, that the value of the Property (appraised at approximately $1.25 billion at December 31, 1994) would be significantly in excess of the Company's obligations (approximately $760 million at December 31, 1994), and that therefore the Company should be able to obtain sufficient financing to fund cash shortfalls of the Property as well as to satisfy the Company's existing obligations until such time (1996) as the Company, on the basis of the projection contained in the December 31, 1994 appraisal, anticipates that the Property will become cash flow positive. Such financing would be subject to the consent of the holders of the Floating Rate Notes and 14% Debentures. However, because of the Company's inability to estimate when, if ever, a potential foreclosure would occur (if the Borrower were to default on its obligations) and what prevailing conditions in the New York real estate market and financial markets might be at such time, no assurance can be given that the Company would have access to sufficient financial resources to fund cash shortfalls of the Property and to meet its other obligations. As required by the Loan Agreement the Borrower has furnished to the Company a certificate signed by the chief accounting officer of RGI stating that, to the best of such officer's knowledge, after reasonable investigation, the Borrower has observed or performed all of it covenants in the Loan Agreement for the year ended December 31, 1994 and that such officer has obtained no knowledge of any Default or Event of Default. Such covenants include the covenant in the Loan Agreement prohibiting the Borrower from permitting Net Operating Income (as defined) for any calendar year to be less than 80% of the Base Interest payable for such year. As reported in the Company's Quarterly Report on Form 10-Q for the quarter ended September 30, 1994 the Borrower had advised the Company in the Fall of 1994 that the Borrower had anticipated that the Borrower would breach this covenant for calendar 1994. As a consequence of the Company's recording on September 6, 1994, at the expense of the Borrower, the Company's $1.25 billion unrecorded mortgage on the Property this covenant and the covenants in the Loan Agreement prohibiting the Borrower from making distributions in any calendar year to its partners in excess of Net Cash Flow (as defined) for such year, from making certain investments and from incurring certain contingent liabilities will be deemed terminated and to be of no further force and effect one year after the date of such recordation. F-29 RESULTS OF OPERATIONS - THE PROPERTY The operating results of the Property during the years ended December 31, 1994, 1993, and 1992 are presented in summary form in the table below:
Years Ended December 31, (In thousands) 1994 1993 1992 -------- -------- ------- Gross revenue: Fixed and percentage rents $156,314 $148,960 $150,197 Operating and real estate tax escalation 42,201 55,643 57,029 Consideration revenues 3,443 3,227 3,295 Sales and service revenues 18,893 18,767 18,479 -------- -------- --------- 220,851 226,597 229,000 -------- -------- --------- Operating Expenses: Real estate taxes 40,884 44,336 44,481 Utilities 16,386 16,553 16,360 Maintenance and engineering 32,062 33,657 30,509 Other operating expenses 39,839 40,639 40,792 Depreciation and amortization 25,761 21,821 19,834 Management fee 2,636 2,579 2,491 General and administrative 4,322 5,871 6,231 -------- -------- --------- 161,890 165,456 160,698 -------- -------- --------- Operating income before interest 58,961 61,141 68,302 Interest expense, net 117,328 114,599 114,040 -------- -------- --------- Net Loss ($58,367) ($53,458) ($45,738) -------- -------- --------- -------- -------- ---------
The gross revenue of the Property for the year ended December 31, 1994 decreased by $5.7 million or 2.6% when compared to the prior year. This decrease in gross revenue was a result of lower operating and real estate tax escalation revenue. This decrease was offset partially by increased fixed rent related to new leases and lease renewals, higher consideration revenue, and increased sales and service revenues. Consideration revenue consists principally of one-time payments negotiated by tenants for the right to cancel their leases prior to scheduled termination dates. The decrease in operating and real estate tax escalation revenue reflects the establishment of new escalation base years in connection with new leases and lease renewals. To the extent to which the revenue decrease was attributable to reduced escalation income, this factor was offset in part by lower real estate tax costs recorded in the operating expense category. The following table shows the occupancy rates for the Property at specified dates: March 31, 1993 - 93.9% March 31, 1994 - 95.6% June 30, 1993 - 93.9% June 30, 1994 - 96.1% September 30, 1993 - 94.1% October 1, 1994 - 90.4% December 31, 1993 - 94.6% December 31, 1994 - 90.2% At year end 1994 the occupancy rate was 90.2%. This occupancy level was attributable to a total of 608,000 square feet of vacant space resulting in large measure from the significant turnover of leases which expired on F-30 September 30, 1994. In addition, a total of 682,000 square feet will become available during 1995. Releasing the space will represent a significant challenge which may involve ongoing high levels of expenditures for tenant work and concessions. During the year ended December 31, 1994, 266 leases covering approximately 2 million square feet of office, retail, and storage space were concluded and took effect at net effective annual fixed rents averaging $31.98 per square foot. The net effective annual rental rates for office space, which accounted for approximately 1.9 million square feet of the total area leased, averaged $30.78 per square foot. This amount compared to a net effective rental rate of $31.54 per square foot for office space leases signed during 1993. Net effective annual rental rates reflect the present value of base rental payments less the current and future expenditures for tenant improvements, concessions, and brokerage commissions. The gross rental rates for the office space leases that were concluded and took effect during the year ended December 31, 1994 averaged $40.82 per square foot (compared with $38.01 per square foot for office space leases signed during 1993). The actual rate at which each lease was executed depended upon its location within the Property, type of space leased, length of lease term, and other factors. Of the approximately 1.9 million square feet of office space leased during the year ended December 31, 1994, approximately 1.4 million square feet represented renewals of existing tenants at an average gross rental rate of $40.14 per square foot. The combined fixed rent and escalation payments prior to lease renewal for these renewing tenants had averaged $36.90 per square foot. The following table shows selected lease expiration information for the Property as of January 1, 1995 and has been furnished to the Company by the Borrower. Lease turnover during the remaining term of the Loan could offer an opportunity to increase the revenue of the Property or might have a negative impact on the Property's revenue. Actual renewal rents and rental income will be affected significantly by market conditions at the time and by the terms at which the Borrower can then lease space.
Number of Percentage of Year leases expiring Area (sq.ft.) total rentable area ---- --------------- ------------- ------------------- 1995 142 682,390 11.0 1996 66 120,680 1.9 1997 43 79,746 1.3 1998 49 186,727 3.0 1999 60 169,697 2.7 2000 21 295,715 4.8 2001 13 36,584 0.6 2002 22 133,742 2.2 2003 24 84,618 1.4 2004 68 383,807 6.2 2005 11 252,245 4.1 2006 22 141,505 2.3 2007 8 57,080 .9 2008 10 163,931 2.7 2009 45 431,711 7.0 2010-2015 14 744,347 12.0 2016-2020 2 100,388 1.6 2022 3 1,283,576 20.7 Space under temporary occupancy N/A 145,569 2.4 Vacant space N/A 607,928 9.8 Space occupied by the Borrower N/A 87,513 1.4 --- --------- ------ 623 6,189,499 100.0% --- --------- ------ --- --------- ------
F-31 During the year ended December 31, 1994, the operating expenses of the Property decreased by $3.6 million or 2% from the prior year. This decrease was a result of lower real estate taxes ($3.5 million), decreased maintenance and engineering expenses ($1.6 million), reduced general and administrative expense ($1.5 million), and lower other operating expenses ($.8 million). These decreases were offset partially by increased charges for depreciation and amortization ($3.9 million). Lower real estate taxes resulted from a decrease in both the assessed valuation of the Property and New York City property tax rates. The lower maintenance and engineering expenses were primarily a result of a reduction in elevator and engineering labor costs, decreased heating, ventilation and air-conditioning maintenance costs, and lower building facade cleaning costs. The decrease in general and administrative expense was attributable to a reduction in the required provision for doubtful accounts. Other operating expenses decreased as a result of reduced cleaning costs and lower costs related to sales of services, offset partially by an increase in protection services. Depreciation and amortization charges increased as a result of a higher fixed asset base which included expenditures required by the Loan Agreement, other capital expenditures, and improvements to tenant spaces necessitated by lease commitments. The net result of the lower revenue offset partially by reduced operating expenses was a decrease of $2.2 million or 4% in operating income before interest for the year ended December 31, 1994. Interest expense, net during the year ended December 31, 1994 increased $2.7 million, or 2%, as a result of scheduled increases in interest payments on the Loan together with increased interest expense as a result of additional loans made to the Borrower by its partners in order to fund certain of the Property's capital improvements. In addition, interest expense increased as a result of the amortization of the mortgage recording tax. The gross revenue of the Property for the year ended December 31, 1993 decreased by $2.4 million or 1% when compared to the prior year. This decrease in gross revenue was primarily a result of lower fixed and percentage rents and lower operating and real estate tax escalation revenue. These combined decreases principally reflected lease renewals at lower base rents and lower average occupancy levels at the Property. The operating expenses of the Property increased by $4.8 million or 3% during the year ended December 31, 1993 when compared to the prior year. This increase was principally a result of increased maintenance and engineering costs ($3.1 million), increased depreciation and amortization ($2 million), and higher utility costs ($.2 million). These increases were offset partially by lower general and administrative expense ($.4 million) and decreased other operating expenses ($.2 million). CASH FLOW-THE PROPERTY For the year ended December 31, 1994, the Property experienced an operating cash deficit of $41.7 million. During the year ended December 31,1993, the operating cash deficit amounted to $17.7 million. These cash flow deficits reflect the payment of interest to the Company totaling $105.5 million and $103.5 million, respectively, during the years ended December 31, 1994 and 1993. The increase of $24 million in the operating cash deficit for year ended December 31, 1994 compared with the similar period during 1993 reflected an increase in lease incentives associated with new and renewal tenants ($10.6 million), higher levels of net working capital ($9.2 million), lower operating income before interest ($2.2 million), and increased interest paid to the Company ($2 million). F-32 On September 6, 1994, the Company perfected its lien by recording the previously unrecorded portion of the Loan at the Borrower's expense. The mortgage recording tax totaled $34.5 million. The funds were loaned to the Borrower by an affiliate of the Borrower and are included in non-interest bearing advances at December 31, 1994. For the year ended December 31, 1992, the Property experienced an operating cash deficit of $18.3 million after payments of interest to the Company of $101.7 million. The lower operating cash deficit for 1992 compared with 1993 reflected lower levels of net working capital offset partially by lower operating income and increased interest paid to the Company. The Borrower also expended funds for capital improvements to the Property, tenant improvements, and leasing commissions as follows:
(In thousands) Years ended December 31, --------------------------------------- 1994 1993 1992 ------- ------- ------- Capital improvements $14,400 $27,300 $24,900 Tenant improvements 23,900 7,900 4,000 Leasing commissions (including legal fees) 24,900 8,500 2,400 ------- ------- ------- $63,200 $43,700 $31,300 ------- ------- ------- ------- ------- -------
The Loan Agreement provides for the establishment of loans for the cumulative portion of capital improvements made by the Borrower in excess of amounts specified in the Loan Agreement. The cumulative amounts of excess capital improvements totaled $126.7 million, $123 million, and $107.5 million at December 31, 1994, 1993, and 1992, respectively. These excess capital improvement loans are deemed to be made to the Borrower by its partners and bear interest at 80% of the prime rate (as defined), compounded quarterly. Interest charges on excess capital improvement loans are added to the loan principal at the end of each year. At December 31, 1994, 1993, and 1992 the amount of excess capital improvement loans (including accrued interest) totaled $160.7 million, $149.7 million, and $127.9 million, respectively. The results of operations of the Property as of December 31, 1994, 1993, and 1992 reflect non-cash interest charges of $7.3 million, $6.3 million, and $6.2 million, respectively, relating to interest on these excess capital improvement loans. Both the excess capital improvement loans and the non-interest bearing advances are subordinated to the Company's Loan; however, if, on the Equity Conversion Date, the Company exercises its option to convert the Loan into an equity interest in the partnership which will then own the Property, any outstanding loans for excess capital improvements (including accrued interest) will become the obligation of the Partnership. The Borrower is committed to expend significant funds for tenant improvements and leasing commissions in connection with certain leases. In order to renew and/or re-lease the available space during 1995, significant expenditures also could be required. Additionally, the Borrower has committed and may be required to commit to rent abatements in connection with the renewal and/or re-leasing of space. The letters of credit previously discussed under "Liquidity and Capital Resources-The Company", support the payment of Base Interest on the Loan in the event of cash flow shortfalls from the Property. On January 1, 1995, the level of this support decreased from $200 million to approximately $70 million and on April 1, 1995 will decrease to $50 million, which is the minimum level that must be maintained through the Equity Conversion Date unless Net Operating Income (as defined) of the Property for any year exceeds $150 million and the Borrower has delivered to the Company an Accountant's Certificate (as defined) stating that no deficits in Net Cash Flow (as defined) of the Property for any subsequent year are forecasted. F-33 APPRAISED VALUE - THE PROPERTY During 1994, the Company engaged Douglas Elliman Appraisal and Consulting Division ("Douglas Elliman"), an independent appraisal firm, to appraise the value assigned to the Property. Douglas Elliman, in a report dated January 11, 1995, concluded that, as of December 31, 1994, the value assigned to the various fee and leasehold interests comprising the Property, subject to existing leases, was $1.25 billion, an increase of $100 million from the value assigned in an appraisal conducted as of December 31, 1993. This increase in value is due primarily to a decrease in the real estate tax assessment and related real estate tax rate and the successful releasing of 500,000 square feet of space since the December 31, 1993 appraisal. During 1994 the Company also engaged The Weitzman Group, Inc. ("The Weitzman Group"), an independent real estate consulting firm, to review the Douglas Elliman report. On February 21, 1995 the Company received a review and concurrence report dated February 15, 1995 prepared by The Weitzman Group stating that, based upon the review described in such report, The Weitzman Group concurred with the Douglas Elliman estimate of the aggregate market value of the Property and that, in the opinion of The Weitzman Group, the aggregate market value estimated by Douglas Elliman does not vary by more than 5.0 percent from the aggregate market value The Weitzman Group would estimate in a full and complete appraisal report. The appraisal and the concurrence report are discussed in greater detail in Part I, Item 1 of the Company's Annual Report on Form 10-K. F-34 QUARTERLY STOCK INFORMATION
Price Range (Composite) - ------------------------------------------------------------------------------- 1994 1Q 2Q 3Q 4Q - ------------------------------------------------------------------------------- High $8 3/8 $5 7/8 $6 $5 3/4 Low $5 1/2 $5 1/8 $5 1/8 $3 3/4 - ------------------------------------------------------------------------------- 1993 1Q 2Q 3Q 4Q - ------------------------------------------------------------------------------- High $10 1/8 $8 3/4 $7 1/2 $7 1/4 Low $6 7/8 $6 3/4 $6 7/8 $6 1/2
F-35 Report of Ernst & Young LLP, Independent Auditors The Partners of Rockefeller Center Properties and RCP Associates We have audited the accompanying combined balance sheets of Rockefeller Center Properties and RCP Associates (collectively, the Partnerships) as of December 31, 1994 and 1993, and the related combined statements of operations and partners' capital deficiency and cash flows for each of the three years in the period ended December 31, 1994. These financial statements are the responsibility of the Partnerships' management. Our responsibility is to express an opinion on these combined financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe our audits provide a reasonable basis for our opinion. In our opinion, the combined financial statements referred to above present fairly, in all material respects, the combined financial position of Rockefeller Center Properties and RCP Associates at December 31, 1994 and 1993, and the combined results of their operations and their cash flows for each of the three years in the period ended December 31, 1994 in conformity with generally accepted accounting principles. As shown in the financial statements, the Partnerships have experienced net losses, have a substantial Partners' capital deficiency and, as more fully described in Note 4 to the financial statements, have experienced and will continue to experience significant cash shortfalls which raise substantial doubt about their ability to continue as going concerns. The 1994 financial statements do not include any adjustments to reflect the possible future effects on the recoverability and classification of assets or the amounts and classification of liabilities that may result from the outcome of this uncertainty. /s/ ERNST & YOUNG LLP New York, New York February 3, 1995 F-36 ROCKEFELLER CENTER PROPERTIES AND RCP ASSOCIATES COMBINED BALANCE SHEETS DECEMBER 31, 1994 AND 1993 (In thousands)
ASSETS 1994 1993 ---- ---- Current assets: Cash $ 3 $ 4 Accounts receivable, less allowance for doubtful accounts of $2,833 and $4,193 4,027 4,343 Due from RGI affiliates 1,286 60 Other current assets 856 622 ---------- ---------- 6,172 5,029 Fixed assets, at cost: Land 402,419 402,419 Buildings 499,226 487,378 Furniture, fixtures and equipment 26,422 23,847 ---------- ---------- 928,067 913,644 Less accumulated depreciation (214,035) (198,675) ---------- ---------- 714,032 714,969 Deferred renting expenses, less accumulated amortization of $20,659 and $44,998 93,735 37,149 Lease incentives 31,327 13,949 Deferred financing expenses, less accumulated amortization of $1,285 and $6,169 30,094 235 Other assets 2,960 2,699 ---------- ---------- Total assets $ 878,320 $ 774,030 ---------- ---------- ---------- ---------- LIABILITIES AND PARTNERS' CAPITAL DEFICIENCY Current liabilities: Accounts payable and accrued expenses $ 26,848 $ 23,617 Due to RGI affiliates 273,778 128,653 ---------- ---------- 300,626 152,270 Mortgage payable, net of unamortized original issue discount of $36,101 and $40,639 1,263,899 1,259,361 Loans payable to RGI 160,715 149,654 Non-current mortgage interest payable 36,321 37,619 Partners' capital deficiency (883,241) (824,874) ---------- ---------- Total liabilities and partners' capital deficiency $ 878,320 $ 774,030 ---------- ---------- ---------- ----------
See accompanying notes. F-37 ROCKEFELLER CENTER PROPERTIES AND RCP ASSOCIATES COMBINED STATEMENTS OF OPERATIONS AND PARTNERS' CAPITAL DEFICIENCY YEARS ENDED DECEMBER 31, 1994, 1993, AND 1992 (In thousands)
1994 1993 1992 ---- ---- ---- Rental revenue: Fixed and percentage $159,757 $152,187 $153,492 Operating and real estate tax escalations 42,201 55,643 57,029 -------- -------- -------- Total rental revenue 201,958 207,830 210,521 Sales of services 18,893 18,767 18,479 -------- -------- -------- Gross revenues 220,851 226,597 229,000 -------- -------- -------- Real estate taxes 40,884 44,336 44,481 Maintenance and engineering 32,062 33,657 30,509 Other operating expenses 26,025 26,026 25,208 Utilities 16,386 16,553 16,360 Cost of service sales 13,060 13,919 14,884 Depreciation and amortization 25,761 21,821 19,834 General and administrative 4,322 5,871 6,231 Management fees 2,636 2,579 2,491 Ground rent 754 694 700 -------- -------- -------- 161,890 165,456 160,698 -------- -------- -------- Operating profit 58,961 61,141 68,302 Interest expense 117,328 114,599 114,040 -------- -------- -------- Net loss (58,367) (53,458) (45,738) Partners' capital deficiency, beginning of year (824,874) (771,416) (725,678) -------- -------- -------- Partners' capital deficiency, end of year ($883,241) ($824,874) ($771,416) -------- -------- -------- -------- -------- --------
See accompanying notes. F-38 ROCKEFELLER CENTER PROPERTIES AND RCP ASSOCIATES COMBINED STATEMENTS OF CASH FLOWS YEARS ENDED DECEMBER 31, 1994, 1993, AND 1992 (In thousands)
1994 1993 1992 ---- ---- ---- CASH FLOWS FROM OPERATING ACTIVITIES: Net loss ($58,367) ($53,458) ($45,738) Adjustments to reconcile net loss to net cash used in operating activities: Depreciation and amortization 25,761 21,821 19,834 Non-current portion of interest expense 6,016 6,893 8,538 Amortization of original issue discount and deferred financing expenses 5,827 4,176 3,839 Lease incentives, net (17,378) (6,826) (2,738) Changes in certain assets and liabilities (3,531) 9,671 (2,051) -------- -------- -------- NET CASH USED IN OPERATING ACTIVITIES (41,672) (17,723) (18,316) -------- -------- -------- CASH FLOWS FROM INVESTING ACTIVITIES: Capital expenditures (14,423) (27,317) (24,890) Deferred renting expenses paid (48,737) (16,358) (6,385) -------- -------- -------- NET CASH USED IN INVESTING ACTIVITIES (63,160) (43,675) (31,275) -------- -------- -------- CASH FLOWS FROM FINANCING ACTIVITIES: Cash received from RGI affiliates, principally relating to cash management system, net 135,601 45,938 44,076 Loans from RGI 3,747 15,457 5,515 Deferred financing expenses paid (34,517) -- -- -------- -------- -------- NET CASH PROVIDED BY FINANCING ACTIVITIES 104,831 61,395 49,591 -------- -------- -------- NET CHANGE IN CASH (1) (3) -- CASH, BEGINNING OF YEAR 4 7 7 -------- -------- -------- CASH, END OF YEAR $3 $4 $7 -------- -------- -------- -------- -------- -------- Supplemental disclosure of cash flow information: Cash paid during the year for interest $105,495 $103,545 $101,660 -------- -------- -------- -------- -------- --------
See accompanying notes. F-39 ROCKEFELLER CENTER PROPERTIES AND RCP ASSOCIATES NOTES TO COMBINED FINANCIAL STATEMENTS Years ended December 31, 1994, 1993 and 1992 1. BASIS OF PRESENTATION The accompanying financial statements include the combined accounts of two partnerships, Rockefeller Center Properties (RCP) and RCP Associates (Associates) (collectively, the Partnerships), in which Rockefeller Group, Inc. (RGI) and one of its subsidiaries, Radio City Music Hall Productions, Inc. (RCMHPI), are the sole partners (the Partners). The Partnerships together own the real property interests constituting most of the land and buildings in the landmarked portion of Rockefeller Center (the Property). Transactions between the Partnerships have been eliminated in the accompanying combined financial statements. 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES DEPRECIATION AND AMORTIZATION - Buildings and improvements are depreciated using the straight-line method over their useful lives, which range from 15 to 50 years. Capital replacements are depreciated using the straight-line method over their estimated useful lives, which range from 3 to 15 years. Deferred renting expenses represent expenditures associated with obtaining new tenants and preparing the premises for occupancy. These costs are amortized on a straight-line basis over the related lease terms. Deferred financing expenses at December 31, 1994 represent mortgage recording taxes paid (see Note 4), net of an accrued mortgage recording tax credit. The cost is being amortized over the initial term of the RCPI mortgage loan which extends until December 31, 2000 using the interest method. LEASE INCENTIVES - Lease incentives represent primarily the value of free rental periods granted to tenants upon initiation or renewal of lease commitments. Once rental payments begin, the lease incentives are reduced over the remainder of the lease term. INTEREST EXPENSE - Interest expense on the Rockefeller Center Properties, Inc. Mortgage Loan (see Note 3) is recognized based on the average yield of the mortgage notes through December 31, 2000 (the Equity Conversion Date). The average yield combines the differing coupon rates of interest (Base Interest) with the amortization (using the interest method) of the original issue discount. INCOME TAXES - The net income or loss of the Partnerships is included in determining the net income of their partners which have the responsibility to pay any related income taxes. F-40 ROCKEFELLER CENTER PROPERTIES AND RCP ASSOCIATES NOTES TO COMBINED FINANCIAL STATEMENTS Years ended December 31, 1994, 1993 and 1992 3. RCPI MORTGAGE LOAN Rockefeller Center Properties, Inc. (RCPI), a real estate investment trust (REIT), used the net proceeds of its initial public offerings to make a $1.3 billion participating mortgage loan (the Loan) to the Partnerships. The net proceeds of the offerings totaled $1,233,752,000 and were loaned to the Partnerships on September 19, 1985, thus creating original issue discount of $66,248,000 with respect to the Loan. Prior to the Equity Conversion Date, the Loan provides for specified quarterly Base Interest payments during its remaining term with annualized coupon rates increasing from 7.82% in 1992 to 8.43% in 2000. The combination of the varying rates of Base Interest with the amortization of the original issue discount results in an effective annual interest rate approximating 8.51% over the term of the Loan. Through the year 2000, the Loan provides for Additional Interest for each year in which gross revenues (as defined) of the Property exceed $312.5 million. Additional Interest is to accrue in an amount equal to the sum of (i) 31.5% of the excess over $312.5 million plus (ii) $42.95 million. Through December 31, 1994, no Additional Interest has been accrued. In accordance with an Internal Revenue Service private letter ruling, effective as of October 26, 1990, the formula used to calculate additional interest was revised. The revised formula is intended to provide the REIT with the same amount of additional interest as it would have received had the NBC transaction (see Note 5) been a gross (as opposed to a net) rent transaction. Under the revised formula for determination of additional interest, actual gross revenues are increased by the amount of any real estate taxes and operating expenses payable by a tenant to a third party (e.g., to New York City or the provider of the services) instead of to the Partnerships. Gross revenues are also increased to include any rent credits NBC receives for capital improvements which qualify toward the Partnerships' obligation to make $197,618,000 of capital improvements to the Property. Under the revised formula, it is estimated that 1994 gross revenues for the purpose of computing additional interest would have been $229.2 million. In connection with the Loan, RCPI has been granted an option, exercisable on the Equity Conversion Date (the Equity Option), to convert the outstanding principal amount of the Loan into a 71.5% equity interest in the partnership (representing the combination of RCP and Associates) then owning the Property. There is no scheduled amortization of the Loan prior to the Equity Conversion Date. F-41 ROCKEFELLER CENTER PROPERTIES AND RCP ASSOCIATES NOTES TO COMBINED FINANCIAL STATEMENTS Years ended December 31, 1994, 1993 and 1992 In the event that the Equity Option is not exercised, the Loan will mature in a single installment on December 31, 2007, will bear interest (after 2000) equal to the London Interbank Offered Rate (LIBOR) plus a spread of as much as 1%, and can be prepaid at the option of the Partnerships (or successor partnership) at 100% of its principal amount plus accrued interest, if any. As of December 31, 1994, the Loan is secured by leasehold mortgages in the aggregate amount of approximately $1.3 billion. Through September 6, 1994, the Loan was secured by a recorded mortgage in the amount of approximately $44.8 million and an unrecorded mortgage in the amount of approximately $1,255.2 million. The Loan is further secured by a recorded Assignment of Rents pursuant to which the Partnerships have assigned to RCPI, as security for repayment of the Loan, the Partnerships' rights to collect certain rents with respect to the Property. The Loan Agreement requires the Partnerships to maintain a standby, irrevocable letter of credit, or to deposit with a trustee either cash or specified types of collateral of an equivalent fair market value (collectively, "Security"). This Security supports the Partnerships' payment of Base Interest due on the Loan. Letters of credit in favor of RCPI have been obtained by RGI to satisfy this requirement. During 1992, RCPI entered into a Stipulation and Agreement of Settlement in settlement of a class action suit brought against RCPI. Under the terms of this agreement, the Security was increased from $126 million to $200 million until December 31, 1994. On January 1, 1995, the level of Security reverted to the level originally required to be maintained under the Loan Agreement, which is $70.4 million. This amount will be further reduced to $50 million on April 1, 1995. As additional security for the Loan, 100,000 square feet of development rights associated with Rockefeller Center were added to the Loan. The Loan Agreement also contains covenants with respect to the operation and maintenance of the Property and limitations on the Partnerships' right to dispose of the Property and incur debt or liens. As noted above, the Loan has many unusual characteristics including the lack of principal amortization, a variable interest rate, and the Property's unique commercial, historic, and aesthetic attributes. While in the past the Partnerships have estimated that the Loan's carrying value approximated its fair value, continued volatility in both interest rates and the New York commercial real estate market have resulted in a conclusion by the Partnerships that only an investment banker, appraiser, or similar expert could make an appropriate evaluation at this time. The Partnerships have declined to incur the significant expense for an appraisal. Accordingly, it is not practicable at this time for the Partnerships to estimate the fair value of the Loan. F-42 ROCKEFELLER CENTER PROPERTIES AND RCP ASSOCIATES NOTES TO COMBINED FINANCIAL STATEMENTS Years ended December 31, 1994, 1993 and 1992 Certain leases grant tenants the right to reduce or offset rent payable if the Partnerships breach certain obligations under the leases, including the funding of tenant improvements and other items. An amendment to the Loan agreement dated February 22, 1994 requires RGI to provide additional collateral security in connection with these leases. The minimum security amount, which at any time is equal to 50% of the excess of the tenants' right to offset rent over $37.5 million, is required to be placed in an escrow account. At December 31, 1994, these obligations totaled $39.3 million, resulting in a minimum security amount of $907,000. 4. FINANCIAL CONDITION AND OUTLOOK The Partnerships have experienced significant cash shortfalls and, based upon management's projections, will continue to experience significant cash shortfalls through the Equity Conversion Date. These cash shortfalls have occurred primarily as a result of changes in the real estate market from levels anticipated when the Loan was initiated. These factors include lower rental rates, greater rent abatements granted to tenants upon initiation or renewal of lease commitments, and higher other expenditures associated with obtaining new and renewal tenants. These cash flow conditions have made it unlikely that the Partnerships will be able to fulfill all financial commitments to RCPI for the foreseeable future from their own resources. The Partnerships do not have a commitment from the Partners to fund these cash shortfalls. These conditions raise substantial doubt about the Partnerships' ability to continue as going concerns. The combined financial statements of the Partnerships do not contain any adjustments to reflect the possible future effects from the outcome of this uncertainty. On September 6, 1994, RCPI, citing material adverse changes with respect to the financial condition of the Partnerships, perfected their lien by recording the $1,255.2 million previously unrecorded portion of the Loan at the Partnerships' expense. The mortgage recording taxes totaled $34.5 million. Funds to pay these taxes were loaned to the Partnerships by RGI. 5. NBC TRANSACTION National Broadcasting Company, Inc. (NBC) leases approximately 1.3 million square feet of space in three Rockefeller Center buildings (the GE Building, the Studio Building, and the GE West Building). Under agreements signed in 1988, the NBC lease has been extended to the year 2022. Through 1997, NBC will continue to pay rent on the basis of its prior lease. The agreements, however, provide that, prior to 1997, NBC will have the right to directly pay a portion of the operating expenses and real estate taxes on its leased space and reduce its lease payments accordingly. F-43 ROCKEFELLER CENTER PROPERTIES AND RCP ASSOCIATES NOTES TO COMBINED FINANCIAL STATEMENTS Years ended December 31, 1994, 1993 and 1992 From 1997 to 2022, NBC will pay rent at fixed rates varying according to the types of space involved (such as office or studio) and location within the three buildings. This rent, which will increase by 15% in 2007 and again in 2017, has been determined on a "net" basis, that is, without including amounts normally payable with regard to real estate taxes and operating expenses. Further, NBC has options for one 10-year renewal period and one 9-year and five-month renewal period, at net rents determined according to then fair market rental value. At NBC's option, the first renewal period can be split into two renewal periods, the first of three years and the second of seven years. The agreements also grant to NBC options to lease, beginning in 1994, up to approximately 910,000 square feet of office space in the GE Building which is currently leased to other tenants. To date, NBC has exercised its right to lease 108,000 square feet at a fixed net rate, increasing by 15% in 2007 and again in 2017. The remaining 802,000 square feet will be offered to NBC for lease at then fair market net rental rates. The transaction was structured to accommodate arrangements between New York City and NBC for certain financial assistance in connection with the project. The three affected buildings were subjected to a condominium regime, and the NBC occupied areas were conveyed to the City's Industrial Development Agency (IDA) for nominal consideration. These areas were then leased back to the Partnerships at nominal rents, with NBC becoming a subtenant of the Partnerships. Upon the expiration of the period of City benefits, ownership will revert to the Partnerships. IDA ownership is a technical structuring required to effectuate the transaction and will have no economic effect upon the Partnerships. 6. RELATED PARTY TRANSACTIONS RGI and affiliates occupy approximately 2% of the total rentable space within the Property. The terms of the leases with RGI provide for an annual base rent of approximately $4,402,000. The Property includes Radio City Music Hall and the land on which it is situated. Radio City Music Hall is operated by an RGI affiliate which pays a nominal rent for this facility and is responsible for paying all costs (including real estate taxes) related to its operation. The Property includes a six-story parking garage. The garage is leased to Rockefeller Center Management Corporation (RCMC) for an annual base rent of approximately $2,300,000. Rental revenue in the accompanying combined statements of operations and partners' capital deficiency included $8,223,000, $7,778,000, and $7,712,000 earned during 1994, 1993, and 1992, respectively, under the terms of the above mentioned leases. In addition to the base rent, the rental revenue includes $1,521,000, $1,544,000, and $1,572,000 in 1994, 1993, and 1992, respectively, relating to their proportionate share of increases in certain costs and expenses of the Property. F-44 ROCKEFELLER CENTER PROPERTIES AND RCP ASSOCIATES NOTES TO COMBINED FINANCIAL STATEMENTS Years ended December 31, 1994, 1993 and 1992 Under the terms of a management agreement, RCMC provides management and administrative services for the Property. During 1994, 1993, and 1992, RCMC charged the Partnerships $2,636,000, $2,579,000, and $2,491,000, respectively, in management fees under the terms of this agreement. This management agreement also allows RCMC to receive commissions with respect to leases negotiated within the Property, including overrides when another broker is the procuring broker. During 1994, 1993, and 1992, RCMC earned $22,389,000, $2,888,000, and $1,563,000 in commissions for leases negotiated within the Property. Cushman & Wakefield, Inc., an RGI subsidiary, was paid $1,673,000, $571,000, and $138,000 in leasing commissions by the Partnerships during 1994, 1993, and 1992, respectively. Under the terms of a franchise agreement with RCMC (as agent for the Partnerships), Rockefeller Group Telecommunications Services, Inc., a subsidiary of RGI, is permitted to provide shared telecommunication services to tenants within the Property. No fees are paid to the Partnerships relating to the right to provide these services. The Partnerships have committed to pay for certain of the capital additions associated with providing these services up to an aggregate of $13,000,000. During 1994, 1993, and 1992, the cost of capital additions borne by the Partnerships approximated $1,153,000, $658,000, and $451,000, respectively. Total expenditures through December 31, 1994 approximated $9,588,000. The Partnerships participate in a cash management system under which their funds, together with the funds of other related companies, are managed by a subsidiary of RGI. At December 31, 1994, 1993, and 1992, the balances due to RGI affiliates include $269,475,000, $125,388,000, and $79,141,000, respectively, of interest-free overdrafts in the cash management system. Salaried employees of the Partnerships participate in the defined benefit pension plan maintained by RGI. Accordingly, the Partnerships were charged their proportionate share of RGI's pension cost which aggregated $574,000, $489,000, and $423,000 in 1994, 1993, and 1992, respectively. The hourly employees of the Partnerships are covered by multi-employer sponsored defined contribution plans. The contributions to these plans in 1994, 1993, and 1992 aggregated $1,332,000, $1,370,000, and $1,326,000, respectively. The Partnerships provide certain health care and life insurance benefits for current and retired salaried employees through plans maintained by RGI. Accordingly, the Partnerships were charged their proportionate share of RGI's health care and life insurance costs which aggregated $1,150,000, $1,725,000, and $1,524,000 in 1994, 1993, and 1992, respectively. 7. LOANS PAYABLE TO RGI The Loan with RCPI (see Note 3) provides that, if the cumulative cost of capital improvements made by the Partnerships is in excess of specified amounts contained in the agreement for any F-45 ROCKEFELLER CENTER PROPERTIES AND RCP ASSOCIATES NOTES TO COMBINED FINANCIAL STATEMENTS Years ended December 31, 1994, 1993 and 1992 calendar year, the excess amount is deemed a renewable one-year loan from RGI to the Partnerships for the next calendar year. The cumulative amount of excess capital improvements totaled $126,681,000, $122,934,000, and $107,477,000 at December 31, 1994, 1993, and 1992, respectively. These excess capital improvement loans accrue interest at 80% of the prime rate, compounded quarterly. Loans for the cumulative excess capital improvements existing at the end of the preceding year do not begin to earn interest until the beginning of the following year. Unpaid interest is added to the principal balance and also earns interest at 80% of the prime rate, compounded quarterly. The cumulative amount of unpaid interest totaled $34,034,000, $26,720,000, and $20,467,000 at December 31, 1994, 1993, and 1992, respectively. The loan principal and accumulated interest are due and payable following the Equity Conversion Date, December 31, 2000. If RCPI exercises its conversion option to acquire a 71.5% equity interest in the partnership then owning the Property, the loans payable to RGI become the obligation of the partnership having RCPI as a 71.5% partner and cease to be the sole obligation of the prior partner group. 8. COMMITMENTS AND CONTINGENCIES As of December 31, 1994, the Partnerships had approximately $54.4 million of outstanding commitments to reimburse certain tenants for improvements to leased premises. It is expected that these improvements will be completed during 1995. Additional commitments are expected to arise as new leases are signed. As required by the Loan Agreement, the Partnerships are committed to make certain capital improvements totaling $197.6 million prior to December 31, 2000. Qualifying capital expenditures through December 31, 1994 approximated $215.7 million, of which $168.4 million satisfy the $197.6 million requirement. 9. TENANT LEASING ARRANGEMENTS Other than the NBC lease (see Note 5), the Partnerships lease to tenants office, retail, and storage space in the Property through non-cancelable operating leases expiring principally over the next 21 years. The leases require fixed minimum monthly payments over their terms and provide for adjustments to rent for the tenants' proportionate share of changes in certain costs and expenses of the Property. Certain retail leases also provide for additional rent which is based upon a percentage of sales of the lessee. F-46 ROCKEFELLER CENTER PROPERTIES AND RCP ASSOCIATES NOTES TO COMBINED FINANCIAL STATEMENTS Years ended December 31, 1994, 1993 and 1992 The following is a schedule of minimum future rentals on non-cancelable operating leases as of December 31, 1994:
Year ending December 31, ------------------------ 1995 $ 164,557,000 1996 149,005,000 1997 148,079,000 1998 157,655,000 1999 153,138,000 Later years 1,781,050,000 -------------- Total minimum future rentals $2,553,484,000 -------------- --------------
As a result of lease incentives, the actual cash flow may vary significantly from the amounts presented above. 10. CASH FLOWS FROM CHANGES IN CERTAIN ASSETS AND LIABILITIES The cash flows from changes in certain assets and liabilities of the Company as of December 31, 1994, 1993, and 1992 are as follows:
1994 1993 1992 ---- ---- ---- Decrease in accounts receivable $316,000 $856,000 $4,104,000 (Increase) decrease in other current and non-current assets (509,000) 669,000 (207,000) (Decrease) increase in accounts payable and accrued expenses (3,338,000) 8,146,000 (5,948,000) ---------- ---------- ---------- ($3,531,000) $9,671,000 ($2,051,000) ---------- ---------- ---------- ---------- ---------- ----------
F-47 EX-3.2 2 EXHIBIT 3.2 EXHIBIT 3.2 BY-LAWS OF ROCKEFELLER CENTER PROPERTIES, INC. As Amended through February 22, 1995 TABLE OF CONTENTS ARTICLE I Stockholders Section 1.1 Annual Meeting . . . . . . . . . . . . . . . 1 Section 1.2 Special Meetings . . . . . . . . . . . . . . 1 Section 1.3 Notice of Meetings . . . . . . . . . . . . . 1 Section 1.4 Quorum . . . . . . . . . . . . . . . . . . . 2 Section 1.5 Voting . . . . . . . . . . . . . . . . . . . 3 Section 1.6 Presiding Officer and Secretary. . . . . . . 4 Section 1.7 Proxies. . . . . . . . . . . . . . . . . . . 5 Section 1.8 List of Stockholders . . . . . . . . . . . . 5 ARTICLE II Directors Section 2.1 Number of Directors; Chairman. . . . . . . . 6 Section 2.2 Independent Directors. . . . . . . . . . . . 6 Section 2.3 Election and Term of Directors . . . . . . . 7 Section 2.4 Stockholder Nomination of Director Candidates . . . . . . . . . . . . . . . . 8 Section 2.5 Newly Created Directorships and Vacancies. . 9 Section 2.6 Resignation. . . . . . . . . . . . . . . . . 10 Section 2.7 Removal. . . . . . . . . . . . . . . . . . . 10 Section 2.8 Meetings . . . . . . . . . . . . . . . . . . 10 Section 2.9 Quorum and Voting. . . . . . . . . . . . . . 11 Section 2.10 Approval of Certain Transactions . . . . . . 12 Section 2.11 Written Consent of Directors in Lieu of a Meeting. . . . . . . . . . . . . . . . . . 12 Section 2.12 Compensation . . . . . . . . . . . . . . . . 13 Section 2.13 Contracts and Transactions Involving Directors. . . . . . . . . . . . . . . . . 13 ARTICLE III Committees of the Board of Directors Section 3.1 Appointment and Powers . . . . . . . . . . . 14 ARTICLE IV Officers, Agents and Employees Section 4.1 Appointment and Term of Office . . . . . . . 16 Section 4.2 Resignation and Removal. . . . . . . . . . . 16 Section 4.3 Compensation and Bond. . . . . . . . . . . . 17 Section 4.4 President. . . . . . . . . . . . . . . . . . 17 Section 4.5 Vice Presidents. . . . . . . . . . . . . . . 18 Section 4.6 Treasurer. . . . . . . . . . . . . . . . . . 18 Section 4.7 Secretary. . . . . . . . . . . . . . . . . . 19 Section 4.8 Assistant Treasurers . . . . . . . . . . . . 19 Section 4.9 Assistant Secretaries. . . . . . . . . . . . 20 Section 4.10 Delegation of Duties . . . . . . . . . . . . 20 Section 4.11 Loans to Officers and Employees; Guaranty of Obligations of Officers and Employees. . . . . . . . . . . . . . . . . 20 ARTICLE V Indemnification Section 5.1 Indemnification of Directors, Officers, Employees and Agents . . . . . . . . . . . 21 ARTICLE VI Common Stock Section 6.1 Certificates . . . . . . . . . . . . . . . . 22 Section 6.2 Transfer of Stock. . . . . . . . . . . . . . 23 Section 6.3 Lost or Destroyed Certificates . . . . . . . 23 Section 6.4 Stockholder Record Date. . . . . . . . . . . 24 ARTICLE VII Investment Policies Section 7.1. Permitted Investments. . . . . . . . . . . . 25 ARTICLE VIII Seal Section 8.1 Seal . . . . . . . . . . . . . . . . . . . . 26 ARTICLE IX Waiver of Notice Section 9.1 Waiver of Notice . . . . . . . . . . . . . . 26 ARTICLE X Checks, Notes, Drafts, Etc. Section 10.1 Checks, Notes, Drafts, Etc.. . . . . . . . . 27 ARTICLE XI Amendments Section 11.1 Amendments . . . . . . . . . . . . . . . . . 27 ARTICLE XII Emergency By-Laws Section 12.1 Emergency By-Laws. . . . . . . . . . . . . . 28 ii BY-LAWS OF ROCKEFELLER CENTER PROPERTIES, INC. ARTICLE I STOCKHOLDERS SECTION 1.1 ANNUAL MEETING. An annual meeting of stockholders of the Corporation for the election of directors and for the transaction of any other proper business shall be held in May or June in each year on such date at such hour and at such place within or without the State of Delaware as may be fixed by the Board of Directors, or if not so fixed, at 10:30 a.m. on the third Thursday in June in such year at the principal business office of the Corporation at 1270 Avenue of the Americas, New York, New York 10020. SECTION 1.2 SPECIAL MEETINGS. A special meeting of the holders of stock of the Corporation entitled to vote on any business to be considered at any such meeting may be called only by the Secretary at the request of the Board of Directors pursuant to a resolution approved by a majority of the entire Board of Directors. Any such request shall state the purpose or purposes of the proposed meeting. SECTION 1.3 NOTICE OF MEETINGS. Whenever stockholders are required or permitted to take any action at a meeting, unless notice is waived in writing by all stockholders entitled to vote 2 at the meeting, a written notice of the meeting shall be given, which shall state the place, date and hour of the meeting, and, in the case of a special meeting, the purpose or purposes for which the meeting is called. Unless otherwise provided by law, and except as to any stockholder duly waiving notice, the written notice of any meeting shall be given personally by mail, not less than ten nor more than sixty days before the date of the meeting to each stockholder entitled to vote at such meeting. If mailed, notice shall be deemed given when deposited in the United States mail, postage prepaid, directed to the stockholder at his or her address as it appears on the records of the Corporation. When a meeting is adjourned to another time or place, notice need not be given of the adjourned meeting if the time and place thereof are announced at the meeting at which the adjournment is taken. At the adjourned meeting the Corporation may transact any business which might have been transacted at the original meeting. If, however, the adjournment is for more than thirty days, or if after the adjournment a new record date is fixed for the adjourned meeting, a notice of the adjourned meeting shall be given to each stockholder of record entitled to vote at the meeting. 3 SECTION 1.4 QUORUM. Except as otherwise provided by law or by the Certificate of Incorporation or by these By-Laws in respect of the vote required for a specified action, at any meeting of stockholders the holders of a majority of the outstanding stock entitled to vote thereat, either present or represented by proxy, shall constitute a quorum for the transaction of any business, but the stockholders present, although less than a quorum, may adjourn the meeting to another time or place and, except as provided in the last paragraph of Section 1.3 of these By-Laws, notice need not be given of the adjourned meeting. SECTION 1.5 VOTING. Whenever directors are to be elected at a meeting, they shall be elected by a plurality of the votes cast at the meeting by the holders of stock entitled to vote. Any corporate action (other than the election of directors or the ratification of the appointment of auditors) which is to be taken by vote of stockholders at a meeting shall be authorized by a majority of the votes cast at the meeting by the holders of stock entitled to vote thereon, unless (i) the holders of at least 62.5% of the then outstanding Warrants and SARs (as defined in the Letter Agreement, dated December 18, 1994, among the Corporation, Whitehall Street Real Estate Limited Partnership V and Goldman, Sachs & Co. (the "Letter Agreement")) have not approved or been deemed to have approved such action in 4 accordance with the procedures set forth in the Letter Agreement, in which case such corporation action shall require the affirmative vote of not less than 62.5% of the then outstanding voting power of the Corporation or (ii) a different vote is required by law or the Corporation's Certificate of Incorporation. Except as otherwise provided by law or by the Certificate of Incorporation, each holder of record of stock of the Corporation entitled to vote on any matter at any meeting of stockholder shall be entitled to one vote for each share of such stock standing in the name of such holder on the stock ledger of the Corporation on the record date for the determination of the stockholders entitled to vote at the meeting. The vote for directors and, upon the demand of any stockholder entitled to vote, the vote on any other matter at a meeting shall be by written ballot, but otherwise the method of voting and the manner in which votes are counted shall be discretionary with the presiding officer at the meeting. SECTION 1.6 PRESIDING OFFICER AND SECRETARY. At every meeting of stockholders the Chairman of the Board, or in his or her absence (or if there be none) the President, or in his absence a Vice President, or, if none be present, the appointee of the meeting, shall preside. The Secretary, or in his or her absence an Assistant Secretary, or if none be present, the 5 appointee of the presiding officer of the meeting, shall act as secretary of the meeting. SECTION 1.7 PROXIES. Each stockholder entitled to vote at a meeting of stockholders may authorize another person or persons to act for him or her by proxy, but no such proxy shall be voted or acted upon after three years from its date, unless the proxy provides for a longer period. Every proxy shall be signed by the stockholder or by his or her duly authorized attorney. SECTION 1.8 LIST OF STOCKHOLDERS. The officer who has charge of the stock ledger of the Corporation shall prepare and make, at least ten days before every meeting of stockholders, a complete list of the stockholders entitled to vote at the meeting, arranged in alphabetical order, and showing the address of each stockholder and the number of shares registered in the name of each stockholder. Such list shall be open to the examination of any stockholder, for any purpose germane to the meeting, during ordinary business hours, for a period of at least ten days prior to the meeting, either at a place within the city where the meeting is to be held, which place shall be specified in the notice of the meeting, or, if not so specified, at the place where the meeting is to be held. The list shall also be produced and kept at the time and place of the meeting during the 6 whole time thereof, and may be inspected by any stockholder who is present. The stock ledger shall be the only evidence as to who are the stockholders entitled to examine the stock ledger, the list required by this Section or the books of the Corporation, or to vote in person or by proxy at any meeting of stockholders ARTICLE II DIRECTORS SECTION 2.1 NUMBER OF DIRECTORS; CHAIRMAN. The Board of Directors shall consist of five directors until changed by amendment of the Certificate of Incorporation. The Board of Directors shall designate, by a majority vote, a Chairman of the Board who shall preside at all meetings of the Board of Directors. SECTION 2.2 INDEPENDENT DIRECTORS. At least three members of the entire Board of Directors and a majority of every committee of the Board of Directors shall be Independent Directors. An Independent Director shall mean a Director who is not, directly or indirectly, an affiliate of Rockefeller Group, Inc. ("RGI"). An affiliate of RGI shall mean a person who: (a) is an officer or director or employee of RGI; (b) beneficially owns 5% or more of any class of equity securities of RGI because of the power to vote, sell, or exercise a right to acquire such 7 securities; (c) is an officer, director or employee or beneficially owns 5% or more of any class of equity securities of an entity that controls, is controlled by or is under common control with, RGI; (d) has a member of his immediate family who has one of the foregoing relationships with RGI; (e) is a descendant of John D. Rockefeller, Jr.; (f) is an executor, administrator or testamentary trustee of any descendant of John D. Rockefeller, Jr.; (g) is a trustee of any trust of which the principal beneficiaries are one or more of the descendants of John D. Rockefeller, Jr.; or (h) is an officer or director of any corporation if more than 50% of the voting power of such corporation is beneficially owned, directly or indirectly, by (i) one or more of the descendants of John D. Rockefeller, Jr., (ii) any executor, administrator or testamentary trustee of any descendant of John D. Rockefeller, Jr., or (iii) any trustee of any trust of which the principal beneficiaries are one or more descendants of John D. Rockefeller, Jr. SECTION 2.3 ELECTION AND TERM OF DIRECTORS. As provided in the Certificate of Incorporation, one class of directors shall be elected annually, by election at the annual meeting of stockholders, to serve until the third annual meeting following such election. If the annual election of directors is not held on the date designated therefor, the directors shall cause such election to be held as soon thereafter as convenient. 8 Each director shall hold office from the time of his or her election and qualification until his or her successor is elected and qualified or until his or her earlier resignation or removal. SECTION 2.4 STOCKHOLDER NOMINATION OF DIRECTOR CANDIDATES. Nominations for the election of directors may be made by the Board of Directors or a committee appointed by the Board of Directors or by any stockholder entitled to vote in the election of directors generally. However, any stockholder entitled to vote in the election of directors generally may nominate one or more persons for election as directors at a meeting only if written notice of such stockholder's intent to make such nomination or nominations has been given, either by personal delivery or by United States mail, postage prepaid, to the Secretary of the Corporation not later than (i) with respect to an election to be held at an annual meeting of stockholders, ninety days prior to the anniversary date of the immediately preceding annual meeting, or, for the first annual meeting, by January 28, 1986, and (ii) with respect to an election to be held at a special meeting of stockholders for the election of directors, the close of business on the tenth day following the date on which notice of such meeting is first given to stockholders. Each such notice shall set forth: (a) the name and address of the stockholder who intends to make the nomination and of the person or persons to be nominated; (b) a 9 representation that the stockholder is a holder of record of stock of the Corporation entitled to vote at such meeting and intends to appear in person or by proxy at the meeting to nominate the person or persons specified in the notice; (c) a description of all arrangements or understandings between the stockholder and each nominee and any other person or persons (naming such person or persons) pursuant to which the nomination or nominations are to be made by the stockholder; (d) such other information regarding each nominee proposed by such stockholder as would be required to be included in a proxy statement filed pursuant to the proxy rules of the Securities and Exchange Commission, had the nominee been nominated, or intended to be nominated, by the Board of Directors; and (e) the consent of each nominee to serve as a director of the Corporation if so elected. The presiding officer of the meeting may refuse to acknowledge the nomination of any person not made in compliance with the foregoing procedure. SECTION 2.5 NEWLY CREATED DIRECTORSHIPS AND VACANCIES. Newly created directorships resulting from any increase in the number of directors and any vacancies on the Board of Directors resulting from death, resignation, disqualification, removal or other cause shall be filled solely by the affirmative vote of a majority of the remaining directors then in office, even though less than quorum of the Board of Directors. Any director elected 10 in accordance with the preceding sentence shall hold office for the remainder of the full term of the class of directors in which the new directorship was crated or the vacancy occurred and until such director's successor shall have been elected and qualified. No decrease in the number of directors constituting the Board of Directors shall shorten the term of any incumbent director. SECTION 2.6 RESIGNATION. Any director may resign at any time upon written notice to the Corporation. Any such resignation shall take effect at the time specified therein or, if the time be not specified, upon receipt thereof, and the acceptance of such resignation, unless required by the terms thereof, shall not be necessary to make such resignation effective. SECTION4 2.7 REMOVAL. Any director may be removed from office, but only for cause, by the affirmative vote of the holders of at least two-thirds of the then outstanding shares of common stock of the Corporation entitled to vote. SECTION 2.8 MEETINGS. Meetings of the Board of Directors, regular or special, may be held at any place within or without the State of Delaware. Members of the Board of Directors, or of any committee designated by the Board, may participate in a meeting of such Board or committee by means of 11 conference telephone or similar communications equipment by means of which all persons participating in the meeting can hear each other, and participation in a meeting by such means shall constitute presence in person at such meeting. An annual meeting of the Board of Directors shall be held after each annual election of directors. If such election occurs at an annual meeting of stockholders, the annual meeting of the Board of Directors shall be held at the same place and immediately following such meeting of stockholders, and no notice thereof need be given. The Board of Directors may fix times and places for regular meetings of the Board and no notice of such meetings need be given. A special meeting of the Board of Directors shall be held whenever called by the Chairman of the Board, if any, or by the President or by at least one-half of the directors for the time being in office, at such time and place as shall be specified in the notice or waiver thereof. Notice of each special meeting shall be given by the secretary or by a person calling the meeting to each director by mailing the same, postage prepaid, not later than the forth day before the meeting, or by telexing or transmitting by facsimile the same or personally telephoning the same not later than the day before the meeting. SECTION 2.9 QUORUM AND VOTING. Subject to the provisions of the Certificate of Incorporation, three directors, at least two of whom shall be Independent Directors, shall 12 constitute a quorum for the transaction of business, but, if there be less than a quorum at any meeting of the Board of Directors, a majority of the directors present may adjourn the meeting from time to time, and no further notice thereof need be given other than announcement at the meeting which shall be so adjourned. Except as otherwise provided by law, by the Certificate of Incorporation or by these By-Laws, the vote of a majority of the directors present at a meeting at which a quorum is present shall be the act of the Board of Directors. SECTION 2.10 APPROVAL OF CERTAIN TRANSACTIONS. Any transaction between the Corporation and RCP Associates, a New York limited partnership; Rockefeller Center Properties, a New York general partnership, or any person, corporation, partnership or other entity controlled, controlling or under common control with either of them must be approved by a majority of the Independent Directors. SECTION 2.11 WRITTEN CONSENT OF DIRECTORS IN LIEU OF A MEETING. Any action required or permitted to be taken at any meeting of the Board of Directors or of any committee thereof may be taken without a meeting if all member of the Board or of such committee, as the case may be, consent thereto in writing, and the writing or writings are filed with the minutes of proceedings of the Board or committee. 13 SECTION 2.12 COMPENSATION. Directors may receive compensation for services to the Corporation in their capacities as directors or otherwise in such manner and in such amounts as may be fixed from time to time by the Board of Directors. SECTION 2.13 CONTRACTS AND TRANSACTIONS INVOLVING DIRECTORS. No contract or transaction between the Corporation and one or more of its directors or officers, or between the Corporation and any other corporation, partnership, association, or other organization in which one or more of its directors or officers are directors or officers, or have a financial interest, shall be void or voidable solely for this reason, or solely because the director or officer is present at or participates in the meeting of the Board of Directors or committee thereof which authorizes the contract or transaction, or solely because his, her or their votes are counted for such purpose, if: (1) the material facts as to his or her relationship or interest and as to the contract or transaction are disclosed or are known to the Board of Directors or the committee, and the Board or committee in good faith authorizes the contract or transaction by the affirmative votes of a majority of the disinterested directors, even though the disinterested directors be less than a quorum; or (2) the material facts as to his or her relationship or interest and as to the contract or transaction are disclosed or are known 14 to the stockholders entitled to vote thereon, and the contract or transaction is specifically approved in good faith by vote of the stockholders; or (3) the contract or transaction is fair as to the Corporation as of the time it is authorized, approved or ratified, by the Board of Directors, a committee thereof, or the stockholders. Common or interested directors may be counted in determining the presence of a quorum at a meeting of the Board of Directors or of a committee which authorizes the contract or transaction. ARTICLE III COMMITTEES OF THE BOARD OF DIRECTORS SECTION 3.1 APPOINTMENT AND POWERS. The Board of Directors may from time to time, by resolution passed by majority of the whole Board, designate one or more committees, each committee to consist of one or more directors of the Corporation and a majority of Independent Directors. The Board of Directors may designate one or more directors as alternate members of any committee, who may replace any absent or disqualified member at any meeting of the committee. The resolution of the Board of Directors may, in addition or alternatively, provide that in the absence or disqualification of a member of a committee, the member or members thereof present at any meeting and not disqualified from voting, whether or not he, she or they constitute a quorum, may unanimously appoint another member of 15 the Board of Directors to act at the meeting in the place of any such absent or disqualified member. Any such committee, to the extent provided in the resolution of the Board of Directors, shall have and may exercise all the powers and authority of the Board of Directors in the management of the business and affairs of the Corporation, and may authorize the seal of the Corporation to be affixed to all papers which may require it, except as otherwise provided by law. Unless the resolution of the Board of Directors expressly so provides, no such committee shall have the power or authority to declare a dividend or to authorize the issuance of stock. Any such committee may adopt rules governing the method of calling and time and place of holding its meetings. Unless otherwise provided by the Board of Directors, a majority of any such committee (or the member thereof, if only one) shall constitute a quorum for the transaction of business, and the vote of a majority of the members of such committee present at a meeting at which a quorum is present shall be the act of such committee. Each such committee shall keep a record of its acts and proceedings and shall report thereon to the Board of Directors whenever requested so to do. Any or all members of any such committee may be removed, with or without cause, by resolution of the Board of Directors, passed by a majority of the whole Board. ARTICLE IV 16 OFFICERS, AGENTS AND EMPLOYEES SECTION 4.1 APPOINTMENT AND TERM OF OFFICE. The officers of the Corporation shall include a President, a Secretary and a Treasurer, and may include one or more Vice Presidents, one or more Assistant Secretaries and one or more Assistant Treasurers. All such officers shall be appointed by the Board of Directors or by a duly authorized committee thereof. Any number of such officers may be held by the same person, but no officer shall execute, acknowledge or verify any instrument in more than one capacity. Except as may be prescribed otherwise by the Board of Directors or a committee thereof in a particular case, all such officers shall hold their offices at the pleasure of the Board for an unlimited term and need not be reappointed annually or at any other periodic interval. The Board of Directors may appoint, and may delegate power to appoint, such other officers, agents and employees as it may deem necessary or proper, who shall hold their offices or positions for such terms, have such authority and perform such duties as may from time to time be determined by or pursuant to authorization of the Board of Directors. SECTION 4.2 RESIGNATION AND REMOVAL. Any officer may resign at anytime upon written notice to the Corporation. Any officer, agent or employee of the Corporation may be removed by the Board of Directors, or by a duly authorized committee 17 thereof, with or without cause at any time. The Board of Directors or such a committee thereof may delegate such power of removal as to officers, as agents and employees not appointed by the Board of Directors or such a committee. Such removal shall be without prejudice to a person's contract rights, if any, but the appointment of any person as an officer, agent or employee of the Corporation shall not of itself create contract rights. SECTION 4.3 COMPENSATION AND BOND. The compensation of the officers of the Corporation shall be fixed by the Board of Directors, but this power may be delegated to any officer in respect of other officers under his or her control. The Corporation may secure the fidelity of any or all of its officers, agents or employees by bond or otherwise. SECTION 4.4 PRESIDENT. The President shall be the chief executive officer of the Corporation. He or she shall have general charge of business affairs of the Corporation. The President may employ and discharge employees and agents of the Corporation, except such as shall be appointed by the Board of Directors, and he or she may delegate these powers. The President may vote the stock or other securities of any other domestic or foreign corporation of any type or kind which may at anytime be owned by the Corporation, may execute any stockholders' or other consents in respect thereof and may, in 18 his or her discretion, delegate such powers by executing proxies, or otherwise, on behalf of the Corporation. The Board of Directors by resolution from time to time may confer like powers upon any other persons or persons. SECTION 4.5 VICE PRESIDENTS. Each Vice President shall have such powers and perform such duties as the Board of Directors or the President may from time to time prescribe. In the absence or inability to act of the President, unless the Board of Directors shall otherwise provide, the Vice President who has served in that capacity for the longest time and who shall be present and able to act, shall perform all the duties and may exercise any of the powers of the President. The performance of any duty by a Vice President shall, in respect of any other person dealing with the Corporation, be conclusive evidence of his or her power to act. SECTION 4.6 TREASURER. The Treasurer shall have charge of all funds and securities of the Corporation, shall endorse the same for deposit or collection when necessary and deposit the same to the credit of the Corporation in such banks or depositaries as the Board of Directors may authorize. He or she may endorse all commercial documents requiring endorsements for or on behalf of the Corporation and may sign all receipts and vouchers for payments made to the Corporation. He or she shall 19 have all such further powers and duties as generally are incident to the position of Treasurer or as may be assigned to him or her by the President or the Board of Directors. SECTION 4.7 SECRETARY. The Secretary shall record all the proceedings of the meetings of the stockholders and directors in a book to be kept for that purpose and shall also record therein all action taken by written consent of directors in lieu of a meeting. He or she shall attend to the giving and serving of all notices of the Corporation. He or she shall have custody of the seal of the Corporation and shall attest the same by his or her signature whenever required. The Secretary shall have charge of the stock ledger and such other books and papers as the Board of Directors may direct but may delegate responsibility for maintaining the stock ledger to any transfer agent appointed by the Board of Directors. The Secretary shall have all such further powers and duties as generally are incident to the position of Secretary or as may be assigned to him or her by the President or the Board of Directors. SECTION 4.8 ASSISTANT TREASURERS. In the absence or inability to act of the Treasurer, any Assistant Treasurer may perform all the duties and exercise all the powers of the Treasurer. The performance of any such duty shall, in respect of any other person dealing with the Corporation, be conclusive 20 evidence of his or her power to act. An Assistant Treasurer shall also perform such other duties as the Treasurer or the Board of Directors may assign to him or her. SECTION 4.9 ASSISTANT SECRETARIES. In the absence or inability to act of the Secretary, any Assistant Secretary may perform all the duties and exercise all the powers of the Secretary. The performance of any such duty shall, in respect of any other person dealing with the Corporation, be conclusive evidence of his or her power to act. An assistant Secretary shall also perform such other duties as the Secretary or the Board of Directors may assign to him or her. SECTION 4.10 DELEGATION OF DUTIES. In case of the absence of any officer of the Corporation, or for any other reason that the Board of Directors may deem sufficient, the Board of Directors may confer for the time being the powers or duties, or any of them, of such officer upon any other officer or upon any director. SECTION 4.11 LOANS TO OFFICERS AND EMPLOYEES; GUARANTY OF OBLIGATIONS OF OFFICERS AND EMPLOYEES. The Corporation may lend money to, or guarantee any obligation of, or otherwise assist any officer or other employee of the Corporation or any subsidiary, including any officer or employee who is a director 21 of the Corporation or any subsidiary, whenever, in the judgment of the directors, such loan, guaranty or assistance may reasonably be expected to benefit the Corporation. The loan, guaranty or other assistance may be with or without interest, and may be unsecured, or secured in such manner as the Board of Directors shall approve, including, without limitation, a pledge of shares of stock of the Corporation. ARTICLE V INDEMNIFICATION SECTION 5.1 INDEMNIFICATION OF DIRECTORS, OFFICERS, EMPLOYEES AND AGENTS. Any person who was or is a party or is threatened to be made a party to any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative (including any action or suit by or in the right of the Corporation to procure a judgment in its favor) by reason of the fact that he or she is or was a director, officer, employee or agent of the Corporation, or is or was serving at the request of the Corporation as a director, officer, employee or agent of another corporation, partnership, joint venture trust or other enterprise, shall be indemnified by the Corporation, if, as and to the extent authorized by applicable law, against expenses (including attorney's fees), judgments, fines and amounts paid in settlement actually and reasonably incurred by him or her in connection with the defense or 22 settlement of such action, suit or proceeding. The indemnification expressly provided by statute in a specific case shall not be deemed exclusive of any other rights to which any person indemnified may be entitled under any lawful agreement, vote of stockholders or disinterested directors or otherwise, both as to action in his or her official capacity and as to action in another capacity while holding such officer, and shall continue as to a person who has ceased to be a director, officer, employee or agent and shall inure to the benefit of the heirs, executors and administrators of such a person. ARTICLE VI COMMON STOCK SECTION 6.1 CERTIFICATES. Certificates for stock of the Corporation shall be in such from as shall be approved by the Board of Directors and shall be signed in the name of the Corporation by the President or a Vice President, and by the Treasurer or an Assistant Treasurer, or the Secretary or an Assistant Secretary. Such certificates may be sealed with the seal of the Corporation or a facsimile thereof. Any of or all of the signatures on a certificate may be a facsimile. In case any officer, transfer agent or registrar who has signed or whose facsimile signature has been placed upon a certificate shall have ceased to be such an officer, transfer agent or registrar, or in case the authority of any officer authorized to sign certificates 23 for stock of the Corporation shall have been withdrawn, before such certificate is issued, it may be issued by the Corporation with the same effect as if he or she were such officer, transfer agent or registrar, or as if such officer had the power to sign such a certificate, at the date of issue. SECTION 6.2 TRANSFER OF STOCK. Transfers of stock shall be made only upon the books of the Corporation by the holder, in person or by duly authorized attorney, and on the surrender of the certificate or certificates for such stock properly endorsed. The Board of Directors shall have the power to make all such rules and regulations, not inconsistent with the Certificate of Incorporation and these By-Laws and the law, as the Board of Directors may deem appropriate concerning the issue, transfer and registration of certificates for stock of the Corporation. The Board may appoint one or more transfer agents or registrars of transfers, or both, and may require all stock certificates to bear the signature of either or both. SECTION 6.3 LOST OR DESTROYED CERTIFICATES. The Corporation may issue a new stock certificate in the place of any certificate theretofore issued by it, alleged to have been lost, stolen or destroyed, and the Corporation may require the owner of the lost, stolen or destroyed certificate or his or her legal representative to given the Corporation a bond sufficient to 24 indemnify it against any claim that may be made against it on account of the alleged loss, theft or destruction of any such certificate or the issuance of any such new certificate. The Board of Directors may require such owner to satisfy other reasonable requirements. SECTION 6.4 STOCKHOLDER RECORD DATE. In order that the Corporation may determine the stockholders entitled to notice of or to vote at any meeting of stockholders or any adjournment thereof, or entitled to receive payment of any dividend or other distribution or allotment of any rights, or entitled to exercise any rights in respect of any change, conversion or exchange of stock, or for the purpose of any other lawful action, the Board of Directors may fix, in advance, a record date, which shall not be more than sixty nor less than ten days before the date of such meeting, nor more than sixty days prior to any other action. Only such stockholders as shall be stockholders of record on the date so fixed shall be entitled to notice of, and to vote at, such meeting and any adjournment thereof, or to receive payment of such dividend or other distribution, or to exercise such rights in respect of any such change, conversion or exchange of stock, or to participate in such action, as the case may be, notwithstanding any transfer of any stock on the books of the Corporation after any record date so fixed. 25 If no record date is fixed by the Board of Directors, (1) the record date for determining stockholders entitled to notice of or to vote at a meeting of stockholders shall be at the close of business on the day next preceding the date on which notice is given, or, if notice is waived by all stockholders entitled to vote at the meeting, at the close of business on the day next preceding the day on which the meeting is held, and (2) the record date for determining stockholders for any other purpose shall be at the close of business on the day on which the Board of Directors adopts the resolution relating thereto. A determination of stockholders of record entitled to notice of or to vote at a meeting of stockholders shall apply to any adjournment of the meeting; provided, however, that the Board of Directors may fix a new record date for the adjourned meeting. ARTICLE VII INVESTMENT POLICIES SECTION 7.1. PERMITTED INVESTMENTS. The Corporation may from time to time make such investment of funds of the Corporation as the President or the Treasurer shall, in the discretion of such officer, consider appropriate provided, however, that no such investment shall be made or retained if the making or retention of such investment would result in the disqualification of the Corporation for taxation as a real estate investment trust as defined in section 856 ET. SEQ. of the Internal Revenue Code of 1986, as amended. 26 ARTICLE VIII SEAL SECTION 8.1 SEAL. The seal of the Corporation shall be circular in form and shall bear, in addition to any other emblem or device approved by the Board of Directors, the name of the Corporation, the year of its incorporation and the words "Corporate Seal" and "Delaware". The seal may be used by causing it or a facsimile thereof to be impressed or affixed or in any other manner reproduced. ARTICLE IX WAIVER OF NOTICE SECTION 9.1 WAIVER OF NOTICE. Whenever notice is required to be given by statute, or under any provision of the Certificate of Incorporation or these By-Laws, a written waiver thereof, signed by the person entitled to notice, whether before or after the time stated therein, shall be deemed equivalent to notice. In the case of a stockholder, such waiver of notice may be signed by such stockholder's attorney or proxy duly appointed in writing. Attendance of a person at a meeting shall constitute a waiver of notice of such meeting, except when the person attends a meeting for the express purpose of objecting at the beginning of the meeting, to the transaction of any business because the meeting is not lawfully called or convened. Neither the business to be transacted at, nor the purpose of, any regular or special meeting of the stockholders, directors or members of a 27 committee of directors need be specified in any written waiver of notice. ARTICLE X CHECKS, NOTES, DRAFTS, ETC. SECTION 10.1 CHECKS, NOTES, DRAFTS, ETC. Checks, notes, drafts, acceptances, bills of exchange and other orders or obligations for the payment of money shall be signed by such officer or officers or person or persons as the Board of Directors or a duly authorized committee thereof may from time to time designate. ARTICLE XI AMENDMENTS SECTION 11.1 AMENDMENTS. These By-Laws or any of them may be altered or repealed, and new By-Laws may be adopted, by the stockholders by vote at a meeting. The Board of Directors shall also have power, by a majority vote of the whole Board of Directors, to alter or repeal any of these By-Laws, and to adopt new By-Laws. 28 ARTICLE XII EMERGENCY BY-LAWS SECTION 12.1 EMERGENCY BY-LAWS. The Emergency By-Laws provided in this Section 12.1 shall be operative during any emergency in the conduct of the business of the corporation resulting from an attack on the United States or on a locality in which the corporation conducts its business or customarily holds meetings of its Board of Directors or its stockholders, or during any nuclear or atomic disaster, or during the existence of any catastrophe, or other similar emergency condition, as a result of which a quorum of the Board of Directors or a standing committee thereof cannot readily be convened for action notwithstanding any different provision in the preceding By-Laws or in the Certificate of Incorporation or in the law. To the extent not inconsistent with the provisions of this Section, The By-Laws of the Corporation shall remain in effect during any emergency and upon its termination the Emergency By-Laws shall cease to be operative. Any amendments of these Emergency By-Laws may make any further or different provision that may be practical and necessary for the circumstances of the emergency. During any such emergency: (A) A meeting of the Board of Directors or a committee thereof may be called by any officer or director of the Corporation. Notice of the time and place of the meeting shall be given by the person calling the meeting to such of the directors as it may be feasible to reach by any 29 available means of communication. Such notice shall be given at such time in advance of the meeting as circumstances permit in the judgment of the person calling the meeting; (B) The director or directors in attendance at the meeting shall constitute a quorum; (C) The officers or other persons designated on a list approved by the Board of Directors before the emergency, all in such order of priority and subject to such conditions and for such period of time (not longer than reasonably necessary after the termination of the emergency) as amy be provided in the resolution approving the list, shall, to the extent required to provide a quorum at any meeting of the Board of Directors, be deemed directors for such meeting; (D) The Board of Directors, either before or during any such emergency, may provide, and from time to time modify, lines of succession in the event that during such emergency any or all officers or agents of the corporation shall for any reason be rendered incapable of discharging their duties; (E) The Board of Directors, either before or during any such emergency, may, effective in the emergency, change the head office or designate several alternative head offices or regional offices, or authorize the officers so to do; and (F) To the extent required to constitute a quorum at any meeting of the Board of Directors during such an emergency, the officers of the corporation who are present shall be deemed, in order of rank and within the same rank in order of seniority, directors for such meeting. 30 No officer, director or employee acting in accordance with any Emergency By-Laws shall be liable except for willful misconduct. These Emergency By-Laws shall be subject to repeal or change by further action of the Board of Directors or by action of the stockholders. EX-27 3 EXHIBIT 27
5 1,000 US DOLLARS 12-MOS DEC-31-1994 JAN-01-1994 DEC-31-1994 1 2,897 0 1,263,899 0 0 0 0 0 1,319,995 0 760,394 383 0 0 517,084 1,319,995 0 109,285 0 0 6,112 0 78,206 24,967 0 24,998 0 (9,855) 0 15,143 .40 0 Loan receivable does not include accrued interest. Classified Balance Sheet is not presented. Classified Balance Sheet is not presented.
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