<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1999
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Commission File Number: 1-13589
PRIME GROUP REALTY TRUST
(Exact name of registrant as specified in its charter)
MARYLAND 36-4173047
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
77 West Wacker Drive, Suite 3900, Chicago, Illinois 60601
(Address of principal executive offices) (Zip Code)
(312) 917-1300
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes X No
----- -----
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date:
At May 13, 1999, 15,135,727 of the Registrant's Common Shares of Beneficial
Interest were outstanding.
- 1 -
<PAGE>
Prime Group Realty Trust
Form 10-Q
INDEX
Part I: Financial Information
<TABLE>
<CAPTION>
Item 1. Financial Statements (Unaudited) PAGE
<S> <C>
Consolidated Balance Sheets as of March 31, 1999 and
December 31, 1998 3
Consolidated Statements of Income for the Three Months
Ended March 31, 1999 and 1998 4
Consolidated Statements of Cash Flows for the Three
Months Ended March 31, 1999 and 1998 5
Notes to Consolidated Financial Statements 6-11
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 11-17
Item 3. Quantitative and Qualitative Disclosures About
Market Risk 18
Part II: Other Information
Item 1. Legal Proceedings 19
Item 2. Changes in Securities 19
Item 3. Defaults Upon Senior Securities 20
Item 4. Submission of Matters to a Vote of Security Holders 20
Item 5. Other Information 20
Item 6. Exhibits and Reports on Form 8-K 20
Signatures 21
</TABLE>
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<PAGE>
Part I. Financial Information
ITEM 1. FINANCIAL STATEMENTS
Prime Group Realty Trust
Consolidated Balance Sheets
(000's omitted, except share data)
(Unaudited)
<TABLE>
<CAPTION>
March 31, December 31,
1999 1998
---------------------------------------
<S> <C> <C>
ASSETS
Real estate, at cost:
Land $ 169,480 $ 139,505
Building and improvements 811,824 630,518
Tenant improvements 76,796 73,008
---------------------------------------
1,058,100 843,031
Accumulated depreciation (31,692) (24,756)
---------------------------------------
1,026,408 818,275
Property under development 56,623 51,376
---------------------------------------
1,083,031 869,651
Mortgage note receivable 64,565 63,270
Cash and cash equivalents 12,634 46,500
Tenant receivables 10,838 7,288
Restricted cash escrows 28,693 53,820
Deferred rent receivable 39,656 39,062
Deferred costs, net 33,061 32,891
Loans receivable from services company 6,383 7,055
Other 50,022 44,977
---------------------------------------
Total assets $1,328,883 $1,164,514
---------------------------------------
---------------------------------------
LIABILITIES AND SHAREHOLDERS' EQUITY
Mortgage notes payable $ 652,932 $ 518,718
Credit facilities 28,595 -
Bonds payable 74,450 74,450
Accrued interest payable 3,281 2,440
Accrued real estate taxes 38,792 29,657
Accounts payable and accrued expenses 21,344 26,068
Liabilities for leases assumed 4,162 4,792
Dividends payable 8,104 8,080
Other 4,307 4,523
---------------------------------------
Total liabilities 835,967 668,728
Minority interests:
Operating Partnership 143,655 144,781
Other 1,000 1,000
Shareholders' equity:
Preferred Shares, $0.01 par value; 30,000,000 shares authorized:
Series B - Cumulative Redeemable Preferred Shares, 4,000,000 shares
designated, issued and outstanding at March 31, 1999 and December 31,
1998
40 40
Series A - Cumulative Convertible Preferred Shares, 2,000,000 shares
designated, issued and outstanding at March 31, 1999 and December 31,
1998
20 20
Common Shares, $0.01 par value; 100,000,000 shares authorized; 15,135,727 and
15,110,794 shares issued and outstanding at March 31, 1999 and December 31,
1998, respectively
151 151
Additional paid-in capital 360,366 360,017
Distributions in excess of earnings (12,316) (10,223)
---------------------------------------
Total shareholders' equity 348,261 350,005
---------------------------------------
Total liabilities and shareholders' equity $1,328,883 $1,164,514
---------------------------------------
---------------------------------------
</TABLE>
See notes to consolidated financial statements.
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<PAGE>
Prime Group Realty Trust
Consolidated Statements of Income
(000's omitted, except per share data)
(Unaudited)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31
--------------------------------------------
1999 1998
--------------------------------------------
<S> <C> <C>
REVENUE
Rental $ 32,616 $18,085
Tenant reimbursements 12,901 8,375
Mortgage note interest 1,506 1,507
Other 2,613 784
--------------------------------------------
Total revenue 49,636 28,751
EXPENSES
Property operations 10,650 5,056
Real estate taxes 9,375 5,358
Depreciation and amortization 7,958 5,335
Interest 10,378 6,415
Loss on treasury lock termination 557 -
Loss on land development option 600 -
General and administrative 2,050 1,396
--------------------------------------------
Total expenses 41,568 23,560
--------------------------------------------
Income before minority interests 8,068 5,191
Minority interests (2,056) (1,965)
--------------------------------------------
Net income 6,012 3,226
Net income allocated to preferred shareholders (3,000) (700)
--------------------------------------------
Net income available to common shareholders $ 3,012 $ 2,526
--------------------------------------------
--------------------------------------------
Net income available per weighted-average common share of
beneficial interest - Basic and diluted $ 0.20 $ 0.19
--------------------------------------------
--------------------------------------------
</TABLE>
See notes to consolidated financial statements.
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<PAGE>
Prime Group Realty Trust
Consolidated Statements of Cash Flows
(000's omitted)
(Unaudited)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31
--------------------------------------------
1999 1998
--------------------------------------------
<S> <C> <C>
OPERATING ACTIVITIES
Net income $ 6,012 $ 3,226
Adjustments to reconcile net income to net cash provided by
operating activities:
Amortization of costs for leases assumed (included in rental
revenue) 245 291
Interest income and development fees added to mortgage note (456) --
receivable principal
Depreciation and amortization 7,958 5,335
Loss on treasury lock termination 557 -
Loss on land development option 600 -
Minority interests 2,056 1,965
Changes in operating assets and liabilities:
Increase in tenant receivables (3,550) (81)
Increase in deferred rent receivable (594) (136)
Decrease (increase) in other assets 3,831 (5,987)
Increase in accrued interest payable 841 639
Increase (decrease) in accrued real estate taxes 9,135 (995)
Increase (decrease) in accounts payable and accrued expenses (4,724) 181
Decrease in liabilities for leases assumed (277) (65)
(Decrease) increase in other liabilities (216) 3,629
--------------------------------------------
Net cash provided by operating activities 21,418 8,002
INVESTING ACTIVITIES
Expenditures for real estate and equipment (157,324) (146,818)
Leasing costs (941) (1,789)
Additional advances on mortgage note receivable (839) (86)
Decrease (increase) in restricted cash escrows 25,127 (26,753)
Option deposits (18,000) --
(Loans)repayments from services company 672 (245)
--------------------------------------------
Net cash used in investing activities (151,305) (175,691)
FINANCING ACTIVITIES
Financing costs (849) (2,393)
Deposits recovered on treasury lock agreements 9,215 ---
Proceeds from mortgage notes payable 72,000 155,230
Net proceeds from credit facilities 28,595 ---
Repayment of mortgage notes payable (1,378) (27,529)
Repayment of mortgage note payable - Affiliate - (3,984)
Contributions from minority interest - Other - 1,000
Distribution to minority interest - Operating partnership (3,482) (1,706)
Proceeds from the sale of common shares - 47,194
Dividends paid to Series B-Preferred shareholders (2,250) ---
Dividends paid to Series A-Preferred shareholders (730) (345)
Dividends paid to common shareholders (5,100) (2,160)
--------------------------------------------
Net cash provided by financing activities 96,021 165,307
--------------------------------------------
Net decrease in cash and cash equivalents (33,866) (2,382)
Cash and cash equivalents at beginning of period 46,500 11,969
--------------------------------------------
Cash and cash equivalents at end of period $ 12,634 $ 9,587
--------------------------------------------
--------------------------------------------
</TABLE>
See notes to consolidated financial statements.
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<PAGE>
Prime Group Realty Trust
Notes to Consolidated Financial Statements
(Unaudited)
1. BASIS OF PRESENTATION
The accompanying unaudited consolidated financial statements have been prepared
in accordance with generally accepted accounting principles for interim
financial information and with the instructions to Form 10-Q and Article 10 of
Regulation S-X. Accordingly, they do not include all of the information and
footnotes required by generally accepted accounting principles for complete
financial statements. In the opinion of management, all adjustments (consisting
of normal recurring accruals) considered necessary for a fair presentation have
been included. Operating results for the three month period ended March 31, 1999
are not necessarily indicative of the results that may be expected for the year
ended December 31, 1999. For further information, refer to the consolidated
financial statements and footnotes thereto included in the Prime Group Realty
Trust's annual report on Form 10-K for the year ended December 31, 1998 as filed
with the Securities and Exchange Commission on March 31, 1999 ("Form 10-K").
Certain prior period amounts have been reclassified to conform with the current
financial statement presentation.
2. FORMATION AND ORGANIZATION OF THE COMPANY
Prime Group Realty Trust (the "Company") was organized in Maryland on July 21,
1997 to continue the business of The Prime Group, Inc. and certain of its
affiliates (collectively "PGI"). The Company intends to qualify as a real estate
investment trust ("REIT") under the Internal Revenue Code of 1986, as amended,
for Federal income tax purposes. On November 17, 1997, the Company completed its
initial public offering with the sale of 12,380,000 of its common shares of
beneficial interest at $20.00 per share and the private placement of 2,000,000
of the Company's Series A cumulative convertible preferred shares of beneficial
interest at $20.00 per share. The Company contributed the initial net proceeds
from the offering and private placement in exchange for 12,380,000 common units
of partnership interest and 2,000,000 preferred units of partnership interest in
Prime Group Realty, L.P. (the "Operating Partnership"). Subsequent to the
initial public offering, the Company issued an additional 3,204,994 of its
common shares (sold 600,000 common shares in 1997, sold 2,579,994 common shares
in 1998 and granted 25,000 shares in 1998) and 4,000,000 of its Series B
cumulative redeemable preferred shares and contributed the net proceeds to the
Operating Partnership in exchange for the same number of common units and
preferred units of partnership interest. In addition, during 1998, the Company
repurchased 474,200 of its common shares for an aggregate of $7.3 million,
pursuant to a common share repurchase program the Company established in
September 1998 (Repurchase the lesser of 1,550,000 common shares or spend $7.5
million with share prices not to exceed $20.00 per common share.).
The Company is the managing general partner of the Operating Partnership and
owns all of the preferred units and 59.4% of the common units of the Operating
Partnership issued at both March 31, 1999 and December 31, 1998. Each common
unit entitles the Company to receive distributions from the Operating
Partnership. Distributions declared or paid to holders of common shares and
preferred shares are based upon such distributions the Company receives with
respect to its common units and preferred units.
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<PAGE>
3. INCOME TAXES
Commencing with the period ended December 31, 1997, the Company elected to be
taxed as a REIT under the Internal Revenue Code of 1986, as amended. As a REIT,
the Company generally will not be subject to federal income tax to the extent
that it distributes at least 95% of its REIT taxable income to its shareholders.
REITs are subject to a number of organizational and operational requirements. If
the Company fails to qualify as a REIT in any taxable year, the Company will be
subject to federal income tax (including any applicable alternative minimum tax)
on its taxable income at regular corporate tax rates.
4. USE OF ESTIMATES
The preparation of the financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenue and expenses during the reporting
period. Actual results could differ from these estimates.
5. RECENT DEVELOPMENTS
During the period from January 1, 1999 through March 31, 1999, the Company
acquired the following office and industrial properties (See "Liquidity and
Capital Resources" for a description of the debt terms.):
<TABLE>
<CAPTION>
NET
RENTABLE SQUARE ACQUISITION COST MORTGAGE
FEET (IN MILLIONS) DEBT MONTH ACQUIRED
PROPERTY LOCATION (IN MILLIONS)
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Office:
33 West Monroe Street(1) Chicago, IL 846,759 $101.3 $ 65.0 January
National City Center Cleveland, OH 766,965 105.0 63.6 February
(1),(2),(3),(4)
Industrial:
901 Technology Way (4) Libertyville, IL 68,824 4.1 - January
---------------------------------------------------
1,682,548 $210.4 $128.6
---------------------------------------------------
---------------------------------------------------
</TABLE>
- -------------------
(1) Acquisition cost includes cash paid at closing plus prorations and
accrued real estate taxes.
(2) The Company funded a portion of the acquisition costs with $30.0
million in advances from its credit facilities.
(3) Acquisition costs and mortgage debt include $2.0 million to adjust an
assumed above market rate mortgage note payable to a current market
rate.
(4) These properties were acquired from minority interest unit holders of
the Operating Partnership or their affiliates.
On February 8, 1999, the Company signed a contract with a buyer pursuant to
which the Company will construct and sell to the buyer an approximately 1,018
space parking garage, including approximately 4,000 square feet of retail space,
on approximately 22,000 square feet of a 61,302 square foot parcel of land that
the Company has under option to purchase in the Chicago central business
district. The sales price is approximately $34.6 million, plus the value of any
of the retail space leased by the Company at the time of sale up to a maximum of
$1.75 million. In addition, the Company is entitled to receive an additional
$1.0 million from the buyer if, within 15 years after the sale of the parking
garage to the buyer, the Company substantially completes construction of an
office building on the land containing at least 800,000 square feet of office
space, which is occupied by at least one tenant
- 7 -
<PAGE>
5. RECENT DEVELOPMENTS (continued)
who is not affiliated with the Company. The Company intends to construct an
office building on the land, which it will lease to third parties. The land
parcel for the office building could not be obtained without obtaining the land
for the parking garage and in order to construct an office building, parking
must be provided pursuant to zoning requirements.
In March 1999, the option period for a parcel adjacent to one of our
development property sites lapsed. The Company has recorded the related
non-refundable option price of $600,000 as a loss on land development option
in the statement of income for the three months ended March 31, 1999.
On March 1, 1999, the Company terminated a $160.0 million treasury lock
agreement due to changes in terms and timing of the purchase of an office
building as a result of an amended purchase agreement. This resulted in
approximately $0.6 million on deposit related to the treasury lock agreement
being forfeited at the time of termination. This has been recorded as a loss
on treasury lock termination in the statement of income for the three months
ended March 31, 1999. As of March 31, 1999, the Company had a treasury lock
agreement with a financial institution to lock a notional amount of $170.0
million of debt instruments at the interest rate on ten-year Treasury Notes
effective on the date of the agreement to provide interest rate protection on
future debt financings. The agreement was entered into in anticipation of a
planned future securitization of a currently outstanding $170.0 million loan
related to the 77 West Wacker Drive building, and had a lock rate of 5.016%.
The agreement expired on April 15, 1999, but was extended to July 14, 1999
with the lock rate modified to 5.205%. On May 11, 1999, the Company
terminated this treasury lock agreement resulting in a net settlement and
gain upon termination of $1.1 million. During the three months ended March
31, 1999, the Company received net cash settlements of approximately $9.2
million related to both treasury lock agreements. At March 31, 1999, $4.9
million was on deposit and is included in other assets. An additional $6.0
million was received subsequent to March 31, 1999.
6. EARNINGS PER SHARE
The following table sets forth the computation of basic and diluted net income
available per weighted-average common share of beneficial interest for the three
months ended March 31, 1999 and 1998:
<TABLE>
<CAPTION>
1999 1998
------------------------------------
<S> <C> <C>
Numerator:
Net income available to common shareholders
(in thousands) $ 3,012 $ 2,526
------------------------------------
------------------------------------
Denominator:
Denominator for basic earnings per share-weighted-average common shares 15,131,849 13,180,667
Employee stock options 2,262 40,243
------------------------------------
Denominator for diluted earnings per share-
weighted average common shares 15,134,111 13,220,910
------------------------------------
------------------------------------
Basic and diluted earnings available to common shares per weighted-average
common share $ 0.20 $ 0.19
------------------------------------
------------------------------------
</TABLE>
Options to purchase 1,122,833 of the Company's common shares were excluded in
the computation of diluted earnings available to common shares for the three
months ended March 31, 1999 because the effect would be antidilutive.
The Company had 10,328,512 and 10,265,882 weighted-average common units
outstanding during March 31, 1999 and 1998, respectively, of which 9,401,412 and
9,338,782, respectively, may be converted (on a one for one basis) into common
shares at the option of the Company. The convertible common units were not
included in the computation of diluted earnings per share because the conversion
would be antidilutive.
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<PAGE>
The Company had 2,000,000 Series A preferred shares outstanding during the
three months ended March 31, 1999 and 1998 which were not included in the
computation of diluted earnings per share because the conversion would have been
antidilutive.
7. SEGMENT REPORTING
The following summarizes the Company's historical segment operating results for
the three months ended March 31, 1999 and 1998 (Amounts in thousands):
<TABLE>
<CAPTION>
Three months ended March 31, 1999
-----------------------------------------------------------------------
Corporate/
Operating
Office Industrial Partnership Total
-----------------------------------------------------------------------
<S> <C> <C> <C> <C>
Total revenue $42,306 $6,676 $654 $49,636
Total expenses 23,732 3,879 13,957 41,568
-----------------------------------------------------------------------
Income (loss) before minority interests 18,574 2,797 (13,303) 8,068
FFO adjustments:
Real estate depreciation and amortization 5,773 1,560 - 7,333
Amortization of costs for leases assumed 245 - - 245
Straight-line rental revenue adjustments (514) (80) - (594)
Loss on treasury lock termination - - 557 557
Loss on land development option - - 600 600
Net income allocated to preferred
shareholders - - (3,000) (3,000)
-----------------------------------------------------------------------
Funds from operations $ 24,078 $ 4,277 $ (15,146) $ 13,209
-----------------------------------------------------------------------
-----------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Three months ended March 31, 1998
-----------------------------------------------------------------------
Corporate/
Operating
Office Industrial Partnership Total
-----------------------------------------------------------------------
<S> <C> <C> <C> <C>
Total revenue $22,454 $5,944 $353 $28,751
Total expenses 12,427 3,051 8,082 23,560
-----------------------------------------------------------------------
Income (loss) before minority interests 10,027 2,893 (7,729) 5,191
FFO adjustments:
Real Estate depreciation and amortization 3,624 1,391 -- 5,015
Amortization of costs for leases assumed
291 -- -- 291
Straight line rental revenue adjustments
210 (238) -- (28)
Net income allocated to preferred
cardholders -- -- (700) (700)
-----------------------------------------------------------------------
Funds from operations $ 14,152 $ 4,046 $(8,429) $ 9,769
-----------------------------------------------------------------------
-----------------------------------------------------------------------
</TABLE>
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<PAGE>
7. SEGMENT REPORTING (continued)
The following summarizes the Company's segment assets and activity as of March
31, 1999 and December 31, 1998 and for the three months ended March 31, 1999 and
1998:
<TABLE>
<CAPTION>
March 31, 1999 December 31, 1998
------------------------------------
<S> <C> <C>
Segment assets:
Office $ 944,643 $ 827,872
Industrial 185,860 180,116
Corporate/operating partnership 198,380 156,526
------------------------------------
Total consolidated assets $1,328,883 $1,164,514
------------------------------------
------------------------------------
<CAPTION>
Three months
ended March 31,
------------------------------------
1999 1998
------------------------------------
<S> <C> <C>
Expenditures for real estate:
Office $ 145,434 $ 145,976
Industrial 6,959 775
Corporate/operating partnership (includes property under development) 4,931 67
------------------------------------
Total expenditures for real estate $ 157,324 $ 146,818
------------------------------------
------------------------------------
</TABLE>
8. PRO FORMA CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
The accompanying unaudited Pro Forma Condensed Consolidated Statements of
Operations of the Company are presented as if, at January 1, 1998, (i) the
Company had completed the 1998 sales of its common shares and Series B
preferred shares and used the net proceeds to acquire preferred units and common
units of the Operating Partnership, (iv) the Operating Partnership acquired
various office and industrial properties (eight properties acquired in 1998 and
three properties acquired in 1999)with cash and debt proceeds. The unaudited Pro
Forma Condensed Consolidated Statements of Operations should be read in
conjunction with the historical financial statements contained in the Company's
Form 10-K. In management's opinion, all adjustments necessary to reflect the
effects of the transactions described above have been made.
The unaudited Pro Forma Condensed Consolidated Statements of Operations of the
Company are not necessarily indicative of what the actual results of operations
would have been assuming the transactions described above had occurred at the
dates indicated above, nor do they purport to present the future results of
operations of the Company.
<TABLE>
<CAPTION>
Three months ended March 31, 1999
------------------------------------
1999 1998
------------------------------------
<S> <C> <C>
Total revenue (in thousands) $52,784 $47,379
------------------------------------
------------------------------------
Net income available to common
shareholders (in thousands) $ 3,180 $ 2,976
------------------------------------
------------------------------------
Earnings per diluted common share $ 0.21 $ 0.20
------------------------------------
------------------------------------
</TABLE>
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<PAGE>
9. SUBSEQUENT EVENTS
On April 13, 1999, the Company modified the terms of the Company's Series A
preferred shares. Under the original terms, the holders of the Series A
preferred shares had certain conversion rights if for two consecutive
quarters (1) the ratio of the Company's debt plus nonconvertible preferred
shares divided by its total market capitalization exceeded 65% or (2) its
fixed charges coverage ratio fell below 1.4. The new agreement eliminates the
debt-to-market capitalization covenant (described above). In exchange, the
holders of the Series A preferred shares were granted the future right to
cause the redemption of their shares at a price of $20.00 per share upon 120
days prior written notice, which redemption may occur during the period
beginning January 15, 2002 and ending January 15, 2004. The Series A
preferred shares will continue to pay an annual dividend of $1.50 per share
and will continue to be convertible into common shares on a one for one
basis. The Company made a $0.4 million one-time payment as part of this
transaction.
On April 22, 1999, the Operating Partnership acquired 24.05 acres of undeveloped
land in Carol Stream, Illinois from a board member who is also a minority
interest unit holder, for a total of $3.1 million in common units and $0.1
million in cash. These acquisitions fulfill the Operating Partnership's 1998
commitment under land purchase obligations established at the Company's
initial public offering.
On April 19, 1999, the Company sold approximately 161,710 net rentable square
feet of its 122 South Michigan Avenue office building to National-Louis
University (NLU) for a gross sales price of $14.95 million and proceeds, net
of commission, closing costs and a capital improvement allowance, of $12.2
million. As part of this sale, NLU has also acquired an undivided 31.56%
interest in certain common areas of the property. The Company will continue
to own the remaining 350,659 net rentable square feet of the building and
will be responsible for the management of the entire property.
ITEM 2: MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS.
OVERVIEW
We are a fully-integrated real estate company providing property management,
leasing, marketing, acquisition, development, redevelopment, construction,
finance and other related services. We intend to qualify as a REIT for
federal income tax purposes. Through the Operating Partnership, we own 27
office properties containing an aggregate of approximately 8.2 million net
rentable square feet, 48 industrial properties containing an aggregate of
approximately 6.2 million net rentable square feet, one retail center and one
parking facility. The properties are located primarily in the Chicago
metropolitan area. In addition, we own a mortgage on an office property
containing 728,860 net rentable square feet. At May 13, 1999, we also own
approximately 249.1 acres of developable land and rights to acquire more than
301.7 additional acres of developable land which management believes could be
developed with approximately 12.3 million rentable square feet of additional
office and industrial space.
In terms of net rentable square feet, approximately 82.0% of our office
properties and 88.6% of our industrial properties are located in the Chicago
metropolitan area in prime business locations within established business
communities. The properties located in the Chicago metropolitan area account for
approximately 87.6% of our total rental and tenant reimbursement revenue for the
three months ended March 31, 1999. Our remaining office properties are located
in Cleveland, Ohio; Nashville, Tennessee; Knoxville, Tennessee; and the
Milwaukee, Wisconsin metropolitan areas, and our remaining
- 11 -
<PAGE>
industrial properties are located in the Columbus, Ohio metropolitan area. We
intend to continue to invest in the acquisition, development and
redevelopment of office and industrial properties primarily located in the
Chicago metropolitan area.
We intend to access multiple sources of capital to fund future acquisition and
development activities. These capital sources may include undistributed cash
flow, borrowings under credit facilities, proceeds from the issuance of
long-term, tax-exempt bonds, joint venture arrangements and other debt or equity
securities and other bank and/or institutional borrowings. There can be no
assurance that any such financing will be obtained.
CAUTIONARY STATEMENTS
The following discussion in "Management's Discussion and Analysis of Financial
Condition and Results of Operations" contains certain forward-looking statements
within the meaning of the Private Securities Litigation Reform Act of 1995 which
reflect management's current view with respect to future events and financial
performance. Such forward-looking statements are subject to certain risks and
uncertainties; including, but not limited to, the effects of future events on
our financial performance; the risk that we may be unable to finance our planned
acquisition and development activities; risks related to the industrial and
office industry in which our properties compete, including the potential adverse
impact of external factors such as inflation, consumer confidence, unemployment
rates and consumer tastes and preferences; risks associated with our development
activities, such as the potential for cost overruns, delays and lack of
predictability with respect to the financial returns associated with these
development activities; the risk of a potential increase in market interest
rates from current rates; and risks associated with real estate ownership, such
as the potential adverse impact of changes in the local economic climate on the
revenues and the value of our properties.
RESULTS OF OPERATIONS: COMPARISON OF THE THREE MONTHS ENDED MARCH 31, 1999
TO THE THREE MONTHS ENDED MARCH 31, 1998
In analyzing the operating results for the quarter ended March 31, 1999, the
changes in rental and tenant reimbursements income, property operating
expenses, real estate taxes and depreciation and amortization from 1998 are
due principally to the addition of a full three months of operating results
for properties acquired in 1998 and the additions of a partial quarter's
worth of operating results for the three properties acquired during the first
quarter of 1999.
For the three months ended March 31, 1999, rental revenue increased $14.5
million, or 80.4%, to $32.6 million, tenant reimbursement income increased $4.5
million, or 54.0%, to $12.9 million, other income increased 1.8 million, or
233.3% to $2.6 million, property operating expenses increased $5.6 million, or
110.6%, to $10.7 million, real estate tax expense increased $4.0 million, or
75.0%, to $9.4 million and depreciation and amortization increased $2.6 million,
or 49.2%, to $8.0 million as compared to the three months ended March 31, 1998.
The additional office and industrial properties resulted in increased rental
revenue of $13.1 million (includes lease termination revenue of $2.8 million),
tenant reimbursements income of $3.7 million, other income of $1.6 million,
property operating expenses of $4.9 million, real estate tax expense of $3.4
million, and depreciation and amortization of $1.8 million for the three months
ended March 31, 1999. Rental revenue, tenant reimbursement income and other
income for properties held in both periods increased $1.4 million, $0.8 million
and $0.2 million, respectively, for the three months ended March 31, 1999
primarily due to two properties acquired during the three months ended March 31,
1998 being owned during the entire three months ending March 31, 1999 and
increased occupancy and rental rates at the other
- 12 -
<PAGE>
properties. Corresponding property operating expenses increased $0.7 million,
real estate tax expense increased $0.6 million and depreciation and
amortization increased $0.8 million for the three months ended March 31, 1999
primarily due to the two properties acquired during the three months ended
March 31, 1998 being owned during the entire three months ending March 31,
1999.
Interest expense increased $4.0 million, or 61.8%, to $10.4 million during
the three months ended March 31, 1999. The increase was due to new mortgages
obtained on certain of the properties which were acquired in 1999 and 1998
offset by refinancing of debt on certain existing properties at lower
interest rates.
General and administrative expense increased $0.7 million, or 46.9%, to $2.1
million during the three months ended March 31, 1999, representing the
expenses associated with the growth of the Company.
Income allocated to minority interests increased $0.1 million, or 4.6% to
$2.1 million for the three months ended March 31, 1999 due to an increase in
income before minority interest of $2.9 million, or 55.4%, to $8.1 million.
The increase in income before minority interests is due to the additional
properties acquired and the effects they had on revenue and expenses
described above.
Net income increased $2.8 million, or 86.4% to $6.0 million for the three
months ended March 31, 1999 due to the changes in revenue, expenses and
minority interests described above associated with acquisitions and new
leasing and releasing of tenant space.
LIQUIDITY AND CAPITAL RESOURCES
CREDIT FACILITIES. Our credit facilities, with a maximum loan
availability totaling $90.0 million, have been provided by various financial
institutions, and are collateralized by first mortgages on certain properties
owned by the operating partnership. Subject to our compliance with the
applicable loan covenants, the credit facilities may be used to provide funds
for acquisitions and development activities and to provide the replacement
letters-of-credit for the $26.9 million of tax-exempt bonds. At March 31,
1999, $28.6 million was drawn on credit facilities and an additional $26.9
million was used to provide letters of credit for the tax-exempt bonds.
INDEBTEDNESS. We have financed a portion of our acquisitions with
proceeds from mortgage notes payable from various financial institutions,
with fixed and variable interest rates and maturities from 1999 through 2013.
We believe that our properties have excess value that may be utilized for
additional mortgage borrowing or debt securitizations.
In connection with our 1999 acquisitions, we obtained the following new
indebtedness:
<TABLE>
<CAPTION>
Original
Principal
Balance Maturity
Collateral (1) (In Millions) Interest Rate Date
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
33 West Monroe (2) $ 65.0 LIBOR + 2.0% increasing 1/02
to 2.15% in 1/00
National City Center (3),(4) 63.6 6.75% 4/01
</TABLE>
- 13 -
<PAGE>
1) All of the loans are subject to various financial and other operating
covenants and are collateralized by mortgages on the properties, unless
otherwise indicated.
(2) Interest payable monthly, with principal due at maturity.
(3) Principal and interest payable monthly through maturity.
(4) Consists of two assumed notes of $52.9 million and $8.7 million, with
actual interest rates of 8.50% and 7.55%, respectively. These interest
rates are in excess of a current market rate, which we estimate to be
6.75%. As a result, we have recorded an additional $2.0 million of
principal to reflect the imputed interest rate of 6.75% over the term
of the notes.
FUTURE OFFERINGS. On January 8, 1999, we filed our initial shelf
registration statement on Form S-3 with the Securities and Exchange Commission
to register up to $500.0 million of our equity and debt securities for future
sale.
We intend to fund future acquisitions and development with a combination of
advances from our credit facilities, additional mortgage notes payable and
future equity and debt offerings.
ANALYSIS OF LIQUIDITY AND CAPITAL RESOURCES. We expect to meet our
short-term liquidity requirements through net cash provided by operations. Our
properties require periodic investments of capital for tenant-related capital
improvements. During 1998, our tenant improvements and leasing commissions
averaged $18.04 per square foot of newly leased office space, $3.85 per square
foot of renewal leased office space, and $4.53 per square foot of newly leased
industrial space. Our estimated annual cost of recurring tenant improvements and
leasing commissions is approximately $8.6 million based upon average annual
square feet for leases expiring during the years ending December 31, 1999 and
2000. Our cost of general capital improvements to our properties average
approximately $3.0 million annually based upon an estimate of $0.26 per square
foot.
We expect to meet our long-term liquidity requirements for the funding of
property development, property acquisitions and other nonrecurring capital
improvements through a combination of net cash from operations, long-term
secured and unsecured indebtedness (including the credit facilities) and the
issuance of additional equity securities. The terms of the credit facilities and
our preferred shares impose restrictions on our ability to incur indebtedness
and issue additional preferred shares.
HISTORICAL CASH FLOWS
We had net cash provided by operating activities of $21.1 million and $8.0
million for the three months ended March 31, 1999 and 1998, respectively. The
$13.1 million increase is primarily due to a $2.8 million increase in net
income, a $2.6 million increase in depreciation and amortization expense, a
$0.6 million increase in loss on treasury lock termination, a $0.6 million
increase in loss on land development option, a $0.1 million increase in
income allocated to minority interest, a $9.8 million decrease in other
assets, a $0.2 million increase in accrued interest, and a $8.1 million
increase in accrued real estate taxes, offset by a $0.5 million increase in
interest income and development costs added to the mortgage note receivable
principal, a $3.5 million increase in tenant receivables, a $0.5 million
increase in deferred rent receivable, a $4.9 million decrease in accounts
payable and accrued expenses, a $0.2 million decrease in liabilities for
leases assumed and a $3.8 million decrease in other liabilities.
- 14 -
<PAGE>
We had net cash used in investing activities of $151.0 million and $175.7
million for the three months ended March 31, 1999 and 1998, respectively. The
$24.7 million decrease in net cash used in investing activities from the
period ended March 31, 1998 through the period ended March 31, 1999 was
primarily due to a $0.8 million decrease in leasing costs, a $51.9 million
decrease in restricted escrow deposits and a $0.9 million net repayment of
loans to the services company, offset by a $10.5 million increase in
expenditures for real estate and equipment, principally related to property
acquisitions, a $18.0 million increase in option deposits, a $0.8 million
increase in advances on the mortgage note receivable.
We had net cash provided by financing activities of $96.0 million and $165.3
million for the three months ended March 31, 1999 and 1998, respectively. The
$69.3 million decrease in net cash provided by financing activities from the
period ended March 31, 1998 through the period ended March 31, 1999 was due to,
a $1.5 million decrease in financing costs, a $9.2 million increase in deposits
recovered on treasury lock agreements, $28.6 million in net proceeds from the
credit facilities, a $30.1 million decrease in the repayment of mortgage notes
payable, offset by a $83.2 million decrease in proceeds from mortgage notes
payable, a $1.0 million decrease in minority interest contributions, a $47.2
million decrease in net proceeds from a private placement and a $7.4 million
increase in distributions to preferred shareholders, common shareholders and
minority interests.
FUNDS FROM OPERATIONS
Industry analysts generally consider Funds from Operations, as defined by the
National Association of Real Estate Investment Trusts ("NAREIT"), an
alternative measure of performance of an equity REIT. Funds from Operations
is defined by NAREIT to mean net income (loss) determined in accordance with
GAAP, excluding gains (or losses) from debt restructuring and sales of
property, plus depreciation and amortization (other than amortization of
deferred financing costs and depreciation of non-real estate assets) and
after adjustment for unconsolidated partnerships and joint ventures. We
believe that in order to facilitate a clear understanding of the combined
historical operating results of the Company, Funds from Operations should be
examined in conjunction with net income (loss) as presented in the unaudited
financial statements included elsewhere in this Form 10-Q. The following
table represents the unaudited calculation of our Funds from Operations for
the three months ended March 31,1999 and 1998:
<TABLE>
<CAPTION>
Three Months
Ended March 31
----------------------------------------
(IN THOUSANDS) 1999 1998
----------------------------------------
<S> <C> <C>
Net income allocated to common shareholders $ 3,012 $2,526
Adjustments to reconcile to Funds from Operations:
Real estate depreciation and amortization 7,333 5,015
Amortization of costs for leases assumed 245 291
Straight-line rental revenue (594) (28)
Loss on treasury lock termination 557 -
Loss on land development option 600 -
Minority interests 2,056 1,965
----------------------------------------
Funds from Operations (1) $13,209 $9,769
----------------------------------------
----------------------------------------
</TABLE>
(1) We compute Funds from Operations in accordance with standards
established by the Board of Governors of NAREIT in its March 1995 White
Paper (with the exception that we report rental revenues on a cash
basis
- 15 -
<PAGE>
(e.g., based on contractual lease terms), rather than a straight-line
GAAP basis, which we believe results in a more accurate presentation of
its actual operating activities), which may differ from the methodology
for calculating Funds from Operations used by other certain office
and/or industrial REITs and, accordingly, may not be comparable to such
other REITs. As a result of our reporting rental revenues on a
contractual basis, contractual rent increases may cause reported Funds
from Operations to increase. Further, Funds from Operations does not
represent amounts available for management's discretionary use because
of needed capital replacement or expansion, debt repayment obligations,
or other commitments and uncertainties. Funds from Operations should
not be considered as an alternative to net income (loss), as an
indication of our performance or to cash flows as a measure of
liquidity or the ability to pay dividends or make distributions.
YEAR 2000
The year 2000 ("Y2K") issue refers generally to computer applications using only
the last two digits to refer to a year rather than all four digits. As a result,
these applications could fail or create erroneous results if they recognize "00"
as the year 1900 rather than the year 2000. We have taken Y2K initiatives in the
following three general areas:
INFORMATION TECHNOLOGY
We have focused our efforts on the high-risk areas of the corporate office
computer hardware, operating systems and software applications. The principal
risks relating to our information technology are failure to correctly bill
tenants and pay invoices. Our assessment and testing of existing equipment
revealed that our hardware, network operating systems, secondary information
systems and desktop software applications are Y2K compliant. However, we
currently have four accounting and property management systems that are not Y2K
compliant. We initiated a comprehensive corporation wide plan in mid-1998 to
completely replace our financial and operational systems by the fourth quarter
of 1999 in order to facilitate our future growth and to improve operational
controls. We anticipate the total cost of this effort will be $3.5 million to
$4.0 million and will have the additional benefit of making our financial and
operational systems Y2K compliant. Of the total project costs, we estimate
approximately $3.2 million to $3.7 million is attributable to the purchase and
implementation of new software and equipment which will be capitalized and the
remainder related to the assessment, modifications to existing hardware and
software, and training which will be expensed as incurred. We also believe that
some of our telecommunication systems may not be Y2K compliant. We are currently
assessing these systems and, where material, plan to replace, modify or upgrade
these systems, as appropriate, by the end of the second quarter of 1999.
NON-INFORMATION TECHNOLOGY
Non-information technology consists mainly of facilities management systems such
as telephone, utility, and security systems for the corporate office and owned
properties. Based on our current efforts, the corporate office's non-information
technology is expected to be Y2K compliant by mid-1999. We are in the process of
identifying date sensitive systems and equipment at our properties. To date, we
have not identified any critical non-compliant systems. Assessment and testing
of non-information technology at our properties is expected to be competed by
mid-1999.
- 16 -
<PAGE>
THIRD PARTIES
We have third-party relationships with tenants, suppliers and contractors. Many
of these third parties are publicly traded corporations and subject to
disclosure requirements. We have begun assessment of major third parties' Y2K
readiness including tenants, key suppliers of outsourced services including
stock transfer, debt servicing, banking collection and disbursement, payroll and
benefits, while simultaneously responding to their inquiries regarding our
readiness. The principal risks to us in our relationships with third parties are
the failure of third-party systems used to conduct business such as (i) tenants
being unable to efficiently conduct their business, (ii) banks being unable to
process receipts and disbursements, (iii) vendors being unable to supply needed
materials and services to the properties, and (iv) processing of outsourced
payroll. Based on Y2K compliance work done to date, we have no reason to believe
that key tenants, banks and suppliers will not be Y2K compliant in all material
respects or cannot be replaced within an acceptable time frame. Additionally, we
have obtained or are in the process of obtaining compliance certification from
suppliers of key services.
We do not believe that the impact of the Y2K problem will have a material
adverse effect on our financial condition and results of operations. Such belief
is based on our analysis of our risks related to both our own potential Y2K
problems discussed above and our assessment of the Y2K problems of our vendors,
suppliers and customers. However, the description of our Y2K compliance is based
upon information obtained by management through evaluations of internal business
systems from inquiries of key tenants and major vendors concerning their
compliance efforts. If key tenants or major vendors with whom we do business
fail to adequately address their Y2K issues, our financial position or results
from operations could be materially adversely affected.
We currently do not have a contingency plan in place. Once we have proceeded
further in the completion of steps outlined above, contingency plans will be
developed.
INFLATION
Substantially all of our office and industrial leases require tenants to pay, as
additional rent, a portion of any increases in real estate taxes and operating
expenses over a base amount. In addition, many of the office and industrial
leases provide for fixed increases in base rent or indexed escalations (based on
the Consumer Price Index or other measures). We believe that inflationary
increases in expenses will be offset, in part, by the expense reimbursements and
contractual rent increases described above.
As of March 31, 1999, approximately $411.2 million of our outstanding
indebtedness (including our Credit Facilities) was subject to interest at
floating rates and future indebtedness may also be subject to floating rate
interest. Offsetting this amount, as of March 31, 1999, the Company owned a
treasury lock agreement with a notional amount of $170 million. Inflation,
and its impact on floating interest rates, could affect the amount of
interest payments due on such indebtedness.
- 17 -
<PAGE>
ITEM 3: QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The following table provides information about our derivative financial
instruments and other financial instruments that are sensitive to changes in
interest rates. For our mortgage note receivable, mortgage notes payable,
credit facilities and bonds payable, the table presents principal cash flows,
including principal amortization, and related weighted-average interest rates
by expected maturity dates as of March 31, 1999. For the treasury lock
agreement, the table presents the notional amount entered into and the lock
rate.
Interest Rate Sensitivity
Principal (Notional) amount by Expected Maturity
Average Interest Rate
<TABLE>
<CAPTION>
1999 2000 2001 2002 2003 Thereafter Total
----------------------------------------------------------------------------
(DOLLARS IN MILLIONS)
<S> <C> <C> <C> <C> <C> <C> <C>
Assets:
Mortgage notes receivable (1) - - - - - $ 64.6 $ 64.6
Fixed interest rate - - - - - 9.64%
Liabilities:
Mortgage notes payable (2):
Fixed rate $ 4.5 $ 6.4 $ 63.0 $ 4.5 $4.8 $261.7 $344.9
Average interest rate 7.05% 7.05% 6.78% 7.26% 7.26% 7.29%
Variable rate $190.5 $61.2 $20.0 $65.0 - - $336.7
Average interest rate (3) 6.72% 7.03% 8.04% 7.07% - -
Bonds payable (2):
Variable rate - - - $48.2 - $26.3 $ 74.5
Average interest rate (3) - - - 4.13% - 3.55%
Treasury Lock Agreement Related to Anticipated Long-Term Debt Issuance
Treasury Lock Agreement (2),(4):
Pay fixed $170.0 - - - - - $170.0
Lock rate 5.016 - - - - -
- -------------
</TABLE>
(1) See Note 2 to our consolidated financial statements in our Form 10-K
for the year ended December 31, 1998 for additional information.
(2) See Note 4 to our consolidated financial statements in our Form 10-K
for the year ended December 31, 1998 for additional information.
(3) Based upon the rates in effect at March 31, 1999. The weighted-average
interest rate on our mortgage notes payable, credit facilities, and
bonds payable at March 31, 1999 were 7.05%, 6.72%, and 3.91%,
respectively. If interest rates on our variable rate debt increased by
one percentage point, our annual interest expense would increase by
approximately $4.1 million.
(4) Through March 31, 1999, we made net deposits totaling $4.9 million
related to this treasury lock agreement, which expired April 15, 1999.
We extended the maturity to July 14, 1999 and modified the lock rate to
5.205%. On May 11, 1999, we terminated the treasury lock agreement
resulting in a net settlement of $6.0 million and gain upon termination
of $1.1 million.
- 18 -
<PAGE>
PART II: OTHER INFORMATION
ITEM 1. Legal Proceedings.
On July 22, 1998, we entered into a purchase agreement, with
an affiliate of an investor in the operating partnership, to
acquire two office buildings, IBM Plaza (a 1,354,354 square
foot office building located in the Chicago central business
district) and National City Center (a 766,965 square foot
office building located in Cleveland, Ohio) for an aggregate
purchase price of approximately $357.0 million. On September
15, 1998, we terminated the purchase agreement in accordance
with the terms of the agreement due to the failure of a
material condition precedent to the closing of these
acquisitions. On September 21, 1998, the sellers notified us
in writing that they believed they were entitled to the $20.0
million earnest money provided for by the agreement, and
instructed the earnest money escrow agent to draw the full
amount under two earnest money letters-of-credit we provided
under one of the Credit Facilities. The sellers also filed a
complaint against us in with the Supreme Court of New York,
New York County alleging that we breached the contract. On
October 30, 1998, we filed our answer to the complaint and
denied all material allegations of the complaint. We also
filed a counterclaim against the sellers alleging that the
sellers breached the contract and sought the return of the
above mentioned earnest money and other damages.
On February 5, 1999, we entered into an amended option
agreement with the sellers of IBM Plaza and an amended
purchase agreement with the sellers of National City Center,
which have the following terms:
- both the original lawsuit filed by the sellers and our
counterclaim were dismissed;
- we purchased National City Center on February 5, 1999
for a contract price of $100.0 million; and
- the $20.0 million earnest money escrow described above was
released and credited to the purchase of National City
Center and an $8.0 million nonrefundable payment for the
option to purchase IBM Plaza. The option allows us to
purchase IBM Plaza for $238.0 million (including the $8.0
million deposit) and expires October 31, 1999. If the
option is exercised, the purchase of the property must be
completed no later than December 20, 1999.
ITEM 2. Changes in Securities.
On April 13, 1999, we modified the terms of our Series A
preferred shares. Under the original terms, the holders of the
Series A preferred shares had certain conversion rights if for
two consecutive quarters (i) the ratio of our debt plus
nonconvertible preferred shares divided by its total market
capitalization exceeded 65% or (ii) its fixed charges coverage
ratio fell below 1.4. The new agreement eliminates the
debt-to-market cap covenant. In exchange, the holders of the
Series A preferred shares were granted the future right to
cause the redemption of their shares at a price of $20.00 per
share, upon 120 days prior written notice, which redemption
may occur during the period beginning January 15, 2002 and
ending January 15, 2004. The Series A preferred shares will
continue to pay an annual dividend of $1.50 per share and will
continue to be convertible into common shares on a one for one
basis. We also
- 19 -
<PAGE>
made a $0.4 million one-time payment as part of this
transaction.
ITEM 3. Defaults Upon Senior Securities.
None.
ITEM 4. Submission of Matters to a Vote of Security Holders.
None.
ITEM 5. Other Information.
None
ITEM 6. Exhibits and Reports on Form 8-K.
(a) Exhibits:
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------- -----------
<S> <C>
3.1 Amendment No. 17 to the Amended and Restated Agreement of
Limited Partnership dated as of January 15, 1999.
3.2 Amendment No. 18 to the Amended and Restated Agreement of
Limited Partnership dated as of February 15, 1999.
3.3 Amendment No. 19 to the Amended and Restated Agreement of
Limited Partnership dated as of March 15, 1999.
10.1 Agreement for Purchase and Sale of Real Estate and Related
property dated as of December 30, 1998 between Prime Group
Realty, L.P. and 33 West Monroe Associates, L.P.
10.2 Agreement of Purchase and Sale dated as of February 4, 1999
among Prime Group Realty, L.P., Blackstone Real Estate
Partners Two, L.P., Blackstone Real Estate Holdings II L.P.,
Blackstone Real Estate Partners II.TE.1 L.P., Blackstone Real
Estate Partners II.R (City Center), Blackstone Real Estate
Partners II.TE.3 L.P., Blackstone Real Estate Partners II.TE.4
L.P., Blackstone Real Estate Partners II.TE.5 L.P., and
Blackstone Real Estate Investors (City Center) Inc.
10.3 Option Agreement dated as of February 4, 1999 between Prime
Group Realty L.P. and BRE/Wabash L.L.C.
12.1 Computation of ratios of earnings to combined fixed charges
and preferred share distributions.
27.1 Financial Data Schedule
(b) Reports on Form 8-K:
We filed the following reports on Form 8-K and Form 8-K/A
relating to the acquisition of certain real estate properties
and the required financial information: Form 8-K on January
29, 1999; Form 8-K on February 5, 1999, Form 8-K/A on February
5, 1999 and Form 8-K on March 31, 1999.
</TABLE>
- 20 -
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
PRIME GROUP REALTY TRUST
------------------------
Registrant
Date: May 17, 1999 /s/ Richard S. Curto
-------------------------
Richard S. Curto
President and Chief Executive
Officer
Date: May 17, 1999 /s/ William M. Karnes
--------------------------
William M. Karnes
Executive Vice President and
Chief Financial Officer
- 21 -
<PAGE>
AMENDMENT NO. 17 TO AMENDED AND RESTATED
AGREEMENT OF LIMITED PARTNERSHIP
OF PRIME GROUP REALTY, L.P.
This AMENDMENT NO. 17 TO AMENDED AND RESTATED AGREEMENT OF LIMITED
PARTNERSHIP OF PRIME GROUP REALTY, L.P. (this "Amendment") is made as of January
15, 1999 by Prime Group Realty Trust, a Maryland real estate investment trust
("PGRT"), as the Managing General Partner of Prime Group Realty, L.P., a
Delaware limited partnership (the "Partnership"), and on behalf of the other
Partners (as hereinafter defined). Capitalized terms used but not otherwise
defined herein shall have the meanings given to such terms in the Amended and
Restated Agreement of Limited Partnership of the Partnership, dated as of
November 17, 1997, by and among PGRT and the other parties signatory thereto, as
amended thereafter (as so amended, the "Limited Partnership Agreement").
W I T N E S S E T H:
FIRST OPTION MAINTENANCE TRANSFER
WHEREAS, pursuant to Section 4.3.C. of the Limited Partnership Agreement,
the Managing General Partner may raise all or any portion of Additional Funds
required by the Partnership for the acquisition of additional properties by
accepting additional Capital Contributions, including the issuance of Common
Units for Capital Contributions that consist of property or interests in
property;
WHEREAS, pursuant to that certain Exchange Agreement dated as of December
15, 1997 by and between H Group LLC, a Delaware limited liability company
("HG"), and the Partnership (the "Exchange Agreement"), HG agreed, among other
things, to grant to the Partnership an option (the "First Option") to exchange
the Underlying Option (as defined in the Exchange Agreement) for 220,000 Common
Units of Limited Partner Interest (subject to adjustment pursuant to the terms
of the Exchange Agreement), which grant of the First Option contemplated the
transfer by the Partnership to HG of 5,000 Common Units of Limited Partner
Interest on the date thereof and, subject to the terms of the First Option,
5,000 Common Units of Limited Partner Interest (subject to adjustment pursuant
to the terms of the Exchange Agreement) on the 15th day of each month thereafter
(each such transfer a "First Option Maintenance Transfer") for such number of
months set forth in the Exchange Agreement;
<PAGE>
WHEREAS, the Partnership has agreed to the terms of the grant by HG of the
First Option set forth in the Exchange Agreement and desires to effect the First
Option Maintenance Transfer due on January 15, 1999.
WHEREAS, HG was admitted to the Partnership as an Additional Limited
Partner as of December 15, 1997 pursuant to Amendment No. 2 to the Limited
Partnership Agreement;
WHEREAS, the Partners desire to amend the Limited Partnership Agreement to
reflect the increase in outstanding Common Units resulting from the issuance of
Common Units to HG in connection with the First Option Maintenance Transfer due
on January 15, 1999;
GRANT SHARES
WHEREAS, on January 15, 1999, an aggregate of 25,694 Common Shares were
issued in grants to certain officers of PGRT (the "Officers") pursuant to the
terms of PGRT's existing share incentive plan (such 25,694 Common Shares are
collectively referred to herein as the "Grant Shares");
WHEREAS, for purposes of the Grant Shares, PGRT will be deemed to have
compensated the Officers in cash, that the Officers in turn paid cash for the
Grant Shares and that PGRT then contributed such cash to the Partnership in
exchange for Common Units corresponding to the Grant Shares (it being understood
that such mechanic shall not affect the vesting schedule for the Grant Shares or
the appropriate tax, accounting and financial reporting treatment applicable to
the Grant Shares);
WHEREAS, the Partners desire to amend the Limited Partnership Agreement to
reflect the increase in outstanding Common Units as a result of the issuance of
25,694 Common Units to PGRT in connection with the issuance and grant by PGRT of
the Grant Shares to the Officers;
REPURCHASED SHARES
WHEREAS, pursuant to the terms of a share repurchase program that PGRT
established on September 14, 1998, PGRT repurchased an aggregate of 474,200
Common Shares (the "Repurchased Shares") from the holders thereof and
reclassified such Common Shares as authorized but unissued Common Shares;
-2-
<PAGE>
WHEREAS, pursuant to Section 4.6 of the Limited Partnership Agreement, on
each occasion on which PGRT repurchased a portion of the Repurchased Shares,
PGRT caused the Partnership to purchase from it a number of Common Units equal
to the number of Repurchased Shares so repurchased, on the same terms that PGRT
repurchased such Repurchased Shares;
WHEREAS, the Partners desire to amend the Limited Partnership Agreement to
reflect the decrease in outstanding Common Units resulting from the
Partnership's purchase of the 474,200 Common Units from PGRT corresponding to
the Repurchased Shares; and
WHEREAS, Sections 2.4 and 12.3 of the Limited Partnership Agreement
authorize, among other things, the Managing General Partner, as true and lawful
agent and attorney-in fact, to execute, swear to, acknowledge, deliver, file and
record this Amendment on behalf of each Partner that has executed the Limited
Partnership Agreement and on behalf of the Partnership.
NOW, THEREFORE, for good and adequate consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto agree as
follows:
Section 1. ACCEPTANCE OF CAPITAL CONTRIBUTION IN EXCHANGE FOR COMMON
UNITS. (a) PGRT, as Managing General Partner and on behalf of the Partnership,
hereby accepts the grant of the rights consisting of the First Option during the
fourteenth month of the term of the First Option from HG as a Capital
Contribution having a value on the date hereof of $100,000, in exchange for
6,891 Common Units of Limited Partner Interest which are hereby issued by the
Partnership to HG pursuant to Section 4.3.C. of the Limited Partnership
Agreement, and which are evidenced by Common Unit Certificate No. 37 of the
Partnership.
(b) Each of the Common Units of Limited Partner Interest issued to HG
pursuant to this SECTION 1 shall have the same terms and provisions of the
Common Units of Limited Partner Interest issued by the Partnership on November
17, 1997 except that (i) the Exchange Rights relating thereto may be exercised
at any time after December 15, 1999 (as opposed to November 17, 1998) and (ii)
such Common Units of Limited Partner Interest will be subject to the
Registration Rights Agreement dated as of December 15, 1997 by and among PGRT,
the Partnership and HG as opposed to the Registration Rights Agreement entered
into by PGRT and the Partnership on November 17, 1997.
-3-
<PAGE>
Section 2. ISSUANCE OF COMMON UNITS CORRESPONDING TO THE GRANT SHARES.
The Partnership hereby issues, effective as of January 15, 1999, 25,694 Common
Units of General Partner Interest to PGRT, which shall correspond to the Grant
Shares. Such Common Units of General Partner Interest issued pursuant to this
SECTION 2 shall not be evidenced by a Common Unit certificate unless hereafter
requested by PGRT.
Section 3. ACKNOWLEDGMENT OF PURCHASE OF COMMON UNITS CORRESPONDING TO
THE REPURCHASED SHARES. The Partnership hereby acknowledges its purchases from
time to time of an aggregate of 474,200 Common Units of General Partner Interest
from PGRT, which 474,200 Common Units correspond to the Repurchased Shares.
Section 4. AMENDMENT OF EXHIBIT A TO THE LIMITED PARTNERSHIP AGREEMENT.
Exhibit A to the Limited Partnership Agreement is hereby amended and restated
to reflect the aforementioned change(s) by deleting Exhibit A attached
thereto in its entirety, and by attaching in lieu thereof a replacement
exhibit in the form of EXHIBIT A attached hereto. From and after the
effectiveness of this Amendment, the amended and restated EXHIBIT A attached
hereto shall be the only Exhibit A to the Limited Partnership Agreement,
unless and until it is hereafter further amended.
Section 5. REFERENCE TO AND EFFECT ON THE LIMITED PARTNERSHIP
AGREEMENT.
A. The Limited Partnership Agreement is hereby deemed to be amended
to the extent necessary to effect the matters contemplated by this Amendment.
Except as specifically provided for hereinabove, the provisions of the Limited
Partnership Agreement shall remain in full force and effect.
B. The execution, delivery and effectiveness of this Amendment shall
not operate (i) as a waiver of any provision, right or obligation of the
Managing General Partner, the other General Partner or any Limited Partner under
the Limited Partnership Agreement except as specifically set forth herein or
(ii) as a waiver or consent to any subsequent action or transaction.
-4-
<PAGE>
Section 6. APPLICABLE LAW. This Amendment shall be construed in
accordance with and governed by the laws of the State of Delaware, without
regard to the principles of conflicts of law.
[signature page follows]
-5-
<PAGE>
AMENDMENT NO. 17 TO AMENDED AND RESTATED
AGREEMENT OF LIMITED PARTNERSHIP OF PRIME
GROUP REALTY, L.P.
IN WITNESS WHEREOF, the parties hereto have executed this Amendment as of
the date first written above.
MANAGING GENERAL PARTNER:
PRIME GROUP REALTY TRUST, a
Maryland real estate investment trust
By: /s/ William M. Karnes
------------------------------
Name: William M. Karnes
Title: Executive Vice President -
Chief Financial Officer
LIMITED PARTNERS:
Each Limited Partner hereby executes
this Amendment to the Limited
Partnership Agreement.
By: PRIME GROUP REALTY TRUST, a
Maryland real estate investment
trust, as attorney-in fact
By: /s/ William M. Karnes
-------------------------
Name: William M. Karnes
Title: Executive Vice President -
Chief Financial Officer
-6-
<PAGE>
EXHIBIT A (*)
PARTNERS, NUMBER OF UNITS AND CAPITAL CONTRIBUTIONS
<TABLE>
<CAPTION>
Number of Capital
Managing General Partner Common Units Contribution
------------------------ ------------ ------------
<S> <C> <C>
Prime Group Realty Trust 15,136,488 (**)
77 West Wacker Drive
Suite 3900
Chicago, IL 60601
Attn: Richard S. Curto
James F. Hoffman
General Partner
---------------
The Nardi Group, L.L.C. 927,100 $18,542,000
c/o Stephen J. Nardi
4100 Madison Street
Hillside, IL 60162
Limited Partners
----------------
Edward S. Hadesman 388,677 $7,773,540
Trust Dated May 22, 1992
c/o Edward S. Hadesman
2500 North Lakeview, Unit 1401
Chicago, IL 60614
Grandville/Northwestern 9,750 $195,000
Management Corporation
c/o Edward S. Hadesman
2500 North Lakeview, Unit 1401
Chicago, IL 60614
Carolyn B. Hadesman 54,544 $1,090,880
Trust Dated May 21, 1992
c/o Edward S. Hadesman
2500 North Lakeview, Unit 1401
Chicago, IL 60614
</TABLE>
- ---------------------
(*) As amended by Amendment No. 17 to the Amended and Restated Agreement of
Limited Partnership of Prime Group Realty, L.P.
(**) This amount shall be inserted by the Managing General Partner.
-7-
<PAGE>
EXHIBIT A - CONT'D
PARTNERS, NUMBER OF UNITS AND CAPITAL CONTRIBUTIONS
<TABLE>
<CAPTION>
Number of Capital
Limited Partners (Cont'd) Common Units Contribution
------------------------- ------------ ------------
<S> <C> <C>
Lisa Hadesman 1991 Trust 169,053 $3,381,060
c/o Edward S. Hadesman
2500 North Lakeview, Unit 1401
Chicago, IL 60614
Cynthia Hadesman 1991 Trust 169,053 $3,381,060
c/o Edward S. Hadesman
2500 North Lakeview, Unit 1401
Chicago, IL 60614
Tucker B. Magid 33,085 $661,700
545 Ridge Road
Highland Park, IL 60035
Frances S. Shubert 28,805 $576,100
511 Lynn Terrace
Waukegan, IL 60085
Grandville Road Property, Inc. 7,201 $144,020
c/o Ms. Frances S. Shubert
511 Lynn Terrace
Waukegan, IL 60085
Sky Harbor Associates 62,149 $1,242,980
c/o Howard I. Bernstein
6541 North Kilbourn
Lincolnwood, IL 60646
Jeffrey A. Patterson 110,000 $2,200,000
c/o Prime Group Realty Trust
77 West Wacker Drive
Suite 3900
Chicago, IL 60601
Primestone Investment Partners, L.P. 7,944,893 (**)
c/o The Prime Group, Inc.
77 West Wacker Drive
Suite 3900
Chicago, IL 60601
Attn: Paul A. Roehri
</TABLE>
- -----------------------
(**) This amount shall be inserted by the Managing General Partner.
-8-
<PAGE>
EXHIBIT A - CONT'D
PARTNERS, NUMBER OF UNITS AND CAPITAL CONTRIBUTIONS
<TABLE>
<CAPTION>
Number of Capital
Limited Partners (Cont'd) Common Units Contribution
------------------------- ------------ ------------
<S> <C> <C>
Prime Group Limited Partnership 47,525 $950,500
c/o The Prime Group, Inc.
77 West Wacker Drive
Suite 3900
Chicago, IL 60601
Attn: Michael W. Reshcke
Robert J. Rudnik
H Group LLC 330,481 $6,400,000
c/o Heitman Financial Ltd.
180 N. LaSalle
Suite 3600
Chicago, IL 60601
Attn: Norman Perlmutter
Ray R. Grinvalds 5,216 $104,320
217 Deer Valley Drive
Barrington, IL 60010
Warren H. John 37,259 $745,180
1730 N. Clark Street
Chicago, IL 60614
</TABLE>
-9-
<PAGE>
EXHIBIT A - CONT'D
PARTNERS, NUMBER OF UNITS AND CAPITAL CONTRIBUTIONS
<TABLE>
<CAPTION>
Number of Capital
Managing General Partner Preferred Units Contribution
------------------------ --------------- ------------
<S> <C> <C>
Prime Group Realty Trust 2,000,000 (**)
77 West Wacker Drive Convertible
Suite 3900 Preferred Units
Chicago, IL 60601
Attn: Richard S. Curto
James F. Hoffman
Prime Group Realty Trust 4,000,000 (**)
77 West Wacker Drive Series B
Suite 3900 Preferred Units
Chicago, IL 60601
Attn: Richard S. Curto
James F. Hoffman
</TABLE>
- -------------------------
(**) This amount shall be inserted by the Managing General Partner.
-10-
<PAGE>
AMENDMENT NO. 18 TO AMENDED AND RESTATED
AGREEMENT OF LIMITED PARTNERSHIP
OF PRIME GROUP REALTY, L.P.
This AMENDMENT NO. 18 TO AMENDED AND RESTATED AGREEMENT OF LIMITED
PARTNERSHIP OF PRIME GROUP REALTY, L.P. (this "Amendment") is made as of
February 15, 1999 by Prime Group Realty Trust, a Maryland real estate investment
trust ("PGRT"), as the Managing General Partner of Prime Group Realty, L.P., a
Delaware limited partnership (the "Partnership"), and on behalf of the other
Partners (as hereinafter defined). Capitalized terms used but not otherwise
defined herein shall have the meanings given to such terms in the Amended and
Restated Agreement of Limited Partnership of the Partnership, dated as of
November 17, 1997, by and among PGRT and the other parties signatory thereto, as
amended thereafter (as so amended, the "Limited Partnership Agreement").
W I T N E S S E T H:
WHEREAS, pursuant to Section 4.3.C. of the Limited Partnership Agreement,
the Managing General Partner may raise all or any portion of Additional Funds
required by the Partnership for the acquisition of additional properties by
accepting additional Capital Contributions, including the issuance of Common
Units for Capital Contributions that consist of property or interests in
property;
WHEREAS, pursuant to that certain Exchange Agreement dated as of December
15, 1997 by and between H Group LLC, a Delaware limited liability company
("HG"), and the Partnership (the "Exchange Agreement"), HG agreed, among other
things, to grant to the Partnership an option (the "First Option") to exchange
the Underlying Option (as defined in the Exchange Agreement) for 220,000 Common
Units of Limited Partner Interest (subject to adjustment pursuant to the terms
of the Exchange Agreement), which grant of the First Option contemplated the
transfer by the Partnership to HG of 5,000 Common Units of Limited Partner
Interest on the date thereof and, subject to the terms of the First Option,
5,000 Common Units of Limited Partner Interest (subject to adjustment pursuant
to the terms of the Exchange Agreement) on the 15th day of each month thereafter
(each such transfer a "First Option Maintenance Transfer") for such number of
months set forth in the Exchange Agreement;
WHEREAS, the Partnership has agreed to the terms of the grant by HG of the
First Option set forth in the Exchange Agreement and desires to effect the First
Option Maintenance Transfer due on February 15, 1999;
<PAGE>
WHEREAS, HG was admitted to the Partnership as an Additional Limited
Partner as of December 15, 1997 pursuant to Amendment No. 2 to the Limited
Partnership Agreement;
WHEREAS, the Partners desire to amend the Limited Partnership Agreement to
reflect the increase in outstanding Common Units resulting from the issuance of
Common Units to HG in connection with the First Option Maintenance Transfer due
on February 15, 1999; and
WHEREAS, Sections 2.4 and 12.3 of the Limited Partnership Agreement
authorize, among other things, the Managing General Partner, as true and lawful
agent and attorney-in fact, to execute, swear to, acknowledge, deliver, file and
record this Amendment on behalf of each Partner that has executed the Limited
Partnership Agreement and on behalf of the Partnership.
NOW, THEREFORE, for good and adequate consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto agree as
follows:
Section 1. ACCEPTANCE OF CAPITAL CONTRIBUTION IN EXCHANGE FOR COMMON
UNITS. (a) PGRT, as Managing General Partner and on behalf of the Partnership,
hereby accepts the grant of the rights consisting of the First Option during the
fifteenth month of the term of the First Option from HG as a Capital
Contribution having a value on the date hereof of $100,000, in exchange for
6,843 Common Units of Limited Partner Interest which are hereby issued by the
Partnership to HG pursuant to Section 4.3.C. of the Limited Partnership
Agreement, and which are evidenced by Common Unit Certificate No. 40 of the
Partnership.
(b) Each of the Common Units of Limited Partner Interest issued to HG
pursuant to this SECTION 1 shall have the same terms and provisions of the
Common Units of Limited Partner Interest issued by the Partnership on November
17, 1997 except that (i) the Exchange Rights relating thereto may be exercised
at any time after December 15, 1999 (as opposed to November 17, 1998) and (ii)
such Common Units of Limited Partner Interest will be subject to the
Registration Rights Agreement dated as of December 15, 1997 by and among PGRT,
the Partnership and HG as opposed to the Registration Rights Agreement entered
into by PGRT and the Partnership on November 17, 1997.
-2-
<PAGE>
Section 2. AMENDMENT OF EXHIBIT A TO THE LIMITED PARTNERSHIP AGREEMENT.
Exhibit A to the Limited Partnership Agreement is hereby amended and restated
to reflect the aforementioned change(s) by deleting Exhibit A attached
thereto in its entirety, and by attaching in lieu thereof a replacement
exhibit in the form of EXHIBIT A attached hereto. From and after the
effectiveness of this Amendment, the amended and restated EXHIBIT A attached
hereto shall be the only Exhibit A to the Limited Partnership Agreement,
unless and until it is hereafter further amended.
Section 3. REFERENCE TO AND EFFECT ON THE LIMITED PARTNERSHIP
AGREEMENT.
A. The Limited Partnership Agreement is hereby deemed to be amended
to the extent necessary to effect the matters contemplated by this Amendment.
Except as specifically provided for hereinabove, the provisions of the Limited
Partnership Agreement shall remain in full force and effect.
B. The execution, delivery and effectiveness of this Amendment
shall not operate (i) as a waiver of any provision, right or obligation of
the Managing General Partner, the other General Partner or any Limited
Partner under the Limited Partnership Agreement except as specifically set
forth herein or (ii) as a waiver or consent to any subsequent action or
transaction.
Section 4. APPLICABLE LAW. This Amendment shall be construed in
accordance with and governed by the laws of the State of Delaware, without
regard to the principles of conflicts of law.
[signature page follows]
-3-
<PAGE>
AMENDMENT NO. 18 TO AMENDED AND RESTATED
AGREEMENT OF LIMITED PARTNERSHIP OF PRIME
GROUP REALTY, L.P.
IN WITNESS WHEREOF, the parties hereto have executed this Amendment as of
the date first written above.
MANAGING GENERAL PARTNER:
PRIME GROUP REALTY TRUST, a
Maryland real estate investment trust
By: /s/ James F. Hoffman
-------------------------------
Name: James F. Hoffman
Title: Senior Vice President, General
Counsel and Secretary
LIMITED PARTNERS:
Each Limited Partner hereby executes
this Amendment to the Limited
Partnership Agreement.
By: PRIME GROUP REALTY TRUST, a
Maryland real estate investment
trust, as attorney-in fact
By: /s/ James F. Hoffman
--------------------------
Name: James F. Hoffman
Title: Senior Vice President,
General Counsel and
Secretary
-4-
<PAGE>
EXHIBIT A (*)
PARTNERS, NUMBER OF UNITS AND CAPITAL CONTRIBUTIONS
<TABLE>
<CAPTION>
Number of Capital
Managing General Partner Common Units Contribution
------------------------ ------------ ------------
<S> <C> <C>
Prime Group Realty Trust 15,136,488 (**)
77 West Wacker Drive
Suite 3900
Chicago, IL 60601
Attn: Richard S. Curto
James F. Hoffman
General Partner
The Nardi Group, L.L.C. 927,100 $18,542,000
c/o Stephen J. Nardi
4100 Madison Street
Hillside, IL 60162
Limited Partners
Edward S. Hadesman 388,677 $7,773,540
Trust Dated May 22, 1992
c/o Edward S. Hadesman
2500 North Lakeview, Unit 1401
Chicago, IL 60614
Grandville/Northwestern 9,750 $195,000
Management Corporation
c/o Edward S. Hadesman
2500 North Lakeview, Unit 1401
Chicago, IL 60614
Carolyn B. Hadesman 54,544 $1,090,880
Trust Dated May 21, 1992
c/o Edward S. Hadesman
2500 North Lakeview, Unit 1401
Chicago, IL 60614
</TABLE>
- --------------
(*) As amended by Amendment No. 18 to the Amended and Restated Agreement of
Limited Partnership of Prime Group Realty, L.P.
(**) This amount shall be inserted by the Managing General Partner.
-5-
<PAGE>
EXHIBIT A - CONT'D
PARTNERS, NUMBER OF UNITS AND CAPITAL CONTRIBUTIONS
<TABLE>
<CAPTION>
Number of Capital
Limited Partners (Cont'd) Common Units Contribution
------------------------- ------------ ------------
<S> <C> <C>
Lisa Hadesman 1991 Trust 169,053 $3,381,060
c/o Edward S. Hadesman
2500 North Lakeview, Unit 1401
Chicago, IL 60614
Cynthia Hadesman 1991 Trust 169,053 $3,381,060
c/o Edward S. Hadesman
2500 North Lakeview, Unit 1401
Chicago, IL 60614
Tucker B. Magid 33,085 $661,700
545 Ridge Road
Highland Park, IL 60035
Frances S. Shubert 28,805 $576,100
511 Lynn Terrace
Waukegan, IL 60085
Grandville Road Property, Inc. 7,201 $144,020
c/o Ms. Frances S. Shubert
511 Lynn Terrace
Waukegan, IL 60085
Sky Harbor Associates 62,149 $1,242,980
c/o Howard I. Bernstein
6541 North Kilbourn
Lincolnwood, IL 60646
Jeffrey A. Patterson 110,000 $2,200,000
c/o Prime Group Realty Trust
77 West Wacker Drive
Suite 3900
Chicago, IL 60601
Primestone Investment Partners, L.P. 7,944,893 (**)
c/o The Prime Group, Inc.
77 West Wacker Drive
Suite 3900
Chicago, IL 60601
Attn: Paul A. Roehri
</TABLE>
- ----------------------
(**) This amount shall be inserted by the Managing General Partner.
-6-
<PAGE>
EXHIBIT A - CONT'D
PARTNERS, NUMBER OF UNITS AND CAPITAL CONTRIBUTIONS
<TABLE>
<CAPTION>
Number of Capital
Limited Partners (Cont'd) Common Units Contribution
------------------------- ------------ ------------
<S> <C> <C>
Prime Group VI, L.P. 304,097 $6,050,500
c/o The Prime Group, Inc.
77 West Wacker Drive
Suite 3900
Chicago, IL 60601
Attn: Michael W. Reshcke
Robert J. Rudnik
H Group LLC 80,752 $1,400,000
c/o Heitman Financial Ltd.
180 N. LaSalle
Suite 3600
Chicago, IL 60601
Attn: Norman Perlmutter
Ray R. Grinvalds 5,216 $104,320
217 Deer Valley Drive
Barrington, IL 60010
Warren H. John 37,259 $745,180
1730 N. Clark Street
Chicago, IL 60614
</TABLE>
-7-
<PAGE>
EXHIBIT A - CONT'D
PARTNERS, NUMBER OF UNITS AND CAPITAL CONTRIBUTIONS
<TABLE>
<CAPTION>
Number of Capital
Managing General Partner Preferred Units Contribution
------------------------ --------------- ------------
<S> <C> <C>
Prime Group Realty Trust 2,000,000 (**)
77 West Wacker Drive Convertible Preferred
Suite 3900 Units
Chicago, IL 60601
Attn: Richard S. Curto
James F. Hoffman
Prime Group Realty Trust 4,000,000 **/
77 West Wacker Drive Series B Preferred
Suite 3900 Units
Chicago, IL 60601
Attn: Richard S. Curto
James F. Hoffman
</TABLE>
- ------------------------
(**) This amount shall be inserted by the Managing General Partner.
-8-
<PAGE>
AMENDMENT NO. 19 TO AMENDED AND RESTATED
AGREEMENT OF LIMITED PARTNERSHIP
OF PRIME GROUP REALTY, L.P.
This AMENDMENT NO. 19 TO AMENDED AND RESTATED AGREEMENT OF LIMITED
PARTNERSHIP OF PRIME GROUP REALTY, L.P. (this "Amendment") is made as of March
15, 1999 by Prime Group Realty Trust, a Maryland real estate investment trust
("PGRT"), as the Managing General Partner of Prime Group Realty, L.P., a
Delaware limited partnership (the "Partnership"), and on behalf of the other
Partners (as hereinafter defined). Capitalized terms used but not otherwise
defined herein shall have the meanings given to such terms in the Amended and
Restated Agreement of Limited Partnership of the Partnership, dated as of
November 17, 1997, by and among PGRT and the other parties signatory thereto, as
amended thereafter (as so amended, the "Limited Partnership Agreement").
W I T N E S S E T H:
WHEREAS, pursuant to Section 4.3.C. of the Limited Partnership Agreement,
the Managing General Partner may raise all or any portion of Additional Funds
required by the Partnership for the acquisition of additional properties by
accepting additional Capital Contributions, including the issuance of Common
Units for Capital Contributions that consist of property or interests in
property;
WHEREAS, pursuant to that certain Exchange Agreement dated as of December
15, 1997 by and between H Group LLC, a Delaware limited liability company
("HG"), and the Partnership (the "Exchange Agreement"), HG agreed, among other
things, to grant to the Partnership an option (the "First Option") to exchange
the Underlying Option (as defined in the Exchange Agreement) for 220,000 Common
Units of Limited Partner Interest (subject to adjustment pursuant to the terms
of the Exchange Agreement), which grant of the First Option contemplated the
transfer by the Partnership to HG of 5,000 Common Units of Limited Partner
Interest on the date thereof and, subject to the terms of the First Option,
5,000 Common Units of Limited Partner Interest (subject to adjustment pursuant
to the terms of the Exchange Agreement) on the 15th day of each month thereafter
(each such transfer a "First Option Maintenance Transfer") for such number of
months set forth in the Exchange Agreement;
WHEREAS, the Partnership has agreed to the terms of the grant by HG of the
First Option set forth in the Exchange Agreement and desires to effect the First
Option Maintenance Transfer due on March 15, 1999;
<PAGE>
WHEREAS, HG was admitted to the Partnership as an Additional Limited
Partner as of December 15, 1997 pursuant to Amendment No. 2 to the Limited
Partnership Agreement;
WHEREAS, the Partners desire to amend the Limited Partnership Agreement to
reflect the increase in outstanding Common Units resulting from the issuance of
Common Units to HG in connection with the First Option Maintenance Transfer due
on March 15, 1999; and
WHEREAS, Sections 2.4 and 12.3 of the Limited Partnership Agreement
authorize, among other things, the Managing General Partner, as true and lawful
agent and attorney-in fact, to execute, swear to, acknowledge, deliver, file and
record this Amendment on behalf of each Partner that has executed the Limited
Partnership Agreement and on behalf of the Partnership.
NOW, THEREFORE, for good and adequate consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto agree as
follows:
Section 1. ACCEPTANCE OF CAPITAL CONTRIBUTION IN EXCHANGE FOR COMMON
UNITS. (a) PGRT, as Managing General Partner and on behalf of the Partnership,
hereby accepts the grant of the rights consisting of the First Option during the
sixteenth month of the term of the First Option from HG as a Capital
Contribution having a value on the date hereof of $100,000, in exchange for
7262.0 Common Units of Limited Partner Interest which are hereby issued by the
Partnership to HG pursuant to Section 4.3.C. of the Limited Partnership
Agreement, and which are evidenced by Common Unit Certificate No. 41 of the
Partnership.
(b) Each of the Common Units of Limited Partner Interest issued to
HG pursuant to this SECTION 1 shall have the same terms and provisions of the
Common Units of Limited Partner Interest issued by the Partnership on
November 17, 1997 except that (i) the Exchange Rights relating thereto may be
exercised at any time after December 15, 1999 (as opposed to November 17,
1998) and (ii) such Common Units of Limited Partner Interest will be subject
to the Registration Rights Agreement dated as of December 15, 1997 by and
among PGRT, the Partnership and HG as opposed to the Registration Rights
Agreement entered into by PGRT and the Partnership on November 17, 1997.
-2-
<PAGE>
Section 2. AMENDMENT OF EXHIBIT A TO THE LIMITED PARTNERSHIP AGREEMENT.
Exhibit A to the Limited Partnership Agreement is hereby amended and restated
to reflect the aforementioned change(s) by deleting Exhibit A attached
thereto in its entirety, and by attaching in lieu thereof a replacement
exhibit in the form of EXHIBIT A attached hereto. From and after the
effectiveness of this Amendment, the amended and restated EXHIBIT A attached
hereto shall be the only Exhibit A to the Limited Partnership Agreement,
unless and until it is hereafter further amended.
Section 3. REFERENCE TO AND EFFECT ON THE LIMITED PARTNERSHIP
AGREEMENT.
A. The Limited Partnership Agreement is hereby deemed to be amended
to the extent necessary to effect the matters contemplated by this Amendment.
Except as specifically provided for hereinabove, the provisions of the Limited
Partnership Agreement shall remain in full force and effect.
B. The execution, delivery and effectiveness of this Amendment shall
not operate (i) as a waiver of any provision, right or obligation of the
Managing General Partner, the other General Partner or any Limited Partner under
the Limited Partnership Agreement except as specifically set forth herein or
(ii) as a waiver or consent to any subsequent action or transaction.
Section 4. APPLICABLE LAW. This Amendment shall be construed in
accordance with and governed by the laws of the State of Delaware, without
regard to the principles of conflicts of law.
[signature page follows]
-3-
<PAGE>
AMENDMENT NO. 19 TO AMENDED AND RESTATED
AGREEMENT OF LIMITED PARTNERSHIP OF PRIME
GROUP REALTY, L.P.
IN WITNESS WHEREOF, the parties hereto have executed this Amendment as of
the date first written above.
MANAGING GENERAL PARTNER:
PRIME GROUP REALTY TRUST, a
Maryland real estate investment trust
By: /s/ James F. Hoffman
-----------------------------
Name: James F. Hoffman
Title: Senior VP
LIMITED PARTNERS:
Each Limited Partner hereby executes
this Amendment to the Limited
Partnership Agreement.
By: PRIME GROUP REALTY TRUST, a
Maryland real estate investment
trust, as attorney-in fact
By: /s/ James F. Hoffman
-------------------------
Name: James F. Hoffman
Title: Senior VP
-4-
<PAGE>
EXHIBIT A (*)
PARTNERS, NUMBER OF UNITS AND CAPITAL CONTRIBUTIONS
<TABLE>
<CAPTION>
Number of Capital
Managing General Partner Common Units Contribution
------------------------ ------------ ------------
<S> <C> <C>
Prime Group Realty Trust 15,136,488 (**)
77 West Wacker Drive
Suite 3900
Chicago, IL 60601
Attn: Richard S. Curto
James F. Hoffman
General Partner
The Nardi Group, L.L.C. 927,100 $18,542,000
c/o Stephen J. Nardi
4100 Madison Street
Hillside, IL 60162
Limited Partners
Edward S. Hadesman 388,677 $7,773,540
Trust Dated May 22, 1992
c/o Edward S. Hadesman
2500 North Lakeview, Unit 1401
Chicago, IL 60614
Grandville/Northwestern 9,750 $195,000
Management Corporation
c/o Edward S. Hadesman
2500 North Lakeview, Unit 1401
Chicago, IL 60614
Carolyn B. Hadesman 54,544 $1,090,880
Trust Dated May 21, 1992
c/o Edward S. Hadesman
2500 North Lakeview, Unit 1401
Chicago, IL 60614
</TABLE>
- ------------------------
(*) As amended by Amendment No. 19 to the Amended and Restated Agreement of
Limited Partnership of Prime Group Realty, L.P.
(**) This amount shall be inserted by the Managing General Partner.
-5-
<PAGE>
EXHIBIT A - CONT'D
PARTNERS, NUMBER OF UNITS AND CAPITAL CONTRIBUTIONS
<TABLE>
Number of Capital
Limited Partners (Cont'd) Common Units Contribution
------------------------- ------------ ------------
<S> <C> <C>
Lisa Hadesman 1991 Trust 169,053 $3,381,060
c/o Edward S. Hadesman
2500 North Lakeview, Unit 1401
Chicago, IL 60614
Cynthia Hadesman 1991 Trust 169,053 $3,381,060
c/o Edward S. Hadesman
2500 North Lakeview, Unit 1401
Chicago, IL 60614
Tucker B. Magid 33,085 $661,700
545 Ridge Road
Highland Park, IL 60035
Frances S. Shubert 28,805 $576,100
511 Lynn Terrace
Waukegan, IL 60085
Grandville Road Property, Inc. 7,201 $144,020
c/o Ms. Frances S. Shubert
511 Lynn Terrace
Waukegan, IL 60085
Sky Harbor Associates 62,149 $1,242,980
c/o Howard I. Bernstein
6541 North Kilbourn
Lincolnwood, IL 60646
Jeffrey A. Patterson 110,000 $2,200,000
c/o Prime Group Realty Trust
77 West Wacker Drive
Suite 3900
Chicago, IL 60601
Primestone Investment Partners, L.P. 7,944,893 (**)
c/o The Prime Group, Inc.
77 West Wacker Drive
Suite 3900
Chicago, IL 60601
Attn: Paul A. Roehri
</TABLE>
- ------------------------
(**) This amount shall be inserted by the Managing General Partner.
-6-
<PAGE>
<TABLE>
<CAPTION>
Number of Capital
Limited Partners (Cont'd) Common Units Contribution
------------------------ --------------- ------------
<S> <C> <C>
Prime Group VI, L.P. 304,097 $6,050,500
c/o The Prime Group, Inc.
77 West Wacker Drive
Suite 3900
Chicago, IL 60601
Attn: Michael W. Reshcke
Robert J. Rudnik
H Group LLC 88,014 $1,500,000
c/o Heitman Financial Ltd.
180 N. LaSalle
Suite 3600
Chicago, IL 60601
Attn: Norman Perlmutter
Ray R. Grinvalds 5,216 $104,320
217 Deer Valley Drive
Barrington, IL 60010
Warren H. John 37,259 $745,180
1730 N. Clark Street
Chicago, IL 60614
</TABLE>
-7-
<PAGE>
EXHIBIT A - CONT'D
PARTNERS, NUMBER OF UNITS AND CAPITAL CONTRIBUTIONS
<TABLE>
<CAPTION>
Number of Capital
Managing General Partner Preferred Units Contribution
------------------------ --------------- ------------
<S> <C> <C>
Prime Group Realty Trust 2,000,000 (**)
77 West Wacker Drive Convertible Preferred
Suite 3900 Units
Chicago, IL 60601
Attn: Richard S. Curto
James F. Hoffman
Prime Group Realty Trust 4,000,000 (**)
77 West Wacker Drive Series B Preferred
Suite 3900 Units
Chicago, IL 60601
Attn: Richard S. Curto
James F. Hoffman
</TABLE>
- ------------------------
(**) This amount shall be inserted by the Managing General Partner.
-8-
<PAGE>
Exhibit 10.1
AGREEMENT FOR PURCHASE AND SALE
OF REAL ESTATE AND RELATED PROPERTY
THIS AGREEMENT FOR PURCHASE AND SALE OF REAL ESTATE AND RELATED PROPERTY
("Agreement") is made and entered into as of the 30th day of December, 1998, by
and between 33 WEST MONROE ASSOCIATES, L.P., an Illinois limited partnership
("Seller"), and PRIME GROUP REALTY, L.P., a Delaware limited partnership
("Purchaser").
RECITALS
A. American National Bank and Trust Company of Chicago, not personally,
but as Trustee under Trust Agreement dated February 1, 1978 and known as Trust
No. 42198 ("Trust One") holds fee title to a parcel of land located at 33 West
Monroe Street, Chicago, Illinois ("Parcel One"). American National Bank and
Trust Company of Chicago, not personally, but as Trustee under Trust Agreement
dated February 1, 1978 and known as Trust No. 42199 ("Trust Two") holds
leasehold title to a parcel of land located adjacent to Parcel One ("Parcel
Two") pursuant to that certain Lease Agreement dated April 1, 1978 between The
Baptist Theological Union, as lessor ("Ground Lessor"), and Trust Two, as
lessee, a short form of which was recorded on April 12, 1978 with the Cook
County, Illinois Recorder of Deeds as Document No. 24399609 ("Ground Lease").
Parcel One and Parcel Two are sometimes together referred to herein as the
"Land".
B. Trust One and Trust Two (collectively called the "Trusts") have
constructed a 28 story office building on the Land ("Building"). In connection
with the construction of the Building, on April 7, 1978, Trust One and Ground
Lessor entered into an Agreement pertaining thereto, which was recorded on April
12, 1978 with the Cook County, Illinois Recorder of Deeds as Document No.
24399610 ("Adjacent Owners Agreement").
C. Seller is the sole beneficiary under the Trusts.
D. Seller has previously made available to Purchaser the following items
(collectively called the "Information Package") in connection with the Property
(as hereinafter defined): (i) copies of all contracts (including equipment
leases, if any) currently in effect (including amendments thereto and any
guarantees and warranties thereunder) which Seller contemplates assigning to
Purchaser in connection with the Closing of the transaction contemplated hereby
("Service Contracts"), (ii) copies of real estate tax bills for the years 1996
and 1997 for the Building and the Land, (iii) copies of any licenses,
authorizations, approvals, warranties and permits (including the Canopy Permit
from the City of Chicago) issued by any governmental authority currently in
effect and in the possession
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of Seller ("Permits and Warranties"), (iv) statements (certified by Seller's
property manager) of income and certain expenses for the years 1996, 1997 and
1998 (to date), (v) copies of the plans and specifications for the Building in
the possession of Seller ("Plans"), (vi) copies of all leases of space (and all
amendments thereto and guarantees thereof) in the Building currently in effect
("Leases"), (vii) copy of the Ground Lease, (viii) current rent roll with
respect to all tenants occupying space in the Building, a copy of which is
attached hereto and made a part hereof as Exhibit A ("Rent Roll"), (ix) copy of
any existing environmental report in the possession of Seller ("Existing
Environmental Report"), (x) copy of the existing survey ("Existing Survey"),
(xi) copies of the Construction Contracts (as hereinafter defined), (xii) copy
of the Tax Contract (as hereinafter defined), and (xiii) 1998 operating and
capital budgets (if any), leasing plans, if any, tenant files and
correspondence.
E. Seller desires to sell, and Purchaser desires to acquire, Parcel One,
the lessee's interest under the Ground Lease, the Building, and certain related
property on an "AS IS, WHERE IS" basis, without any conditions, representations
or warranties of any kind, except as specifically and expressly set forth in
this Agreement.
NOW, THEREFORE, in consideration of and in reliance upon the above
Recitals (which are incorporated in and made a part of this Agreement), and the
mutual covenants, promises and undertakings set forth in this Agreement, and
other good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, Seller and Purchaser agree as follows:
AGREEMENTS
1. PURCHASE AND SALE OF PROPERTY.
A. Seller agrees to sell and convey (or to cause the Trusts to sell and
convey, as the case may be) to Purchaser or Purchaser's assignee in accordance
with Section 13.D below, and Purchaser agrees to purchase and accept all of the
right, title and interest of Seller or the Trusts, as the case may be, in and to
the following described property (all of which is hereinafter collectively
referred to as the "Property"):
1. Fee simple title to Parcel One, as is more specifically described in
Exhibit B attached hereto and made a part hereof, together with all
easements, rights, privileges, tenements, hereditaments and appurtenances
pertaining thereto, and all right, title and interest of Seller in and to
any streets, alleys, passages and other rights-of-way included therein or
adjacent thereto.
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2. The lessee's interest under the Ground Lease which demises Parcel Two,
as Parcel Two is more specifically described in Exhibit C attached hereto
and made a part hereof.
3. The Building, together with all other improvements and all fixtures now
situated on the Land and all systems, facilities, machinery, equipment and
conduits to provide fire protection, security, heat, exhaust, ventilation,
air conditioning, electrical power, light, plumbing, refrigeration, gas,
sewer and water to the Building (including replacements or additions
thereto between the date hereof and the Closing, as that term is
hereinafter defined) (collectively, the "Improvements").
4. All personal property, machinery, apparatus, equipment, fixtures,
furnishings and other personal property situated on the Land or the
Improvements ("Personal Property"). An inventory of the Personal Property
has previously been delivered to Purchaser. The Personal Property
specifically excludes any personal property owned by the Property Manager
(as hereinafter defined) and any personal property owned by tenants under
the Leases. The Personal Property to be conveyed is subject to depletions,
replacements and additions in the ordinary course of the operation, repair
and maintenance of the Land and Improvements.
5. The Leases, the Service Contracts, the Plans, the Permits and
Warranties, the Construction Contracts, the Tax Contract, the Adjacent
Owners Agreement, and copies of any existing books, records, documents and
intangible property (other than accounts, accounts receivable and
proprietary computer software) desired by Purchaser pertaining to the
operation, maintenance, repair and leasing (including information on
computer disks pertaining to tenant billings and escalations) of the
Property in the possession of Seller or the Property Manager.
The Land and Improvements are sometimes together referred to herein as the
"Premises."
B. Except for the express representations and warranties of Seller set
forth in Section 8.A of this Agreement, the Property is being sold in an "AS
IS-WHERE IS" condition and with "ALL FAULTS" as of the date of this Agreement.
Except as specifically and expressly set forth in this Agreement, no promises,
representations or warranties have been made or are made and no responsibility
has been or is assumed by Seller or by any partner, officer, director,
shareholder, beneficiary, affiliate, person, firm, agent or representative
acting or purporting to act on behalf of Seller as to (i) the condition or state
of repair or
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utility of the Property, (ii) the value, expense of operation or income
potential thereof, or (iii) any other fact or condition which has or could
affect the Property or the condition, repair, value, expense of operation or
income potential of the Property or any portion thereof, including, without
limitation, with respect to any environmental matters which could affect the
Property. Purchaser waives (such waiver to be effective from and after the date
which is six months after the Closing hereunder) any rights to contribution for
environmental matters it may now or hereafter have, whether under the
Comprehensive Environmental Response, Compensation and Liability Act (42 U.S.C.
Section 9601 et seq.), or otherwise. The parties acknowledge and agree that the
intent of this Agreement is that Purchaser has previously examined the
Information Package and Purchaser has had an agreed upon time period within
which to investigate and determine all matters pertaining to the Property to its
own satisfaction, including, without limitation, its satisfaction with the
environmental condition of the Property, and compliance with the Americans with
Disabilities Act. Except as specifically and expressly set forth in this
Agreement, Seller shall have no liability for the accuracy of any matters, facts
or data reflected in the Information Package, unless Seller has fraudulently
failed to disclose to Purchaser any actual knowledge Seller had that such
matters, facts or data were not materially correct. The parties acknowledge and
agree that all understandings and agreements heretofore made between them or
their respective agents or representatives regarding the purchase and sale of
the Property are merged into this Agreement and the Exhibits made a part hereof,
which alone fully and completely express their agreement and that neither party
is relying upon any statement, promise or representation by the other unless
such statement, promise or representation is specifically and expressly set
forth in this Agreement or the Exhibits made a part hereof. At Closing and as a
material inducement for Seller to consummate the transaction contemplated
hereby, Purchaser shall execute and deliver a certification in the form of
Exhibit D attached hereto and made a part hereof.
2. PURCHASE PRICE.
The purchase price ("Purchase Price") which Seller agrees to accept and
Purchaser agrees to pay for the Property is ONE HUNDRED MILLION DOLLARS
($100,000,000) U.S., payment of which is to be made as follows:
A. Within one (1) Business Day (as hereinafter defined) after execution of
this Agreement by Purchaser and Seller and Purchaser's receipt of a fully
executed original hereof, Purchaser shall make an earnest money deposit of THREE
MILLION DOLLARS ($3,000,000) U.S. ("Deposit"). The Deposit shall be held in
escrow by Commonwealth Land Title Insurance Company (sometimes called the
"Deposit Escrowee" or the "Title Company") in an
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interest bearing account pursuant to the terms of a joint order escrow agreement
in the form of Exhibit E attached hereto and made a part hereof ("Deposit Escrow
Agreement"). Any interest earned on the Deposit shall be considered part of the
Deposit. Except as otherwise specifically provided in this Agreement, the
Deposit shall be paid to Seller and applied to the Purchase Price at Closing.
Any escrow cost related to the Deposit shall be equally divided and paid by
Seller and Purchaser.
B. At 10:00 A.M. Central Time on the date of Closing (provided that all
express conditions to Purchaser's obligations contained herein have been
satisfied and all applicable documents required by Section 10.A hereof have been
deposited previously into escrow with Deposit Escrowee), Purchaser shall pay to
Deposit Escrowee an amount equal to the Purchase Price less the Deposit, plus or
minus prorations as provided herein, via wire transfer in immediately available
U.S. funds to a bank account designated by Deposit Escrowee ("Cash Balance").
3. PRIOR TO CLOSING.
A. During the period from the date of Seller's execution of this Agreement
until Closing or the earlier termination of this Agreement, Seller shall and
hereby covenants to:
1. Except as otherwise provided in this Agreement, operate the Property
through its on-site property manager ("Property Manager"), in the normal
course of business and, through the Property Manager, keep the Property in
its existing condition and state of repair, ordinary wear and tear and
loss due to fire or other casualty excepted, subject to Section 11 below.
Notwithstanding the foregoing, Seller shall continue (in accordance with
the terms of the Construction Contracts defined below) with its scheduled
elevator renovation ("Elevator Renovation") and garage repairs ("Garage
Repairs"), if any, in the Building until the Closing. Seller shall assign
to Purchaser at Closing, and Purchaser shall accept and assume, the
contracts previously or hereafter entered into by or on behalf of Seller
which pertain to the Elevator Renovation and Garage Repairs ("Construction
Contracts"); provided, however, that from and after the date hereof,
Seller shall not enter into any Construction Contract unless it has been
approved in writing by Purchaser. Purchaser shall receive a credit against
the Purchase Price payable at Closing with respect to the Elevator
Renovation and Garage Repairs, as is more particularly described in
Sections 9.H and 9.I below.
2. Keep the Premises and Personal Property insured against fire or other
hazards covered by extended coverage endorsement and comprehensive public
liability insurance against claims for bodily injury, death and property
damage
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occurring in, on or about the Premises, on terms no less favorable than
currently existing.
3. Not sell, lease, mortgage, pledge, encumber, hypothecate or otherwise
transfer or dispose of (or grant any interest in) all or any part of the
Property, the beneficial interest in the Trusts, or the general partner
interests in Seller, except that Seller may enter into new Leases (or
amendments, modifications, extensions or expansions of existing Leases)
pursuant to Section 3.B.1 below, and except for depletions and
replacements of Personal Property in the ordinary course of the operation,
repair and maintenance of the Land and Improvements and except as a result
of the exercise of a condemnation (but subject to Section 11 hereof).
4. Promptly give written notice to Purchaser upon obtaining knowledge of
the occurrence of any event which affects the truth or accuracy of any
representations or warranties made by Seller in this Agreement.
5. Perform (or cause to be performed) all of the applicable obligations of
Seller under the Leases and Service Contracts.
6. Not apply or use any portion of any security or other deposits posted
or made by tenants under the Leases.
7. Not pursue any legal or contractual remedies under the Leases without
Purchaser's consent, except in the event (in Seller's reasonable judgment)
of an emergency. In such event, Seller shall advise Purchaser of same as
soon as reasonably possible.
B. During the period from the date hereof until Closing or the earlier
termination of this Agreement, Seller shall and hereby covenants to:
1. Neither enter nor permit the Property Manager to enter into any new
Lease (or amendments, modifications, extensions, terminations or
expansions of existing Leases) without the prior written consent of
Purchaser. In the event Seller desires to enter into a new Lease (or
amendments, modifications, extensions, terminations or expansions of
existing Leases) of any portion of the Premises after the date hereof,
Seller shall submit to Purchaser a lease proposal package describing the
proposed tenant and the economic terms of the proposed new Lease (or
amendments, modifications, extensions, terminations or expansions of
existing Leases) and containing any other material information Seller has
regarding the applicable tenant or reasonably requested by Purchaser
("Lease Proposal"). The Lease Proposal shall consist of financial
information, if any, relating to the tenant under a proposed new Lease,
and a
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written summary of the material lease terms including, without limitation,
the following information (if applicable): (i) rent (including a
description of rent inducements, if any), (ii) lease term, (iii) security
deposit, (iv) leasing commissions, (v) moving allowance, and (vi) tenant
improvement allowance. Purchaser shall have two (2) Business Days after
its receipt of the Lease Proposal to consent to (or disapprove) the terms
of the Lease Proposal (if so approved, an "Approved Lease Proposal"). If
consent to a Lease Proposal is not received within such period, the
Proposal shall be deemed to have not been approved. Prior to executing any
Lease (or amendments, modifications, extensions, terminations or
expansions of existing Leases) prepared in accordance with the terms and
conditions described in an Approved Lease Proposal, Seller shall submit a
draft of such proposed new Lease to Purchaser for Purchaser's approval
("Lease Draft Proposal"). Purchaser shall have two (2) Business Days after
its receipt of the Lease Draft Proposal to consent (or disapprove) the
terms of the Lease Draft Proposal. If consent to a Lease Draft Proposal is
not received within such period, the Proposal shall be deemed to have not
been approved. Purchaser shall bear all costs in connection with new
Leases (or amendments, modifications, extensions or expansions of existing
Leases) entered into pursuant to this Section 3.B.1, including leasing
commissions, tenant improvement costs, moving costs, engineering fees,
rent concessions or inducements, and other tenant incentives (collectively
called the "Leasing Costs"), provided that the transaction contemplated
hereby is consummated.
2. Neither enter nor permit the Property Manager to enter into any new
Service Contract or extend, renew or materially modify or amend any
existing Service Contract, except those that are cancelable on not more
than 30 days' written notice without payment of any termination fee or
penalty.
3. Cooperate with Purchaser and Purchaser's accountants in connection with
such accountant's reasonable review and audit of Seller's books, records
and financial statements (excluding balance sheets) and information. In no
event, however, shall Seller be obligated to give such accountants any
kind of a "representation letter".
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4. INSPECTION OF THE PROPERTY.
During the period commencing on December 10, 1998 and ending on the date
of Closing, Purchaser and its agents and representatives may inspect the
Property (including the Information Package and the books, records and documents
of, and information related to, the Property maintained by either Seller or the
Property Manager with respect to the Property) and conduct such sampling or
non-destructive testing as Purchaser shall reasonably deem necessary during
normal business hours, subject to the following terms and conditions:
A. Purchaser shall give Seller (in care of Donald Vitek (312) 580-6547) at
least one (1) Business Day telephonic notice of its intention to inspect the
Property or conduct any sampling or testing. Purchaser shall only be permitted
to have contact with the tenants under the Leases or the Ground Lessor if
Purchaser has first obtained the prior consent of Seller, which consent shall
not be unreasonably withheld or delayed.
B. If Purchaser desires to conduct any environmental sampling or testing
at the Premises, Purchaser shall first provide Seller with the proposed study
plan therefor ("Plan"). The Plan is subject to the approval of Seller (not to be
unreasonably withheld or delayed) and no environmental sampling or testing shall
be performed until the Plan therefor has been approved by Seller, which approval
shall not be unreasonably withheld or delayed. Purchaser agrees that Seller may
have a representative present at any inspection, sampling or testing, including,
but not limited to, an environmental engineer or consultant designated by Seller
(in connection with any environmental sampling or testing conducted by Purchaser
in accordance with this Section 4). At Seller's request, any sampling or testing
by Purchaser's environmental consultant shall be conducted in a manner so as to
provide "split" samples or data to Seller's environmental consultant. Such
"split" samples shall be at Seller's cost.
C. Purchaser shall maintain commercially reasonable levels of liability
insurance coverage for its officers, employees, agents and representatives
inspecting the Property or conducting sampling or testing and, at Seller's
request, will provide Seller with written evidence of same.
D. Except to the extent otherwise provided herein, any such inspections,
sampling and testing shall be at Purchaser's sole cost and expense, and
Purchaser agrees to keep the Property free and clear of any liens which may
arise as a result of such inspections, sampling and testing.
E. Purchaser shall restore promptly any physical damage caused by the
inspection, sampling or testing of the Property.
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F. Purchaser shall, upon the request of Seller, provide Seller with copies
of written sampling test results and reports prepared by third parties, but
otherwise Purchaser and its officers, directors, employees, agents and
representatives shall keep all such information, sampling and test results and
reports obtained or developed during or as a result of such inspection strictly
confidential, except as provided in Section 13.F below.
G. Purchaser hereby indemnifies and agrees to defend, and hold Seller, the
Trusts and their respective partners, officers, directors, shareholders,
advisors, beneficiaries, agents, employees, representatives and tenants harmless
from and against all loss, cost, liability, lien, damage or expense, including
reasonable attorneys' fees and costs made, sustained, suffered or incurred
against or by Seller, the Trusts and their respective partners, officers,
directors, shareholders, advisors, beneficiaries, agents, employees,
representatives and tenants and attributable to or arising out of a breach of
the foregoing agreements set forth in this Section 4 by Purchaser in connection
with any such inspection, sampling or testing.
5. NO TERMINATION OF AGREEMENT.
As set forth in Section 1.B above, Purchaser has been given a period of
time to conduct an inspection and review of the Information Package and all
aspects of the Property desired by Purchaser. Purchaser has completed such
inspection and review and is prepared to proceed with the purchase of the
Property in accordance with the terms hereof. Accordingly, even though Purchaser
has continuing access to the Property pursuant to Section 4 above, Purchaser
shall not have any rights to terminate this Agreement (whether based upon such
access, or otherwise) unless such termination is expressly provided for
hereunder.
6. TITLE AND SURVEY.
A. The fee interest in Parcel One shall be conveyed to Purchaser at
Closing by a recordable Trustee's Deed in the form of Exhibit F attached hereto
and made a part hereof, and the leasehold interest in Parcel Two shall be
conveyed to Purchaser at Closing by a recordable Assignment of Lease in the form
of Exhibit G attached hereto and made a part hereof. Such Deed and Assignment
shall be subject to (i) the lien of non-delinquent real estate taxes and
assessments, (ii) the rights of tenants, as tenants only, under the Leases,
(iii) acts and deeds of Purchaser, and (iv) the matters described in Schedule B
of the Pro Forma Title Insurance Policy attached hereto as Exhibit H ("Pro Forma
Policy") (all of the foregoing are collectively called the "Permitted
Exceptions").
B. Seller has previously furnished to Purchaser a
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commitment issued by Title Company ("Title Commitment") for an extended coverage
ALTA (1992) Owner's and Leasehold Owner's Title Insurance Policy showing fee
title to Parcel One and leasehold title to Parcel Two in Seller, and proposing
to insure Purchaser in the amount of the Purchase Price. Purchaser has reviewed
the Title Commitment and has approved the Permitted Exceptions.
C. Seller has previously furnished to Purchaser an update of the Existing
Survey ("Updated Survey"), which was certified to Purchaser and the Title
Company by a surveyor registered in the State of Illinois. Purchaser has
reviewed and approved the Updated Survey; provided, however, that such approval
shall not require Purchaser to accept the fee and leasehold title to the Land
subject to any exceptions other than the Permitted Exceptions.
D. If on or prior to Closing any update of the Title Commitment discloses
an exception that is not a Permitted Exception or any update of the Updated
Survey discloses any material new item that is not a Permitted Exception and
Seller fails, at its sole cost, to discharge, remove or cause the Title Company
to insure over (subject to Purchaser's reasonable approval of any applicable
title endorsement) any such exception to title or other item that is not a
Permitted Exception, then Purchaser may elect, in its sole discretion, within
two Business Days after Seller has notified Purchaser that Seller will not
discharge, remove or cause the Title Company to insure over such exception (and
to insure over such exception to future owners and lenders of the Premises): (i)
subject to satisfaction of the other conditions to Closing contained herein, to
close the purchase of the Property, and take title subject to any such
exceptions that have not been discharged, removed or insured over at or before
Closing with no reduction in the Purchase Price, or (ii) to terminate this
Agreement, in which event the Deposit and all interest earned thereon shall be
immediately returned to Purchaser; provided, however, that the provisions of
Sections 4.G, 8.D and 13.F shall survive such termination. Notwithstanding the
foregoing, Seller shall cause to be paid at Closing such amount as is necessary
to discharge the existing mortgage on the Property which is disclosed in the
Title Commitment ("Existing Mortgage"), and Seller shall additionally cause to
be discharged or insured over, at Seller's cost, any liens of a definite amount
which are not Permitted Exceptions (and cause such liens to be insured over to
future owners and lenders of the Premises), provided that such liens were either
created by Seller or were permitted to be created by the direct acts of Seller.
Seller covenants not to intentionally create any unpermitted title exceptions.
E. Seller has delivered to Purchaser UCC, tax lien, bankruptcy, pending
litigation and judgment searches of Seller and its general partners
("Searches"). The Searches covered the
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Illinois Secretary of State's Office, the UCC records of Cook County, Illinois,
the U.S. District Court for the Northern District of Illinois and the Circuit
Court of Cook County, Illinois; provided, however, that the pending litigation
searches did not cover the general partners of Seller and the UCC searches did
not cover D&K (as hereinafter defined).
F. The cost of the Searches, the Title Commitment and the owner's title
insurance policy (including extended coverages) issued pursuant thereto ("Title
Policy") and the Updated Survey shall be paid by Seller. Any reinsurance or
endorsements for additional title coverage beyond the extended coverage owner's
title insurance policy (including the endorsements, other than an extended
coverage endorsement, contained in the Pro Forma Policy) shall be obtained
solely at Purchaser's own expense.
7. CLOSING.
A. Payment of the Purchase Price and the consummation of the transaction
contemplated by this Agreement ("Closing") shall take place pursuant to an
escrow closing which provides that the Purchase Price shall be paid to Seller
upon satisfaction or waiver of all express conditions contained herein to
Purchaser's obligations to close. The Closing shall occur at 9:00 A.M. Central
Time on January 20, 1999 at the offices of Seller's attorneys in Chicago,
Illinois or at such earlier date or other place as may be mutually agreed upon
in writing by both Seller and Purchaser; provided, however, that Seller, at
Seller's sole discretion, may elect to extend the Closing as necessary (but in
no event more than thirty (30) additional days) in order to satisfy the
requirements of Section 10.D(ii) below. Seller and Purchaser shall meet at the
office of Seller's attorneys and commence preparations for Closing on the day
immediately prior to the date of Closing ("Proration Date"), so that all Closing
documents required hereunder are signed and deposited into escrow with the Title
Company (and all Closing prorations required hereunder are finalized) before the
close of business on the Proration Date. All documents or other deliveries
provided for hereunder to be made by Purchaser or Seller at Closing, and all
transactions provided for hereunder to be consummated concurrently with Closing,
shall be deemed to have been delivered and to have been consummated
simultaneously with all other transactions and all other deliveries, and no
delivery shall be deemed to have been made, and no transaction shall be deemed
to have been consummated, until all deliveries provided for hereunder by
Purchaser and Seller shall have been made, and all concurrent or other
transactions shall have been consummated.
B. Purchaser shall have a one-time right to elect to extend the Closing
until February 2, 1999, upon the following conditions:
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(i) written notice of such extension shall be given to Seller not
later than January 15, 1999.
(ii) Contemporaneously with the giving of such notice, Purchaser
shall increase the amount of the Deposit held by Title Company by
One Million Dollars ($1,000,000).
(iii) Purchaser is not in default hereunder at the time of the
giving of such extension notice.
8. REPRESENTATIONS AND WARRANTIES.
A. Seller represents and warrants to Purchaser that:
1. Seller is a limited partnership, duly organized, validly existing and
in good standing under the laws of the State of Illinois, has duly
authorized the execution, delivery and performance of this Agreement and
such execution, delivery and performance will not violate or create a
default under the Limited Partnership Agreement of Seller or any contract
or agreement by which Seller or the Property are bound. The individuals
signing this Agreement and all documents executed or to be executed
pursuant hereto are and shall be duly authorized to sign same on behalf of
and bind Seller.
2. This Agreement is valid and enforceable against and binding upon Seller
in accordance with its terms and each instrument to be executed by Seller
pursuant to this Agreement will, when executed and delivered, be
enforceable in accordance with its terms, subject to bankruptcy,
insolvency and similar laws affecting creditors' rights generally.
3. To Seller's knowledge, and except with respect to (a) any matters
disclosed in the Existing Environmental Report or in any environmental
report or study obtained by Purchaser pursuant to Section 4 hereof, or (b)
any hazardous material that may be located on the Property in the ordinary
course of any tenant's business which is in compliance with applicable law
and the terms and provisions of such tenant's Lease, neither Seller nor
the Property Manager has received written notice from any governmental
authority of any violation or alleged violation of any environmental,
zoning, building, fire, health or other code regulation, ordinance,
statute, law, act, permit, license, order or decree applicable to the
Property or any portion thereof, that has not heretofore been corrected in
accordance with applicable law.
4. To Seller's knowledge, the Service Contracts contained in the
Information Package are all of the contracts (including amendments) made
by Seller or the Property Manager which affect the Property as of the date
of this Agreement, except
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for the Leases, the Permitted Exceptions and the existing property
management agreement which is to be terminated effective upon Closing.
(Service Contracts entered into pursuant to Section 3.B.2 above shall not
be deemed to be a breach of the foregoing warranty.)
5. To Seller's knowledge, the Rent Roll is true and correct in all
material respects, and the updated Rent Roll to be delivered to Purchaser
at Closing hereunder will (when delivered) be true and correct in all
material respects.
6. There are no delinquencies with respect to real estate taxes affecting
the Premises.
7. The Land constitutes a separate parcel or parcels for real estate tax
purposes, except as may be indicated otherwise in the Title Commitment.
8. To Seller's knowledge, there are no Leases currently in effect executed
by the Trusts, Seller or Property Manager or other rights of occupancy or
use granted by the Trusts, Seller or Property Manager of any portion of
the Property other than the Ground Lease or the Leases and rights of
occupancy described on the Rent Roll.
9. The Ground Lease is in full force and effect, has not been modified
(other than modifications for which Purchaser has been provided a copy) or
terminated, and Seller has not received any written notice from Ground
Lessor alleging any default of Trust Two thereunder. The parties
acknowledge, however, that the procedures for adjusting the Base Period
Rental and for determining the Base Period Annual Tax Equivalent have not
been concluded within the time periods set forth in Section 2.03 of the
Ground Lease ("Rent Adjustment Procedures") and, accordingly, no warranty
is made (or shall be implied) with respect to the consequences arising
therefrom.
10. There is no litigation, arbitration or other proceeding before any
court, arbitrator or regulatory official, body or authority which is
pending or, to Seller's knowledge, threatened, against Seller relating to
the Property, except as may be listed on Exhibit N hereto.
11. To Seller's knowledge, no condemnation or eminent domain proceeding is
pending with respect to all or any part of the Property.
12. Except as set forth in Exhibit O hereto, or as contemplated in the
contract between Seller and the law firm of O'Keffe Ashenden Lyons & Ward
("Tax Contract"), there are no pending actions or proceedings by the
Trusts or Seller for
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a reduction of real estate taxes applicable to the Property.
13. There are no leasing commissions owed to D&K (as hereinafter defined)
with respect to the Leases and, to Seller's knowledge, there are no
leasing commissions owed to any other broker (except in connection with
the Lease to Merrill, Lynch, Pierce, Fenner & Smith, Inc.) with respect to
the Leases.
14. Seller owns one hundred percent of the beneficial interest in and to,
and the power of direction under, the Trusts, free and clear of liens,
encumbrances, options and restrictions created by Seller, except in
connection with the Existing Mortgage, and no party (other than Seller and
the lender under the Existing Mortgage) has the right to direct the
Trustee under the Trusts.
15. The interest of Seller in the Service Contracts, Leases, Permits and
Warranties and other documents and property described in Section 1.A.5
above has not been assigned by Seller to any other party, except in
connection with the Existing Mortgage.
16. To Seller's knowledge, the Leases provided in the Information Package
constitute all of the agreements between Seller and the current tenants
(except Levy, as hereinafter defined) of the Property.
17. To Seller's knowledge, Seller has not received written notice stating
that the real estate tax exemption for Parcel Two has been revoked, or
that the assessor has assessed or intends to assess real estate taxes on
Parcel Two.
18. Exhibit M attached hereto contains a true and correct description of
the amount of unused tenant improvement allowances that are currently due
and owing to the tenants under the Leases ("Current TI Amount").
B. Purchaser represents and warrants to Seller that:
1. Purchaser is a limited partnership, duly organized, validly existing
and in good standing under the laws of the State of Delaware, is
authorized to do business in the State of Illinois, has duly authorized
the execution, delivery and performance of this Agreement, and such
execution, delivery and performance will not violate its limited
partnership agreement, or any contract or agreement by which it is bound.
The individuals signing this Agreement and all other documents executed or
to be executed pursuant hereto are and shall be duly authorized to sign
the same on behalf of and bind Purchaser.
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2. This Agreement is valid and enforceable against and binding upon
Purchaser in accordance with its terms and each instrument to be executed
by Purchaser pursuant to this Agreement will, when executed and delivered,
be enforceable in accordance with its terms, subject to bankruptcy,
insolvency and similar laws affecting creditors' rights generally.
C. As used in Section 8.A. (or in any other Sections of this Agreement),
Seller's "knowledge" shall mean and be limited to the actual knowledge (as
distinguished from implied, imputed or constructive knowledge) of Douglas Kramer
(a general partner of Seller), Frederick Ford (another general partner of
Seller), James Elsman (the manager of the Property for Property Manager), and
Donald Vitek (the asset manager of the Property). Such "knowledge" of the
aforedescribed individuals shall not include a duty to inquire or investigate
any facts or information with respect to the Property or the warranties of
Seller contained herein.
D. Seller and Purchaser mutually represent and warrant to each other that
each has had no dealings, negotiations, or consultations with any broker or
other intermediary in connection with this Agreement or the sale of the
Property, except for Draper and Kramer, Incorporated ("D&K"). Provided the
transaction contemplated hereby is consummated, Seller shall pay a brokerage
commission to D&K in an amount previously agreed to by such parties. Seller and
Purchaser agree that each will indemnify, defend and hold the other free and
harmless from the claims (including attorneys' fees) of any other broker or
other intermediary claiming to have dealt with Seller or Purchaser,
respectively, in connection with this Agreement or the sale of the Property.
E. It shall be a condition to each party's obligation to close that (i)
the representations and warranties of the other party are true and correct in
all material respects as of Closing, (ii) the other party has timely performed
all material obligations of such party as of the Closing, (iii) all other
conditions precedent set forth in this Agreement have been satisfied or waived
by the other party, and (iv) Seller has obtained all consents from third parties
which are required in order to consummate the transaction contemplated hereby.
F. If prior to Closing Purchaser becomes aware that any of Seller's
representations and warranties is not true and correct, Purchaser shall promptly
notify Seller of same. Seller shall have (at Seller's election) a period of
thirty (30) days ("Warranty Cure Period") in which to attempt to cure any breach
of warranty alleged by Purchaser or any breach of warranty otherwise discovered
by Seller (and the date of Closing shall be extended accordingly); provided,
however, that Seller, at its
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sole option, may elect not to cure (or attempt to cure) the alleged breach. If
Seller does not cure such breach of warranty within the Warranty Cure Period,
Purchaser may within two (2) Business Days after the earlier to occur of (x)
receipt of notice from Seller that Seller does not elect to cure the alleged
breach of warranty, or (y) expiration of the Warranty Cure Period, (i) terminate
this Agreement upon written notice given to Seller, or (ii) elect, upon written
notice given to Seller, to close without any set-off or deduction of any kind
against the Purchase Price or otherwise. If this Agreement is so terminated, the
Deposit Escrowee shall return promptly the Deposit and any interest earned
thereon to Purchaser and neither party shall have any liability to the other
except for the obligations of Purchaser set forth in Section 4.G above and the
obligations of the parties set forth in Sections 8.D and 13.F above, which shall
survive the termination of this Agreement. If Seller does not receive written
notice of Purchaser's election to terminate this Agreement within the two
Business Day period specified above, Purchaser shall be conclusively presumed to
have elected to close notwithstanding the alleged breach of warranty.
G. The representations and warranties set forth in Section 8.D shall
survive the Closing for the full period of the applicable statute of
limitations. All of the other representations, warranties, certifications and
indemnifications of the parties set forth in Sections 8.A and 8.B above, and in
the documents delivered pursuant to Section 10.A below (collectively called the
"Closing Documents") shall survive Closing, provided written notice of any claim
arising from a breach of such representations, warranties, certifications and
indemnifications must be specified and received by the other party not later
than six (6) months after the date of Closing and prosecuted by the filing of a
lawsuit in a court of proper jurisdiction within nine (9) months after the date
of Closing. All other claims for breach of such representations, warranties,
certifications and indemnifications shall be barred and neither party shall have
any liability with respect thereto. In no event shall the aggregate liability of
Seller for a breach of the representations, warranties, certifications and
indemnifications set forth in Section 8.A above or contained in the Closing
Documents exceed Three Million Dollars ($3,000,000). Notwithstanding anything
contained herein to the contrary, Purchaser shall have no right to recover
damages against Seller for the breach of any representation, warranty,
certification or indemnification of Seller contained herein or in the Closing
Documents as to which Purchaser had actual knowledge prior to Closing, but as to
which Purchaser did not give Seller the notification required in Section 8.F
above. Purchaser's actual knowledge shall mean and include the actual knowledge
of Jeffrey Patterson, Scott McKibben, Patricia Chmielewski, and Michael Moran,
and all facts, information and data contained in any written or oral reports
made to Purchaser or such individuals by
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any outside consultants, engineering firms, environmental firms, attorneys and
accountants retained by Purchaser.
9. CLOSING COSTS AND PRORATIONS.
A. Seller and Purchaser shall share equally the cost of the escrow closing
arrangements. Seller shall pay the State of Illinois and Cook County real estate
transfer tax related to the sale of the Premises, and Purchaser shall pay the
City of Chicago real estate transfer tax related to the sale of the Premises.
Except as otherwise specifically provided in this Agreement, each party shall
bear its own costs in performing its obligations under this Agreement including,
without limitation, its own attorneys' fees and, in the case of Purchaser, all
costs and expenses in connection with its inspection of the Property as provided
in Section 4 above. All covenants and obligations contained in this Section 9
shall survive the Closing in accordance with the terms hereof.
B. The following items are to be prorated or adjusted as of the Proration
Date:
1. Rents, percentage rents (if any) and other amounts owed under the
Leases actually received by Seller, rent, percentage rent (if any) and
other payments under the Ground Lease, payments under Service Contracts
assigned to Purchaser, installment payments of special assessment liens
(and Purchaser shall be responsible to pay all installments of special
assessments which are due after the Proration Date), sewer charges and
operating or utility charges actually collected, billed or paid as of the
date of Closing shall be prorated as of the Proration Date and be adjusted
against the Cash Balance due at Closing, provided that within a reasonable
time after Closing, Purchaser and Seller will make a further adjustment
for such rents, payments, or charges which may have been incurred for the
period of time before Closing, but not billed or paid at that time. In
addition, Seller or Purchaser may require a further adjustment of such
rents, payments, or charges following the end of calendar year 1999 after
the actual amount of the applicable items becomes known and available.
Without limiting the generality of the foregoing, Seller shall be entitled
to receive (and Purchaser shall promptly pay to Seller after receipt
thereof from the applicable tenants) all expense reimbursements under the
Leases actually paid by tenants which relate to periods of time prior to
the Closing. Rents and other amounts collected by Purchaser or its agent
under any Lease after Closing attributable to the time period before
Closing shall be paid to Seller, but only after all amounts then due and
payable to Purchaser have been paid. Seller shall have the right after
Closing to pursue all actions (including the commencement of legal
proceedings in
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the name of Seller or Purchaser) against tenants in order to recover
delinquent amounts under (or in connection with) the Leases which are owed
to Seller. In no event, however, shall Seller institute any legal
proceedings against Levy, or in any manner attempt, to recover any amounts
owed under the Lease with Levy. Purchaser shall cooperate with all
reasonable requests of Seller in connection with the recovery of such
amounts (at no cost to Purchaser), provided that no such legal proceeding
shall seek to terminate the tenant's Lease or to evict the tenant from its
demised premises. The amount of any refund or credit due to tenants of the
Property as the result of the collection by or on behalf of Seller prior
to the Closing of contributions by such tenants for operating expenses
and/or taxes which exceed the actual amount of such operating expenses
and/or taxes payable by such tenants with respect to periods prior to the
Closing shall be prorated as soon as such actual operating expenses and/or
taxes are known, and Seller shall promptly pay to Purchaser, upon delivery
to Seller of appropriate documentation, the amount due as a result of such
proration. Purchaser shall assume and timely discharge all obligations
with respect to accrued expenses, prepaid income and security deposits for
which it receives proration credit. Tax and expense escalation,
pass-through and participation payments under Leases including, but
without limitation, amounts due tenants for excess payments thereby of tax
and expense escalation and refunds due tenants for tax abatements,
refunds, credits or other similar amounts for periods prior to the Closing
(collectively, "Tenant Items") shall be prorated as of the Proration Date
on an estimated basis. Seller agrees to cooperate (at no cost to Seller)
with Purchaser in the preparation of the financial statements and other
financial data respecting the ownership and operation of the Property for
calendar year 1998 (if such statements have not been completed by the date
of Closing) and subsequent periods for which such statements and data must
be prepared in order to compute, charge and prorate the Tenant Items. As
soon as reasonably possible after the preparation of the aforesaid
financial statements and data, Purchaser will render statements for the
Tenant Items to the tenants of the Property under their respective Leases.
From time to time as Purchaser receives payment of the Tenant Items from
the tenants, Purchaser will promptly remit to Seller that portion of the
Tenant Items allocable to the Property prior to the date of Closing, but
only after all amounts then due and payable to Purchaser have been paid.
2. Real property taxes will be prorated as of the Proration Date using one
hundred five percent (105%) of the most recent ascertainable tax bill
therefor. Purchaser shall receive a credit for the 1998 real estate taxes
payable in 1999 and for the 1999 real estate taxes (from January 1, 1999
through the
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Proration Date) payable in 2000. Such taxes will be reprorated within
ninety (90) days after the issuance of the actual tax bill, it being the
intent of the parties that Seller be responsible for real estate taxes for
the Premises attributable to the period before Closing and Purchaser be
responsible for the real estate taxes for the Premises attributable to the
period after Closing. Any refund of real estate taxes for the Premises
attributable to the fiscal year in which the Closing takes place (or any
fiscal year prior to such year) shall be prorated between the parties
within thirty (30) days after such refund has been received (whether in
the form of cash or as a credit against future real estate taxes) by
Seller or Purchaser, as the case may be. Seller shall be entitled to
receive the portion of such refund that pertains to the period of time
prior to the date of Closing and Purchaser shall be entitled to receive
the portion of such refund that pertains to the period of time after the
date of Closing; provided, however, that (a) the out-of-pocket costs to
third parties incurred in obtaining such refund shall be shared by the
parties in the same percentage as they share in the applicable tax refund,
and (b) the tenants under the Leases shall be reimbursed from the net
refund amount (after payment of third party costs as provided above) in
accordance with the applicable terms of the Leases before the remaining
refund amount is paid to Seller and/or Purchaser, as the case may be.
C. The full amount of security deposits paid under the Leases, which have
not been applied (subject to Section 3.A.6 above) by Seller shall be credited to
Purchaser by application against the Cash Balance due at Closing.
D. Seller shall receive a credit at Closing in an amount equal to all
deposits previously made by Seller with Ground Lessor or third parties under the
Ground Lease, including all amounts contained in the tax escrow account held by
the Harris Bank in Chicago, Illinois. Seller shall assign to Purchaser at
Closing all of Seller's right, title and interest in and to all such deposits
and accounts for which Seller has received a credit at Closing.
E. Seller shall pay for the Leasing Costs currently due and owing in
connection with all Leases entered into prior to the date hereof ("Current
Leases") and any other Lease that has been entered into by Seller that is not in
accordance with Section 3.B.1 hereof. Purchaser shall pay (a) all Leasing Costs
arising out of the exercise by a tenant after the date hereof and prior to the
date of Closing of an extension or expansion option (or the failure of a tenant
to exercise a cancellation option) contained in a Current Lease, (b) all Leasing
Costs in connection with any Leases entered into after the date hereof, in
accordance with Section 3.B.1 hereof ("New Leases"), and (c) all Leasing
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Costs in connection with the exercise by a tenant on or after the date of
Closing of an extension or expansion option (or the failure of a tenant to
exercise a cancellation option) contained in a Current Lease or a New Lease.
Notwithstanding the foregoing, Purchaser shall pay all Leasing Costs in
connection with the 21st floor expansion of the Lease with Merrill, Lynch,
Pierce, Fenner & Smith, Inc., but Seller acknowledges and agrees that no leasing
commission will be due D&K in connection therewith.
F. All prorations and Closing adjustments shall be made on the basis of a
365 day calendar year. All such prorations and adjustments shall be subject to
post-Closing adjustments as necessary to reflect later relevant information not
available at Closing and to correct any errors made at Closing with respect to
such apportionments and the party receiving more than it was entitled to
hereunder shall reimburse the other party hereto in the amount of such
overpayment within thirty (30) days after receiving written demand therefor.
Notwithstanding the foregoing, such apportionments shall be deemed final and not
subject to further post-Closing adjustment, except for reproration of real
estate taxes or tax refunds as provided above, if no such adjustments have been
requested within ninety (90) days after the end of calendar year 1999. Utility
prorations for Closing will be made by utility readings as close to the date of
Closing as practical.
G. Purchaser and Ground Lessor have reached an agreement which provides
(among other things) for the amount of the annual Base Period Rental and the
Base Period Annual Tax Equivalent which will be payable from and after May 1,
1998 ("Settlement Agreement"). A copy of the Settlement Agreement is attached
hereto as Exhibit K. Purchaser shall perform all of its obligations under the
Settlement Agreement (including the entering into of the Ground Lease amendment
described therein) and shall enforce its rights under the Settlement Agreement
to receive the Ground Lessor Estoppel Certificate and Agreement Regarding Ground
Lease described therein (collectively called the "Ground Lessor Estoppel
Certificates") within the time periods provided for therein and in this
Agreement. Purchaser shall receive a credit against the Cash Balance at Closing
with respect to the period commencing on May 1, 1998 and ending on the Proration
Date ("Stub Period") equal to the sum of (i) the difference between $800,000 (as
adjusted to reflect the Stub Period) and the amount of Base Period Rental
previously paid by Seller with respect to the Stub Period, and (ii) the
difference between $737,500 (as adjusted to reflect the Stub Period) and the
amount of Base Period Annual Tax Equivalent previously paid by Seller with
respect to the Stub Period. The amounts credited to Purchaser in accordance with
the preceding sentence shall be repaid by Purchaser to Seller (in accordance
with the provisions of Section 9.B.1 above) if and when collected by Purchaser
from tenants of the Property after Closing, but only after all amounts then due
and payable to Purchaser have been paid.
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H. At Closing, Purchaser shall receive a credit against the Cash Balance
in an amount equal to the difference between (i) $997,000 and (ii) the amount
previously spent by Seller (whether to consultants or otherwise) on the Elevator
Renovation. The parties acknowledge, however, that Seller and Arthur Andersen &
Co. ("Andersen") have entered into a separate agreement whereby Andersen is
obligated to reimburse Seller for a portion of the cost of the Elevator
Renovation over a twenty year period. Seller shall receive a credit from
Purchaser at Closing in the amount of $234,000, which represents a discounted
portion of the amount payable under such agreement with Andersen and a
discounted portion of amounts payable by other tenants with respect to the
Elevator Renovation), and Seller shall assign its rights under such agreement
with Andersen to Purchaser at Closing.
I. At Closing, Purchaser shall receive a credit against the Cash Balance
in an amount equal to the difference between (i) $110,000 and (ii) the sum of
(i) the amount previously spent by Seller (whether to consultants or otherwise)
on the Garage Repairs, and (ii) the amount of the Garage Repairs payable by
tenants under the Leases (approximately $10,000).
J. Purchaser acknowledges that Levy (Monroe) Limited Partnership ("Levy")
has ceased paying rent under its Lease and, accordingly, is in default
thereunder ("Levy Lease Default"). Purchaser accepts the Levy Lease Default
(without deduction or offset from the Purchase Price), and Seller shall have no
liability or obligation of any kind or nature whatsoever to Purchaser or Levy
with respect to the Levy Lease Default or the Lease with Levy after Closing.
K. At Closing, Seller shall receive a credit from Purchaser in the amount
of $500,000, which represents a portion of the real estate taxes for calendar
year 1998 which are payable in calendar year 1999 under the Lease with Andersen.
L. At Closing, Purchaser shall receive a credit against the Cash Balance
in an amount equal to the Current TI Amount. Purchaser shall assume and be
responsible to pay such Amount to the applicable tenants pursuant to the terms
of their Leases.
10. CLOSING DOCUMENTS AND MATTERS.
A. On the Proration Date, Seller shall deliver the following original
documents into escrow, each acknowledged and executed by Seller and/or the
Trusts, as appropriate:
1. A Trustee's Deed to Parcel One in the form of Exhibit F attached hereto
and made a part hereof, subject to the Permitted Exceptions.
2. State of Illinois, Cook County and City of Chicago real
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estate transfer tax declarations, and Chicago Water Certification.
3. Assignment of lessee's interest under the Ground Lease in the form of
Exhibit G attached hereto and made a part hereof, subject to the Permitted
Exceptions.
4. A Bill of Sale with respect to the Personal Property, in the form of
Exhibit I attached hereto and made a part hereof.
5. An Assignment and Assumption of Leases, Service Contracts, Construction
Contracts, Tax Contract, Adjacent Owners Agreement, Permits and
Warranties, Plans and any other so-called intangible property constituting
the Property in the form of Exhibit J attached hereto and made a part
hereof ("Miscellaneous Assignment").
6. A letter advising tenants under the Leases of the change in ownership
of the Premises, that Purchaser has assumed the Leases, that any security
deposits under the Leases have been transferred to Purchaser, and
directing such tenants to pay rent as Purchaser may direct, to the manager
of the Property.
7. A letter advising the Ground Lessor that the Ground Lease has been
assigned to (and assumed by) Purchaser.
8. The Ground Lease, all Leases and assigned Service Contracts, all
Permits and Warranties, Plans and copies of the intangible property
described in Section 1.A.4 above (including copies of tenant files and
correspondence), all of which shall be delivered to Purchaser or its agent
at the Premises.
9. An Affidavit from Seller pursuant to the Foreign Investment in Real
Property Tax Act.
10. An ALTA Loan and Extended Coverage Statement or the equivalent thereof
reasonably required by the Title Company in connection with the issuance
of the Title Policy, which Statement may disclose the Leases by attaching
a copy of the Rent Roll. Such Statement shall be accompanied by such lien
waivers and contractors statements as the Title Company reasonably
requires in connection with the Construction Contracts.
11. Any evidence of the authority of Seller to consummate the transaction
contemplated hereby that is reasonably requested by the Title Company.
12. Letter of Direction from Seller directing the Trustee of the Trusts to
execute and deliver the applicable Closing Documents provided for herein.
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13. A Disclosure Statement contemplated under the Illinois Responsible
Property Transfer Act, or an Affidavit of Non-Applicability.
14. Ground Lessor Estoppel Certificates from Ground Lessor, substantially
in the form attached to the Settlement Agreement, which Certificates may
be conditioned (as to their effectiveness) on the Closing of the
transaction contemplated hereby.
15. A Closing Statement in accordance with Section 9 hereof.
16. A so-called Gap Undertaking, if required by the Title Company, in form
and substance reasonably acceptable to Seller.
17. Lien waiver from Property Manager.
18. A so-called pay proceeds letter from the Trustee of the Trusts.
19. A Certificate with respect to Seller's representations and warranties
hereunder in the form of Exhibit P attached hereto.
20. Update of the Rent Roll.
21. Bulk Sale Stop Order from the Illinois Department of Revenue.
22. Records for the prior five years with respect to percentage rent owed
under the Ground Lease.
23. The assignment of the tax escrow account contemplated by Section 9.D
above. At the request of Purchaser, Seller shall join in a direction to
the escrowee of such account to disburse to Purchaser (for use at the
Closing) the surplus in such account that is described in the Settlement
Agreement, but such disbursement shall not be a condition of Closing
hereunder.
24. Termination of the existing management agreement with D&K pertaining
to the Property.
B. On the Proration Date, Purchaser shall deliver or cause to be delivered
the following original documents into escrow, each acknowledged and executed (as
appropriate):
1. The Assignment of Ground Lease in the form of Exhibit G hereto.
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2. The Miscellaneous Assignment in the form of Exhibit J hereto.
3. State of Illinois, Cook County and City of Chicago real estate transfer
tax declarations.
4. An ALTA Loan and Extended Coverage Statement or the equivalent thereof
reasonably required by the Title Company in connection with the issuance
of the Title Policy.
5. The tenant notification letters described in Section 10.A.6 above.
6. The notification letter to the Ground Lessor described in Section
10.A.7 above.
7. Any evidence of the authority of Purchaser to consummate the
transaction contemplated hereby that is reasonably requested by the Title
Company.
8. The Disclosure Statement described in Section 10.A.13 above, if
applicable.
9. The Certificate in the form of Exhibit D hereto.
10. A Closing Statement in accordance with Section 9 hereof.
11. The assignment described in Section 10.A.23 above.
C. At Closing, upon satisfaction of all express conditions to Purchaser's
obligation to close contained herein, the Deposit shall be paid to Seller and
Purchaser shall cause to be paid to Seller the Cash Balance as required pursuant
to Section 2 above, plus or minus prorations as determined pursuant hereto.
Closing shall be deemed to have occurred (e.g., for purposes of possession and
prorations) at such time as the Deposit and the Cash Balance have been sent by
wire transfer from the Title Company to Seller (and Seller's mortgagee), but in
no event later than noon Central Time. Amounts not sent by such time shall, for
purposes hereof (including all prorations required hereby), be deemed to have
been sent the next Business Day.
D. In addition to the other conditions to Closing expressly set forth in
this Agreement, it shall be a condition to Purchaser's obligation to close the
transaction contemplated hereby that Purchaser receives at Closing:
(i) Executed (by the Title Company) Pro Forma Policy (including all
endorsements and reinsurance contained or described therein).
(ii) Estoppel certificates, substantially in the form of
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Exhibit L attached hereto and made a part hereof, from Andersen, D&K,
Gersco (GE Railcar), Merrill Lynch & Co., and either Standard Chartered
Bank or Levenfeld, Eisenberg, Janger & Glassberg ("Required Estoppel
Certificates"). Seller shall use reasonable efforts to obtain estoppel
certificates from all tenants leasing space in the Improvements (other
than Levy and tenants leasing parking spaces), including the entity which
occupies a portion of the space leased to Standard Chartered Bank, but if
the Required Estoppel Certificates are not delivered at or prior to
Closing, (an estoppel certificate shall be deemed to satisfy the
requirements of this Section 10.D(ii) even though it may not be in the
form or substance of Exhibit L, provided that the certificate contains the
specific information (as opposed to a general or "catch-all" requirement),
if any, required by the applicable Lease or that the departures therefrom
reflect facts or circumstances that are disclosed in the Information
Package or that were actually known to Purchaser through its inspection of
the Property prior to the date hereof), Purchaser may elect to terminate
this Agreement. If this Agreement is terminated pursuant to this Section,
the Deposit Escrowee shall refund the Deposit and any interest earned
thereon to Purchaser and the parties shall not have any further
obligations hereunder, except pursuant to Sections 4.G, 8.D and 13.F
hereof, which shall survive such termination. Notwithstanding anything to
the contrary contained herein, the Required Estoppel Certificates and the
Ground Lessor Estoppel Certificates described in Section 10.A.14 above
shall be delivered to Purchaser on or before January 18, 1999 (or, by
January 29, 1999, if Purchaser has extended the Closing pursuant to
Section 7.B above). If such delivery is not made, the date of Closing may
be extended, at no cost, by Purchaser for the number of days (not to
exceed 30 days) until delivery of such Estoppel Certificates is made. Such
right to extend the Closing shall not diminish or affect the right of
Seller to extend the Closing pursuant to Section 7.A above. If Seller so
extends, the Closing shall take place on or before five Business Days
after the missing Required Estoppel Certificates have been received by
Purchaser. At Purchaser's request, Seller shall also send to the tenants
of the Property a supplement to the Estoppel Certificate attached hereto
as Exhibit L ("Supplemental Certificates"). The Supplemental Certificates
shall be substantially in the form of Exhibit Q hereto, but, in no event,
shall receipt by Purchaser of executed Supplemental Certificates from the
tenants of the Property be a condition precedent to Purchaser's obligation
to close hereunder. The so-called "cover letter" to the tenants which
accompanies the Estoppel Certificates attached hereto as Exhibit L and the
Supplemental Certificates shall be substantially in the form of the letter
attached hereto as Exhibit R.
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E. Seller shall terminate the existing management agreement with the
Property Manager effective as of the date of Closing. On the date of Closing,
Seller shall also terminate and satisfy all obligations to all employees
employed by Seller or the "property" in the operation of the Property. If
Purchaser notifies Seller in writing prior to the date of Closing that Purchaser
intends to continue the employment of any such employees after the Closing,
Seller shall terminate such employees designated by Purchaser only with regard
to their continued employment by Seller and not with regard to their employment
at the Property. Seller agrees that all obligations with respect to the
termination of all such employees who are not continued by Purchaser, including
termination benefits earned prior to the date of Closing and unfunded
contributions or termination obligations with respect to any employee benefit
plans, agreements and trusts shall be the sole responsibility and expense of
Seller; provided that Seller shall not be responsible for any such obligations
attributable to the employment of such employees by Purchaser or its agents
subsequent to the date of Closing.
F. Purchaser shall be entitled to sole and exclusive possession of the
Property at the conclusion of Closing subject only to the Permitted Exceptions.
G. Effective upon Closing, Seller may notify all contractors and utility
companies serving the Property of the sale of the Property and to (i) return any
deposit or deposits posted by Seller, (ii) terminate Seller's account effective
on noon on the date of Closing, and (iii) direct to Purchaser all bills for
services provided to the Property on and after the date of Closing. Seller and
Purchaser shall coordinate such matters and final meter readings of utilities
prior to Closing.
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11. CASUALTY AND CONDEMNATION.
A. If, prior to Closing, either (i) the Premises are destroyed or
materially damaged by fire or other casualty or (ii) the Premises or a material
part thereof is condemned (or written notice threatening condemnation is
received by Seller from a governmental agency), then Purchaser may elect to
terminate this Agreement. Purchaser shall give written notice of its election to
Seller within ten (10) days after receiving actual notice or actual knowledge of
damage or condemnation. In such event, the Deposit Escrowee shall return the
Deposit and all interest earned thereon to Purchaser and thereupon this
Agreement shall be null and void and neither party shall have any further
obligations under this Agreement except under Sections 4.G, 8.D and 13.F, which
survive such termination. If Purchaser does not give such written notice within
such ten (10) day period, the transaction contemplated by this Agreement shall
be consummated as otherwise provided herein. In such event, Purchaser shall have
the right to participate in any adjustment or settlement of an insurance claim
and Seller will assign to Purchaser at Closing the physical damage proceeds of
any insurance policy payable or paid to Seller or Seller's portion of the
condemnation award and Purchaser shall receive a credit against the Purchase
Price in the amount of the deductible under such policy.
B. As used in Section 11.A(i) above, material damage shall be deemed to
have occurred if the cost of repairing such damage (as estimated by the
applicable insurance carrier for Seller) is in excess of Five Million Dollars
($5,000,000). As used in Section 11.A (ii) above, a condemnation of a material
part of the Premises shall be deemed to have occurred if the portion taken
adversely affects the normal use, access to or income of the Premises, or
involves a value in excess of Five Million Dollars ($5,000,000).
C. If prior to Closing less than a material portion of the Premises is
damaged by fire or other casualty or less than a material part thereof is
condemned, then the transaction contemplated by this Agreement shall be
consummated as otherwise provided herein. In the event of such casualty or
condemnation, Purchaser shall have the right to participate in any adjustment or
settlement of an insurance claim and Seller shall assign to Purchaser at Closing
the physical damage proceeds of any insurance policy payable or paid to Seller
or Seller's portion of the condemnation award and Purchaser shall receive a
credit against the Purchase Price in the amount of the deductible under such
policy.
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<PAGE>
12. DEFAULT.
A. If Purchaser shall default under this Agreement prior to Closing, and
such default is not cured within ten (10) days after written notice thereof from
Seller to Purchaser (except for failure to pay the Cash Balance at Closing,
which shall be a default without notice or opportunity to cure), then, as
Seller's sole and exclusive remedy under this Agreement, at law or in equity
(Seller hereby waiving any right to collect additional damages or pursue any
other remedies with respect to such default), the Deposit and interest thereon
shall be paid by the Deposit Escrowee to Seller as liquidated damages, and both
parties shall be relieved of and released from any further liability hereunder,
except for the obligations of Purchaser set forth in Section 4.G. above and the
obligations of the parties set forth in Sections 8.D and 13.F above. Seller and
Purchaser agree that the Deposit and interest thereon is a fair and reasonable
amount to be retained by Seller as agreed and liquidated damages in light of
Seller's removal of the Property from the market and the costs incurred by
Seller and shall not constitute a penalty or a forfeiture.
B. If Seller shall default under this Agreement prior to Closing or refuse
or fail to convey the Property as herein provided, and such default or refusal
is not cured within ten (10) days after written notice thereof from Purchaser to
Seller, Purchaser's sole remedy therefor shall be either (1) to terminate this
Agreement and have the Deposit and all interest earned thereon returned to it,
or (2) to enforce Seller's obligations to convey the Property in accordance with
the terms, provisions, covenants and conditions contained herein, provided that
no such action in specific performance shall seek to require Seller to (a)
change the condition of the Property or restore the Property or any part thereof
following any fire, other casualty or condemnation; (b) expend money or post a
bond to remove a title defect or correct any matter shown on the Updated Survey
in excess of its obligations under Section 6.D above; or (c) secure any permit,
approval or consent with respect to the Property or Seller's conveyance of the
Property.
13. MISCELLANEOUS.
A. No alteration, modification or interpretation of this Agreement or the
Exhibits shall be binding unless in writing and signed by both parties.
B. If any provision of this Agreement or any application to any party or
circumstances shall be determined by any court of competent jurisdiction to be
invalid and unenforceable to any extent, the remainder of this Agreement or the
application of such provision to such person or circumstances, other than those
as to which it is so determined invalid or unenforceable, shall
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not be affected thereby, and each provision hereof shall be valid and shall be
enforced to the fullest extent permitted by law, except that, if as a result
thereof, the consideration to be paid to Seller under this Agreement is
diminished in any material respect Seller shall have the option, upon written
notice to Purchaser, to terminate this Agreement.
C. This Agreement shall be construed and enforced in accordance with the
laws of the State of Illinois.
D. Purchaser may not assign this Agreement without first obtaining
Seller's written consent, which consent may be withheld in Seller's sole
discretion; provided, however, that Seller shall not withhold its consent to an
assignment of this Agreement to an entity which has Purchaser or affiliates
thereof as its managing partners, managing members or controlling shareholders
("Qualified Assignee") so long as the requirements of Section 13.Q below are
satisfied with respect to such assignment. Any assignment in contravention of
this provision shall be void. No assignment (including an assignment to a
Qualified Assignee) shall release the Purchaser herein named from any obligation
or liability under this Agreement. If Purchaser requests Seller's written
consent to any assignment, Purchaser shall (i) notify Seller in writing of the
proposed assignment; (ii) provide Seller with the name and address of the
proposed assignee; (iii) provide Seller with financial information including
financial statements of the proposed assignee (unless the proposed assignee is a
Qualified Assignee); and (iv) provide Seller with a copy of the proposed
assignment.
E. This Agreement shall be binding and inure to the benefit of Purchaser
and Seller and their successors and permitted assigns.
F. Seller shall have the right to review (prior to issuance) any press
release issued by or on behalf of Purchaser (whether before or within six months
after Closing) with respect to the transaction contemplated hereby.
G. The captions in this Agreement are inserted only as a matter of
convenience and for reference and in no way define, limit or describe the scope
of this Agreement or the scope or content of any of its provisions.
H. In the event of any litigation arising out of this Agreement, in
addition to any other rights or remedies specified herein, the prevailing party
(which term shall mean the party which obtains substantially all of the relief
sought by such party) shall be entitled to its reasonable attorneys' fees and
costs.
I. When used in this Agreement, the term "Business Day"
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shall mean any day when national banks located in Chicago, Illinois are open for
business.
J. Nothing contained in this Agreement shall be construed to create a
partnership or joint venture between the parties or their successors in interest
or any other relationship other than seller and purchaser.
K. Time is of the essence of this Agreement.
L. This Agreement may be executed and delivered in any number of
counterparts, each of which so executed and delivered shall be deemed to be an
original and all of which shall constitute one and the same instrument.
M. Purchaser and Seller agree not to record this Agreement or any
memorandum thereof.
N. No failure or delay by a party to exercise any right it may have by
reason of the default of the other party shall operate as a waiver of default or
as a modification of this Agreement or shall prevent the exercise of any right
by the first party while the other party continues to be so in default.
O. For the purpose of complying with Internal Revenue Service reporting
requirements for this transaction, the Title Company shall be obligated to
prepare and file the 1099-S form (and any necessary supporting documentation)
and Seller and Purchaser shall cooperate with any requests from the Title
Company in connection therewith.
P. Purchaser acknowledges and agrees that the agreements of Seller
contained herein shall only be enforceable (subject to all limitations on
liability contained in this Agreement) against the property of Seller and the
proceeds of sale received by Seller hereunder ("Sale Proceeds"). By executing
this Agreement (i) Purchaser agrees to look solely to the property of Seller and
the Sale Proceeds (subject to all limitations on liability contained in this
Agreement) for the enforcement of its rights hereunder, and (ii) Purchaser
hereby waives any claim or any right to proceed for the enforcement of any of
its rights hereunder against the general and limited partners of Seller, or any
affiliates thereof. Seller covenants that at least Three Million Dollars
($3,000,000) of the Sale Proceeds will be held back from distributions to the
partners of Seller until at least six (6) months have elapsed after the date of
Closing.
Q. To satisfy compliance with the Employee Retirement Income Security Act
of 1974, as amended ("ERISA"), Purchaser represents and warrants to Seller that,
as of the date hereof and as of the date of Closing:
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(i) Purchaser's rights under this Agreement do not, and upon its
acquisition by Purchaser the Property shall not, constitute "plan
assets" within the meaning of 29 C.F.R. Section 2510.3-101, because
one or more of the following circumstances is true:
(x) Equity interests in Purchaser are publicly offered securities,
within the meaning of 29 C.F.R. Section 2510.3-101(b)(2); or
(y) Less than twenty-five percent (25%) of all equity interests in
Purchaser are held by "benefit plan investors" within the
meaning of 29 C.F.R. Section 2510.3-101(f)(2); or
(z) Purchaser qualifies as an "operating company", "venture
capital operating company", or a "real estate operating
company" within the meaning of 29 C.F.R. Section
2510.3-101(c), (d) or (e).
(ii) Purchaser is not a "governmental plan" within the meaning of Section
3(32) of ERISA and the execution of this Agreement and the purchase
of the Property by Purchaser is not subject to state statutes
regulating investments of and fiduciary obligations with respect to
governmental plans.
Purchaser hereby agrees to execute such documents or provide such information as
Seller may reasonably require in connection with the transaction contemplated
hereby (the "Transaction") or to otherwise assure Seller that: (i) this is not a
prohibited transaction under ERISA, (ii) that the Transaction is otherwise in
full compliance with ERISA, and (iii) that Seller is not in violation of ERISA
by compliance with this Agreement and by closing the Transaction. Seller shall
not be obligated to consummate the Transaction unless and until the Transaction
complies with ERISA and Seller is satisfied that the Transaction complies in all
respects with ERISA. The obligations of Purchaser under this Section shall
survive the Closing and shall not be merged therein.
R. The submission by Seller to Purchaser of this Agreement in unsigned
form shall be deemed to be a submission solely for Purchaser's consideration and
not for acceptance and execution. Such submission shall have no binding force
and effect, shall not constitute an option, and shall not confer any rights or
impose any obligations upon Purchaser, irrespective of any reliance thereon,
change of position or partial performance. The submission by Seller of this
Agreement for execution by Purchaser and the actual execution and delivery
thereof by Purchaser to Seller shall similarly have no binding force and effect
on Seller unless and until Seller shall have executed this Agreement and a
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<PAGE>
counterpart thereof shall have been delivered to Purchaser.
S. Seller has advised Purchaser that the Lease with Andersen contains a
right of first refusal ("ROFR") in the event Seller receives an offer to
purchase the Property which Seller desires to accept. Seller will send the
requisite notice to Andersen pursuant to the ROFR within three (3) Business Days
after the date hereof. If Andersen should timely elect to purchase the Property
pursuant to the ROFR, this Agreement shall be terminated without liability to
the parties (except pursuant to Sections 4.G, 8.D and 13.F, which shall survive
termination), and Deposit Escrowee shall return the Deposit and all interest
earned thereon to Purchaser. If Andersen does not timely elect to purchase the
Property in accordance with the ROFR, this Agreement shall continue in full
force and effect in accordance with its terms.
T. Seller has advised Purchaser that, pursuant to Seller's Limited
Partnership Agreement, a certain percentage of the limited partners of Seller
are required to consent to a sale of the Property ("Consent"). If Seller does
not advise Purchaser in writing within fourteen (14) days after the date hereof
that the Consent has been obtained, this Agreement shall be terminated
automatically without liability to the parties (except pursuant to Sections 4.G,
8.D and 13.F, which shall survive termination), Deposit Escrowee shall return
the Deposit and all interest earned thereon to Purchaser, and Seller shall
reimburse Purchaser for the bona fide, out-of-pocket costs incurred by Purchaser
to third parties in connection with the transaction contemplated hereby (such
reimbursement not to exceed $100,000). If Seller notifies Purchaser in writing
within such 14 day period that the Consent has been obtained, this Agreement
shall continue in full force and effect in accordance with its terms. In seeking
to obtain the Consent, Seller shall recommend to its other general partners and
to its limited partners, that the transactions contemplated hereby be approved.
14. NOTICES.
Any notices or requests required or permitted to be given hereunder shall
be (i) hand delivered, or (ii) sent by Federal Express or similar nationally
recognized overnight service for next business day delivery, or (iii) sent by
U.S. certified mail, return receipt requested, in all cases addressed to the
parties at their respective addresses as follows:
If to Seller: 33 West Monroe Associates, L.P.
33 West Monroe Street
Chicago, Illinois 60603
Attn: Douglas Kramer
Frederick Ford and
Forrest Bailey
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Facsimile No: (312) 346-6059
With a copy to: Robert Grant, Esq. and
Dustin E. Neumark, Esq.
Sonnenschein Nath & Rosenthal
8000 Sears Tower
Chicago, Illinois 60606
Facsimile No: (312) 876-7934
If to Purchaser: Prime Group Realty, L.P.
77 West Wacker Drive
Chicago, Illinois 60601
Attn: Jeffrey Patterson and
Michael Moran, Esq.
Facsimile No: (312) 917-1684
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<PAGE>
With a copy to: William Ralph, Esq.
Winston & Strawn
35 West Wacker Drive
Chicago, Illinois 60601
Facsimile No: (312) 558-5700
or in each case to such other address as either party may from time to time
designate by giving notice in writing to the other party. Notices shall be
deemed received (a) upon receipt if hand delivered, (b) one (1) Business Day
after delivery to the overnight courier, (c) two (2) Business Days after
deposited in the mail, or (d) upon receipt if sent by facsimile, provided that a
"hard" copy of such notice is received by the applicable party on the next
Business Day thereafter.
15. WAIVER OF JURY TRIAL.
IN ANY PROCEEDING TO ENFORCE THE TERMS OF THIS AGREEMENT OR OBTAIN ANY
REMEDY PROVIDED FOR HEREIN OR OTHERWISE PERMITTED BY LAW IN CONNECTION WITH THE
SUBJECT MATTER HEREOF, WHETHER BEFORE OR AFTER CLOSING, SELLER AND PURCHASER
HEREBY KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVE TRIAL BY JURY TO THE
FULLEST EXTENT PERMITTED BY LAW.
IN WITNESS WHEREOF, Seller and Purchaser have executed and delivered this
Agreement as of the date first written above, being the date inserted by Seller
as the date of its execution and delivery hereof to Purchaser.
SELLER: PURCHASER:
33 WEST MONROE ASSOCIATES, L.P., an Illinois PRIME GROUP REALTY, L.P., a
limited partnership Delaware limited partnership
By Draper and Kramer By: Prime Group Realty Trust,
Incorporated, a general a Maryland real estate
partner investment trust, its
Managing General Partner
By: ________________________ By: ________________________
Its_____________________ Its_____________________
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List of Exhibits
A - Rent Roll
B - Legal Description of Parcel One
C - Legal Description of Parcel Two
D - Purchaser's Certification
E - Deposit Escrow Agreement
F - Trustee's Deed
G - Assignment of Ground Lease
H - Proforma Policy
I - Bill of Sale
J - Miscellaneous Assignment
K - Settlement Agreement
L - Tenant Estoppel Certificate
M - Current TI Amount
N - Litigation List
O - Tax Reduction Proceedings
P - Seller's Bring Down Certificate
Q - Supplemental Certificate
R - Cover Letter to Tenants
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EXHIBIT A
RENT ROLL
[OMITTED]
-36-
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EXHIBIT B
LEGAL DESCRIPTION OF PARCEL ONE
[OMITTED]
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<PAGE>
EXHIBIT C
LEGAL DESCRIPTION OF PARCEL TWO
[OMITTED]
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<PAGE>
EXHIBIT D
PURCHASER'S CERTIFICATION
[OMITTED]
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<PAGE>
EXHIBIT E
DEPOSIT ESCROW AGREEMENT
[OMITTED]
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EXHIBIT F
TRUSTEE'S DEED
[OMITTED]
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<PAGE>
EXHIBIT G
ASSIGNMENT OF GROUND LEASE
[OMITTED]
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EXHIBIT H
PROFORMA POLICY
[OMITTED]
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<PAGE>
EXHIBIT I
BILL OF SALE
[OMITTED]
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<PAGE>
EXHIBIT J
MISCELLANEOUS ASSIGNMENT
[OMITTED]
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EXHIBIT K
SETTLEMENT AGREEMENT
[OMITTED]
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EXHIBIT L
TENANT ESTOPPEL CERTIFICATE
[OMITTED]
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EXHIBIT M
CURRENT TI AMOUNT
1. Merrill Lynch & Co. $982,770.00
2. Levenfeld, Eisenberg, Janger & Glassberg $176,187.96
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EXHIBIT N
LITIGATION LIST
[OMITTED]
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EXHIBIT O
TAX REDUCTION PROCEEDINGS
[OMITTED]
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EXHIBIT P
SELLER'S BRING DOWN CERTIFICATE
[OMITTED]
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EXHIBIT Q
SUPPLEMENTAL CERTIFICATE
[OMITTED]
-52-
<PAGE>
EXHIBIT R
COVER LETTER TO TENANTS
[OMITTED]
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<PAGE>
Exhibit 10.2
Option Agreement
This Option Agreement ("Option Agreement") is made as of the __ day
of February, 1999 between BRE/Wabash L.L.C., a Delaware limited liability
company ("BRE"), and Prime Group Realty, L.P. ("Prime").
Preliminary Statement
A. BRE is the owner of certain property located in Cook County,
Illinois which is described in the Agreement of Purchase and Sale attached as
Exhibit A to this Option Agreement (the "Purchase Agreement").
B. BRE is willing to grant to Prime an option to purchase the Asset
(as defined in the Purchase Agreement) in accordance with the terms of this
Option Agreement and the Purchase Agreement.
Agreement
In consideration of the foregoing recitals and the covenants and
agreements of the parties herein contained and for other good and valuable
consideration, the receipt and sufficiency of which is hereby acknowledged, BRE
and Prime agree as follows:
1. Grant of Option. BRE hereby irrevocably grants to Prime a one
time option to purchase the Asset strictly in accordance with the terms of, and
subject to, this Option Agreement (the "Option") and the Purchase Agreement.
2. Term of the Option; Performance Obligations. The term of the
Option shall commence upon the execution of this Option Agreement and the
simultaneous execution of that certain lease agreement (the "Lease
Agreement")between Enterprise Center VII, L.P., as landlord, and, as tenant,
and continue until 5:00 P.M. (E.D.T.) on October 31, 1999 (the "Option Period").
3. Exercise of the Option and Prime's Performance of Obligations.
The Option may be exercised by Prime only by (a) written notice of such
exercise, in accordance with the provisions of Section 14 below, in the form set
forth in Exhibit B Delivered by Prime to BRE prior to the termination of the
Option Period (the "Option Notice") and (b) the deposit by Prime, within one (1)
Business Day after Delivery of Option Notice, with Escrow Agent (as defined in
the Purchase Agreement) of the Earnest Money (as defined in the Purchase
Agreement).
<PAGE>
2
Time shall be of the essence with respect to the Delivery of the Option Notice,
deposit of the Earnest Money with Escrow Agent and with respect to the
performance by Prime of all of its obligations under this Option Agreement. If
Prime fails to exercise the Option during the Option Period as provided above,
the Option shall terminate and neither BRE nor Prime shall have any further
obligations or liability to each other under this Option Agreement, except with
respect to a default hereunder, in which event if it is Prime which desires to
claim a default (x) Prime's sole and exclusive remedies shall be limited to
those set forth in Section 18(b)(i) below (without limiting Prime's rights under
Section 18(b)(ii) hereof) and (y) such claim must be made by Delivering written
notice thereof to BRE not later than November 10, 1999.
4. BRE's Performance of Obligations. With respect to any of BRE's
obligations under this Option Agreement, upon Delivery of a written notice from
Prime stating specifically the obligations under this Option Agreement that BRE
had failed to perform, BRE shall have an additional fourteen (14) day period to
complete performance of said obligations (the "Fourteen Day Notice Period").
Time shall be of the essence with respect to BRE's performance of any
obligations which are properly included in any such notice within the Fourteen
Day Notice Period; provided, however, that BRE shall not be deemed in breach of
this Option Agreement unless and until the Fourteen Day Notice Period expires
without BRE performing, in accordance with the terms and provisions of this
Option Agreement, the obligations properly included in said notice.
5. The Purchase Agreement. Upon the valid exercise of the Option by
Prime in accordance with Section 3 above, except as otherwise provided in this
Section 5, the Purchase Agreement shall conclusively be deemed to have been
executed and delivered by Prime and BRE and to be in full force and effect
without the need for any further action by either of such parties, except BRE
(and Prime with respect to Schedule E-1 only), shall have the opportunity to
update the Schedules to the Purchase Agreement (the "Updated Schedules") within
three Business Days (as defined in the Purchase Agreement) of the receipt of
such exercise notice and Prime shall have the right within two (2) Business Days
after Delivery of the Updated Schedules (except Schedule E-1)(the "Review
Period") to notify BRE whether it accepts the Updated Schedules. In the event
that Prime notifies BRE in writing within the Review Period that it does not
accept any part of the Updated Schedules, then the Purchase Agreement shall be
deemed null and void, the Earnest Money (but not the Option Payment) shall be
returned to Prime, Prime shall have no further rights to exercise the Option and
neither party shall have any further rights, duties or obligations under the
Purchase Agreement. In the event that Prime does accept the Updated Schedules in
writing within the Review Period, or in the event that it does not notify BRE
during the Review Period that it
<PAGE>
3
rejects the Updated Schedules, then the Purchase Agreement shall conclusively be
deemed to have been executed by Prime and BRE and be in full force and effect,
together with the Updated Schedules as the Schedules thereto. Within two (2)
Business Days of Prime's acceptance of the Updated Schedules, whether by
inaction or by written notice, each of BRE and Prime shall execute and deliver
to the other counterparts of the Purchase Agreement; provided, however, the
failure of either party to execute and deliver counterparts shall not impair the
effectiveness of the Purchase Agreement. In addition to and not in limitation of
the foregoing, BRE shall have the ongoing right, but not the obligation, from
time to time, during the duration of the Option Period, to provide to Prime
Updated Schedules to the Purchase Agreement.
6. Option Payment. The total consideration to be paid by Prime for
the granting of the Option shall be $8,000,000 (the "Option Payment") payable by
Prime to BRE on the date of this Option Agreement in immediately available
funds. Except as expressly provided for in Section 18(b)(i) below (which
exception is limited solely to a violation by BRE of its representations
contained in Section 10(a)(i) hereof), the Option Payment shall not be
refundable under any circumstances, whatsoever, including, without limitation,
any lapse of the Option Period without exercise of the Option and any
termination of the Purchase Agreement, whether arising from a default by BRE
thereunder or otherwise. In the event of a default by BRE under the Purchase
Agreement after the valid exercise by Prime of the Option, Prime shall have
solely the rights and remedies set forth in Section 14.1(b) of the Purchase
Agreement.
7. Purchase Price. The purchase price to be paid by Prime for the
Asset shall be $230,000,000, subject to adjustment as provided in the Purchase
Agreement, to be wired at the Closing (as defined below) in immediately
available funds in accordance with the Purchase Agreement.
8. Closing. The Asset shall be transferred to Prime, and the
Purchase Price shall be paid on the Closing Date (as defined in the Purchase
Agreement) in accordance with, and subject to, the terms, conditions and
provisions set forth in the Purchase Agreement. Time shall be of the essence,
subject to the terms and conditions of the Purchase Agreement, with respect to
Prime's obligations to close on the Closing Date, and any failure by Prime to
comply with such obligations on that date shall, at BRE's option, result in a
termination of the Option, after which Prime shall have no further rights under
this Option Agreement or under the Purchase Agreement.
9. Agreements. BRE shall have the right, in its sole and absolute
discretion, to enter into agreements relating to the Property, including without
limitation, agreements relating to the purchase and sale of the Property and/or
the ground leasing
<PAGE>
4
of the Property or any portion thereof, to mortgage the Property or any portion
thereof and to sell the Property or any portion thereof, provided, however, that
with respect to sale agreements and mortgages relating to the Property, and any
rights of first refusal and rights of first offer granted with respect to the
acquisition of the Property, sale/leaseback transactions and new ground leases
relating to the entire Property and options to purchase the Property, all such
sale agreements, mortgages, rights of first refusal, rights of first offer,
sale/leasebacks, ground leases and options to purchase shall specifically and
expressly provide that they are, and all such sale agreements, mortgages, rights
of first refusal, rights of first offer, sale/leaseback agreements, ground
leases and options to purchase shall be specifically entered into, subject and
subordinate to the rights of Prime pursuant to, and in accordance with, this
Option Agreement. BRE shall deliver to Prime written notice of, and evidence of
such statement of subordination with respect to, any sale agreements, mortgages,
rights of first refusal, rights of first offer, sale/leaseback agreements,
ground leases or options to purchase that BRE enters into during the Option
Period
10. Representations; Covenants. (a) BRE hereby represents and
warrants the following:
(i) it has all requisite power and authority to enter into and
deliver this Option Agreement, to perform its obligations hereunder and to
consummate the transactions contemplated hereby. The execution, delivery
and performance of this Option Agreement and the consummation of the
transactions provided for in this Option Agreement have been duly
authorized by all necessary action on its part.
(ii) except for any consent, license, approval, order, permit,
authorization, registration, filing or declaration, the failure of which
to obtain will not adversely affect (A) BRE's ability to consummate the
transactions contemplated by this Option Agreement, (B) BRE's ownership of
the Asset (as defined in the Purchase Agreement) or (C) in a material
adverse manner, the operation or value of the Property to Prime, no
consent, license, approval, order, permit or authorization of, or
registration, filing or declaration with, any court, administrative agency
or commission or other governmental authority or instrumentality, domestic
or foreign, is required to be obtained or made in connection with the
execution, delivery and performance of this Option Agreement by BRE.
(iii) the execution, delivery and compliance with, and
performance of the terms and provisions of, this Option Agreement will not
(i) conflict with or result in any violation of BRE's organizational
documents, (ii) to BRE's knowledge, conflict with or result in any
violation of any provision of any bond, note or other instrument of
<PAGE>
5
indebtedness, contract, indenture, mortgage, deed of trust, loan
agreement, lease or other agreement or instrument to which BRE is a party
in its individual capacity, or (iii) violate any existing term or
provision of any order, writ, judgment, injunction, decree, statute, law,
rule or regulation applicable to BRE or its assets or properties except,
in each case, for any conflict or violation which (A) will not adversely
affect (1) BRE's ability to consummate the transactions contemplated by
this Option Agreement, (2) the ownership of the Asset or Property (3) in a
material manner, the operation by BRE of the Property or value thereof or
(B) arises under the documents evidencing and securing the Cigna Loan (as
defined in the Purchase Agreement) with respect to the sale of the Asset.
(b) Prime hereby represents and warrants the following:
(i) it has all requisite power and authority to enter into and
deliver this Option Agreement, to perform its obligations hereunder and to
consummate the transactions contemplated hereby. The execution, delivery
and performance of this Option Agreement and the consummation of the
transactions provided for in this Option Agreement have been duly
authorized by all necessary action on its part.
(ii) other than the filing of this Option Agreement with the
Securities and Exchange Commission, no consent, license, approval, order,
permit or authorization of, or registration, filing or declaration with,
any court, administrative agency or commission or other governmental
authority or instrumentality, domestic or foreign, is required to be
obtained or made in connection with the execution, delivery and
performance of this Option Agreement or any of the transactions required
or contemplated hereby.
(iii) the execution, delivery and compliance with, and
performance of the terms and provisions of, this Option Agreement, and the
purchase of the Asset, will not (a) conflict with or result in any
violation of its organizational documents, (b) conflict with or result in
any violation of any provision of any bond, note or other instrument of
indebtedness, contract, indenture, mortgage, deed of trust, loan
agreement, lease or other agreement or instrument to which it is a party
in its individual capacity, or (c) violate any existing term or provision
of any order, writ, judgment, injunction, decree, statute, law, rule or
regulation applicable to it or its assets or properties.
(c) Except as expressly set forth in the Purchase Agreement and in
this Option Agreement, BRE is not making, and shall not be deemed to have made,
any covenant, representation or warranty of any nature whatsoever, express or
implied, regarding
<PAGE>
6
the Asset or any other matter relating in any way to this Option Agreement or
any of the obligations of BRE under this Option Agreement, including, without
limitation, the condition or status of the Asset. Prime agrees that it is
entering into this Option Agreement, and, if it should exercise the Option, will
be exercising the Option, with the express and specific understanding that no
covenants, representations or warranties are being made by BRE.
(d) Throughout the term of this Option Agreement, BRE shall:
(i) permit Prime to inspect the Property for the sole purpose of
facilitating financing for its acquisition of the Property and in
accordance with the provisions of Article VIII of the Purchase
Agreement, provided further, however, Prime shall only be permitted
to inspect the Property a maximum of twice during the Option Period;
(ii) deliver to Prime, from time to time but not more than once a
calendar month, within ten (10) days after Delivery of a written
request from Prime requesting, with specificity, the documents so
desired, the following: an updated rent roll for the Property,
monthly operating, leasing and delinquency reports, New Leases and
material Lease Modifications regarding the Property (all as prepared
by BRE in its usual course of business), copies of all new material
contracts relating to the Property for which the amount payable
thereunder is in excess of $10,000 annually and any material
modifications, amendments, extensions or terminations of any
material contracts related to the Property and updated litigation
Schedules with respect to the Property. Subject to the provisions of
Section 21(n) relating to confidentiality, Prime shall have the
right to use and deliver any of the foregoing information to its
investors and/or its lender in connection with any investment or
financing of the acquisition of the Property. For purposes of this
Section 10(d)(ii), the term material contracts shall be deemed to
mean contracts relating to the Property for which the amount payable
thereunder is in excess of $10,000 annually. For the avoidance of
doubt, it is understood and agreed that any request by Prime
pursuant to this Section 10(d)(ii) shall include information about
the items so requested reasonably sufficient for BRE to readily
identify the specific contract or other document being sought; and
(iii) not engage in, nor engage a real estate broker or other person
to engage in, broad based marketing with respect to the sale of the
Property, which marketing is in a manner typically utilized by real
estate brokers
<PAGE>
7
in connection with the advertising of the sale of office buildings
of similar size and value. Notwithstanding the foregoing, nothing
contained in this Section 10(d)(iii) shall be construed to prevent
or limit BRE from engaging in active discussions and negotiations
with potential buyers and or lenders of the Property, nor shall the
restrictions in this Section 10(d)(iii) be deemed to apply to the
efforts of Eastdil (as hereinafter defined) (A) in connection with
its involvement with this transaction and (B) with respect to
persons with whom Eastdil engages in discussions and negotiations
with as a result of its previous marketing efforts relating to the
Property, provided (with respect to this item (B))such negotiations
are not initiated by BRE.
11. Submission to Jurisdiction. The provisions of Section 15.14 of
the Purchase Agreement governing the Submission to Jurisdiction of the parties
thereto and hereto are incorporated herein by reference and made a part hereof.
12. No Brokers. (a) BRE represents and warrants to Prime that it has
not dealt with any broker, salesman, finder or consultant with respect to this
Option Agreement or the transactions contemplated hereby other than Eastdil
Realty Company, L.L.C. ("Eastdil"). BRE agrees to indemnify, protect, defend and
hold Prime harmless from and against all claims, losses, damages, liabilities,
costs, expenses (including reasonable attorneys' fees and disbursements) and
charges resulting from BRE's breach of the foregoing representation in this
subsection (a). BRE agrees to pay Eastdil any commissions or other fees owing to
Eastdil pursuant to a separate agreement. The provisions of this subsection (a)
shall survive the Closing and any termination of this Option Agreement.
(b) Prime represents and warrants to BRE that it has not dealt with
any broker, salesman, finder or consultant with respect to this Option Agreement
or the transactions contemplated hereby other than Eastdil. Prime agrees to
indemnify, protect, defend and hold BRE harmless from and against all claims,
losses, damages, liabilities, costs, expenses (including reasonable attorneys'
fees and disbursements) and charges resulting from Prime's breach of the
foregoing representations in this subsection (b). The provisions of this
subsection (b) shall survive the Closing and any termination of this Option
Agreement.
13. Title to Asset. In the event BRE is unable to convey title to
the Asset in the manner required under the Purchase Agreement, Prime shall not
be entitled to a return of the Option Payment and the terms of Article IX of the
Purchase Agreement shall control.
<PAGE>
8
14. Management. Prime shall have the right, from time to time, upon
not less than five (5) Business Days notice and not more than once per calendar
month, to meet with members of the staff managing, operating and leasing the
Property for the purpose of updating Prime's due diligence materials with
respect to leasing, operating, managing and maintenance at and of the Property.
15. Leases. (a) During the Option Period, BRE shall (i) continue its
present rental program and efforts with respect to the Property (as defined in
the Purchase Agreement) to rent vacant space and, (ii) except with respect to
any Contemplated Leases listed on Schedule A hereto (which Contemplated Leases
are deemed consented to by Prime), enter into and execute new leases and
extensions, renewals and expansions with respect to the existing tenancies ("New
Leases"), either (a) in accordance with the leasing guidelines set forth on
Exhibit C hereto (the "Leasing Guidelines") or (b) upon receipt from Prime of
Prime's prior written consent to same, which consent shall not be unreasonably
withheld or (c) without the consent of Prime, provided that, notwithstanding
anything to the contrary contained herein, BRE shall act in a commercially
reasonable manner and shall be responsible for all Buyer's Leasing Costs with
respect to such New Lease entered into pursuant to this subsection 15(c). If a
New Lease requires Prime's prior written consent pursuant to subsection 15(b)
hereof, and Prime does not object within ten Business Days (as defined in the
Purchase Agreement) after receipt of a copy of a term sheet containing the
material terms of such New Lease, the financial and credit and other information
relating to the tenant reasonably requested by Prime and copies of all
agreements entered into with the tenant to induce the tenant to execute a New
Lease, then Prime shall be deemed to have approved same. With respect to any
amendments, terminations, modifications, surrender agreements, assignments and
approvals of sublease agreements with respect to existing tenancies ("Lease
Modifications"), BRE shall have the right in its sole discretion and without
regard to the Leasing Guidelines, to execute and approve of any such Lease
Modification, provided that BRE shall act at all times in a commercially
reasonable manner and shall not enter into any Lease Modifications which have a
material adverse affect on the value of the Property and further provided that
such Lease Modifications are not inconsistent with BRE's past practices at the
Property. For the avoidance of doubt, Prime hereby acknowledges and agrees that
(x) BRE in its sole discretion shall have the right to terminate any tenancy,
regardless of whether such termination is pursuant to a New Lease, a Lease
Modification or otherwise if BRE determines in its sole discretion that said
tenant is in default under the terms of its lease and (y) BRE has the right to
enter into New Leases pursuant to and in accordance with subsection 15(c)
without the consent of Prime and BRE's entry into and execution of such New
Leases shall not be deemed a breach of this Option Agreement or the Purchase
Agreement.
<PAGE>
9
(b) During the Option Period, if Prime presents to BRE a potential
tenant with respect to the Property whose qualifications and proposed leasing
terms comply with the Leasing Guidelines, including, without limitation, the
credit requirements, then, provided that the negotiation and execution of said
lease will not interfere with any existing obligations of BRE to any other
tenant or potential tenant of the Property, BRE shall not unreasonably withhold
its consent to a lease to such tenant and shall negotiate in good faith with
such tenant a lease in an attempt to reach a lease agreement based upon the
terms proposed by Prime.
(c) With respect to all New Leases entered into after the date of
this Option Agreement in accordance with the Leasing Guidelines or with the
prior written consent of Prime (if required) or with a tenant introduced to BRE
by Prime and all Lease Modifications entered into after the date of this Option
Agreement in accordance with the terms hereof, Prime, provided that it shall
acquire the Asset in accordance with the terms and provisions of the Purchase
Agreement, (i) will be responsible for all capital costs, tenant improvement
costs, relocation costs, temporary leasing costs, brokerage commissions, legal,
design and other professional fees, surrender fees or similar payments made to
an existing tenant, payments made under takeover agreements and any and all
other expenses incurred with respect to the New Leases and Lease Modifications
and allowances granted to tenants in lieu of any of the above ("Leasing
Expenses"), (ii) shall assume the economic effect of any "free rent" or other
concessions pertaining to the period from and after the Closing Date relating to
such New Leases and Lease Modifications ((i) and (ii) shall be collectively
referred to as "Buyer's Leasing Costs") and (iii) shall further assume all
takeover obligations or like agreements entered into to induce a tenant to
execute a New Lease or a Lease Modification. To the extent that BRE pays any of
the Buyer's Leasing Costs or Leasing Expenses during the Option Period, the
Purchase Price will be increased at Closing by the aggregate amount of such
expenditures upon presentation by BRE of an invoice therefor and evidence of
payment thereof. Subject to the preceding sentence which provides that BRE shall
receive a credit with respect to the Purchase Price at closing for all Buyer's
Leasing Costs and Leasing Expenses paid by BRE, BRE shall pay all of Buyer's
Leasing Costs and Leasing Expenses that shall become due and payable prior to
Closing. Prime will pay all other Buyer's Leasing Costs as and when the same are
due. If, as of the Closing, there is a dispute with respect to whether BRE
entered into any Lease Modification in compliance with the terms of Section
15(a)of this Option Agreement, the parties shall continue to be obligated to
Close the sale and purchase of the Property in accordance with the terms of the
Purchase Agreement, such dispute shall not be an objection to Closing, nor
provide a basis for delaying the Closing, and Prime, in addition to its payment
of the Purchase Price in accordance
<PAGE>
10
with the terms of the Purchase Agreement, shall place in escrow with Escrow
Agent (as defined in the Purchase Agreement), pending resolution of the dispute,
cash in an amount equal to the amount of Buyer's Leasing Costs and Leasing
Expenses paid by BRE prior to Closing in connection with the Lease Modification
that is the subject of the dispute. The aforementioned escrow shall be
maintained by Escrow Agent in accordance with the provisions of an escrow
agreement entered into between BRE and Prime, which escrow agreement shall be
substantially in the form of the escrow provisions contained in the Purchase
Agreement with such appropriate changes necessary or desired to reflect the
purpose of the escrow and to provide for the payment of the escrow monies to
Prime if Prime establishes that BRE entered into the Lease Modification in
dispute in violation of Section 15(a) hereof and otherwise, to BRE.
(d) BRE shall have the right, but not the obligation, from time to
time, to amend and provide Updated Schedules to the Purchase Agreement to
reflect any New Leases and Lease Modifications.
(e) Notwithstanding anything to the contrary contained in this
Section 13, BRE is hereby authorized to accept the termination of any New Leases
or existing leases at the end of their existing term or the termination of any
New Lease or existing lease subject to a unilateral termination right exercised
by any tenant under a New Lease or an existing lease.
16. Notices. Any notice, demand or request shall be given in writing
to the party for whom it is intended, either (i) by personal delivery, (ii) by
registered or certified mail (return receipt requested and postage prepaid),
(iii) by a nationally recognized overnight courier providing for signed receipt
of delivery, or (iv) by facsimile, in each case at the following address, or
such other address as may be designated in writing by notice given in accordance
with this Section:
(a) To BRE:
c/o Blackstone Real Estate Advisors L.P.
345 Park Avenue
New York, New York 10154
Attention: Mr. Steven E. Orbuch
Facsimile: 212-754-8726
with copies thereof to:
Simpson Thacher & Bartlett
425 Lexington Avenue
New York, New York 10017
Attention: Glenn D. Kesselhaut, Esq.
Facsimile: 212-455-2502
<PAGE>
11
(b) To Prime:
c/o The Prime Group Realty Trust
77 West Wacker Drive, Suite 3900
Chicago, Illinois 60601
Attention: Mr. Jeffrey A. Patterson
Facsimile: 312-917-0460; and
Attention: James F. Hoffman, Esq.
Facsimile: 312-917-1684
with copies thereof to:
Jones, Day, Reavis & Pogue
77 West Wacker Drive, 35th Floor
Chicago, Illinois 60601
Attention: Julie O. Ehrlich, Esq.
Facsimile: 312-782-8585
All notices (i) shall be deemed to have been given ("Delivered") on the date
that the same shall have been actually delivered in accordance with the
provisions of this Section and (ii) may be Delivered either by a party or by
such party's attorneys. Any party may, from time to time, specify as its address
for purposes of this Agreement any other address upon the giving of 10 days'
written notice thereof to the other parties.
17. Assignment. The covenants and agreements of BRE under this
Option Agreement are intended to be, and shall be, covenants running with the
land with respect to the Property, and this Option Agreement shall be binding
upon and inure to the benefit of the heirs, successors, administrators,
executors, and assigns of the respective parties; provided, however, that this
Option Agreement may not be assigned by Prime, in whole or in part, to any other
individual or entity without the express written permission of BRE, which
permission may be withheld in BRE's sole discretion and without regard to any
commercial standard. Any attempted assignment of this Option Agreement shall, at
BRE's option, be deemed a breach of the terms of this Option Agreement which
results in the termination of the Option and all of Prime's rights hereunder.
18. Default. (a) If Prime shall default in its obligations (i) under
this Option Agreement or (ii) under the City Center Purchase Agreement (as
defined in the Purchase Agreement) then BRE may, in its sole discretion,
terminate this Option Agreement (and the Purchase Agreement, if the Option has
been exercised), after which Prime shall have no further rights under this
Option Agreement or under the Purchase Agreement.
<PAGE>
12
(b)(i) Notwithstanding anything to the contrary contained herein,
except as provided in the third sentence of this Section 18(b)(i), in the event
that Prime shall assert that BRE is in breach of any provision of this Option
Agreement at any time, whether during or after the Option Period, Prime's
remedies shall be limited to (i) a claim for monetary damages arising from the
alleged breach not to exceed $7,000,000 or (ii) equitable relief to cause
performance of the precise obligation or obligations allegedly unfulfilled, it
being understood that under no circumstances shall Prime be entitled to enjoin
the transfer of the Property, file a lis pendens or similar encumbrance
affecting title to the Property, move for specific performance to cause a
transfer of the Property, make any claim or bring any action or proceeding
against a potential or actual purchaser of the Property or take any other action
whatsoever to enjoin, restrain, delay or rescind or otherwise legally interfere
with or affect the transfer of the Property or title to the Property for any
claim relating to a breach alleged to occur prior to the Delivery of the Option
Notice or prior to the termination of the Option Period. By way of example, if
BRE defaults under this Option Agreement by failing to deliver to Prime a rent
roll after Delivery by Prime of all notices that Prime is required to Deliver
under this Option Agreement requesting such rent roll, and BRE's failure to
deliver same causes a default by BRE of its covenant to deliver the rent roll
pursuant to the terms hereof, Prime shall be permitted to compel delivery of the
rent roll to Prime, but shall not be permitted to compel performance by BRE of
any other obligation under this Option Agreement or under the Purchase
Agreement, including, without limitation, specific performance by BRE of the
transfer of the Property. In the event that it is determined that BRE's breach
of this Option Agreement is a violation of Section 10(a)(i) hereof, then in that
event only, Prime shall be entitled to a return of the Option Payment. In the
event of any violation by Prime of this Section 18(b)(i), Prime shall be liable
to BRE for all damages incurred as a result of Prime's violation, whether
foreseen or unforeseen, actual, consequential or punitive and BRE's recovery
shall not be limited by any amounts previously paid or on deposit. For the
avoidance of doubt, it is understood and agreed that Prime's right to equitable
relief described under clause (ii) above shall be limited to causing performance
of the individual covenants to be fulfilled with respect to BRE's conduct during
the Option Period (which covenants are primarily, but not exclusively, those set
forth in Section 10(d)) and the right to equitable relief described under clause
(ii) above shall not extend in any manner whatsoever to causing specific
performance of the obligation to transfer the Property, to any other relief
affecting title to the Property or to any other similar relief of the type
prohibited above.
(ii) Notwithstanding the foregoing provisions of Section 18(b)(i),
Section 3 or any other provision of this Option Agreement, in the event
that BRE sells or mortgages or enters into an agreement to sell or
mortgage the
<PAGE>
13
Property, or a sale/leaseback agreement, a new ground lease of the entire
Property or grants a right of first refusal, a right of first offer or an
option to purchase the Property and such sale or mortgage, or
sale/leaseback, or new ground lease or agreement relating thereto, or
right of first refusal, right of first offer or option to purchase, as the
case may be, is not specifically and expressly made subject and
subordinate to the rights of Prime in the manner prescribed by Section 9
of this Option Agreement, then Prime shall have all of its rights and
remedies at law and equity for such breach, including, all damages as a
result of such breach, whether forseen or unforseen, actual, consequential
or punitive, specific performance of this Option Agreement as a result of
such breach and the right to take action to enjoin, restrain or delay the
transfer of the Property, including, the filing of a lis pendens (in each
case as a result of BRE's breach of the provisions of this Section
18(b)(ii)) and Section 9.
(c) The Delivery of the Option Notice shall be deemed a full and
irrevocable waiver by Prime of any claim relating to a breach alleged to occur
prior to the Delivery of the Option Notice subject to (1) Prime's rights
pursuant to Section 18(b)(ii) hereof and (2) survival of a claim under 18(b)(i)
of Prime with respect to a default by BRE under 18(b)(i) for a failure to
deliver an item specifically requested to be delivered in accordance with the
provisions of Section 10(d)(ii), which item (x) if delivered, would have
changed, in a material manner, the Schedules attached to the Purchase Agreement
or (y) is specifically itemized in such Schedules.
(d) For the avoidance of doubt, Prime hereby understands and
acknowledges that nothing contained in this Section 18 shall be deemed to give
Prime a right to a return of the Option Payment, except as herein provided with
respect to a violation of Section 10(a)(i).
19. Costs and Expenses. Each party shall bear its own legal and
other professional costs and expenses in connection with the preparation,
negotiation and performance of this Option Agreement and, if entered into, the
Purchase Agreement.
20. Jenner & Block Estoppel Certificate. Following the receipt by
BRE of the Option Payment, BRE shall exhibit to Prime a photocopy of proposed
tenant estoppel certificate delivered by Jenner & Block, as a tenant of the
Property, dated as of September 16, 1998. The exhibiting of such tenant estoppel
certificate by BRE to Prime shall not constitute a delivery of the Jenner &
Block tenant estoppel certificate, nor shall Prime have any right to rely upon
said tenant estoppel certificate without BRE's prior written consent.
<PAGE>
14
21. Miscellaneous. (a) Prime shall not otherwise record or file this
Option Agreement or the Purchase Agreement or any copy or memorandum of either
with any public agency or land records, and any such recording or filing shall,
at BRE's option, render this Option Agreement and, if entered into, the Purchase
Agreement null and void and shall constitute a default of Prime's obligations
under this Option Agreement resulting in a termination of the Option and all of
Prime's rights under this Option Agreement and the Purchase Agreement.
(b) The acceptance by Prime of the Deed (as defined in the Purchase
Agreement) shall be deemed to constitute full performance and discharge of every
condition, covenant and obligation contained or expressed in this Option
Agreement and in the Purchase Agreement, except such as are, by the express
terms of this Option Agreement or the Purchase Agreement, to survive the
Closing. The receipt and confirmation of receipt by BRE of the Purchase Price
shall be deemed full compliance by Prime of all of Prime's obligations with
respect to the Property, except with respect to those obligations of Prime which
are specifically stated to survive the payment of the Purchase Price.
(c) This Option Agreement, together with the Purchase Agreement,
constitutes the entire agreement between the parties and fully supersedes and
cancels all prior agreements, arrangements or understandings, whether oral or
written, between them relating to the subject matter hereof and no party shall
be bound by any terms, conditions, statements, or representations, oral or
written, not herein contained. No modification of this Option Agreement and, if
entered into, the Purchase Agreement shall be valid or binding unless such
modification is in writing, duly dated and signed by the party or parties
against whom enforcement of such modification is sought.
(d) In the event that any one or more of the provisions of this
Option Agreement or, if entered into, the Purchase Agreement shall for any
reason be held to be invalid, illegal or unenforceable in any respect, such
invalidity, illegality or unenforceability shall not affect any other provision
of this Option Agreement or, if entered into, the Purchase Agreement, but each
shall be construed as if such invalid, illegal or unenforceable provision had
never been included.
(e) This Option Agreement may be executed in one or more
counterparts, each of which may be an original or telecopy and all of which
taken together shall constitute one and the same instrument.
(f) This Option Agreement shall be governed, construed, interpreted
and enforced in accordance with the laws of the State of New York.
<PAGE>
15
(g) Nothing expressed or implied in this Option Agreement or the
Purchase Agreement is intended or will be construed to confer upon or give any
person or entity other than the parties hereto any rights or remedies under or
by reason of this Option Agreement, the Purchase Agreement or any transactions
contemplated by this Option Agreement or the Purchase Agreement.
(h) The headings in this Option Agreement are for purposes of
reference only and shall have no meaning in construing this Option Agreement.
Capitalized terms used in this Option Agreement and not defined shall have the
meanings specified in the Purchase Agreement.
(i) This Option Agreement shall become a binding agreement only at
such time as it shall have been duly executed and delivered by BRE and Prime.
(j) Subject to the provisions of Section 18 hereof, Prime shall not
be entitled to any consequential, speculative, punitive damages or any similar
claim in any action relating to this Option Agreement but shall be entitled to
seek specific performance with respect to BRE hereunder.
(k) Notwithstanding anything to the contrary contained herein, if
the due date of any obligation hereunder (including the exercise of the option)
falls on a day other than a Business Day, then the date for performance of such
obligation shall be extended to the next following Business Day.
(l) In the event of any conflict or inconsistency between the terms
and provisions of this Option Agreement and terms and provisions of the Purchase
Agreement, the terms and provisions of the Purchase Agreement shall, in each
such instance, govern and control.
(m) The terms and provisions of this Option Agreement shall survive
the entry, and shall not merge or be deemed to merge, into the Purchase
Agreement.
(n) The The provisions of Section 15.4(a)and 15.4(b) of the Purchase
Agreement governing the Confidentiality of the parties thereto and hereto are
incorporated herein by reference and made a part hereof.
<PAGE>
16
The parties have duly executed this Option Agreement as of the date
first referenced above.
BRE:
BRE/WABASH L.L.C., a Delaware
limited liability company
By:_______________________________________
Name:
Title
PRIME:
PRIME GROUP REALTY, L.P., a
Delaware limited partnership
By: Prime Group Realty Trust, a
Maryland real estate
investment trust, its Managing
General Partner
By:____________________________________
Name:
Title:
<PAGE>
17
EXHIBIT A
PURCHASE AGREEMENT
[SEE ATTACHED]
<PAGE>
18
AGREEMENT OF PURCHASE AND SALE
AGREEMENT OF PURCHASE AND SALE (this "Agreement"), made as of the
____ day of ______________, 1999 by and between BRE/Wabash L.L.C. ("Seller"), a
Delaware limited liability company, and PRIME GROUP REALTY, L.P., a Delaware
limited partnership ("Buyer").
Background
A.Seller is the fee owner of the land described on Schedule A-1
attached hereto and the buildings and other improvements located thereon and the
owner of a leasehold interest in and to the parcel of land described on Schedule
A-2 attached hereto, together with the buildings and other improvements located
thereon which are owned in fee (collectively, the "Property"). The Property,
together with the Asset-Related Property (as defined below) with respect thereto
shall be referred to as the "Asset".
B.The Seller desires to sell to the Buyer, and the Buyer desires to
purchase from the Seller, the Asset on the terms and conditions hereinafter set
forth.
AGREEMENT
NOW, THEREFORE, in consideration of the mutual covenants and
agreements set forth in this Agreement, and for other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the
parties hereby agree as follows:
ARTICLE I
DEFINITIONS
Section I.1 Defined Terms. The capitalized terms used herein will
have the following meanings.
"Agreement" shall mean this Agreement of Purchase and Sale and all
amendments hereto, together with the exhibits and schedules attached hereto, as
the same may be amended, restated, supplemented or otherwise modified.
"Asset" shall have the meaning assigned thereto in "Background"
paragraph A.
- ----------
(1) Date to be completed by Seller, effective as of the exercise of the Option.
<PAGE>
19
"Asset File" shall mean the materials with respect to the Asset
previously delivered, or made available at the Property, to the Buyer or its
representatives by or on behalf of the Seller.
"Asset-Related Property" shall have the meaning assigned thereto in
subsection 2.1(b).
"Assignment of Contracts" shall have the meaning assigned thereto in
Article VI.
"Assignment of Leases" shall have the meaning assigned thereto in
Article VI.
"Basket Limitation" shall mean an amount equal to one percent (1%)
of the Purchase Price.
"Blackstone Lease" shall have the meaning assigned thereto in
Article VI.
"Bill of Sale" shall have the meaning assigned thereto in Article
VI.
"BREA" shall mean Blackstone Real Estate Acquisitions L.L.C.
"Business Day" shall mean any day other than a Saturday, Sunday or
other day on which banks are authorized or required by law to be closed in
Chicago, Illinois or New York City, New York.
"Buyer" shall have the meaning assigned thereto in the Preamble to
this Agreement.
"Buyer's Leasing Costs" shall have the meaning assigned thereto in
Subsection 11.12(a).
"Buyer-Related Entities" shall have the meaning assigned thereto in
subsection 12.1.
"Cap Limitation" shall mean an amount equal to four percent (4%) of
the Purchase Price.
"Cigna Loan" shall mean the loan from Connecticut General Life
Insurance Company and Landes Hessen-Thuringen Girozentrale to Seller secured by
the Property.
"Cigna Loan Closing Balance" shall have the meaning assigned thereto
in subsection 2.2(d).
"City Center Purchase Agreement" shall mean that certain Purchase
and Sale Agreement between Prime Group Realty,
<PAGE>
20
L.P., as Buyer, and certain of Seller's affiliates, as Sellers, executed on
February ___, 1999.
"Closing" shall have the meaning assigned thereto in Subsection
2.3(a).
"Closing Date" shall have the meaning assigned thereto in Subsection
2.3(a).
"Complying Title Policy" shall have the meaning set forth in Section
2.2(b)(ii).
"Condition of the Asset" shall have the meaning assigned thereto in
subsection 4.1(f).
"Contemplated Leases" shall mean those Space Leases identified on
Schedule F-2.
"Contracts" shall have the meaning assigned thereto in Subsection
2.1(b).
"Deed" shall have the meaning assigned thereto in Article VI.
"Earnest Money" shall have the meaning assigned thereto in
subsection 2.2(b).
"Eastdil" shall mean Eastdil Realty Company, L.L.C.
"Existing Survey" shall mean the survey with respect to the Property
listed on Schedule B attached hereto.
"Existing Title Commitment" shall mean the title policy and title
commitment with respect to the Property listed on Schedule B attached hereto.
"Fixed Rents" shall have the meaning assigned thereto in subsection
11.1(a).
"Ground Lease" shall mean the lease entered into between
International Business Machines Corporation, as tenant, and Marion Ortsteifen
Kane and Philip J. Reddy, as trustees, et al., as Landlord, on December 20,
1968, a memorandum of which was filed for record on January 10, 1969, as
document number 20724873, in the Office of the Recorder, Cook County, Illinois,
as same was assigned by Assignment, Acceptance and Assumption of Seller's Right,
Title and Interest to Ground Lease and Deed to Improvements, from IBM to Seller
dated August 30, 1996 and filed for record on September 3, 1996, as document
number 96671600, in the Office of the Recorder, Cook County, Illinois.
"Hazardous Materials" shall have the meaning assigned thereto in
subsection 4.1(f).
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21
"IBM Lease" shall mean that certain lease between Seller, as
landlord, and International Business Machines Corporation, as tenant, dated
August 30, 1996.
"Intangible Personal Property" shall have the meaning assigned
thereto in subsection 2.1(b).
"IRS" shall mean the Internal Revenue Service.
"IRS Reporting Requirements" shall have the meaning assigned thereto
in subsection 15.4(c).
"Leasing Expenses" shall mean all capital costs, tenant improvement
costs, relocation costs, temporary leasing costs, leasing commissions, legal,
design and other professional fees, and other expenses incurred with respect to
the Space Leases and allowances granted to any tenants in lieu of any of the
above.
"Loan Documents" shall mean all documents evidencing and securing
the Cigna Loan.
"Losses" shall have the meaning assigned thereto in subsection 12.1.
"Option Agreement" shall mean that certain Option Agreement dated as
of February__, 1999 by and between Seller and Buyer.
"Overage Rent" shall have the meaning assigned thereto in subsection
11.2(a).
"Permitted Exceptions" shall mean with respect to the Property, (i)
excluding any affirmative coverage and affirmative insurance with respect
thereto, the matters set forth in the Existing Title Commitment or the Existing
Survey, (ii) the Ground Lease, Space Leases, and Contracts affecting the
Property and any Space Leases, or Contracts entered into after the date hereof,
in accordance with the terms of this Agreement, (iii) liens for current real
estate taxes which are not yet due and payable, (iv) standard exclusions and the
terms and provisions contained in forms of title insurance policies, subject to
Seller causing the Title Company to provide extended coverage over the general
title exceptions, except those exclusions and conditions and stipulations which
customarily remain in fee and leasehold title insurance policies in the
jurisdiction in which the Property is located and the rights of tenants under
leases (v) subject to the adjustments provided for herein and if a lien, any
service, installation, connection or maintenance charge due after Closing and
charges for sewer, water, electricity, telephone, cable television or gas,
excluding mechanic's liens, (vi) as to assets which are not real property,
rights of vendors and holders of security interests on personal property
installed on the Property and owned by tenants and rights of tenants to remove
trade fixtures at the expiration of the term of the Space Leases of such
tenants, (vii) matters contained in the updated title commitment or survey with
respect to each Property obtained by
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22
the Buyer as permitted under Section 9.2 which matters do not qualify as
Permitted Exceptions under one of the other clauses of this definition and with
respect to which either (A) the Buyer has not raised an objection within the
time period required in Section 9.2 or (B) the Buyer has raised an objection
within the time period required in Section 9.2 and the Seller has not agreed to
cause such title exception to be removed prior to Closing, provided Buyer either
waives such objection at or prior to the Closing or Buyer closes the transaction
despite such objection (viii) (the matters described in clauses (i) through
(vii) above, collectively, the "Permitted Exceptions").
"Person shall mean a natural person, partnership, limited
partnership, limited liability company, corporation, trust, estate, association,
unincorporated association or other entity.
"Property" shall have the meaning assigned thereto in "Background"
paragraph A.
"Purchase Option" shall have the meaning assigned thereto in the
Option Agreement.
"Purchase Price" shall have the meaning assigned thereto in
subsection 2.2(a).
"Repayment Costs" shall have the meaning assigned thereto in
subsection 2.2(d).
"Replaced Tenants" shall have the meaning set forth in subsection
3.3(i).
"Replacement Tenants" shall have the meaning assigned thereto in
subsection 3.3(i).
"Reporting Person" shall have the meaning assigned thereto in
subsection 15.4(c).
"Seller" shall have the meaning assigned thereto in the Preamble to
this Agreement.
"Seller-Related Entities" shall have the meaning assigned thereto in
subsection 12.2.
"Seller's knowledge" shall mean the actual knowledge of the Seller
based upon the actual knowledge of Gary M. Sumers and Marshall Findley without
any duty on the part of any such executive officer or other Person to conduct
any independent investigation or make any inquiry of any Person.
"Seller's Leasing Costs" shall have the meaning assigned thereto in
subsection 11.12(b).
"Space Leases" shall have the meaning assigned thereto in subsection
2.1(b).
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23
"Survival Period" shall have the meaning assigned thereto in
subsection 12.4.
"Tangible Personal Property" shall have the meaning assigned thereto
in Section 2.1(b).
"Tenant Estoppel Certificate" shall have the meaning assigned
thereto in subsection 3.3(i).
"Tenant Notices" shall have the meaning assigned thereto in Article
VI.
"UCC" shall mean the Uniform Commercial Code adopted by the state in
question.
"Union Contracts" shall mean, contracts with Operating Engineering
Local 399 and its branches.
"Voluntary/De Minimis Title Exceptions" shall mean title exceptions
affecting the Property that are (i) knowingly and intentionally created by the
Seller, after the date of this Agreement through the execution by the Seller of
one or more instruments creating or granting such title exceptions, or (ii)
dischargeable by the payment of not more than $400,000 (which $400,000 shall be
the maximum aggregate amount required to be spent by the Seller in connection
with all title exceptions, other than those referenced in (i) above, that arise
with respect to the Property), or (iii) without regard to the cap in clause (ii)
above, mechanic's or materialman's liens arising from nonpayment for any work
performed or to be performed by Seller in connection with Seller's existing
lease obligations which are more particularly set forth in Section 11.12 hereof
and on Schedule F-1 and F-4 attached hereto; provided, however, that the term
"Voluntary/De Minimis Title Exceptions" as used in this Agreement shall not
include the following: (a) any Permitted Exceptions; (b)(1) Space Leases for the
Property and ; (b)(2) any title exception created pursuant to a Space Lease for
the Property by the tenant thereunder, provided such tenant has the express
right under such Space Lease to create such title exception; (c) any title
exceptions that are approved, waived or deemed to have been approved or waived
by the Buyer pursuant to the terms of this Agreement or that are created in
accordance with the provisions of this Agreement; (d) any title exceptions
which, pursuant to a Space Lease for the Property or otherwise, are to be
discharged by a tenant or occupant of such Property; (e) except as set forth in
(iii) of the definition of Voluntary/De Minimis Title Exceptions, mechanic's or
materialman's liens which, when aggregated with any sums required to discharge
title exceptions pursuant to the provisions of (ii) and sums required to pay any
federal tax liens, exceed $400,000 or (f) any federal tax liens, which when
aggregated with any sums required to discharge title exceptions pursuant to the
provisions of (ii) and sums required to discharge any mechanic's liens, exceed
$400,000.
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24
ARTICLE II
SALE, PURCHASE PRICE AND CLOSING
Section II.1 Sale of Assets. (a) On the Closing Date (as hereinafter
defined) and pursuant to the terms and subject to the conditions set forth in
this Agreement, Seller shall sell to the Buyer, and the Buyer shall purchase
from Seller, the Asset.
(b) The transfer of the Asset to the Buyer shall include the
transfer, directly or indirectly, of all Asset-Related Property with respect to
the Asset. For purposes of this Agreement, "Asset-Related Property" shall mean
all of Seller's right, title and interest in and to (A) all easements, covenants
and other rights appurtenant to said Property and all right, title and interest
of the Seller, if any, in and to any land lying in the bed of any street, road,
avenue or alley or any other right of way, open or closed, in front of or
adjoining said Property, (B) all furniture, fixtures, equipment and other
tangible personal property (except items owned or leased by tenants from third
parties or which are leased by the Seller (provided, however, that Seller shall
assign such leases to Buyer, in accordance with this Agreement) which are now,
or may hereafter prior to the Closing Date be, placed in, attached to, situated
in or upon the Property (collectively, with all additions and replacements
thereof, the "Tangible Personal Property"), (C) to the extent they may be
transferred under applicable law, all licenses, franchises, certifications,
approvals, permits and authorizations presently issued in connection with the
operation, ownership and maintenance of all or any part of the Property as it is
presently being operated, (D) to the extent assignable, all warranties, if any,
issued or assigned to the Seller by any manufacturer or contractor in connection
with construction or installation of equipment or any component of the
improvements included as part of the Property, (E) to the extent assignable, all
service, supply and maintenance contracts including commitments therefor (if
any) held by Seller with respect to the Property, including, without limitation,
those contracts listed on Schedule E attached hereto (collectively, the
"Contracts"), (F) to the extent assignable by Seller, all trade names, logos,
designs, trademarks, service marks, copyrights and other general intangibles and
intellectual property (including any computer software programs used for
purposes of tenant escalation billings and maintained at the Property) relating
to the Property, including, without limitation, but limited, nonetheless, to the
extent assignable and subject to the provisions of the Article 17 under the IBM
Lease, the name "IBM Plaza" (collectively, the "Intangible Personal Property")
and (G) all leases, licenses, contracts and other agreements, to the extent
transferable, for the use and occupancy of all or any part of the Property (the
"Space Leases") and all security and escrow deposits (including any interest or
other amounts accrued or earned thereon) that are required to be returned to
tenants pursuant to Space Leases held by Seller in
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25
connection with any such leases, licenses, contracts and other agreements.
Section II.2 Purchase Price; Earnest Money. (a) The consideration
for the Assets shall be equal to Two Hundred and Thirty Million Dollars
($230,000,000.00) (the "Purchase Price"), subject to the prorations and credits
as hereinafter provided in this Agreement. For avoidance of doubt, Buyer hereby
acknowledges and agrees that no part of the $8,000,000.00 Option Price (as
defined in the Option Agreement) shall be applied to or credited against the
Purchase Price.
(b) The Purchase Price shall be paid to the Seller as follows:
(i) within one Business Day after the delivery by Buyer to Seller of
written notice (the "Option Notice") that it is exercising the Option in
accordance with the terms of the Option Agreement (notwithstanding Buyer's
Review Period (as defined in the Option Agreement)), the Buyer shall deposit
with Title Associates Inc., as escrow agent ("Escrow Agent") cash in an amount
equal to Three Million Five Hundred Thousand Dollars ($3,500,000.00), in
immediately available funds by wire transfer to such account or accounts as
Escrow Agent shall designate to Buyer (such cash, together with any interest
earned thereon, shall be referred to as the "Earnest Money"); the Earnest Money
shall be held in escrow in accordance with the provisions of Section 15.5 and
shall be nonrefundable to Buyer except (A) if Buyer does not accept the revised
Schedules in accordance with the terms of the Option Agreement, in which event,
the Option Agreement shall terminate, the Earnest Money shall be returned to the
Buyer and this Purchase Agreement shall be deemed null and void and (B) as
otherwise set forth in this Agreement. If the Buyer does not deliver the Earnest
Money to Escrow Agent within one Business Day after the delivery of the Option
Notice, the Seller shall have the right, at its option, to terminate this
Agreement and upon such termination, Seller shall have no further obligations
hereunder.
(ii) on the Closing Date, simultaneously with the delivery by the
Title Company of a marked commitment for an ALTA form 1992 Owner's and Leasehold
Owner's Title Insurance Policy in the amount of the Purchase Price, subject only
to the Permitted Exceptions with extended coverage endorsements (a "Complying
Title Policy") (provided that the sole conditions to the effectiveness thereof
are that Buyer shall have completed, or is simultaneously completing, all of its
Closing obligations and deliveries in accordance with this Agreement, including
payment of the Purchase Price). The Buyer shall deliver to Seller on the Closing
Date, in immediately available funds by wire transfer to such account or
accounts that Seller shall designate to the Buyer, and subject only to the
closing adjustments as provided for in Article XI of this Agreement, an amount
equal to the Purchase Price less the Earnest Money. The Escrow Agent shall
deliver to Seller on the Closing Date, in immediately available federal funds by
wire transfer to such account or accounts as Seller shall designate, the Earnest
Money.
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26
(c) No adjustment shall be made to the Purchase Price except as
explicitly set forth in this Agreement.
(d) On or before the Closing, the Seller shall repay the outstanding
balance of principal and interest on the Cigna Loan (collectively, the "Cigna
Loan Closing Balance") including, without limitation the prepayment, due on
sale, breakage costs, assumption fees and lender closing costs in connection
with said repayment (the "Repayment Costs"). Notwithstanding the foregoing, or
anything else contained in this Agreement (including, without limitation, the
provisions of Article XIV hereof), Buyer hereby indemnifies and holds Seller
harmless from all Losses (as hereinafter defined) Seller incurs in connection
with Seller's delivery of a notice of prepayment with respect to the Cigna Loan
in the event Buyer defaults in the performance of its obligations contained
herein.
Section II.3 The Closing. (a) The closing of the purchase and sale
of the Asset (the "Closing") shall take place in accordance with the following:
(1) if Buyer exercises the Purchase Option on or prior to October 20, 1999, then
on the day that is sixty (60) calendar days after the date Buyer exercises the
Purchase Option (or if such day is not a Business Day, the first Business Day
immediately succeeding such sixtieth calender day) and (2) if Buyer exercises
the Purchase Option after October 20, 1999 but on or prior to October 31, 1999,
then on December 20, 1999 (the "Closing Date"), Time Being of The Essence with
respect to Buyer's obligations under both clauses (1) and (2) hereof. At the
Closing, subject to the terms and in accordance with the provisions of this
Agreement, including the condition that Buyer deliver to Seller the Purchase
Price, Seller shall convey to the Buyer all of its right, title and interest in
and to the Asset. Notwithstanding anything to the contrary contained herein,
TIME SHALL BE OF THE ESSENCE with respect to Seller's obligations hereunder on
the day that is fourteen days after the Closing Date.
(b) The Closing shall be held on the Closing Date at 10:00 A.M. at
the offices of Simpson Thacher & Bartlett, 425 Lexington Avenue, New York, New
York, or at such other location agreed upon by the parties hereto.
ARTICLE III
REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE SELLER
Section III.1 General Seller Representations and Warranties. Seller
hereby represents, warrants and covenants to the Buyer as of the date hereof and
as of the Closing Date, with respect to itself and, to the extent applicable,
the Property owned and/or the Asset being sold by Seller, as follows:
(a) Formation; Existence. It is a limited liability company, duly
formed, validly existing, in good standing
<PAGE>
27
under the laws of the state of Delaware and is, or will at Closing be,
qualified to do business in the State of Illinois, unless the absence of
such qualification does not materially adversely affect the Seller's
ownership or ability to convey the Asset or performance of its other
obligations under this Agreement.
(b) Power and Authority. It has all requisite power and authority to
enter into and deliver this Agreement, to perform its obligations
hereunder and to consummate the transactions contemplated hereby. The
execution, delivery and performance of this Agreement and the consummation
of the transactions provided for in this Agreement have been duly
authorized by all necessary action on its part. This Agreement has been
duly executed and delivered by it and constitutes its legal, valid and
binding obligation, enforceable against it in accordance with its terms,
except as such enforceability may be limited by bankruptcy, insolvency,
reorganization, moratorium or other laws affecting creditors' rights and
by general principles of equity (whether applied in a proceeding at law or
in equity).
(c) No Consents. Except (i) as set forth in Schedule D and (ii) for
any consent, license, approval, order, permit, authorization,
registration, filing or declaration (each, a "Filing"), the failure of
which to obtain will not adversely affect (A) Seller's ability to
consummate the transactions contemplated by this Agreement, (B) the
Seller's ownership of the Asset or (C) in a material adverse manner, the
operation or value of the Property to Buyer, no Filing with, any court,
administrative agency or commission or other governmental authority or
instrumentality, domestic or foreign, is required to be obtained or made
in connection with the execution, delivery and performance of this
Agreement by Seller or any of the transactions required or contemplated
hereby, other than (r) the recording of the Deed and the Assignment and
Assumption of Ground Lease conveying Seller's interest in the Property and
any Filing customarily made, or required to be made, in connection
therewith, (s) the release or satisfaction of the Cigna Loan, or any other
loan encumbering or relating to the Property and any additional Filings
customarily made, or required to be made, in connection therewith, (t) a
disclosure statement pursuant to Illinois Responsible Property Transfer
Act, 765 ILSC 90/1, et.seq., (u) any water certificate and/or transfer or
other tax filing to be filed in connection with the transfer of the
Property and the Asset, and (v) any other Filing that is customarily made
in the jurisdiction in which the Property is located, or pursuant to this
Agreement, is required to be made in connection with the transfer of the
Property or the Asset.
(d) No Conflicts. The execution, delivery and compliance with, and
performance of the terms and provisions of, this Agreement, and the sale
of the Asset will not (i)
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28
conflict with or result in any violation of the Seller's organizational
documents, (ii) except as set forth on Schedule D, to Seller's knowledge,
conflict with or result in any violation of any provision of any bond,
note or other instrument of indebtedness, contract, indenture, mortgage,
deed of trust, loan agreement, lease or other agreement or instrument to
which Seller is a party in its individual capacity, or (iii) violate any
existing term or provision of any order, writ, judgment, injunction,
decree, statute, law, rule or regulation applicable to Seller or its
assets or properties except, in each case, for any conflict or violation
which (A) will not adversely affect (1) Seller's ability to consummate the
transactions contemplated by this Agreement, (2) the ownership of the
Asset or Property (3) in a material adverse manner, the operation by
Seller of the Property or value thereof or (B) arises under the documents
evidencing or securing the Cigna Loan.
(e) Foreign Person. The Seller is not a "foreign person" as defined
in Internal Revenue Code Section 1445 and the regulations issued
thereunder.
Section III.2 Representations and Warranties of the Seller as to the
Asset. Seller hereby represents, warrants and covenants to the Buyer as of the
date hereof and as of the Closing Date, with respect to the Asset owned by
Seller as follows:
(a) Ownership of the Asset. (i) Seller is the owner of the Asset
free and clear of any lien, pledge, charge, security interest,
encumbrance, title retention agreement, adverse claim or restriction
except, the Permitted Exceptions and (ii) with respect to the Ground
Lease, it is in full force and effect, Seller has not received any notice
of default (which remains uncured) and knows of no event which with the
giving of notice or the passing of time or both will constitute a default
under the Ground Lease, and the Seller has not terminated or modified the
Ground Lease, except as set forth on Schedule A-2. It has the right to
sell the Asset pursuant to the terms of this Agreement. Upon transfer of
the Asset by Seller to the Buyer and upon delivery by Buyer to Seller of
the Purchase Price, the Buyer will receive the Asset free and clear of any
encumbrances (other than (i) the Permitted Exceptions and (ii) any
encumbrances arising from acts of the Buyer or its affiliates). It has not
prior to the date hereof sold (or entered into an agreement to sell) the
Asset (except for the possible granting of security interests, all of
which will be terminated prior to the Closing).
(b) Contracts. The Contracts affecting the Property are set forth on
Schedule E attached hereto and to Seller's knowledge the same have not
been modified or amended, except as shown in such documents. Seller has
not received any written notice of default under any of the Contracts
affecting the Property (which remains uncured).
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29
(c) Space Leases. With respect to the Space Leases listed on
Schedule F, as modified by Schedule F-2 attached hereto, (A) such Space
Leases constitute all the leases, licenses or other occupancy agreements
relating to the Property, (B) such Space Leases have not been modified or
terminated except as stated in Schedule F, (C) such Space Leases contain
the entire agreement between the landlord and the tenants named therein,
(D) except as set forth in Schedule F and F-2, fixed rent and additional
rent are currently being collected under such Space Leases without offset,
counterclaim or deduction and (E) Seller has not received any written
notice of a default (which remains uncured) and has no knowledge of any
event which with the giving of notice or the passage of time or both will
constitute a default under any of the Space Leases. True copies of the
Space Leases have been delivered to the Buyer. Except as set forth on
Schedules F-1 and F-2 and F-3, all tenant improvements or other
construction work which as of the date of this Agreement are required to
be performed by the landlord under the Space Leases have been or will be
prior to the relevant Closing Date fully completed or made and paid for.
Schedule I sets forth a true and complete list of security deposits held
by Seller under the Space Leases. Except for the Space Leases, or as
otherwise set forth in this Agreement or in the Asset Files, to Seller's
knowledge, no other Persons have legal agreements to occupy or possess any
portion of the Property, excluding any subtenants, occupants or licensees
pursuant to any of the Space Leases. Notwithstanding anything contained in
this subsection 3.2(c), from and after the date of this Agreement until
the applicable Closing Date, Buyer shall notify Seller if Buyer discovers
an inconsistency between the representations and warranties contained in
this subsection and any Space Leases which it deems relevant and Buyer's
failure to notify Seller of such inconsistency prior to the applicable
Closing shall constitute a waiver by Buyer of any right or claim Buyer may
have against the Seller with respect to such inconsistency, including any
claims under Article XII of this Agreement.
(d) Brokerage Commissions. There are no brokerage commissions or
finders' fees payable by Seller with respect to the current or any renewal
term of any of the Space Leases affecting the Property other than those
set forth on Schedule G attached hereto and the Seller has no agreement
with any broker with respect to any renewal term of any Space Lease except
as set forth in Schedule G.
(e) Condemnation. There are no pending condemnation, eminent domain
or similar proceedings affecting the Property, and no street widening,
change of grade nor limitations on the use of the street abutting the
Property, nor does Seller have knowledge that any of the foregoing is
threatened or contemplated.
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30
(f) Litigation. Except as disclosed in Schedule H attached hereto,
there are no actions, suits or proceedings pending against or, to Seller's
knowledge, affecting the Asset, the Property or Seller in any court or
before or by an arbitration tribunal or regulatory commission, department
or agency which, if adversely determined, would adversely affect (1)
Seller's ability to consummate the transactions contemplated by this
Agreement, (2) the ownership of the Asset or (3) in a material adverse
manner, the operation or value of the Property.
(g) Environmental Violations. Seller has not received written notice
of a violation of law with respect to Hazardous Materials on or about the
Property (which has not been cured in accordance with all applicable federal,
state and local laws, statutes, codes, ordinances, rules, regulation and
guidelines).
Section III.3 Covenants of the Sellers Prior to Closing. Until
Closing, Seller, or its agents shall:
(a) Insurance. Keep the Property insured against fire and other
hazards covered by the insurance policies maintained by Seller on the date
of this Agreement, and continue to maintain in effect such comprehensive
general liability insurance policy maintained on the date hereof.
(b) Operation. Operate and maintain the Property in a businesslike
manner and substantially in accordance with Seller's past and present
practices with respect to the Property.
(c) New Contracts. Not enter into third party or other contracts
relating to the Property, without the prior written consent of the Buyer,
which consent shall not be unreasonably withheld, except that no such
consent shall be required if such contract (i) is necessary as a result of
an emergency at the Property (and such contract is not binding
post-closing), or (ii) is terminable without payment of a termination fee
upon no more than 30 days prior written notice and provided that the
amount payable under all such contracts for the 30 day period does not
exceed, in the aggregate, $25,000, unless such contract is terminable at
will. If Seller enters into any third party contracts after the date of
this Agreement, then Seller shall promptly provide written notice and a
copy thereof to the Buyer and unless such contract required the Buyer's
approval pursuant to this paragraph and such approval was not obtained and
subject to Buyer's right to terminate such contracts in a timely manner as
described below, the Buyer shall assume such contract at Closing, such
contract shall be deemed added to Schedule E attached hereto and Schedule
E shall be deemed amended at the Closing to include such contracts. If a
new contract requires the Buyer's approval and the Buyer does not object
within ten Business Days after receipt of a copy of such contract, then
the Buyer shall be deemed to
<PAGE>
31
have approved such contract. Notwithstanding the foregoing, and except in
connection with the Union Contracts, the Seller's shall terminate on or
before the Closing Date, any Contracts listed on Schedule E-1 hereto and
Seller shall be responsible for any termination fees and penalties due in
connection with such terminations.
(d) New Space Leases. (i) Continue the rental program in accordance
with the terms of Section 15 of the Option Agreement, except that the
provisions of Section 15 that permit Seller to enter into New Leases and
Lease Modifications that neither conform to the Leasing Guidelines, nor
have been consented to by Buyer shall not apply during the time that this
Purchase Agreement is in effect.
(ii) If the Property Owner enters into any Space Leases after
the date of this Agreement in accordance with the provisions of clause (i)
above, the Buyer shall assume such Space Lease at Closing, such Space
Lease shall be deemed added to Schedule F attached hereto and Schedule F
shall be deemed amended at the Closing to include such Space Lease.
(e) Litigation. Advise the Buyer promptly of any litigation,
arbitration proceeding or administrative hearing, or upon receipt of any
written notice of an intention to institute same (including condemnation
and eminent domain), before any court or governmental agency which affects
the Asset in any respect, which is instituted after the date of this
Agreement and which, if adversely determined, would adversely affect (1)
the Sellers' ability to consummate the transactions contemplated by this
Agreement, (2) the ownership of the Asset, or (3) in a materially adverse
manner, the operation or value of the Asset.
(f) Sale of Tangible Personal Property. Not transfer or dispose of,
or permit to be sold, transferred or otherwise disposed of, any item or
group of items constituting Tangible Personal Property associated with the
Property, except for the use and consumption of inventory, office and
other supplies and spare parts, and the replacement of worn out, obsolete
and defective tools, equipment and appliances, in the ordinary course of
business.
(g) Performance Under Space Leases. Perform or cause any of its
agents to perform, all material obligations of landlord or lessor under
the Space Leases for the Property.
(h) Ground Lease Estoppel Certificates.IBM Ground Lease Estoppel
Certificate") substantially in the form attached as Exhibit I-1 or
otherwise certifying to such matters which are required to
<PAGE>
32
be certified to by the Garage Lessor pursuant to the Ground Lease from the
Garage Lessor or its agent. TIME SHALL BE OF THE ESSENCE with respect to
Seller's obligations hereunder on the day that is fourteen days after the
Closing Date.
(i) Space Lease Estoppel Certificates. (A) On or prior to the day
before the Closing Date, Seller shall obtain from the following tenants
under Space Leases estoppel certificates (a) substantially in the form
attached hereto as Exhibit I-2 or (b) otherwise certifying only as to
those matters which are required to be certified to by such tenants
pursuant to the provisions of such tenants' Space Leases(each a "Tenant
Estoppel Certificate"): (A) International Business Machines Corporation,
(B) Arthur Andersen (C) Burke, Warren and McKay, (D) Keroff & Rosenberg
and (E) Lovell, White & Durrant. Notwithstanding the foregoing, Seller may
satisfy the conditions of this subsection 3.3(i)(A) with respect to the
tenants referenced in (B), (C), (D) and (E) (the "Replaced Tenants") by
obtaining Tenant Estoppel Certificates from other tenants under Space
Leases in the Property which are not specifically named in this subsection
3.3(i)(A) or in subsection 3.3(i)(B)(the "Replacement Tenants") provided
the aggregate rentable square feet covered by the Replacement Tenants'
leases either equals or exceeds the number of rentable square feet leased
by the Replaced Tenants. Except with respect to any and all tenants
pursuant to the Jenner & Block Lease ("Jenner") and State Street Bank and
Trust Company Lease ("State Street"), Seller shall make a good faith
effort to obtain from tenants under other Space Leases not referenced
herein Tenant Estoppel Certificates, but the delivery of such Tenant
Estoppel Certificates shall not be deemed a condition to Closing. TIME
SHALL BE OF THE ESSENCE with respect to Seller's obligation to deliver the
Tenant Estoppel Certificates to Buyer in accordance with the provisions of
this Section 3.3(i)(A), such obligation to become TIME OF THE ESSENCE on
the day that is fourteen days after the Closing Date.
(B) (1) Buyer hereby acknowledges and agrees that,
notwithstanding anything else contained in this Agreement or otherwise,
Seller is not required to deliver to Buyer tenant estoppel certificates
from Jenner or State Street (or its agent). Seller, however, (a) shall
deliver to Buyer on the Closing Date tenant estoppel certificates executed
by Seller in the form of Exhibit I-4 with respect to the Jenner and State
Street Space Leases,(each a "Seller Estoppel Certificate") and (b) shall
provide evidence reasonably satisfactory to Buyer that $5,000,000 of the
Purchase Price will be retained by Seller for a six (6) month period after
the Closing as security against any damages and Losses suffered by Buyer
due to the untruthfulness of any statement made by Seller in Seller's
Estoppel Certificate only. For purposes of the preceding sentence, a
guaranty in the form of Exhibit H to Buyer from the members of Seller that
$5,000,000 of the Purchase Price is being retained by Seller
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33
shall be deemed reasonably sufficient evidence that such moneys are being
retained by Seller. In the event Seller is aware of any facts which,
unless revealed in the Seller Estoppel Certificate, would render untrue
any of the statements made by Seller in the Seller Estoppel Certificate,
Seller shall have the right to disclose such facts in the Seller Estoppel
Certificate; provided, however that if Seller discloses any such facts in
a Seller Estoppel Certificate, Buyer shall then have the right, on or
before the earlier to occur of (x) three Business Days after delivery of
the relevant Seller Estoppel Certificate or (y) the Closing Date, to
terminate the Purchase Agreement, at which time the Earnest Money shall be
returned to Buyer and neither Seller nor Buyer shall have any further
obligations hereunder.
(2) Notwithstanding the foregoing, if Seller obtains an estoppel
certificate from either Jenner and/or State Street (or its agent),
respectively, whether before or after the Closing Date, in the relevant
form attached as Exhibit I-3 or otherwise certifying as to any matter
contained in the relevant Seller Estoppel Certificate (and provided, with
respect to (2) and (3) of this subsection, that the relevant party
delivering the estoppel certificate does not disclose facts in the
estoppel certificate that would render untrue any of the statements of
either the relevant form of estoppel certificate attached as Exhibit I-3
or the Seller Estoppel Certificate), then (1) Seller's liability with
respect to the matter so certified to and confirmed by Jenner and/or State
Street (or its agent), respectively, shall be eliminated, and (2) if said
estoppel certificate is provided to Buyer in the form required herein on
or before the Closing Date, Seller shall not be required to certify to
such matters in its Seller Estoppel Certificate and (3) if and when Jenner
and/or State Street (or its agent) delivers an estoppel certificate or
series of estoppel certificates from either Jenner and/or State Street (or
its agent), as applicable, certifying as to all matters certified to by
Seller in the Seller Estoppel Certificate(s)in accordance with the
provisions hereof, then (provided, with respect to (2) and (3) of this
subsection, that the relevant party delivering the estoppel certificate
does not disclose facts in the estoppel certificate that would render
untrue any of the statements of the relevant form of estoppel certificate
attached as Exhibit I-3 or the Seller Estoppel Certificate) Seller's
liability as to all such matters shall be eliminated and the Seller
Estoppel Certificate(s) and the requirement that Seller retain $5,000,000
of the Purchase Price (as more particularly described above) shall be
terminated. For the avoidance of doubt Buyer hereby acknowledges and
agrees that an estoppel certificate delivered by either State Street or
its agent in the form of Exhibit I-3 shall be deemed a complying estoppel
certificate in accordance with the provisions of this subsection
3.3(i)(B). Notwithstanding anything to the contrary contained in this
Agreement, in the event either Jenner or
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34
State Street (or its agent) delivers a tenant estoppel certificate which
discloses the existence of litigation between Seller and Jenner or Seller
and State Street, as applicable, the disclosure of such litigation shall
be deemed to comply with the statements required to be made by Jenner or
State Street (or its agent), as applicable, in the form of estoppel set
forth on Exhibit I-3, provided, however, such litigation does not
materially adversely affect the value of the Property.
(3) TIME SHALL BE OF THE ESSENCE with respect to Seller's
obligations under this Section 3.3(i)(B) on the day that is fourteen days
after the Closing Date.
(j) Security Deposits. Except with respect to the ongoing use and
application of Security Deposits as disclosed on Schedule I, Seller shall
notify Buyer upon the use or application by Seller of any security deposit
being held by such Seller in connection with a Space Lease.
(k) Updating Information. Sellers shall make a good faith effort to
deliver to Buyer any information of which Sellers became aware concerning
material events subsequent to the date of this Agreement which is
necessary to supplement the information contained in or made a part of the
representations and warranties contained herein.
(l) Review of Books and Records. The Seller shall cooperate in good
faith with Buyer and Buyer's accountants in connection with Buyer's
accountants review of Seller's books, records and financial statements and
information. To enable accountants to better meet reporting obligations
required by Rule 3-14 of the federal securities laws and in such
connection Seller shall provide to Buyer's auditors a certification in the
form of Exhibit K hereto stating that the statement of revenues and
certain expenses which Seller furnishes to such auditors, with respect to
Seller's property, fairly represents such information as was contained on
the statements, except as noted, and further, Seller shall provide access
to Seller's books and records as is necessary for Buyer's auditors to do a
Rule 3-14 review. Notwithstanding anything to the contrary contained
herein, except for the above-referenced certification, Seller shall not be
obligated to make any other statement or certification to Buyer's auditors
or otherwise in connection with this Section 3.3(l).
(m) Property Management Employees. Seller shall permit Buyer, upon
notice to Seller, to interview employees that Buyer intends to retain
after the Closing.
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35
ARTICLE IV
REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE BUYER
Section IV.1 Representations, Warranties and Covenants of the Buyer.
The Buyer hereby represents, warrants and covenants to Seller as of the date
hereof and as of the Closing Date as follows:
(a) Formation; Existence. Buyer is a limited partnership duly
organized, validly existing and in good standing under the laws of the
State of Delaware.
(b) Power; Authority. The Buyer has all requisite power and
authority to enter into this Agreement, to perform its obligations
hereunder and to consummate the transactions contemplated hereby. The
execution, delivery and performance of this Agreement, the purchase of the
Asset and the consummation of the transactions provided for herein have
been duly authorized by all necessary action on the part of the Buyer.
This Agreement has been duly executed and delivered by the Buyer and
constitutes the legal, valid and binding obligation of the Buyer
enforceable against the Buyer in accordance with its terms, except as such
enforceability may be limited by bankruptcy, insolvency, reorganization,
moratorium or other laws affecting creditors' rights and by general
principles of equity (whether applied in a proceeding at law or in
equity).
(c) No Consents. Other than the filing of this Agreement with the
Securities and Exchange Commission, no consent, license, approval, order,
permit or authorization of, or registration, filing or declaration with,
any court, administrative agency or commission or other governmental
authority or instrumentality, domestic or foreign, is required to be
obtained or made in connection with the execution, delivery and
performance of this Agreement or any of the transactions required or
contemplated hereby.
(d) No Conflicts. The execution, delivery and compliance with, and
performance of the terms and provisions of, this Agreement, and the
purchase of the Asset, will not (a) conflict with or result in any
violation of its organizational documents, (b) conflict with or result in
any violation of any provision of any bond, note or other instrument of
indebtedness, contract, indenture, mortgage, deed of trust, loan
agreement, lease or other agreement or instrument to which it is a party
in its individual capacity, or (c) violate any existing term or provision
of any order, writ, judgment, injunction, decree, statute, law, rule or
regulation applicable to it or its assets or properties.
(e) Examination; No Contingencies. In entering into this Agreement,
the Buyer has not been induced by and has
<PAGE>
36
not relied upon any written or oral representations, warranties or
statements, whether express or implied, made by BREA, Seller, any partner
of BREA or Seller, or any agent, employee, or other representative of any
of the foregoing or by any broker or any other person representing or
purporting to represent BREA and/or Seller with respect to the Asset, the
Condition of the Asset or any other matter affecting or relating to the
transactions contemplated hereby, other than those expressly set forth in
this Agreement. The Buyer's obligations under this Agreement shall not be
subject to any contingencies, diligence or conditions except as expressly
set forth in this Agreement. The Buyer acknowledges and agrees that,
except as expressly set forth herein, Seller makes no representations or
warranties whatsoever, whether express or implied or arising by operation
of law, with respect to the Asset or the Condition of the Asset. The Buyer
agrees that the Asset will be sold and conveyed to (and accepted by) the
Buyer at the Closing in the then existing condition of the Asset, AS IS,
WHERE IS, WITH ALL FAULTS, AND WITHOUT ANY WRITTEN OR VERBAL
REPRESENTATIONS OR WARRANTIES WHATSOEVER, WHETHER EXPRESS OR IMPLIED OR
ARISING BY OPERATION OF LAW, other than representations and warranties of
the Seller expressly set forth in this Agreement or in any closing
documents delivered at Closing. Without limiting the generality of the
foregoing, except for the representations and warranties of the Seller
contained in this Agreement, the transactions contemplated by this
Agreement are without statutory, express or implied warranty,
representation, agreement, statement or expression of opinion of or with
respect to (A) the Condition of the Asset or any aspect thereof,
including, without limitation, any and all statutory, express or implied
representations or warranties related to the suitability for habitation,
merchantability, or fitness for a particular purpose, (B) the nature or
quality of construction, structural design or engineering of the
improvements included in the Property, (C) the quality of labor or
materials included in the improvements included in the Property, (D) the
soil conditions, drainage, topographical features, flora, fauna, or other
conditions of or which affect the Property, (E) any conditions at or which
affect the Property with respect to a particular use, purpose,
development, potential or otherwise, (F) areas, size, shape,
configuration, location, access, capacity, quantity, quality, cash flow,
expenses, value, condition, make, model, composition, accuracy,
completeness, applicability, assignability, enforceability, exclusivity,
usefulness, authenticity or amount, (G) any statutory, express or implied
representations or warranties created by any affirmation of fact or
promise, by any description of the Asset, the Property or by operation of
law, (H) any environmental, botanical, zoological, hydrological,
geological, meteorological, structural, or other condition or hazard or
the absence thereof heretofore, now or hereafter affecting in any manner
the Property and (I) all other statutory, express or implied
representations or
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37
warranties by the Seller whatsoever. The Buyer acknowledges that the Buyer
has knowledge and expertise in financial and business matters that enable
the Buyer to evaluate the merits and risks of the transactions
contemplated by this Agreement.
(f) For purposes of this Agreement the term "Condition of the Asset"
means the following matters:
(A) Physical Condition of the Property. The quality, nature
and adequacy of the physical condition of the Property, including,
without limitation, the quality of the design, labor and materials
used to construct the improvements included in the Property; the
condition of structural elements, foundations, roofs, glass,
mechanical, plumbing, electrical, HVAC, sewage, and utility
components and systems; the capacity or availability of sewer,
water, or other utilities; the geology, flora, fauna, soils,
subsurface conditions, groundwater, landscaping, and irrigation of
or with respect to the Property, the location of the Property in or
near any special taxing district, flood hazard zone, wetlands area,
protected habitat, geological fault or subsidence zone, hazardous
waste disposal or clean-up site, or other special area, the
existence, location, or condition of ingress, egress, access, and
parking; the condition of the personal property and any fixtures;
and the presence of any asbestos or other Hazardous Materials,
dangerous, or toxic substance, material or waste in, on, under or
about the Property and the improvements located thereon. "Hazardous
Materials" means (A) those substances included within the
definitions of any one or more of the terms "hazardous substances,"
"toxic pollutants", "hazardous materials", "toxic substances", and
"hazardous waste" in the Comprehensive Environmental Response,
Compensation and Liability Act, 42 U.S.C. ss. 9601 et seq. (as
amended), the Hazardous Materials Transportation Act, as amended, 49
U.S.C. Sections 1801 et seq., the Resource Conservation and Recovery
Act of 1976 as amended, 42 U.S.C. Section 6901 et seq., Section 311
of the Clean Water Act and any similar state laws or any regulations
issued under any such laws and (B) petroleum, radon gas, lead based
paint, asbestos or asbestos containing material and polychlorinated
biphenyls.
(B) Adequacy of the Asset. The economic feasibility, cash flow
and expenses of the Asset, and habitability, merchantability,
fitness, suitability and adequacy of the Property for any particular
use or purpose.
(C) Legal Compliance of the Asset. The compliance or
non-compliance of the relevant Seller or the operation of the
Property or any part thereof in
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38
accordance with, and the contents of, (i) all codes, laws,
ordinances, regulations, agreements, licenses, permits, approvals
and applications of or with any governmental authorities asserting
jurisdiction over the Property, including, without limitation, those
relating to zoning, building, public works, parking, fire and police
access, handicap access, life safety, subdivision and subdivision
sales, and Hazardous Materials, dangerous, and toxic substances,
materials, conditions or waste, including, without limitation, the
presence of Hazardous Materials in, on, under or about the Property
that would cause state or federal agencies to order a clean up of
the Property under any applicable legal requirements and (ii) all
agreements, covenants, conditions, restrictions (public or private),
condominium plans, development agreements, site plans, building
permits, building rules, and other instruments and documents
governing or affecting the use, management, and operation of the
Property.
(D) Matters Disclosed in the Scheduled Documents and Asset
File. Those matters referred to in this Agreement and the documents
listed on the Schedules attached hereto and the matters disclosed in
the Asset File.
(E) Insurance. The availability, cost, terms and coverage of
liability, hazard, comprehensive and any other insurance of or with
respect to the Property.
(F) Condition of Title. The condition of title to the
Property, including, without limitation, vesting, legal description,
matters affecting title, title defects, liens, encumbrances,
boundaries, encroachments, mineral rights, options, easements, and
access; violations of restrictive covenants, zoning ordinances,
setback lines, or development agreements; the availability, cost,
and coverage of title insurance; leases, rental agreements,
occupancy agreements, rights of parties in possession of, using, or
occupying the Property; and standby fees, taxes, bonds and
assessments.
(g) Buyer's Affiliate/Assignee. In the event that Buyer, in
accordance with the terms of, and as permitted by, Section 15.7 hereof,
shall designate an "Affiliate" or an assignee or designee to which the
Assets will be transferred at Closing, the representations and warranties
and all covenants and obligations set forth in this Agreement, including,
without limitation, the provisions of this Section 4.1, shall apply with
respect to Buyer's Affiliate or assignee or designee as if Buyer's
Affiliate or assignee or designee was named as Buyer hereunder, and all
representations and warranties shall be true, complete and accurate as of
the Closing Date. Notwithstanding the
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39
foregoing, nothing contained herein shall be construed as relieving Buyer
of any of its obligations or liabilities under this Agreement.
(h) Like Kind Exchange. In the event that Seller elects to utilize a
like-kind exchange (within the meaning of Section 1031 of the Internal
Revenue Code of 1986, as amended), Buyer shall reasonably cooperate with
Seller in connection with Seller's election and shall execute any and all
documents reasonably requested by Seller in connection therewith.
Notwithstanding anything to the contrary contained herein, including the
representations and covenants regarding this Agreement or similar
understandings on the part of Buyer, the Seller may enter into
intermediate contracts or other agreements to sell the Property to the
third party that enters into such contract or agreement with such Seller
and Buyer shall proceed to purchase the Property from such third party on
the same terms and conditions as set forth in this Agreement, provided,
however, that Buyer shall not incur any cost or liability if Seller elects
to utilize a like-kind exchange as provided for herein.
ARTICLE V
CONDITIONS PRECEDENT TO CLOSING
Section V.1 Conditions Precedent To Seller's Obligations. The
obligation of Seller to consummate the transfer of the Asset to the Buyer on the
Closing Date is subject to the satisfaction (or waiver) by the Seller as of the
Closing of the following conditions:
(a) Each of the representations and warranties made by the Buyer in
this Agreement shall be true and correct in all material respects when
made and on and as of the Closing Date as though such representations and
warranties were made on and as of the Closing Date.
(b) The Buyer shall have performed or complied in all material
respects with each obligation and covenant required by this Agreement to
be performed or complied with by the Buyer on or before the Closing.
(c) No order or injunction of any court or administrative agency of
competent jurisdiction nor any statute, rule, regulation or executive
order promulgated by any governmental authority of competent jurisdiction
shall be in effect as of the Closing which restrains or prohibits the
transfer of the Asset or the consummation of any other transaction
contemplated hereby.
(d) The Seller shall have received all of the documents required to
be delivered by the Buyer under Article VI.
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(e) The Seller shall have received the Purchase Price in accordance
with subsection 2.2(b) and all other amounts due to the Seller hereunder.
(f) The Buyer shall have closed on the acquisition of the Interests
(as defined in the City Center Purchase Agreement).
Section V.2 Conditions to the Buyer's Obligations. (a) The
obligation of the Buyer to purchase and pay for the Asset is subject to the
satisfaction (or waiver) by the Buyer as of Closing of the following conditions:
(1) Each of the representations and warranties made by the Seller in
this Agreement shall be true and correct in all material respects when
made and on and as of such Closing Date as though such representations and
warranties were made on and as of the Closing Date.
(2) The Seller shall have performed or complied in all material
respects with each obligation and covenant required by this Agreement to
be performed or complied with by Seller on or before the Closing.
(3) No order or injunction of any court or administrative agency of
competent jurisdiction nor any statute, rule, regulation or executive
order promulgated by any governmental authority of competent jurisdiction
shall be in effect as of the Closing which restrains or prohibits the
transfer of the Asset or the consummation of any other transaction
scheduled to occur at such Closing.
(4) Title to the Property shall be delivered to the Buyer in the
manner required under Section 9.1 hereof, as evidenced by a Complying
Title Policy;
(5) The Buyer shall have received all of the documents required to
be delivered by the Seller under Article VI.
(6) The Property shall be in the same condition as at the date
hereof subject to reasonable wear and tear and the provisions of Section
10.2.
(7) The Buyer shall have received the IBM Ground Lease Estoppel
Certificate and Tenant Estoppel Certificates (and, if applicable, the
Seller Estoppel Certificates) required under Sections 3.3(h) and(i) above.
<PAGE>
41
ARTICLE VI
CLOSING DELIVERIES
(a) At the Closing, the Buyer shall deliver, with respect to the following
documents:
(i) with respect to the Property:
(A) in connection with the Seller's leasehold interests in the
Property, an Assignment and Assumption of Ground Lease substantially in
the form of Exhibit A-1 (with any necessary modifications in order to
conform with local laws for recording in the land records in Cook County,
Illinois), duly executed by Seller;
(B) an assignment and assumption of landlord's interest in the Space
Leases (an "Assignment of Leases") duly executed by the Buyer in
substantially the form of Exhibit A hereto;
(C) an assignment and assumption of Contracts (an "Assignment of
Contracts") duly executed by the Buyer in substantially the form of
Exhibit B hereto; and
(D) a lease duly executed by Buyer, as landlord, substantially in
the form of Exhibit D hereto (the "Blackstone Lease").
(ii) with respect to the transactions contemplated hereunder:
(A) such other assignments, instruments of transfer, and other
documents as the Seller may reasonably require in order to complete the
transactions contemplated hereunder or to evidence compliance by the Buyer
with the covenants, agreements, representations and warranties made by it
hereunder, in each case, duly executed by the Buyer;
(B) a duly executed and sworn Secretary's Certificate from the Buyer
(or the managing general partner or the administrative member of the
Buyer, where appropriate) certifying that the Buyer has taken all
necessary action to authorize the execution of all documents being
delivered hereunder and the consummation of all of the transactions
contemplated hereby and that such authorization has not been revoked,
modified or amended;
(C) an executed and acknowledged Incumbency Certificate from the
Buyer (or the managing general partner or administrative member of the
Buyer, where appropriate) certifying the authority of the officers
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42
of the Buyer (or the general partner of the Buyer, where appropriate) to
execute this Agreement and the other documents delivered by the Buyer to
the Seller at the Closing;
(D) such other proof as Seller may reasonably request from time to
time to evidence the authority of the Buyer and its officers and directors
to execute all documents being delivered hereunder and consummate the
transactions contemplated hereby;
(E) all consents, approvals or waivers listed on Schedule J on terms
satisfactory to the Sellers;
(F) all transfer tax returns which are required by law and the
regulations issued pursuant thereto in connection with the payment of all
state or local real property transfer taxes that are payable or arise as a
result of the consummation of the transactions contemplated by this
Agreement, in each case, as prepared, determined and apportioned by
Seller;
(G) a closing statement prepared by Seller in accordance with the
terms hereof (such delivery may be waived by Seller as to the condition
precedent benefitting it).
(b) At the Closing the Seller shall deliver the following documents:
(i) with respect to the Property:
(A) in connection with the Seller's fee interests in the Property, a
special warranty deed ("Deed") in substantially the form of Exhibit E
(with any necessary modifications in order to conform with the local laws
for recording in the land records of Cook County, Illinois), duly executed
by the Seller, without recourse, which deed, upon proper recording by the
Buyer, shall be sufficient to transfer and convey to the Buyer whatever
rights in the Property the Seller has acquired subject only to the
Permitted Exceptions;
(B) with respect to the Seller's leasehold interests in the
Property, an Assignment and Assumption of Ground Lease in substantially
the form of Exhibit A-1 (with any necessary modifications in order to
conform with the local laws for recording in the land records of Cook
County, Illinois), duly executed by Seller;
(C) an Assignment of Space Leases (in the form of Exhibit A) duly
executed by the Seller, together with certified copies, and if available,
originals of the Space Leases referred to in such assignment;
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43
(D) a bill of sale (a "Bill of Sale") duly executed by the Seller in
substantially the form of Exhibit F hereto, relating to the Tangible
Personal Property owned by the relevant Seller which are currently located
upon or attached to the Property;
(E) an Assignment of Contracts in the form of Exhibit B duly
executed by the Seller;
(F) the Blackstone Lease in the form of Exhibit D, duly executed by
Seller or an affiliate of Seller, as tenant.
(G) notice letters ("Tenant Notices") duly executed by the Seller,
in the form of Exhibit C attached hereto. Such notice letters shall be
retained by the Seller and delivered by the Seller to each tenant and
other such entity, with a copy thereof to Buyer, immediately following
Closing.
(H) a disclosure document from Seller in the form required under the
Illinois Responsible Property Transfer Act, 765 ILSC 90/1, et.seq. or an
affidavit to the effect that to the best of Seller's knowledge, no such
IRPTA disclosure document is required under such act;
(I) a water certificate as required by the applicable governmental
authority;
(J) all keys and keycards to the Property which are in the Seller's
possession;
(K) an affidavit that the Seller is not a "foreign person" within
the meaning of the Foreign Investment in Real Property Tax Act of 1980, as
amended, in substantially the form of Exhibit G hereto;
(L) copies, or to the extent available originals, of all Ground
Leases, Space Leases, Contracts, Licenses and Asset Files (at Seller's
option such items will be made available at the Property);
(M) evidence that each terminated Contract has been terminated or
that all actions necessary to terminate such Contract have been taken; and
(N) a closing statement prepared by Seller in accordance with the
terms hereof (such delivery may be waived by Buyer, as to the condition
precedent benefitting it);
(O) Evidence of termination of Property Management Agreement and a
release of lien executed by the property manager of the Property.
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44
(P) Evidence that all steps have been taken by Seller with respect
to the termination of the employees of the Property, other than (i) those
being assumed by Buyer hereunder, (ii) employees under Union Contracts
whose Contracts will not be terminated.
(iii) with respect to the transactions contemplated hereunder:
(A) such other assignments, instruments of transfer, and other
documents as the Buyer may reasonably require in order to complete the
transactions contemplated hereunder or to evidence compliance by the
Seller with the covenants, agreements, representations and warranties made
by it hereunder;
(B) a duly executed and sworn Secretary's Certificate from the
Seller (or the managing general partner of the Seller or the
administrative member, where appropriate) certifying that the Seller has
taken all necessary action to authorize the execution of all documents
being delivered hereunder and the consummation of all of the transactions
contemplated hereby and that such authorization has not been revoked,
modified or amended;
(C) an executed and acknowledged Incumbency Certificate from the
Seller (or the managing general partner of the Seller or the
administrative member, where appropriate) certifying the authority of the
officers of the Seller (or the general partner of the Seller, where
appropriate) to execute this Agreement and the other documents delivered
by the Seller to the Buyer at the Closing; and
(D) all transfer tax returns which are required by law and the
regulations issued pursuant thereto in connection with the payment of all
state or local real property transfer taxes that are payable or arise as a
result of the consummation of the transactions contemplated by this
Agreement, in each case, as prepared, and duly executed by the Seller in
accordance with the First Installment and the Second Installment (as
defined herein).
(iii) In the event any Asset-Related Property is not assignable (such as a
letter of credit that is not transferable), the Seller shall use commercially
reasonable efforts to provide the Buyer, at no cost to the Seller, with the
economic benefits of such property by enforcing its rights with respect to such
property (solely at the Buyer's
<PAGE>
45
direction) for the benefit and at the expense of the Buyer. Seller's obligations
under this subsection 6.2(iii) only shall survive after Closing and shall be
subject to the provisions of section 12.3 hereof, but not section 12.4.
(iv) TIME SHALL BE OF THE ESSENCE with respect to Seller's obligations
hereunder on the day that is fourteen days after the Closing Date.
ARTICLE VII
INTENTIONALLY DELETED
ARTICLE VIII
INSPECTIONS
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46
Prior to the Closing Date, the Buyer and its agents shall have the
right to inspect the Property (including conducting environmental and
engineering inspections) at reasonable times agreed upon by Seller and Buyer,
upon reasonable notice (at least twenty-four (24) hours in advance), provided,
however, (a) the Buyer shall permit a representative of Seller to accompany the
Buyer and/or its agents during any such inspection if the Seller shall make such
a representative available and (b) such inspection or interview shall not
unreasonably impede the normal day-to-day business operations of the Property;
(c) Buyer shall not conduct any testing or inspections with respect to property
or premises of tenants, subtenants, licensees or other occupants of the Property
to the extent not permitted by a Space Lease and without the reasonable prior
consent of the Seller; (d) Buyer shall not contact, or have discussions, either
directly or indirectly, with any tenants, subtenants, licensees or other users
or occupants of the Property, without the prior written consent of the Seller,
which consent shall not be unreasonably withheld; and (e) Buyer shall obtain
from the Seller, its prior written consent, which consent will not be
unreasonably withheld, before conducting any invasive testing at the Property
which testing shall be subject to conditions imposed by such Seller in its
reasonable discretion. The Buyer's right of inspection of the Property shall be
subject to the rights of tenants, subtenants, licensees or other occupants of
the Property. Prior to entering the Property, Buyer shall deliver to Seller
certificates satisfactory to Seller evidencing that Buyer maintains general
liability insurance policies acceptable to Seller in its reasonable discretion,
naming Seller as additional insured and loss payee thereunder. The Buyer hereby
indemnifies and agrees to defend and hold the Seller harmless from all loss,
cost (including, without limitation, reasonable attorneys' fees), claim or
damage arising in connection with or from any such inspection by the Buyer or
its agents and any breach of this Article VIII by Buyer. In the event Buyer
fails to purchase the Property as provided for in this Agreement, upon Seller's
request, Buyer shall return to Seller copies of all reports and documents
delivered to Buyer in connection with the transaction or any inspections of the
Property. The provisions of this Article shall survive the Closing or any
earlier termination of this Agreement.
ARTICLE IX
TITLE AND PERMITTED EXCEPTIONS
Section IX.1 Permitted Exceptions The Asset shall be sold and is to
be conveyed, and the Buyer agrees to purchase the Asset, subject to the
Permitted Exceptions.
Section IX.2 Title Report, (a) With respect to the Property, the
Buyer has received and/or reviewed a copy of the Existing Title Commitment and
the Existing Survey. If not previously ordered, promptly after the date of this
Agreement the Buyer shall order, if desired, a survey redate
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and an updated title commitment with respect to the Property and Seller shall
order updated UCC, federal and state tax lien, judgment and pending litigation
searches with respect to the Seller and, in addition, the Buyer shall (a)
instruct Title Associates and the surveyor delivering such updated items to
furnish copies of all updated commitments and surveys to Seller's counsel at the
address set forth in Section 15.9 hereof and (b) within three Business Days
after the later of (i) receipt of any such updated documents and (ii) receipt of
the updated survey, give notice to Seller specifying all title exceptions set
forth in such updated documents which the Buyer claims are not Permitted
Exceptions. Subject to Section 9.6, Buyer's right to give notice of objection as
set forth above for any such title exception, for all purposes under this
Agreement, shall be limited to the title exceptions which materially interfere
with the continued use of the Property or materially adversely affect the value
of the Property (the "Material Objections"); and any title exceptions contained
in the updated documents which are not Material Objections shall be deemed
Permitted Exceptions.
(b) Seller shall order and deliver, or cause to be delivered, to
Buyer updated UCC, federal and state judgment and lien, pending litigation and
bankruptcy searches for Seller.
Section IX.3 Use of Purchase Price to Discharge Title Exceptions.
Subject to the provisions of Section 9.6, if, at the Closing, there are any
title exceptions applicable to the Property which are not Permitted Exceptions
and which Seller is obligated by this Agreement or elects to pay and discharge,
Seller may use any portion of the Purchase Price to satisfy the same, provided
that Seller shall have delivered to the Buyer at the Closing instruments in
recordable form sufficient to satisfy such title exceptions of record, together
with the cost of any applicable recording or filing fees. The existence of any
such liens or encumbrances shall not be deemed objections to title if Seller
shall comply with the foregoing requirements. Any unpaid liens for taxes, water
charges and assessments applicable to the period prior to the Closing Date shall
not be objections to title, but the amount thereof plus any interest and
penalties thereon shall be deducted from the balance of the Purchase Price,
subject to the provisions for apportionment of taxes, water charges and
assessments contained in Article XI of this Agreement.
Section IX.4 Inability to Convey. Except as expressly set forth in
Section 9.6, nothing contained in this Agreement shall be deemed to require
Seller to take or bring any legal action or proceeding or any other steps to
remove any title exception or to expend any moneys therefor, nor shall the Buyer
have any right of action against Seller, at law or in equity, for Seller's,
inability to convey title, subject only to the Permitted Exceptions.
Section IX.5 Rights in Respect of Inability to Convey. In the event
that Seller shall be unable to convey the Asset as a result of the existence of
a title exception Seller is not
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required to remove pursuant to this Agreement, subject only to the Permitted
Exceptions and the Buyer shall not, on or before the Closing Date (as it may
have been adjourned in accordance with this Agreement), give notice to the
Seller that the Buyer is willing to waive objection to each title exception
which is not a Permitted Exception and close this transaction without abatement
of the Purchase Price, credit or allowance of any kind or any claim or right of
action against Seller for damages or otherwise, Seller shall have the right, at
Seller's sole election, to either (l) take such action as Seller shall deem
advisable to discharge each such title exception which is not a Permitted
Exception or (2) terminate this Agreement. In the event Seller shall elect to
take action to discharge each such title exception which is not a Permitted
Exception, the Seller shall be entitled to one or more adjournments of the
Closing Date for a period not to exceed 45 days in the aggregate (inclusive of
any adjournments made by the Seller pursuant to Section 9.6 below) and the
Closing shall be adjourned to a date mutually agreed upon by Seller and Buyer
not beyond such 45 day period. If, for any reason whatsoever, Seller shall not
have succeeded in discharging each such title exception at the expiration of
such adjournment(s) and if Buyer shall not, prior to the expiration of the last
of such adjournments, give notice to Seller that Buyer is willing to waive
objection to each such title exception and to close this transaction without
abatement of the Purchase Price, credit or allowance of any kind or any claim or
right of action against Seller for damages or otherwise, then this Agreement
shall be deemed to be terminated as of the last date to which the Closing Date
was adjourned by the Seller pursuant to this Article IX. Upon any termination of
this Agreement pursuant to this Section, the Earnest Money shall be returned to
Buyer and neither party shall have any further rights or obligations with
respect to the Property, except those obligations which expressly survive the
termination of this Agreement. No action taken by Seller to discharge, or
attempt to discharge any purported title exception shall be an admission that
any such purported title exception is not a Permitted Exception. The provisions
of this Section 9.5 shall be subject to Seller's and Buyer's rights and
obligations with respect to Voluntary/De Minimis Title Exceptions set forth in
Section 9.6. It is understood and agreed that a discharge of a title exception
shall include the elimination of the title exception itself, the omission of the
exception from the Complying Title Policy or affirmative insurance against any
loss due to the existence of such exception provided such form of affirmative
insurance is reasonably approved by Buyer.
Section IX.6 Voluntary/De Minimis Title Exceptions. If, from time to
time prior to the Closing, the Buyer shall become aware of any Voluntary/De
Minimis Title Exceptions, then the Buyer shall promptly notify Seller thereof,
which notice shall describe in reasonable detail the Voluntary/De Minimis Title
Exceptions(s). Seller shall discharge, or subject to Buyer's approval, provide
title endorsements over, all Voluntary/De Minimis Title Exceptions on or prior
to Closing. Seller shall be entitled to one or more adjournments of the Closing
Date not to exceed 45 days in the aggregate (inclusive of
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any adjournments made by Seller pursuant to Section 9.5 hereof) to discharge
Voluntary/De Minimis Title Exceptions.
Section IX.7 The Buyer's Right to Accept Title. Notwithstanding the
foregoing provisions of this Article IX, Buyer may, by notice given to Seller at
any time on or prior to the Closing Date (as it may have been adjourned by the
relevant Seller pursuant to this Article IX) or within five (5) days after
receipt from Seller of a notice to terminate this Agreement, elect to accept
such title as Seller can convey, notwithstanding the existence of any title
exceptions which are not Permitted Exceptions. In such event, this Agreement
shall remain in effect and the parties shall proceed to Closing but, except to
the extent set forth in Section 9.6, Buyer shall not be entitled to any
abatement of the Purchase Price, any credit or allowance of any kind or any
claim or right of action against Seller for damages or otherwise by reason of
the existence of any title exceptions which are not Permitted Exceptions.
Section IX.8 Cooperation. Buyer and Seller shall cooperate with
Title Associates in connection with obtaining title insurance or an update of
title insurance insuring title to the Property subject only to the Permitted
Exceptions and otherwise in the form and of the substance of a Complying Title
Policy. In furtherance and not in limitation of the foregoing, at or prior to
the Closing, Buyer and Seller shall deliver to Title Associates such affidavits,
certificates and other instruments as are reasonably requested by such title
company and customarily furnished in connection with the issuance of owner's
policies of title insurance, including, without limitation, (i) evidence
sufficient to establish (x) the legal existence of Buyer and Seller and (y) the
authority of the respective signatories of Seller and Buyer to bind Seller and
Buyer, as the case may be, (ii) a certificate of good standing of Seller, (iii)
necessary affidavits required by Title Associates Inc. to issue a Non-Imputation
Endorsement and (iv) an ALTA Statement and Personal (GAP) undertakings.
ARTICLE X
TRANSACTION COSTS; RISK OF LOSS
Section X.1 Transaction Costs.Transfer Taxes"), shall be paid for
entirely by Seller. In addition to the foregoing and their respective
apportionment obligations hereunder, (a) Sellers and Buyer shall each be
responsible for the payment of the costs of their respective legal counsel,
advisors and other professionals employed thereby in connection with the sale of
the Assets, (b) Seller shall be responsible (i) for the title insurance policy
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premiums in respect of any fee and leasehold title insurance, including extended
coverage obtained by the Buyer only, excluding the cost of any endorsements
which the Buyer elects to obtain and (ii) the cost and expense of obtaining UCC
searches, federal and state tax lien, judgment, pending litigation and
bankruptcy searches for Seller and (iii) any Repayment Costs and (c) Buyer shall
be responsible for all costs and expenses associated with (i) Buyer's due
diligence, (ii) title reports or abstracts with respect to the Property, all
title endorsements which Buyer elects to obtain and all survey and search costs
and updates related to title insurance, in each case commissioned by the Buyer,
(iii) the policy premiums in respect of any mortgage title insurance obtained by
Buyer (if any), (iv) payment, at the Closing, of the recording charges and fees
and recordation taxes for the documents necessary to transfer the Asset, (v) all
costs and expenses of obtaining any financing the Buyer may elect to obtain
(including any fees, financing costs, transfer taxes resulting from the
placement of the lien of a mortgage by Buyer upon the Property, mortgage and
recordation taxes and intangible taxes in connection therewith) and (vi) all
other costs which are the responsibility under applicable law for the Buyer to
pay (including, without limitation, all sales and use taxes due as a result of
the sale of the Asset). With respect to the Property, Buyer and Seller shall
indemnify the other and their respective successors and assigns from and against
any and all loss, damage, cost, charge, liability or expense (including court
costs and reasonable attorneys' fees) which such other party may sustain or
incur as a result of the failure of the indemnifying party to timely pay any of
the aforementioned taxes, fees or other charges for which it has assumed
responsibility under this Section.
Section X.2 Risk of Loss.a) If, on or before the Closing Date, the
Property or any portion thereof shall be (i) damaged or destroyed by fire or
other casualty or (ii) taken or threatened to be taken as a result of any
condemnation or eminent domain proceeding, Seller shall promptly notify the
Buyer.
(b As soon as practicable after the occurrence of such casualty or
an actual condemnation, as opposed to a threatened condemnation , Seller
shall notify Buyer of (i) the estimated cost of restoration of the
Property with respect to any casualty as determined by written estimate of
an independent construction contractor chosen by Seller with Buyer's
approval not to be unreasonably withheld or (ii) the estimated loss in
value of the Property as a result of such condemnation as determined by
written estimate of an independent appraisal firm chosen by Seller with
Buyer's approval not to be unreasonably withheld. If the estimated cost of
restoration arising out of a casualty or estimated loss in value arising
out of a condemnation, shall be $5,000,000 or less, then notwithstanding
any provision in this Agreement to the contrary, Seller will credit
against the Purchase Price payable by the Buyer an amount equal to the net
proceeds, if any, received by Seller from such casualty or condemnation
less any amounts spent by Seller prior to Closing with respect to a
restoration of the
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Property. If as of the Closing Date, Seller has not received any such
insurance or condemnation proceeds then the parties shall nevertheless
consummate on the Closing Date the conveyance of the Asset (without any
deduction for such insurance or condemnation proceeds) and Seller will at
Closing assign to the Buyer all rights of Seller, if any, to the insurance
or condemnation proceeds and to all other rights or claims arising out of
or in connection with such casualty or condemnation. If the estimated cost
of restoration arising from a casualty or the loss in value of the
Property arising from a condemnation exceeds $5,000,000, then Buyer shall
have the option to either (i) terminate this Agreement and thereupon this
Agreement shall terminate and be of no further force and effect or (ii)
accept the Property "as is" together with an assignment of the insurance
or condemnation proceeds. Notwithstanding the foregoing, in the event that
a casualty or condemnation had occurred during the Option Period and
Seller has not expended all of the insurance proceeds applicable to such
casualty or the condemnation proceeds in connection with the rebuilding or
restoration of the Property, the parties shall proceed to Closing in
accordance with this Agreement and the Seller shall assign to the Buyer at
Closing all rights of Seller, if any to the insurance or condemnation
proceeds and all other rights or claims arising out of or in connection
with such casualty or condemnation. To the extent that Seller has received
but not expended such insurance proceeds, Seller shall credit to Buyer
such amounts received, less the reasonable costs, if any, of collection
thereof.
ARTICLE XI
ADJUSTMENTS
Unless otherwise provided below, the following are to be adjusted
and prorated between Seller and Buyer as of 11:59 P.M. on the day preceding the
Closing Date, based upon a 365 day year, and the net amount thereof shall be
added to (if such net amount is in Seller's favor) or deducted from (if such net
amount is in Buyer's favor) the Purchase Price payable at Closing:
Section XI.1 Fixed Rents.a) Fixed rents (collectively, "Fixed
Rents") paid or payable by tenants under the Space Leases in connection with
their occupancy of the Property shall be adjusted and prorated on and if, as and
when collected basis. Any Fixed Rents collected by Buyer or Seller after the
Closing from any tenant who owes Fixed Rents for periods prior to the Closing,
shall be applied (i) first, in payment of Fixed Rents owed by such tenant for
the month in which the Closing Date occurs, (ii) second, in payment of Fixed
Rents owed by such tenant for the month prior to the month in which the Closing
Date occurs but not more than 30 days prior to the Closing Date (iii) third, in
payment of Fixed Rents owed by such tenant for the period (if any) after the
month in which the
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Closing Date occurs and (iv) fourth, in payment of any other Fixed Rents owed by
such tenant for periods more than thirty (30) days prior to the Closing Date.
Each such amount, less any costs of collection (including reasonable counsel
fees) reasonably allocable thereto, shall be adjusted and prorated as provided
above, and the party who receives such amount shall promptly pay over to the
other party the portion thereof to which it is so entitled.
(b Buyer shall bill tenants who owe Fixed Rents for periods prior to
the Closing on a monthly basis for a period of six consecutive months
following the Closing Date and shall use commercially reasonable efforts
to collect such past due Fixed Rents (related to periods of time prior to
the Closing Date). Notwithstanding the foregoing, if Buyer shall be unable
to collect such past due Fixed Rents within six (6) months after the
Closing Date, Seller shall have the right, upon prior written notice to
Buyer, to pursue tenants to collect such delinquencies (including, without
limitation, the prosecution of one or more lawsuits for delinquencies in
amounts of not more than $100,000 with Buyer's prior reasonable consent,
which consent shall not be unreasonably withheld) but Seller shall not be
entitled to evict (by summary proceedings or otherwise) any such tenants.
Any payment by a tenant in an amount less than the full amount of Fixed
Rents and Overage Rent (as defined below) then due and payable by such
tenant shall be applied first to Fixed Rents (in the order of priority as
to time periods as is set forth above) to the extent of all such Fixed
Rents then due and payable by such tenant, and thereafter to Overage Rents
(in the order of priority as to time periods as is set forth in Section
11.2 below).
(c) Notwithstanding the foregoing, Seller will consider using any
alternative reasonable proposals offered by Buyer with respect to
determining the adjustment in the collection of any arrearage or
delinquencies in fixed rent, which proposals are designed to achieve the
same economic effect as the formulas provided above.
Section XI.2 Overage Rents.a) With respect to any Space Lease that
provides for (ii) so-called common area maintenance or "CAM" charges or (iii)
so-called "escalation rent" or additional rent based upon increases in real
estate taxes or operating expenses or labor costs or cost of living or porter's
wages or otherwise (such percentage rent, CAM charges, escalation rent and
additional rent being collectively called "Overage Rent"), such Overage Rent
shall be adjusted and prorated on an if, as and when collected basis.
(b As to any Overage Rent in respect of an accounting period that
shall have expired prior to the Closing but which shall be paid after the
Closing, Buyer agrees that it will pay the entire amount over to Seller
upon receipt thereof, less any costs of collection (including reasonable
counsel fees) reasonably allocable thereto. Buyer agrees
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that it shall (i) promptly render bills for any Overage Rent in respect of
an accounting period that shall have expired prior to the Closing but
which shall be paid after the Closing, (ii) bill tenants such Overage Rent
attributable to an accounting period that shall have expired prior to the
Closing on a monthly basis for a period of six consecutive months
thereafter and (iii) use commercially reasonable efforts to collect
Overage Rent. Notwithstanding the foregoing, if Buyer shall be unable to
collect such Overage Rent within six (6) months after the Closing Date,
Seller shall have the right, upon prior written notice to Buyer, to pursue
tenants to collect such delinquencies (including, without limitation, the
prosecution of one or more lawsuits), but the Seller shall not be entitled
to evict (by summary proceedings or otherwise) any such tenants. Seller
shall furnish to the Buyer all information relating to the period prior to
the Closing that is reasonably necessary for the billing of such Overage
Rent and Buyer will deliver to Seller, concurrently with the delivery to
tenants, copies of all statements relating to Overage Rent for the period
prior to the Closing. Buyer shall bill tenants for Overage Rents for
accounting periods prior to the Closing in accordance with and on the
basis of such information furnished by Seller.
(c If, prior to the Closing, Seller shall have received any
installments of Overage Rent attributable to Overage Rent for periods from
and after the Closing Date, such sum shall be apportioned at the Closing.
If, after the Closing, the Buyer shall receive any installments of Overage
Rent attributable to Overage Rent for periods prior to the Closing, such
sum (less any costs and expenses (including reasonable counsel fees)
incurred by the Buyer in the collection of such Overage Rent) shall be
paid by the Buyer to the Seller promptly after the Buyer receives payment
thereof.
(d Any payment by a tenant on account of Overage Rent (to the extent
not applied against Fixed Rents due and payable by such tenant in
accordance with subsection 11.1(b) above) shall be applied to Overage
Rents then due and payable in the same order of priority that Fixed Rents
are applied under subsection 11.1(b) above.
(e To the extent that any portion of Overage Rent is required to be
paid monthly by tenants on account of estimated amounts for any calendar
year (or, if applicable, any lease year or tax year or any other
applicable accounting period), and at the end of such calendar year (or
lease year, tax year or other applicable accounting period, as the case
may be), such estimated amounts are to be recalculated based upon the
actual expenses, taxes and other relevant factors for that calendar (lease
or tax) year or other applicable accounting period, with the appropriate
adjustments being made with such tenants, then such portion of the Overage
Rent shall be prorated between the relevant Seller and the Buyer at the
Closing based on such estimated
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payments actually paid by tenants (i.e., with the Seller entitled to
retain all monthly or other periodic installments of such amounts paid by
tenants with respect to periods prior to the calendar month or other
applicable installment period in which the Closing occurs, the Seller to
pay to the Buyer at the Closing all monthly or other periodic installments
of such amounts theretofore received by the Seller with respect to periods
following the calendar month or other applicable installment period in
which the Closing occurs and the Seller and the Buyer to apportion as of
the Closing Date all monthly or other periodic installments of such
amounts paid by tenants with respect to the calendar month or other
applicable installment period in which the Closing occurs). At the time(s)
of final calculation and collection from (or refund to) each tenant of the
amounts in reconciliation of actual Overage Rent for a period for which
estimated amounts paid by such tenant have been prorated, there shall be a
re-proration between the Seller and the Buyer. If, with respect to any
tenant, the recalculated Overage Rent exceeds the estimated amount paid by
such tenant, upon collection from the tenant, (i) the entire excess shall
be paid by the Buyer to the Seller, if the accounting period for which
such recalculation was made expired prior to the Closing and (ii) such
excess shall be apportioned between the Seller and the Buyer as of the
Closing Date (on the basis described in the first sentence of subsection
11.2 above), if the Closing occurred during the accounting period for
which such recalculation was made, with the Buyer paying to the Seller the
portion of such excess which the Seller is so entitled to receive. If,
with respect to any tenant, the recalculated Overage Rent is less than the
estimated amount paid by such tenant, (1) the entire shortfall shall be
paid by the Seller to the Buyer (or, at the Seller's option, directly to
the tenant in question), if the accounting period for which such
recalculation was made expired prior to the Closing and (2) such shortfall
shall be apportioned between the Seller and the Buyer as of the Closing
Date (on the basis described in the first sentence of subsection 11.2(c)
above), if the Closing occurred during the accounting period for which
such recalculation was made, with the Seller paying to the Buyer (or, at
the Seller's option, directly to the tenant in question) the portion of
such shortfall so allocable to the Seller.
(f Until such time as all amounts required to be paid to the Seller
by the Buyer pursuant to Section 11.1 and this Section 11.2 shall have
been paid in full, the Buyer shall furnish to the Seller from time to time
upon request of Seller a reasonably detailed accounting of such amounts
payable by the Buyer. The Seller shall have the right from time to time
following the Closing, on prior notice to the Buyer, during ordinary
business hours on Business Days, to review the Buyer's rental records with
respect to the Property to ascertain the accuracy of such accountings.
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(g With respect to any payments of additional rent based upon a
percentage of the tenant's business during a specified annual or other
period (sometimes referred to as "percentage rent") being made under Space
Leases Seller and Buyer hereby agree to adjust and prorate such percentage
rent as of 11:59 P.M. on the day immediately preceding each Closing Date,
based upon estimates of such percentage rent for the year. Seller and
Buyer agree to adjust such determination at the end of the year based upon
actual percentage rent collected for the year in which the Closing Date
occurs.
Section XI.3. Ground Lease Rents. All rents and other charges
payable by Seller as the tenant under the Ground Lease shall be adjusted and
prorated between Seller and Buyer as of 11:59 p.m. on the day preceding each
Closing.
Section XI.4 Taxes and Assessments. Real estate taxes and
assessments payable in the year in which each Closing occurs shall be based on
(a) the periods of ownership of the Asset by Seller and Buyer during such year
and (b) the amount of real property tax actually payable during that year (i.e.,
on a cash basis rather than an accrual or lien year basis). In the event that
the Property or any part thereof shall be or shall have been affected by an
assessment or assessments, whether or not the same become payable in annual
installments, Seller shall, at the Closing, be responsible for any installments
due prior to the Closing and the Buyer shall be responsible for any installments
due on or after the Closing subject to the foregoing proration. Notwithstanding
anything to the contrary contained herein, Buyer shall be responsible for the
payment of all real estate taxes which become payable (in accordance with the
determination set forth in this Section 11.4) any time from or after the Closing
Date and Buyer hereby indemnifies and holds Seller harmless from and against any
and all loss, damage, charge, liability or expense (including court costs and
reasonable attorneys' fees) which Seller may sustain or incur as a result of the
failure of Buyer to timely pay the aforementioned taxes and assessments. Buyer's
obligation under the previous sentence shall survive the Closing Date.
Section XI.5 Water and Sewer Charges. Water rates, water meter
charges, sewer rents and vault charges, if any (other than any such charges,
rates or rents which shall have been paid by tenants of the Property pursuant to
such tenants' Space Leases), shall be adjusted and prorated on the basis of the
fiscal period for which assessed. If there is a water meter, or meters, on the
Property, Seller agrees that it shall at the Closing furnish, or cause to be
furnished, a reading of same to a date not more than 30 days prior to the
Closing and the unfixed meter charges and the unfixed sewer rent thereon for the
time intervening from the date of the last reading shall be apportioned on the
basis of such last reading, and shall be appropriately readjusted after the
Closing on the basis of the next subsequent bills. Unmetered water charges shall
be apportioned on the basis of the charges therefor for the same
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period of the preceding calendar year, but applying the current rate thereto. As
to any unpaid water charges or sewer rents payable directly by tenants, Buyer
shall consummate the Closing subject to such unpaid charges and rents and any
lien resulting therefrom, without credit against the Purchase Price or any claim
or right of action against Seller.
Section XI.6 Utility Charges. Gas, steam, electricity and other
public utility charges (other than any such charges which are payable by tenants
of the Property pursuant to such tenants' Space Leases) will be paid by Seller
to the utility company to the Closing Date. Seller shall arrange for a final
reading of all utility meters (covering gas, water, steam and electricity) as of
the Closing, except meters the charges of which are payable by tenants of the
Property pursuant to such tenants' Space Leases. Seller and Buyer shall jointly
execute a letter to each of such utility companies advising such utility
companies of the termination of the Seller's responsibility for such charges for
utilities furnished to the Property as of the date of the Closing and
commencement of the Buyer's responsibilities therefor from and after such date.
If a bill is obtained from any such utility company as of the Closing, the
Seller shall pay such bill on or before the Closing. If such bill shall not have
been obtained on or before the Closing, the Seller shall, upon receipt of such
bill, pay all such utility charges as evidenced by such bill or bills pertaining
to the period prior to the Closing, and the Buyer shall pay all such utility
charges pertaining to the period thereafter. Any bill which shall be rendered
which shall cover a period both before and after the date of Closing shall be
apportioned between the Buyer and the Seller as of the Closing.
Section XI.7 Contracts. Charges and payments under all Contracts
being assumed by Buyer in accordance with the terms of this Agreement, including
the Union Contracts.
Section XI.8 Miscellaneous Revenues. Revenues, if any, arising out
of telephone booths, vending machines, or other income-producing agreements.
Section XI.9 Supplies. Maintenance supplies in unopened containers
based on the Seller's actual cost therefor, including sales and/or use tax.
Section XI.10 Security Deposits. The actual amounts of the security
deposits (including all interest or other amounts earned thereon and required to
be returned to any tenants pursuant to the terms of Space Leases) held by the
Seller as of the Closing Date shall be assigned to the Buyer by, at the Seller's
option, (i) payment of the amount thereof to the Buyer or (ii) a credit to the
Buyer against the balance of the Purchase Price. Any such tenants' securities in
form other than cash shall be transferred to the Buyer by way of appropriate
instruments of transfer or assignment.
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Section XI.11 Employee Costs. All salaries, wages, vacation pay and
other fringe benefits (including, without limitation, payments and deposits, if
any, with respect to social security, unemployment compensation, employee
health, life and disability insurance, sick pay and welfare and pension fund
contributions) of the employees with respect to the Property in connection with
the management, operation or maintenance of the Property under the Union
Contracts shall be adjusted and prorated between the Seller and the Buyer as of
11:59 P.M. on the day preceding the Closing Date. The Buyer acknowledges that
such employees are union employees and agrees to be responsible for all
severance pay and other obligations arising as a result of any termination by
the Buyer of any such employees. Notwithstanding anything to the contrary
contained herein, and except with respect to employees being assumed by Buyer
pursuant to the provisions hereof, including, without limitation, employees
under Union Contracts, Buyer shall not be liable for, and shall not be
responsible any liabilities related to, employees of the Property or Seller.
Section XI.12 Leasing Costs. (a) With respect to Space Leases
entered into during the Option Period or after the effective date of this
Agreement in accordance with the terms hereof or Option Agreement, as
applicable, or renewals or expansions of Space Leases during the Option Period
in accordance with terms of Option Agreement or after the effective date of this
Agreement (including any renewals or expansions exercised pursuant to options
contained in existing Space Leases), Buyer will be responsible for all Leasing
Expenses and any other costs to be borne under Section 13 of the Option
Agreement and shall assume the economic effect of any "free rent" or other
concessions pertaining to the period from and after the Closing Date relating to
such Space Leases (the foregoing, "Buyer's Leasing Costs"). In addition, Buyer
shall be responsible for all Leasing Expenses and Buyer's Leasing Costs with
respect to all deferred tenant improvement work with respect to existing Space
Leases more particularly set forth on Schedule F-3 hereof ("Deferred Tenant
Improvements")and with respect to Schedule F-2. To the extent that Seller has
paid any of the Buyer's Leasing Costs prior to Closing, the Purchase Price will
be increased at Closing by the aggregate amount of such expenditures upon
presentation by Seller of an invoice therefor and reasonable evidence of payment
thereof. The Buyer will pay all other Buyer's Leasing Costs as and when the same
are due.
(b) Except as otherwise set forth in Clause (a) of this Section,
Seller shall be responsible for all Leasing Costs with respect to Space
Leases in effect as of the date of this Agreement, including, without
limitation, those set forth on Schedule F-1, Schedule F-4 and Schedule G,
(collectively, "Seller's Leasing Costs") and Buyer's leasing costs, for
which Seller is expressly obligated to pay in accordance with terms of
Option Agreement. To the extent such items are incomplete or not fully
paid at Closing, Seller shall give Buyer a credit against the Purchase
Price
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58
for such remaining costs and Buyer shall assume the obligations to pay
such costs or perform such obligations.
Section XI.13 Cigna Loan Escrows. With respect to the Cigna Loan,
all escrows deposited with, or being held for the benefit of the lenders
thereunder, including, without limitation, all tax and insurance escrows, shall
be the property of Seller.
Section XI.14 Other. If applicable, the Purchase Price shall be
adjusted at Closing in accordance with subsection 11.12 and Section 10.2 and to
reflect the adjustment of any other item which, under the terms of this
Agreement, is to be apportioned at Closing.
Section XI.15 Re-Adjustment. Except for re-adjustments of Overage
Rent to be made pursuant to subsection 11.2(e), if any such items are not
determinable at the Closing, the adjustment shall be made subsequent to the
Closing when the charge is determined. Any errors or omissions in computing
adjustments at the Closing shall be promptly corrected, provided that the party
seeking to correct such error or omission shall have notified the other party of
such error or omission on or prior to the date that is 180 days following the
Closing Date. The provisions of this Article XI shall survive the Closing.
ARTICLE XII
INDEMNIFICATION
Section XII.1 Indemnification by the Seller. With respect to the
Asset Seller shall indemnify and hold Buyer, its affiliates, members and
partners, and the partners, shareholders, officers, directors, employees,
representatives and agents of each of the foregoing (collectively,
"Buyer-Related Entities") harmless from and against any and all costs, fees,
expenses, damages, deficiencies, interest and penalties (including, without
limitation, reasonable attorneys' fees and disbursements) suffered or incurred
by any such indemnified party in connection with any and all losses,
liabilities, claims, damages and expenses ("Losses"), arising out of, or in any
way relating to, (i) any breach of any representation or warranty of Seller
contained in this Agreement or in any Schedule, certificate, instrument or other
document delivered pursuant hereto, (ii) any breach of any covenant of the
Seller contained in this Agreement, (iii) matters under any of the Space Leases
which arise prior to the Closing Date, and (iv) with respect to claims of
creditors arising as a result of Seller's failure to obtain a bulk sale stop
order from the Illinois Department of Revenue, Illinois Department of Employment
Security or the Chicago Department of Revenue in connection with the sale of the
IBM Plaza Property, such obligation to survive the Closing subject to Section
12.4.
Section XII.2 Indemnification by the Buyer. The Buyer shall
indemnify and hold Seller, its affiliates, members and partners, and the
partners, shareholders, officers, directors,
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59
employees, representatives and agents of each of the foregoing (collectively,
"Seller-Related Entities") harmless from any and all Losses arising out of, or
in any way relating to, (i) any breach of any representation or warranty by the
Buyer contained in this Agreement or in any Schedule, certificate, instrument or
other document delivered pursuant hereto or in connection herewith, (ii) any
breach of any covenant of the Buyer contained in this Agreement and (iii)
matters under any of the Space Leases which arise from and after the Closing
Date and (iv) Seller's delivery of a notice to prepay the Cigna Loan to the
Cigna lender and Buyer's default under this Agreement, such obligation to
survive the Closing or termination of this Agreement subject to Section 12.4.
Section XII.3 Limitations on Indemnification. Notwithstanding the
foregoing provisions of Section 12.1, (a) Seller shall not be required to
indemnify the Buyer or any Buyer-Related Person under this Agreement unless the
aggregate of all amounts for which an indemnity would otherwise be payable by
Seller under this Agreement exceeds the applicable Basket Limitation and, in
such event, Seller shall be responsible for only the amount in excess of the
applicable Basket Limitation and (b) in no event shall the liability of the
Seller with respect to the indemnification provided for in Section 12.1 above
exceed in the aggregate the applicable Cap Limitation and (c) Seller shall not
be responsible for or indemnify Buyer for any other matters which accrue or
arise with respect to events or occurrences at the Property from and after the
Closing Date.
Section XII.4 Survival. The representations and warranties contained
in this Agreement and the indemnification by Seller with respect to matters
arising under any of the Space Leases prior to the Closing Date shall survive
for a period of 225 days after the Closing (except with respect to any
representations made by Seller in a Seller Estoppel Certificate delivered to
Buyer, then for a maximum period of six (6) months after the Closing (in
accordance with subsection 3.3(i)(B) hereof)) (the "Survival Period") provided,
any action, suit or proceeding with respect to the representations and
warranties is properly commenced within the applicable Survival Period. Seller's
agreement to indemnify Buyer with respect to Seller's failure to obtain a bulk
sale stop order as provided for in Section 12.1 shall survive until such time as
Seller delivers to Buyer a bulk sale stop order as required herein. The
covenants contained in this Agreement to the extent to be performed prior to or
at Closing shall not survive after the Closing. All other covenants, indemnities
and provisions of this Agreement shall survive the Closing unless otherwise
provided herein. Notwithstanding anything to the contrary contained herein,
Seller's obligation to indemnify Buyer shall terminate and be null and void
unless Buyer files an action, suit or proceeding against Seller seeking recovery
from Seller for its obligations under this Article 12 if properly commenced by
Buyer within the appropriate survival period more particularly set forth in this
subsection 12.4.
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Section XII.5 Indemnification as Sole Remedy. If the Closing has
occurred, the sole and exclusive remedy available to a party in the event of a
breach by the other party to this Agreement of any representation, warranty,
covenant or other provision of this Agreement which survives the Closing shall
be the indemnifications provided for under this Article XII.
ARTICLE XIII
TAX CERTIORARI PROCEEDINGS
Section XIII.1 Prosecution and Settlement of Proceedings. If any tax
reduction proceedings in respect of the Property, relating to any fiscal years
ending prior to the fiscal year in which the Closing occurs are pending at the
time of the Closing, the Seller reserves and shall have the right to continue to
prosecute and/or settle the same in its own name. If any tax reduction
proceedings in respect of the Property, relating to the fiscal year in which the
Closing occurs, are pending at the time of Closing, then the Seller reserves and
shall have the right to continue to prosecute and/or settle the same; provided,
however, that the Seller shall not settle any such proceeding without the
Buyer's prior written consent, which consent shall not be unreasonably withheld
or delayed. The Buyer shall reasonably cooperate with the Seller in connection
with the prosecution of any such tax reduction proceedings and Seller shall not,
to effectuate a reduction of such taxes, specifically agree with the relevant
authorities to an increase in such taxes for fiscal years ending after the year
during which the Closing occurs. Seller's obligation set forth in the preceding
sentence shall survive Closing.
Section XIII.2 Application of Refunds or Savings. Any refunds or
savings in the payment of taxes resulting from such tax reduction proceedings
applicable to taxes payable during the period prior to the date of the Closing
(as such period is determined in accordance with Section 11.4 of this Agreement)
shall belong to and be the property of the Seller, and any refunds or savings in
the payment of taxes applicable to taxes payable from and after the date of the
Closing (as such period is determined in accordance with Section 11.4 of this
Agreement)shall belong to and be the property of the Buyer; provided, however,
that if any such refund creates an obligation to reimburse any tenants under
Space Leases for any rents or additional rents paid or to be paid, that portion
of such refund equal to the amount of such required reimbursement (after
deduction of allocable expenses as may be provided in the Space Lease to such
tenant) shall, at the Seller's election, either (a) be paid to the Buyer and the
Buyer shall disburse the same to such tenants or (b) be paid by the Seller
directly to the tenants entitled thereto, after payment of Buyer's costs related
thereto. All attorneys' fees and other expenses incurred in obtaining such
refunds or savings shall be apportioned between the Seller and the Buyer in
proportion to the gross amount of such refunds
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61
or savings payable to the Seller and the Buyer, respectively (without regard to
any amounts reimbursable to tenants).
Section XIII.3 Survival. The provisions of this Article XIII shall
survive the Closing.
ARTICLE XIV
DEFAULT
Section XIV.1 Default. (a) If the Buyer shall default in the
performance of its obligations under this Agreement to purchase the Asset on the
Closing Date or if the Buyer shall default under the City Center Purchase
Agreement prior to the acquisition by Buyer of all of the Interests of Seller in
and to City Center LLC (as defined in the City Center Purchase Agreement),
Seller shall be entitled to (1) terminate this Agreement, (2) to direct Escrow
Agent to deliver the Earnest Money to Seller,(3) to retain the Earnest Money and
(4) if Buyer takes any action to enjoin the transfer of the Property, file a lis
pendens or take any other action whatsoever to enjoin, restrain, delay or
rescind or otherwise interfere legally with or [affect the transfer of the
Property or title to the Property], Seller shall have the additional right to
seek all of its rights and remedies at law and in equity and to recover all
damages as a result of Buyer's default hereunder, whether forseen or unforseen,
actual, consequential or punitive, at which time this Agreement shall be
terminated and of no further force and effect except for the provisions which
explicitly survive such termination. Nothing in this Section shall be deemed to
limit the Seller's remedies with respect to a breach by the Buyer of any of its
obligations which survive the Closing but such remedies shall be limited as
provided in Section 12.5. It is understood and agreed that the foregoing shall
constitute Seller's sole and exclusive remedies hereunder.
(b If Seller shall default in the performance of its obligations
under this Agreement to cause the sale of the Asset or the Property by the
Closing Date, the Buyer, as its sole and exclusive remedy, shall be
entitled at its option, either (i) to terminate this Agreement, direct the
Escrow Agent to deliver the Earnest Money to Buyer and retain the Earnest
Money, at which time this Agreement shall be terminated and of no further
force and effect except for the provisions which explicitly survive such
termination or (ii) specifically enforce the terms and conditions of this
Agreement by injunctive relief or otherwise. Nothing in this Section shall
be deemed to limit the Buyer's remedies with respect to a breach by the
Seller of any of the Seller's obligations which survive the Closing but
such remedies shall be limited as provided in Section 12.5.
ARTICLE XV
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MISCELLANEOUS
Section XV.1 Use of Blackstone Name and Address. Subject to the
provisions of Section 15.4 hereof, the Buyer hereby acknowledges and agrees that
neither the Buyer nor any affiliate, successor, assignee or designee of Buyer
shall be entitled to use the name "Blackstone" in any way whatsoever.
Section XV.2 Exculpation of the Seller. Notwithstanding anything to
the contrary contained herein, the Seller's shareholders, partners, the partners
of such partners, the shareholders of such partners, and the trustees, officers,
directors, employees, agents and security holders of the Seller and the partners
of the Seller assumes no personal liability for any obligations entered into on
behalf of the Seller and such parties' individual assets shall not be subject to
any claims of any person relating to such obligations. The foregoing shall
govern any direct and indirect obligations of the Seller under this Agreement.
Section XV.3 Brokers. (a) Seller and Buyer each represent and
warrant to the other that it has dealt with no broker, salesman, finder or
consultant with respect to this Agreement or the transactions contemplated
hereby other than Eastdil, whose commission shall be paid by Seller pursuant to
the terms of a separate agreement to which the Purchaser is not a party, if and
only if the Closing occurs. Each Seller agrees to indemnify, protect, defend and
hold the Buyer harmless from and against all claims, losses, damages,
liabilities, costs, expenses (including reasonable attorneys' fees and
disbursements) and charges resulting from the Seller's breach of the foregoing
representation in this subsection (a). The provisions of this subsection (a)
shall survive the Closing and any termination of this Agreement.
(b) The Buyer represents and warrants to the Seller that it has
dealt with no broker, salesman, finder or consultant with respect to this
Agreement or the transactions contemplated hereby other than Eastdil. The
Buyer agrees to indemnify, protect, defend and hold the Seller harmless
from and against all claims, losses, damages, liabilities, costs, expenses
(including reasonable attorneys' fees and disbursements) and charges
resulting from the Buyer's breach of the foregoing representations in this
subsection (b). The provisions of this subsection (b) shall survive the
Closing and any termination of this Agreement.
Section XV.4 Confidentiality; Press Release; IRS Reporting
Requirements. (a) The Buyer and the Seller shall hold as confidential all
information disclosed in connection with the transaction contemplated hereby and
concerning each other, the Asset, this Agreement and the transactions
contemplated hereby and shall not release any such information to third parties
without the prior written consent of the other parties hereto, except (i) any
information which was previously or is hereafter
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63
publicly disclosed (other than in violation of this Agreement or other
confidentiality agreements to which affiliates of the Buyer are parties), (ii)
to their partners, advisers, underwriters, analysts, employees, affiliates,
officers, directors, consultants, lenders, investors, potential investors,
accountants, legal counsel or other advisors of any of the foregoing, provided
that they are advised as to the confidential nature of such information and are
instructed to maintain such confidentiality, (iii) to comply with any law, rule
or regulation, (iv) to analysts covering Buyer and the REIT industry and (v) to
governmental bodies and regulatory agencies, including the Securities and
Exchange Commission or required by court or other binding order. The foregoing
shall constitute a modification of any prior confidentiality agreement that may
have been entered into by the parties. The provisions of this Section shall
survive the Closing or the termination of this Agreement for a period of 180
days. Notwithstanding the foregoing and prior to Closing, Buyer shall be
entitled (after having provided a copy thereof to Seller at least two Business
Days prior to issuance and having given good faith consideration to Seller's
comments) to file any applicable forms with the Securities and Exchange
Commission that accurately set forth such factual information pertaining to the
Property and the transaction contemplated hereby that Buyer concludes, in good
faith, to be necessary or prudent in order to comply with Buyer's legal
disclosure obligations. Seller shall have no liability whatsoever for the
accuracy of any information contained in such filings or disclosure documents.
(b) Neither Seller nor Buyer shall issue a press release with
respect to this Agreement and the transactions contemplated hereby except
(i) in the form of Exhibit J hereto and (ii) as consented to in writing by
the other party to this Agreement (such approval not to be unreasonably
withheld or delayed). In no event shall any press release issued by Buyer
disclose the identity of the Seller's direct or indirect beneficial owners
by name.
(c) For the purpose of complying with any information reporting
requirements or other rules and regulations of the IRS that are or may
become applicable as a result of or in connection with the transaction
contemplated by this Agreement, including, but not limited to, any
requirements set forth in proposed Income Tax Regulation Section 1.6045-4
and any final or successor version thereof (collectively, the "IRS
Reporting Requirements"), the Seller and the Buyer hereby designate and
appoint the Escrow Agent to act as the "Reporting Person" (as that term is
defined in the IRS Reporting Requirements) to be responsible for complying
with any IRS Reporting Requirements. The Escrow Agent hereby acknowledges
and accepts such designation and appointment and agrees to fully comply
with any IRS Reporting Requirements that are or may become applicable as a
result of or in connection with the transaction contemplated by this
Agreement. Without limiting the responsibility and obligations of the
Escrow Agent as the Reporting Person, the
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64
Seller and the Buyer hereby agree to comply with any provisions of the IRS
Reporting Requirements that are not identified therein as the
responsibility of the Reporting Person, including, but not limited to, the
requirement that the Seller and the Buyer each retain an original
counterpart of this Agreement for at least four (4) years following the
calendar year of the Closing.
Section XV.5 Escrow Provisions. (a) The Escrow Agent shall hold the
Earnest Money in escrow in an interest-bearing bank account at a banking
institution located in New York City, New York (the "Escrow Account").
(b) The Escrow Agent shall hold the Earnest Money in the Escrow
Account, until the Closing or sooner termination of this Agreement and
shall hold and apply the Earnest Money in accordance with the terms of
this paragraph (b). The Seller and the Buyer understand that no interest
is earned on the Earnest Money during the time it takes to transfer into
and out of the Escrow Account. At the Closing, the Earnest Money shall be
paid by the Escrow Agent to, or at the direction of, the Seller. If for
any reason prior to the date of Closing or if the Closing does not occur
and either party makes a written demand upon the Escrow Agent for payment
of such amount being held by Escrow Agent, the Escrow Agent shall, within
one Business Day give written notice to the other party of such demand. If
the Escrow Agent does not receive a written objection within five Business
Days after the giving of such notice, the Escrow Agent is hereby
authorized to make such payment. If the Escrow Agent does receive such
written objection within such five day period or if for any other reason
the Escrow Agent in good faith shall elect not to make such payment, the
Escrow Agent shall continue to hold such amount until otherwise directed
by joint written instructions from the parties to this Agreement or a
final judgment of a court of competent jurisdiction. However, the Escrow
Agent shall have the right at any time to deposit the Earnest Money with
the clerk of the court of New York County and to file an action in
interpleader in New York State Supreme Court located in New York County .
The Escrow Agent shall give written notice of such deposit to the Seller
and the Buyer. Upon such deposit the Escrow Agent shall be relieved and
discharged of all further obligations and responsibilities hereunder.
(c) The parties acknowledge that the Escrow Agent is acting solely
as a stakeholder at their request and for their convenience, that the
Escrow Agent shall not be deemed to be the agent of either of the parties,
and the Escrow Agent shall not be liable to either of the parties for any
act or omission on its part, other than for its gross negligence or
willful misconduct. Seller and the Buyer shall jointly and severally
indemnify and hold the Escrow Agent harmless from and against all costs,
claims and expenses, including attorneys' fees and disbursements,
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65
incurred in connection with the performance of the Escrow Agent's duties
hereunder.
(d) The Escrow Agent has acknowledged its agreement to these
provisions by signing this Agreement in the place indicated following the
signatures of the Seller and the Buyer.
Section XV.6 Successors and Assigns; No Third-Party Beneficiaries .
The stipulations, terms, covenants and agreements contained in this Agreement
shall inure to the benefit of, and shall be binding upon, the parties hereto and
their respective permitted successors and assigns (including any successor
entity after a public offering of stock, merger, consolidation, purchase or
other similar transaction involving a party hereto) and nothing herein expressed
or implied shall give or be construed to give to any person or entity, other
than the parties hereto and such assigns, any legal or equitable rights
hereunder.
Section XV.7 Assignment. This Agreement may not be assigned by the
Buyer except: (a) at Closing, to an Affiliate if Buyer designates the Affiliate
to which the Asset will be transferred at the Closing; or if not to an
Affiliate, (b) Buyer receives Seller's prior written consent to the assignment,
which consent shall be in Seller's sole discretion. In addition, Buyer may name,
without obtaining Seller's prior written consent, a nominee or designee to whom
the Asset will be transferred at Closing, provided that Buyer does not assign
this Agreement to such nominee or designee and Seller is only required to deal
with Buyer in connection with this Agreement and the transactions contemplated
herein. For purposes of this Section 15.7, the term "Affiliate" shall mean a
Person which controls, is controlled by or is under common control with Buyer.
Notwithstanding the foregoing, nothing herein shall be construed as limiting the
liability of Buyer hereunder and Buyer shall remain primarily liable to Sellers
with respect to this Agreement. The word "control" means, with respect to a
Person that is a corporation, the right to exercise the twenty-five percent of
the voting shares of the controlled corporation and, with respect to a Person
that is not a corporation, the possession of a twenty-five percent ownership
interest in the controlled Person. Notwithstanding the foregoing, nothing herein
shall prevent a Buyer from transferring to another Person, pursuant to
requirements under a loan for which the Property is pledged as security, a
nominal one percent interest in such Affiliate.
Section XV.8 Further Assurances. From time to time, as and when
requested by any party hereto, the other party shall execute and deliver, or
cause to be executed and delivered, all such documents and instruments and shall
take, or cause to be taken, all such further or other actions as such other
party may reasonably deem necessary or desirable to consummate the transactions
contemplated by this Agreement.
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66
Section XV.9 Notices. All notices, demands or requests made pursuant
to, under or by virtue of this Agreement must be in writing and shall be (i)
personally delivered, (ii) delivered by express mail, Federal Express or other
comparable overnight courier service, (iii) facsimile or (iv) mailed to the
party to which the notice, demand or request is being made by certified or
registered mail, postage prepaid, return receipt requested, as follows:
(a) To the Seller:
c/o Blackstone Real Estate Advisors L.P.
345 Park Avenue
New York, New York 10154
Attention: Mr. Steven Orbuch
Facsimile: 212-754-8726
with copies thereof to:
Simpson Thacher & Bartlett
425 Lexington Avenue
New York, New York 10017
Attention: Glenn D. Kesselhaut, Esq.
Facsimile: 212-455-2502
(b) To the Buyer:
c/o Prime Group Realty Trust
77 West Wacker Drive
Suite 3900
Chicago, Illinois 60601
Attention: Jeffrey A. Patterson
Facsimile: 312-917-0460; and
Attention: James F. Hoffman
Facsimile: 312-917-1684
with copies thereof to:
Jones, Day, Reavis & Pogue
77 West Wacker Drive
35th Floor
Chicago, Illinois 60601
Attention: Julie O. Ehrlich
Facsimile: 312-782-8585
All notices (i) shall be deemed effective upon receipt or refusal of delivery in
accordance with the provisions of this Section and (ii) may be given either by a
party or by such party's attorneys. Any party may, from time to time, specify as
its address for purposes of this Agreement any other address upon the giving of
10 days' notice thereof to the other parties.
Section XV.10 Entire Agreement. This Agreement, along with the
Exhibits and Schedules hereto contains all of the terms agreed upon between the
parties hereto with respect to the
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67
subject matter hereof, and all understandings and agreements heretofore had or
made among the parties hereto are merged in this Agreement which alone fully and
completely expresses the agreement of the parties hereto.
Section XV.11 Amendments. This Agreement may not be amended,
modified, supplemented or terminated, nor may any of the obligations of the
Seller or the Buyer hereunder be waived, except by written agreement executed by
the party or parties to be charged.
Section XV.12 No Waiver. No waiver by either party of any failure or
refusal by the other party to comply with its obligations hereunder shall be
deemed a waiver of any other or subsequent failure or refusal to so comply.
Section XV.13 Governing Law. With respect to matters affecting the
Property only, this Agreement shall be governed by, interpreted under, and
construed and enforced in accordance with, the laws of the State in which the
Property is located, and with respect to all other matters hereunder, the laws
of the State of New York.
Section XV.14 Submission to Jurisdiction. (a) Each of the Buyer and
the Seller irrevocably submits to the jurisdiction of (i) the Supreme Court of
the State of New York, New York County and (ii) the United States District Court
for the Southern District of New York for the purposes of any suit, action or
other proceeding arising out of this Agreement or any transaction contemplated
hereby. Each of the Buyer and the Seller further agrees that service of any
process, summons, notice or document by U.S. registered mail to such party's
respective address set forth above shall be effective service of process for any
action, suit or proceeding in New York with respect to any matters to which it
has submitted to jurisdiction as set forth above in the immediately preceding
sentence.
(b) Each of the Buyer and Seller irrevocably and unconditionally
waives trial by jury and agrees that any suit, action or proceeding with
respect to this Agreement or the transactions contemplated hereby may be
brought only in (i) the Supreme Court of the State of New York, New York
County and (ii) the United States District Court for the Southern District
of New York, and hereby further irrevocably and unconditionally waives any
objection that it may have to the venue of such suit, action or proceeding
in any such court or that such suit or proceeding in such court was
brought in an inconvenient court and agrees not to plead or claim same.
Section XV.15 Severability. If any term or provision of this
Agreement or the application thereof to any person or circumstances shall, to
any extent, be invalid or unenforceable, the remainder of this Agreement or the
application of such term or provision to persons or circumstances other than
those as to which it is held invalid or unenforceable shall not be affected
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68
thereby, and each term and provision of this Agreement shall be valid and
enforceable to the fullest extent permitted by law.
Section XV.16 Section Headings. The headings of the various Sections
of this Agreement have been inserted only for purposes of convenience, are not
part of this Agreement and shall not be deemed in any manner to modify, explain,
expand or restrict any of the provisions of this Agreement.
Section XV.17 Counterparts. This Agreement may be executed in two or
more counterparts, each of which shall be deemed an original, and it shall not
be necessary in making proof of this Agreement to produce or account for more
than one such counterpart.
Section XV.18 Acceptance of Deed. The acceptance of the Deed for the
Property by the Buyer shall be deemed full compliance by Seller of all of the
Seller's obligations under this Agreement except for those obligations of the
Seller which are specifically stated to survive the delivery of the Deed to the
Property.
Section XV.19 Payment of Purchase Price . The receipt and
confirmation of receipt by the Seller of the Purchase price, as adjusted, shall
be deemed full compliance by Buyer of all of Buyer's obligations with respect to
the Property, except for those obligations of the Buyer which are specifically
stated to survive the payment of the Purchase Price.
Section XV.20 Construction. The parties acknowledge that the parties
and their counsel have reviewed and revised this Agreement and that the normal
rule of construction to the effect that any ambiguities are to be resolved
against the drafting party shall not be employed in the interpretation of this
Agreement or any exhibits or amendments hereto.
Section XV.21 Recordation. Neither this Agreement nor any memorandum
or notice of this Agreement may be recorded by any party hereto without the
prior written consent of the other party hereto. The provisions of this Section
shall survive the Closing or any termination of this Agreement.
Section XV.22 Waiver of Jury Trial. The Seller and the Buyer hereby
waive trial by jury in any action, proceeding or counterclaim brought by any
party against another party on any matter arising out of or in any way connected
with this Agreement.
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69
IN WITNESS WHEREOF, this Agreement has been duly executed by the
parties hereto as of the day and year first above written.
BUYER:
PRIME GROUP REALTY, L.P. a Delaware
limited partnership
By: Prime Group Realty Trust, a
Maryland real estate investment
trust, its Managing General Partner
By:______________________________
Name:
Title:
SELLER:
BRE/WABASH L.L.C., a Delaware limited
liability company
By:______________________________________
Name:
Title:
ESCROW AGENT:
TITLE ASSOCIATES INC.
By:______________________________________
Name:
Title:
<PAGE>
TABLE OF CONTENTS
Page
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ARTICLE I. DEFINITIONS......................................................1
Section 1.1 Defined Terms.............................................1
ARTICLE II. SALE, PURCHASE PRICE AND CLOSING................................7
Section 2.1 Sale of Assets............................................7
Section 2.2 Purchase Price; Earnest Money.............................8
Section 2.3 The Closing...............................................9
ARTICLE III. REPRESENTATIONS, WARRANTIES AND
COVENANTS OF THE SELLER.........................................10
Section 3.1 General Seller Representations
and Warranties..................................................10
(a) Formation; Existence.......................................10
(b) Power and Authority........................................10
(c) No Consents................................................10
(d) No Conflicts...............................................11
(e) Foreign Person.............................................11
Section 3.2 Representations and Warranties of the
Seller as to the Asset..........................................11
(a) Ownership of the Asset.....................................11
(b) Contracts..................................................12
(c) Space Leases...............................................12
(d) Brokerage Commissions......................................13
(e) Condemnation...............................................13
(f) Litigation.................................................13
(g) Environmental Violations...................................13
Section 3.3 Covenants of the Sellers Prior to Closing................13
(a) Insurance..................................................13
(b) Operation..................................................13
(c) New Contracts..............................................13
(d) New Space Leases...........................................14
(e) Litigation.................................................14
(f) Sale of Tangible Personal Property.........................15
(g) Performance Under Space Leases.............................15
(h) Ground Lease Estoppel Certificates.........................15
(i) Space Lease Estoppel Certificates..........................15
(j) Security Deposits..........................................16
(k) Updating Information.......................................17
(l) Review of Books and Records................................17
(m) Property Management Employees..............................17
ARTICLE IV. REPRESENTATIONS, WARRANTIES AND COVENANTS
OF THE BUYER....................................................17
Section 4.1 Representations, Warranties and
Covenants of the Buyer..........................................17
(a) Formation; Existence.......................................17
(b) Power; Authority...........................................17
(c) No Consents................................................18
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<PAGE>
Page
----
(d) No Conflicts...............................................18
(e) Examination; No Contingencies..............................18
(g) Buyer's Affiliate/Assignee.................................21
(h) Like Kind Exchange.........................................21
ARTICLE V. CONDITIONS PRECEDENT TO CLOSING..................................22
Section 5.1 Conditions Precedent To Seller's
Obligations.....................................................22
Section 5.2 Conditions to the Buyer's Obligations....................23
ARTICLE VI. CLOSING DELIVERIES..............................................24
ARTICLE VII. INTENTIONALLY DELETED..........................................28
ARTICLE VIII. INSPECTIONS...................................................28
ARTICLE IX. TITLE AND PERMITTED EXCEPTIONS..................................29
Section 9.1 Permitted Exceptions.....................................29
Section 9.2 Title Report.............................................29
Section 9.3 Use of Purchase Price to Discharge Title Exceptions......30
Section 9.4 Inability to Convey......................................30
Section 9.5 Rights in Respect of Inability to Convey.................30
Section 9.6 Voluntary/De Minimis Title Exceptions....................31
Section 9.7 The Buyer's Right to Accept Title........................31
Section 9.8 Cooperation..............................................32
ARTICLE X. TRANSACTION COSTS; RISK OF LOSS..................................32
Section 10.1 Transaction Costs.......................................32
Section 10.2 Risk of Loss............................................33
ARTICLE XI. ADJUSTMENTS.....................................................34
Section 11.1 Fixed Rents.............................................34
Section 11.2 Overage Rents...........................................35
Section 11.3 Ground Lease Rents......................................38
Section 11.4 Taxes and Assessments...................................38
Section 11.5 Water and Sewer Charges.................................38
Section 11.6 Utility Charges.........................................39
Section 11.7 Contracts...............................................39
Section 11.8 Miscellaneous Revenues..................................39
Section 11.9 Supplies................................................39
Section 11.10 Security Deposits......................................39
Section 11.11 Employee Costs.........................................40
Section 11.12 Leasing Costs..........................................40
Section 11.13 Cigna Loan Escrows.....................................41
Section 11.14 Other..................................................41
Section 11.15 Re-Adjustment..........................................41
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<PAGE>
Page
----
ARTICLE XII. INDEMNIFICATION................................................41
Section 12.1 Indemnification by the Seller...........................41
Section 12.2 Indemnification by the Buyer............................41
Section 12.3 Limitations on Indemnification..........................42
Section 12.4 Survival................................................42
Section 12.5 Indemnification as Sole Remedy..........................43
ARTICLE XIII. TAX CERTIORARI PROCEEDINGS....................................43
Section 13.1 Prosecution and Settlement of
Proceedings.....................................................43
Section 13.2 Application of Refunds or Savings.......................43
Section 13.3 Survival................................................44
ARTICLE XIV. DEFAULT........................................................44
Section 14.1 Default.................................................44
ARTICLE XV. MISCELLANEOUS...................................................45
Section 15.1 Use of Blackstone Name and Address.....................45
Section 15.2 Exculpation of the Seller. ............................45
Section 15.3 Brokers................................................45
Section 15.4 Confidentiality; ......................................45
Section 15.5 Escrow Provisions......................................47
Section 15.6 Successors and Assigns; No Third-Party Beneficiaries...48
Section 15.7 Assignment.............................................48
Section 15.8 Further Assurances.....................................49
Section 15.9 Notices................................................49
Section 15.10 Entire Agreement.......................................50
Section 15.11 Amendments.............................................50
Section 15.12 No Waiver..............................................50
Section 15.13 Governing Law..........................................50
Section 15.15 Severability...........................................51
Section 15.16 Section Headings.......................................51
Section 15.17 Counterparts...........................................51
Section 15.18 Acceptance of Deed.....................................51
Section 15.19 Payment of Purchase Price..............................51
Section 15.20 Construction...........................................52
Section 15.21 Recordation............................................52
Section 15.22 Waiver of Jury Trial...................................52
-iii-
<PAGE>
Exhibits
Exhibit A - Assignment of Leases
Exhibit A-1 - Assignment and Assumption of Ground Lease
Exhibit B - Assignment of Contracts
Exhibit C - Tenant Notices
Exhibit D - Blackstone Lease
Exhibit E - Special Warranty Deed
Exhibit F - Bill of Sale
Exhibit G - FIRPTA Certificate
Exhibit H - Guaranty
Exhibit I-1 - IBM Plaza Ground Lease Estoppel Certificate
Exhibit I-2 - Tenant Estoppel Certificate
Exhibit I-3 - Form of Jenner Estoppel Certificate
Form of State Street Estoppel Certificate
Exhibit I-4 - Form of Seller's Estoppel Certificate
Exhibit J - Form of Press Release
Exhibit K - Form of Auditors' Certification
Schedules
Schedule A-1 - Description of IBM Plaza Fee Parcel
Schedule A-2 - Description of IBM Plaza Leasehold Parcel
Schedule B - Existing Title Policy and Survey
Schedule C - Third Party Loans
Schedule D - Consents
Schedule E - Contracts
Schedule F - Space Leases
Schedule F-1 - Landlord's Work in Progress
Schedule F-2 - Contemplated Leases
Schedule F-3 - Deferred Tenant Improvements
Schedule F-4 - Base Building Work
Schedule G - Brokerage Commissions
Schedule H - Litigation
Schedule I - Security Deposits Held By Seller
Schedule J - Buyer Consents
-iv-
<PAGE>
AGREEMENT OF PURCHASE AND SALE
among
BRE/WABASH L.L.C., the SELLER
and
PRIME GROUP REALTY, L.P., the BUYER
As of ______________ __, 1999
-5-
<PAGE>
EXHIBIT A
ASSIGNMENT AND ASSUMPTION OF LANDLORD'S INTEREST IN LEASES
[OMITTED]
-6-
<PAGE>
EXHIBIT B
ASSIGNMENT AND ASSUMPTION OF CONTRACTS
[OMITTED]
-7-
<PAGE>
EXHIBIT C
NOTICE LETTER TO TENANTS
[OMITTED]
-8-
<PAGE>
EXHIBIT D
BLACKSTONE LEASE
[OMITTED]
-9-
<PAGE>
EXHIBIT E
SPECIAL WARRANTY DEED
[OMITTED]
-10-
<PAGE>
EXHIBIT F
BILL OF SALE
[OMITTED]
-11-
<PAGE>
EXHIBIT G
ENTITY TRANSFEROR
FOREIGN INVESTORS REAL PROPERTY
TAX ACT CERTIFICATION AND AFFIDAVIT
[OMITTED]
-12-
<PAGE>
EXHIBIT H
GUARANTY
[OMITTED]
-13-
<PAGE>
EXHIBIT I-1
FORM OF GROUND LEASE ESTOPPEL CERTIFICATE
[OMITTED]
-14-
<PAGE>
EXHIBIT I-2
FORM OF TENANT ESTOPPEL CERTIFICATE
[OMITTED]
-15-
<PAGE>
EXHIBIT I-3
FORM OF LEASE ESTOPPEL CERTIFICATE FOR STATE STREET BANK AND
TRUST COMPANY LEASE
[OMITTED]
-16-
<PAGE>
EXHIBIT I-3
FORM OF LEASE ESTOPPEL CERTIFICATE FOR JENNER & BLOCK LEASE
[OMITTED]
-17-
<PAGE>
EXHIBIT I-4
FORM OF SELLER'S ESTOPPEL CERTIFICATE
[OMITTED]
-18-
<PAGE>
EXHIBIT J
PRESS RELEASE
[OMITTED]
-19-
<PAGE>
EXHIBIT K
AUDITORS CERTIFICATE
[OMITTED]
-20-
<PAGE>
SCHEDULE A-1
DESCRIPTION OF FEE PARCEL
[OMITTED]
-21-
<PAGE>
SCHEDULE A-2
DESCRIPTION OF LEASEHOLD PARCEL
[OMITTED]
-22-
<PAGE>
SCHEDULE B
EXISTING TITLE POLICY AND SURVEY
[OMITTED]
-23-
<PAGE>
SCHEDULE C
CIGNA LOAN
[OMITTED]
-24-
<PAGE>
SCHEDULE D
CONSENTS
[OMITTED]
-25-
<PAGE>
SCHEDULE E
CONTRACTS
[OMITTED]
-26-
<PAGE>
SCHEDULE E-1
CONTRACTS TO BE TERMINATED
NONE.
-27-
<PAGE>
SCHEDULE F
SPACE LEASES
[OMITTED]
-28-
<PAGE>
SCHEDULE F-1
LANDLORD'S WORK IN PROGRESS
<TABLE>
<CAPTION>
TENANT DESCRIPTION ALLOWANCE PD TO DATE BALANCE
- ------ ----------- --------- ---------- -------
<S> <C> <C> <C> <C>
Coffou Partners Tenant Improvement Allowance 35,240 35,240 0
Foley Lardner Tenant Improvement 694,806 0 694,806
Allowance - Original Lease
Tenant Improvement Allowance 208,370 0 208,370
Amendment
Segal McCambridge Tenant Improvement Allowance 1,186,875 334,110 852,765
Moving/Drawing Allowance 92,313 78,788 13,525
Feasibility Study 14,836 12,244 2,592
Alonti Cafe Tenant Improvement Allowance 193,480 193,480 0
TOTALS 2,425,920 653,862 1,772,058
</TABLE>
-29-
<PAGE>
SCHEDULE F-2
CONTEMPLATED LEASES
[OMITTED]
-30-
<PAGE>
xxxvi
SCHEDULE F-3
DEFERRED TENANT IMPROVEMENTS
<TABLE>
<CAPTION>
TENANT DESCRIPTION DATE TO BE PERFORMED
- ------ ----------- --------------------
<S> <C> <C>
Aronberg Goldgehn Davis Lease Commitment - Wall Washing 01/01/01
Lease Commitment - Painting 01/01/03
Lease Commitment - Wall Washing 01/01/06
Lease Commitment - Painting 01/01/08
Jenner & Block Replacement of Light Bulbs on Floors On Going
25, 37, 38, 39, 40E, 42, 43, 44, 45, 46
Lease Commitment - Wall Washing 01/01/01
Repaint Premises 01/01/03
Lease Commitment - Wall Washing 01/01/06
Repaint Premises 01/01/08
IBM Corporation Replacement of Light Bulbs on all FloorS On Going
Better Business Bureau Tenant Improvement Allowance 05/01/01
Information Management Group Carpets and Painting 08/01/03
Lovell White Durrant Expansion Buildout 03/15/99
</TABLE>
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<PAGE>
SCHEDULE F-4
BASE BUILDING WORK
DESCRIPTION ESTIMATED REMAINING COST
- ----------- ------------------------
Parking Garage Renovation $876,301
Floors 2 & 3 Base Building Work $649,233
-32-
<PAGE>
SCHEDULE G
BROKERAGE COMMISSIONS
NONE.
-33-
<PAGE>
SCHEDULE H
LITIGATION
[OMITTED]
-34-
<PAGE>
SCHEDULE I
SECURITY DEPOSITS HELD BY SELLER
[OMITTED]
-35-
<PAGE>
SCHEDULE J
BUYER CONSENTS
NONE.
-36-
<PAGE>
EXHIBIT B
FORM OF OPTION NOTICE
[OMITTED]
-37-
<PAGE>
EXHIBIT C
LEASING GUIDELINES
[OMITTED]
-38-
<PAGE>
EXHIBIT 10.3
AGREEMENT OF PURCHASE AND SALE
AGREEMENT OF PURCHASE AND SALE (this "Agreement"), made as of the th
day of February, 1999 by and among each of the entities listed in the column
entitled Sellers of Schedule A attached hereto (each individually, a "Seller"
and collectively, the "Sellers", and PRIME GROUP REALTY, L.P., a Delaware
limited partnership ("Buyer").
Background
A. Each Seller is a member of BRE/City Center L.L.C. ("City Center
LLC"). City Center LLC is the fee owner of the land described on Schedule A-1
attached hereto and the buildings and other improvements located thereon and the
owner of a leasehold interest in and to the parcel of land described on Schedule
A-2 attached hereto, together with the buildings and other improvements located
thereon (collectively, the "Property").
B. The membership, beneficial and other ownership interests in City
Center LLC owned by the Sellers shall be referred to herein as the "Interests",
and the Interests, together with the Asset Related Property, to the extent such
Asset-Related Property is related to the Interests, shall be referred to as the
"Asset".
C. The Sellers desire to sell to the Buyer, and the Buyer desires to
purchase from the Sellers, the Asset on the terms and conditions hereinafter set
forth.
AGREEMENT
NOW, THEREFORE, in consideration of the mutual covenants and
agreements set forth in this Agreement, and for other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the
parties hereby agree as follows:
ARTICLE I
DEFINITIONS
Section I.1 Defined Terms. The capitalized terms used herein will
have the following meanings.
"Agreement" shall mean this Agreement of Purchase and Sale and all
amendments hereto, together with the exhibits and
<PAGE>
2
schedules attached hereto, as the same may be amended, restated, supplemented or
otherwise modified.
"Asset" shall have the meaning assigned thereto in "Background"
paragraph B.
"Asset File" shall mean the materials with respect to the Asset
previously delivered or made available to the Buyer or its representatives by or
on behalf of the Sellers.
"Asset-Related Property" shall have the meaning assigned thereto in
subsection 2.1(b).
"Basket Limitation" shall mean an amount equal to one percent (1%)
of the Purchase Price.
"BREA" shall mean Blackstone Real Estate Acquisitions L.L.C.
"Business Day" shall mean any day other than a Saturday, Sunday or
other day on which banks are authorized or required by law to be closed in
Chicago, Illinois or New York City, New York.
"Buyer" shall have the meaning assigned thereto in the Preamble to
this Agreement.
"Buyer's Leasing Costs" shall have the meaning assigned thereto in
Subsection 11.12(a).
"Buyer-Related Entities" shall have the meaning assigned thereto in
subsection 12.1.
"Cap Limitation" shall mean an amount equal to four percent (4%) of
the Purchase Price. For the avoidance of doubt, the Cap Limitation shall be
reached when the aggregate sum of all monies payable by, collectively, the
Sellers, pursuant to any and all of the indemnities provided for in this
Agreement, equals 4% of the Purchase Price.
"City Center Ground Lessor" shall mean the lessor under the National
City Bank Lease.
"City Center LLC" shall have the meaning assigned thereto in
"Background" paragraph A.
"Closing" shall have the meaning assigned thereto in Section 2.3(a).
"Closing Date" shall have the meaning assigned thereto in Section
2.3(a).
"Complying Title Policy" shall have the meaning set forth in Section
2.2(b)(ii).
<PAGE>
3
"Condition of the Assets" shall have the meaning assigned thereto in
subsection 4.1(f).
"Contemplated Leases" shall mean those Space Leases identified on
Schedule F-2.
"Contracts" shall have the meaning assigned thereto in Subsection
2.1(b).
"Designated Assignor" shall mean that certain Seller designated by
the remainder of the Sellers (a) to receive and distribute the Purchase Price on
behalf of the remainder of the Sellers and (b) to perform certain other
obligations designated by the remainder of the Sellers or otherwise set forth
herein.
"Earnest Money" shall have the meaning assigned thereto in
subsection 2.2(b).
"Eastdil" shall mean Eastdil Realty Company, L.L.C.
"Existing Survey" shall mean the survey with respect to the Property
listed on Schedule B attached hereto.
"Existing Title Commitment" shall mean the title commitment with
respect to the Property listed on Schedule B attached hereto.
"Financial Statements" shall have the meaning assigned thereto in
subsection 3.1(j),
"Fixed Rents" shall have the meaning assigned thereto in subsection
11.1(a).
"Ground Lease" shall mean the National City Bank Lease.
"Hazardous Materials" shall have the meaning assigned thereto in
subsection 4.1(f).
"Intangible Personal Property" shall have the meaning assigned
thereto in subsection 2.1(b).
"Interests" shall have the meaning assigned thereto in background
paragraph "B".
"IRS" shall mean the Internal Revenue Service.
"IRS Reporting Requirements" shall have the meaning assigned thereto
in subsection 15.4(c).
"LC Agreement" shall have the meaning ascribed thereto in Subsection
11.12(a).
"LC Amount" shall have the meaning ascribed thereto in Subsection
11.12(a).
<PAGE>
4
"Leasing Expenses" shall mean all capital costs, tenant improvement
costs, relocation costs, temporary leasing costs, leasing commissions, legal,
design and other professional fees, and other expenses incurred with respect to
the Space Leases and allowances granted to any tenants in lieu of any of the
above.
"Letter of Credit" shall have the meaning ascribed thereto in
Subsection 11.12(a).
"Loan Documents" shall mean all documents evidencing and securing
the NY Life Loan.
"Losses" shall have the meaning assigned thereto in subsection 12.1.
"National City Bank Lease" shall mean the lease entered into between
The Kope Realty Company, as lessor, and National City Bank, as lessee, a
memorandum of which was filed for record on October 26, 1976 and recorded in
Volume 515, Page 1 of Cuyahoga County, Ohio Lease Records, the lessee's interest
therein having been assigned to National City Center Joint Venture by Assignment
of Lease filed for record on October 21, 1977 and recorded in Volume 523, Page
47, of Cuyahoga County, Ohio Lease Records, and from National City Center Joint
Venture to Euclid-Ninth Community Urban Redevelopment Corporation by Assignment
of Lease filed for record on December 12, 1977 and recorded in Volume 524, Page
469, of Cuyahoga County, Ohio Lease Records and from Euclid-Ninth Community
Urban Redevelopment Corporation to City Center LLC by Assignment and Assumption
of the Kope Lease dated as of February 10, 1998 and recorded in Volume 98-1563,
Page 20 of Cuyahoga County records.
"NCB Space Lease" shall mean that certain Agreement of Lease between
City Center LLC, as successor in interest to National City Center Joint Venture,
as landlord, and National City Bank, as tenant.
"NY Life Loan" shall mean the loan from New York Life Insurance
Company to City Center LLC secured by the Property.
"NY Life Loan Closing Balance" shall have the meaning assigned
thereto in subsection 2.2(d).
"Option Agreement" shall have the meaning assigned thereto in
Article XIV.
"Overage Rent" shall have the meaning assigned thereto in subsection
11.2(a).
"Permitted Exceptions" shall mean with respect to the Property, (i)
excluding any affirmative coverage and affirmative insurance with respect
thereto, the matters set forth in the Existing Title Commitment or the Existing
Survey, (ii) the Ground Lease, Space Leases, and Contracts affecting the
Property and any
<PAGE>
5
Space Leases, or Contracts entered into after the date hereof, in accordance
with the terms of this Agreement, (iii) liens for current real estate taxes
which are not yet due and payable, (iv) standard exclusions and the terms and
provisions contained in forms of title insurance policies, subject to Seller
causing the Title Company to provide extended coverage over the general title
exceptions, except those exclusions and conditions and stipulations which
customarily remain in fee and leasehold title insurance policies in the
jurisdiction in which the Property is located and the rights of tenants under
leases (v) subject to the adjustments provided for herein and if a lien, any
service, installation, connection or maintenance charge due after Closing and
charges for sewer, water, electricity, telephone, cable television or gas,
excluding mechanic's liens, (vi) as to assets which are not real property,
rights of vendors and holders of security interests on personal property
installed on the Property and owned by tenants and rights of tenants to remove
trade fixtures at the expiration of the term of the Space Leases of such
tenants, (vii) matters contained in the updated title commitment or survey with
respect to each Property obtained by the Buyer as permitted under Section 9.2
which matters do not qualify as Permitted Exceptions under one of the other
clauses of this definition and with respect to which either (A) the Buyer has
not raised an objection within the time period required in Section 9.2 or (B)
the Buyer has raised an objection within the time period required in Section 9.2
and the Seller has not agreed to cause such title exception to be removed prior
to Closing, provided Buyer either waives such objection at or prior to the
Closing or Buyer closes the transaction despite such objection (viii) liens
securing the NY Life Loan affecting the Property (the matters described in
clauses (i) through (viii) above, collectively, the "Permitted Exceptions").
"Person shall mean a natural person, partnership, limited
partnership, limited liability company, corporation, trust, estate, association,
unincorporated association or other entity.
"Property" shall have the meaning assigned thereto in "Background"
paragraph A.
"Purchase Price" shall have the meaning assigned thereto in
subsection 2.2(a).
"Repayment Costs" shall have the meaning assigned thereto in
subsection 2.2(d).
"Reporting Person" shall have the meaning assigned thereto in
subsection 15.4(c).
"Seller" shall have the meaning assigned thereto in the Preamble to
this Agreement.
<PAGE>
6
"Seller-Related Entities" shall have the meaning assigned thereto in
subsection 12.2.
"Seller's knowledge" shall mean the actual knowledge of the Seller
based upon the actual knowledge of Gary M. Sumers and Marshall Findley without
any duty on the part of any such executive officer or other Person to conduct
any independent investigation or make any inquiry of any Person.
"Seller's Leasing Costs" shall have the meaning assigned thereto in
subsection 11.12(b).
"Space Leases" shall have the meaning assigned thereto in subsection
2.1(b).
"Survival Period" shall have the meaning assigned thereto in
subsection 12.4.
"Tangible Personal Property" shall have the meaning assigned thereto
in Section 2.1(b).
"Tenant Notices" shall have the meaning assigned thereto in Article
VI.
"UCC" shall mean the Uniform Commercial Code adopted by the state in
question.
"Union Contracts" shall mean any and all contracts with the
International Union of Operating Engineers local 186 and its branches.
"Updated Estoppel Certificates" shall have the meaning assigned
thereto in Section 3.3(h).
"Voluntary/De Minimis Title Exceptions" shall mean title exceptions
affecting the Property that are (i) knowingly and intentionally created by the
Sellers or City Center LLC, as applicable, after the date of this Agreement
through the execution by the Sellers or City Center LLC of one or more
instruments creating or granting such title exceptions, or (ii) dischargeable by
the payment of not more than $200,000 (which $200,000 shall be the maximum
aggregate amount required to be spent by the Sellers, collectively, in
connection with all title exceptions, other than those referenced in (i) above,
that arise with respect to the Property), or (iii) without regard to the cap in
clause (ii) above, mechanic's or materialman's liens arising from nonpayment for
any work performed or to be performed by City Center LLC in connection with City
Center LLC's existing lease obligations which are more particularly set forth in
Section 11.12 hereof and on Schedule F-1 and F-4 attached hereto; provided,
however, that the term "Voluntary/De Minimis Title Exceptions" as used in this
Agreement shall not include the following: (a) any Permitted Exceptions; (b)(1)
Space Leases for the Property and ; (b)(2) any title exception created pursuant
to
<PAGE>
7
a Space Lease for the Property by the tenant thereunder, provided such tenant
has the express right under such Space Lease to create such title exception; (c)
any title exceptions that are approved, waived or deemed to have been approved
or waived by the Buyer pursuant to the terms of this Agreement or that are
created in accordance with the provisions of this Agreement; (d) any title
exceptions which, pursuant to a Space Lease for the Property or otherwise, are
to be discharged by a tenant or occupant of such Property; (e) except as set
forth in (iii) of the definition of Voluntary/De Minimis Title Exceptions,
mechanic's or materialman's liens which, when aggregated with any sums required
to discharge title exceptions pursuant to the provisions of (ii) and sums
required to pay any federal tax liens, exceed $200,000 or (f) any federal tax
liens, which when aggregated with any sums required to discharge title
exceptions pursuant to the provisions of (ii) and sums required to discharge any
mechanic's liens, exceed $200,000.
ARTICLE II
SALE, PURCHASE PRICE AND CLOSING
Section II.1 Sale of Asset. (a) On the Closing Date (as hereinafter
defined) and pursuant to the terms and subject to the conditions set forth in
this Agreement, Sellers shall sell to the Buyer, and the Buyer shall purchase
from Sellers, the Asset.
(b) The transfer of the Asset to the Buyer shall include the
transfer, directly or indirectly, of all Asset-Related Property with respect to
such Asset. For purposes of this Agreement, "Asset-Related Property" shall mean
all of the Seller's right, title and interest (to the extent, by operation of
law, the Sellers own such right title and interest), in and to (A) all
easements, covenants and other rights appurtenant to said Property and all
right, title and interest of the Seller, if any, in and to any land lying in the
bed of any street, road, avenue or alley or any other right of way, open or
closed, in front of or adjoining said Property, (B) all furniture, fixtures,
equipment and other tangible personal property (except items owned or leased by
tenants from third parties or which are leased by the Seller which are now, or
may hereafter prior to the Closing Date be, placed in, attached to, situated in
or upon such Property (collectively, with all additions and replacements
thereof, the "Tangible Personal Property"), (C) to the extent they may be
transferred under applicable law, all licenses, franchises, certifications,
approvals, permits and authorizations presently issued in connection with the
operation, ownership and maintenance of all or any part of the Property as it is
presently being operated, (D) to the extent assignable, all warranties, if any,
issued or assigned to the Seller by any manufacturer or contractor in connection
with construction or installation of equipment or any component of the
improvements included as part of the Property, (E) to the extent assignable, all
service,
<PAGE>
8
supply and maintenance contracts including commitments therefor (if any) held by
the Seller with respect to its Property, including, without limitation, those
contracts listed on Schedule E attached hereto (collectively, the "Contracts"),
(F) to the extent assignable by the Seller, all trade names, logos, designs,
trademarks, service marks, copyrights and other general intangibles and
intellectual property (including any computer software programs used in
connection with tenant escalation billings and maintained at the Property)
relating to the Property, including, without limitation, but limited,
nonetheless, to the extent assignable and subject to the provisions of Paragraph
36 of the NCB Space Lease, the name "National City Center" (collectively, the
"Intangible Personal Property") and (G) all leases, licenses, contracts and
other agreements, to the extent transferable, for the use and occupancy of all
or any part of the Property, including, without limitation, all of Sellers' and
City Center LLC's interests, as lessor, in and to the NCB Space Lease (the
"Space Leases") and all security and escrow deposits (including any interest or
other amounts accrued or earned thereon) that are required to be returned to
tenants pursuant to Space Leases held by City Center LLC in connection with any
such leases, licenses, contracts and other agreements. For avoidance of doubt,
it is understood and agreed that the interests of the Sellers in and to the
Property and the Asset-Related Property with respect thereto are indirect and
derivative by virtue of their membership Interests in City Center LLC and no
direct assignment of property rights is intended to occur by the Sellers with
respect to the Asset-Related Property except to the extent that the Sellers are
direct holders of such rights.
Section II.2 Purchase Price; Earnest Money. (a) The consideration
for the Asset shall be equal to One Hundred Million Dollars ($100,000,000) (the
"Purchase Price"), subject to the prorations and credits as hereinafter provided
in this Agreement.
(b) The Purchase Price shall be paid to the Sellers as follows:
(i) simultaneously with the execution of this Agreement, the Buyer
is delivering to Sellers, to be held by Sellers in accordance with the
terms of this Agreement, cash in an amount equal to Fifteen Million
Dollars ($15,000,000.00) in immediately available funds (the cash,
together with any interest earned thereon, shall be referred to as the
"Earnest Money"); the Earnest Money shall be held by Sellers and shall be
nonrefundable to the Buyer except as otherwise set forth in this
Agreement. If for any reason Sellers do not receive, on the date hereof,
the Earnest Money or if Buyer restrains Sellers' receipt or use of the
Earnest Money, Buyer shall continue to be liable (A) to deliver to Sellers
the Earnest Money and (B) in connection with its failure to deliver the
Earnest Money in accordance with this Agreement. In the event the Closing
occurs on the
<PAGE>
9
same day as the date of this Agreement, Buyer shall be obligated to
deliver, or cause the delivery of, the Earnest Money to Sellers and such
monies shall not be treated as Earnest Money, but as a portion of the
Purchase Price payable to the Sellers; and
(ii) on the Closing Date, simultaneously with the delivery of (A) a
marked commitment for an ALTA form 1992 Owner's and Leasehold Owner's
Title Insurance Policy in the amount of the Purchase Price, subject only
to the Permitted Exceptions with extended coverage endorsements (a
"Complying Title Policy") (provided that the sole conditions to the
effectiveness thereof are that Buyer shall have completed, or is
simultaneously completing, all of its Closing obligations and deliveries
in accordance with this Agreement, including payment of the Purchase
Price) and (B) the Sellers' Interests, in accordance with the terms of
this Agreement, the Buyer shall deliver to the Sellers or the Designated
Assignor in immediately available funds by wire transfer to such account
or accounts that the Designated Assignor shall designate to the Buyer, and
subject only to the closing adjustments as provided for in Article XI of
this Agreement, an amount equal to the difference between (x) the Purchase
Price and (y) the sum of (1) the Earnest Money, and (2) the NY Life Loan
Closing Balance, whether assumed or paid provided, however, in the event
that the Closing occurs on the same day as the date of this Agreement, the
Earnest Money shall be deemed to be a portion of the Purchase Price and
Buyer shall be obligated to deliver, or cause the delivery of, the Earnest
Money to Seller as a portion of the Purchase Price; and
(c) No adjustment shall be made to the Purchase Price except as
explicitly set forth in this Agreement.
(d) Upon the Closing, the Buyer shall, at its option, either repay
the outstanding balance of principal and interest on the NY Life Loan
(collectively, the "NY Life Loan Closing Balance") or acquire the Interests,
subject to the outstanding balance of principal and interest on the NY Life
Loan, it being understood that City Center LLC is the borrower under the terms
of the NY Life Loan and the NY Life Loan encumbers the Property. In addition to
the Purchase Price, the Buyer agrees to pay (i) all prepayment, due on sale and
similar amounts, if any, payable to holders of the NY Life Loan in connection
with the transfer of the Asset and the repayment of such NY Life Loan in
connection therewith, and all breakage costs under any interest rate swap, cap
or similar agreement relating to the NY Life Loan (other than any such costs not
set forth in the Loan Documents or written requests previously received by
Buyer), (ii) all assumption fees and similar amounts in connection with the
assumption and retention of such NY Life Loan, including without limitation that
certain 1% assumption fee, and (iii) all legal fees, title fees, other fees and
closing costs required by the holders of the NY
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10
Life Loan in connection with the assumption, retention or repayment thereof
(collectively, the "Repayment Costs"). Notwithstanding anything to the contrary
contained herein, the repayment, retention or assumption of the NY Life Loan
including, without limitation, all Repayment Costs in connection therewith,
shall be the sole responsibility of Buyer hereunder. Sellers hereby agree to
reasonably cooperate in connection with Buyer's assumption or repayment of the
NY Life Loan, including, without limitation, executing any and all instruments
reasonably necessary and specifically required by the NY Life Loan lender to
effectuate same. For the avoidance of doubt, it is hereby understood and agreed
that it shall be the sole responsibility of Buyer to obtain from NY Life any and
all consents necessary in connection with the assumption or repayment of, or the
transferring of the Interests subject to, the NY Life Loan and any failure to
obtain the consent from NY Life shall not be a failure to meet a condition of
Closing and shall not give Buyer a reason to delay the Closing. Buyer hereby
indemnifies and holds Sellers (and all of their affiliates) harmless from and
against all Losses (as hereinafter defined) that Sellers (and/or any of their
affiliates) incur in connection with the assumption or repayment of, or the
transfer of Interests subject to, the NY Life Loan and from and after the
Closing Date (and not subject to the limitations contained in Article XII
hereof), the NY Life Loan.
Section II.3 The Closing. The closing of the purchase and sale of
the Asset (the "Closing") shall take place on February , 1999, TIME BEING OF THE
ESSENCE WITH RESPECT TO BUYER'S OBLIGATIONS HEREUNDER (the "Closing Date"); at
which Closing, subject to the terms and in accordance with the provisions of
this Agreement, including the condition that Buyer deliver to Sellers the
Purchase Price, Sellers shall convey to the Buyer all of their right, title and
interest in and to the Interests. Notwithstanding anything to the contrary
contained herein, TIME SHALL BE OF THE ESSENCE WITH RESPECT TO SELLER'S
OBLIGATIONS HEREUNDER on the day that is fourteen days after the Closing Date.
(a) The Closing shall be held on the Closing Date at 10:00 A.M. at
the offices of Simpson Thacher & Bartlett, 425 Lexington Avenue, New York, New
York, or at such other location agreed upon by the parties hereto.
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11
ARTICLE III
REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE SELLER
Section III.1 General Seller Representations and Warranties. City
Center LLC and each Seller hereby represents, warrants and covenants to the
Buyer as of the date hereof and as of the Closing Date, with respect to itself
and, to the extent applicable, the Property owned and/or the Asset being sold or
assigned by such party, as follows:
(a) Formation; Existence. It is a limited partnership or limited
liability company or corporation, as applicable, duly formed, validly
existing, in good standing under the laws of the state of Delaware and
City Center LLC, is, or will at Closing be, qualified to do business in
the State of Ohio unless the absence of such qualification does not
materially adversely affect the City Center LLC's ownership or ability to
convey the Property or the Asset or performance of its other obligations
under this Agreement.
(b) Power and Authority. It has all requisite power and authority to
enter into and deliver this Agreement, to perform its obligations
hereunder and to consummate the transactions contemplated hereby. The
execution, delivery and performance of this Agreement and the consummation
of the transactions provided for in this Agreement have been duly
authorized by all necessary action on its part. This Agreement has been
duly executed and delivered by it and constitutes its legal, valid and
binding obligation, enforceable against it in accordance with its terms,
except as such enforceability may be limited by bankruptcy, insolvency,
reorganization, moratorium or other laws affecting creditors' rights and
by general principles of equity (whether applied in a proceeding at law or
in equity).
(c) No Consents. Except (i) as set forth in Schedule D and (ii) for
any consent, license, approval, order, permit, authorization,
registration, filing or declaration, the failure of which to obtain will
not adversely affect (A) the individual Seller's ability to consummate the
transactions contemplated by this Agreement, (B) the applicable Seller's
or City Center LLC's ownership of its Asset or Property or (C) in a
material adverse manner, the operation or value of the Property to Buyer,
no consent, license, approval, order, permit or authorization of, or
registration, filing or declaration with, any court, administrative agency
or commission or other governmental authority or instrumentality, domestic
or foreign, is required to be obtained or made in connection with the
execution, delivery and performance of this Agreement or any of the
transactions required or contemplated hereby.
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12
(d) No Conflicts. The execution, delivery and compliance with, and
performance of the terms and provisions of, this Agreement, and the sale
of the Asset will not (i) conflict with or result in any violation of the
relevant Seller's organizational documents, (ii) except as set forth on
Schedule D, to each Seller's knowledge, conflict with or result in any
violation of any provision of any bond, note or other instrument of
indebtedness, contract, indenture, mortgage, deed of trust, loan
agreement, lease or other agreement or instrument to which such Seller or
City Center LLC is a party in its individual capacity, or (iii) violate
any existing term or provision of any order, writ, judgment, injunction,
decree, statute, law, rule or regulation applicable to that Seller or its
assets or properties except, in each case, for any conflict or violation
which (A) will not adversely affect (1) the Seller's ability to consummate
the transactions contemplated by this Agreement, (2) the ownership of the
Asset or Property (3) in a material adverse manner, the operation by City
Center LLC of the Property or value thereof or (B) arises under the
documents evidencing or securing the NY Life Loan.
(e) Subsidiaries/ Authority to Conduct Business. City Center LLC has
no subsidiaries. Except to the extent that the absence of such power does
not materially adversely affect the City Center LLC's ownership or ability
to convey the Property and the Asset or performance of its other
obligations under this Agreement, City Center LLC has full power and
authority to carry on the lines of business it currently conducts and to
own, lease and use the properties owned, leased and used by it.
(f) Limited Liability Company Agreement. That certain BRE/City
Center L.L.C. Limited Liability Company Agreement dated as of December 2,
1997, a copy of which was previously delivered to Buyer, (i) constitutes
the entire agreement between the Sellers with respect to City Center LLC
and (ii) has not been amended or modified.
(g) Sellers. As of the date of this Agreement and as of the Closing
Date, the identity of each Seller, and the respective percentage ownership
interest of each Seller, is set forth on Schedule A. The Sellers are the
owners of all of the issued and outstanding interests in City Center LLC
free and clear of any and all liens, claims, encumbrances and security
interests. None of the Interests in City Center LLC listed here on
Schedule A have been transferred, assigned, sold, hypothecated, pledged or
encumbered.
(h) Restrictions upon Acquisition of Interests. Except as set forth
in this Agreement and except with respect to any right of first refusal or
purchase option affecting the Property and in connection with the NY Life
Loan, there are no subscriptions, warrants, options,
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13
conversion rights or other agreements of any kind to purchase or otherwise
acquire or sell any Seller's Interest in City Center LLC.
(i) Transferability of Interests. Except with respect to the NY Life
Loan and any right of first refusal or purchase option affecting the
Property, to the extent applicable, City Center LLC is not a party to, and
to its knowledge, no Seller is a party to, any voting agreement, voting
trusts, proxies or any other agreements, instruments or understandings
with respect to the voting of any Interests of City Center LLC, or any
agreements with respect to the transferability of any Interest in City
Center LLC.
(j) Liabilities. As of the date reflected on the Financial
Statements (as defined below), City Center LLC does not have any
obligations or liabilities required to be reflected on a balance sheet in
accordance with preparation of a balance sheet on an accrual basis of
accounting used for income tax purposes ("Tax Basis") other than (a)
liabilities reflected on the unaudited financial statements of City Center
LLC internally prepared on a Tax Basis for the period from December 17,
1997 (inception) to December 31, 1997 and for the eleven months ending
November 30, 1998, and on the unaudited monthly operating statements of
City Center LLC for the eleven months ending November 30, 1998, internally
prepared on a Tax Basis for their respective periods (such financial and
operating statements collectively, the "Financial Statements"), (b)
liabilities arising out of the NY Life Loan and (c) leases, contracts or
other matters disclosed in this Agreement. The foregoing representation
shall not imply that Buyer is assuming the liabilities set forth on the
Financial Statements other than the NY Life Loan, which NY Life Loan has
an outstanding principal balance of $61,820,136 as of November 30, 1998.
Accounts payable and real estate taxes which are shown on the Financial
Statements will be handled in the manner described in Article XI of this
Agreement.
(k) Financial Statements. City Center LLC has delivered to the Buyer
prior to the date hereof the Financial Statements, prepared on a Tax
Basis, as the case may be, which Financial Statements are true, correct
and complete and, in accordance with the basis used for their preparation,
fairly present the assets, liabilities and financial condition of City
Center LLC as of the date of such Financial Statement and the results of
operations for the periods then ended, as applicable.
(l) Obligations. Between the date that City Center LLC's Financial
Statements are delivered to Buyer and the Closing Date, and other than in
connection with (i) the NY Life Loan as requested by Buyer or (ii) as
permitted under the provisions of this Agreement: City Center LLC will not
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14
incur any obligations, contingent or non-contingent liabilities or
liabilities for any charges, long-term leases or unusual forward or
long-term commitments which are not reflected on the balance sheet of City
Center LLC or disclosed hereunder and which could, alone or in the
aggregate, reasonably be expected to have a material adverse effect on the
ownership, operation or value of the Property or the Interests, unless
approved by Buyer, which approval shall not be unreasonably withheld.
(m) Income Taxes. All federal, state, municipal and other income tax
returns and reports required by law to be filed by City Center LLC before
the date hereof have been duly executed and filed and with respect to such
income taxes, all taxes, levies, imposts, deductions, or withholdings, and
all liabilities with respect thereto, interest and penalties due have been
paid in full. No such returns have been subject to written requests for
data by, notice for audit by, or under audit by, any taxing authority.
(n) Foreign Person. The Seller is not a "foreign person" as defined
in Internal Revenue Code Section 1445 and the regulations issued
thereunder.
Section III.2 Representations and Warranties of the Sellers as to
the Assets. Each Seller and City Center LLC hereby represents, warrants and
covenants to the Buyer as of the date hereof and as of the Closing Date, with
respect to the Asset and Property owned by such Seller or City Center LLC, as
follows:
(a) Ownership of the Asset. (i) Such Seller or City Center LLC is
the owner of the Asset or Property free and clear of any lien, pledge,
charge, security interest, encumbrance, title retention agreement, adverse
claim or restriction except for the Permitted Exceptions and (ii) with
respect to the Ground Lease, the Ground Lease is in full force and effect,
neither Seller, nor City Center LLC, has received any notice of default
(which remains uncured) and knows of no event which with the giving of
notice or the passing of time or both will constitute a default under such
Ground Lease, and the Seller and City Center LLC have not terminated or
modified or, as applicable, caused City Center LLC to terminate or modify
the Ground Lease, except as set forth on Schedule A-2. It has the right to
sell the Asset pursuant to the terms of this Agreement. Upon transfer of
the Asset by Seller to the Buyer and upon delivery by the Buyer to the
Sellers of the Purchase Price, the Buyer will receive the Asset free and
clear of any encumbrances other than (i) the Permitted Exceptions and
(ii)any encumbrances arising from acts of the Buyer or its affiliates. It
has not prior to the date hereof sold (or entered into an agreement to
sell) the Asset, and with respect to the Property, the Seller has not
caused City Center LLC to sell
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15
(or enter any agreement to sell) said Property (except for the possible
granting of security interests, all of which, except with respect to the
NY Life Loan being assumed or taken subject to by Buyer, will be
terminated prior to the Closing). Other than as set forth on Schedule C-1
hereto and except as contained in the Loan Documents, there are no
options, instruments or agreements to which any Interest is bound or
pursuant to which any such Interest might be restricted or otherwise
encumbered.
(b) Contracts. The Contracts affecting the Property are set forth on
Schedule E attached hereto and to each Seller's knowledge the same have
not been modified or amended, except as shown in such documents. Neither
Seller, nor City Center LLC, has received any written notice of default
under any of the Contracts affecting the Property (which remains uncured).
(c) Space Leases. With respect to the Space Leases listed on
Schedule F and F-2 attached hereto, (A) such Space Leases constitute all
the leases, licenses or other occupancy agreements relating to the
Property, (B) such Space Leases have not been modified or terminated
except as stated in Schedule F, (C) such Space Leases contain the entire
agreement between the relevant landlord and the tenants named therein, (D)
except as set forth in Schedules F and F-2, fixed rent and additional rent
are currently being collected under such Space Leases without offset,
counterclaim or deduction and (E) neither Seller, nor City Center LLC, has
received any written notice of a default (which remains uncured) or has
knowledge of any event which with the giving of notice or the passage of
time or both will constitute a default under any of the Space Leases. True
copies of the Space Leases have been delivered to the Buyer. Except as set
forth on Schedules F-1 and F-2, all tenant improvements or other
construction work which as of the date of this Agreement are required to
be performed by the landlord under the Space Leases have been or will be
prior to the relevant Closing Date fully completed or made and paid for.
Schedule I sets forth a true and complete list of security deposits held
by City Center LLC, respectively, under the Space Leases. Except for the
Space Leases, or as otherwise set forth in this Agreement or in the Asset
Files, to Seller's and City Center LLC's knowledge, no other Persons have
legal agreements to occupy or possess any portion of the relevant
Property, excluding any subtenants, occupants or licensees pursuant to any
of the Space Leases. Notwithstanding anything contained in this subsection
3.2(c), from and after the date of this Agreement until the Closing Date,
Buyer shall notify Seller if Buyer discovers an inconsistency between the
representations and warranties contained in this subsection and any Space
Leases which it deems relevant and Buyer's failure to notify Seller of
such inconsistency prior to the
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16
Closing shall constitute a waiver by Buyer of any right or claim Buyer may
have against the Seller and City Center LLC with respect to such
inconsistency, including any claims under Article XII of this Agreement.
(d) Brokerage Commissions. There are no brokerage commissions or
finders' fees payable by the Sellers or City Center LLC with respect to
the current or any renewal term of any of the Space Leases affecting the
Property other than those set forth on Schedule G attached hereto and
neither Sellers nor City Center LLC has any agreement with any broker with
respect to any renewal term of any Space Lease except as set forth in
Schedule G.
(e) Condemnation. There are no pending condemnation, eminent domain
or similar proceedings affecting the Property, and no street widening,
change of grade nor limitations on the use of the street abutting the
Property, nor does such Seller have knowledge that any of the foregoing is
threatened or contemplated.
(f) Litigation. Except as disclosed in Schedule H attached hereto,
there are no actions, suits or proceedings pending against or, to Seller's
or City Center LLC's knowledge, affecting the Asset, the Property, any
Seller or City Center LLC in any court or before or by an arbitration
tribunal or regulatory commission, department or agency which, if
adversely determined, would adversely affect (1) that particular Seller's
ability to consummate the transactions contemplated by this Agreement, (2)
the ownership of the Asset or (3) in a material adverse manner, the
operation or value of the Property. Each Seller represents that except as
disclosed in Schedule H attached hereto, there are no actions, suits or
proceedings pending against or, to its knowledge affecting the Interests
in any court or before or by an arbitration tribunal or regulatory
commission, department or agency.
(g) Environmental Violations. Neither Seller nor City Center LLC has
received written notice of a violation of law with respect to Hazardous
Materials on or about the Property (which has not been cured in accordance
with all applicable federal, state and local laws, statutes, codes,
ordinances, rules, regulation and guidelines).
(h) Loan Documents. The Loan Documents, including all amendments,
modifications and supplements thereto with respect to the NY Life Loan are
set forth on Schedule C attached hereto, and City Center LLC has not
received any notice of default or acceleration under the Loan Documents
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17
(which remains uncured) and City Center LLC is current with respect to
payments of principal and interest under the NY Life Loan. The mortgages
and the other Loan Documents which are security documents executed by City
Center LLC, do not secure debt other than the NY Life Loan.
Section III.3 Covenants of the Sellers Prior to Closing. From the
date of this Agreement until the Closing Date, (i) City Center LLC and its
agents shall with respect to the Property, and (ii) the Sellers shall cause the
City Center LLC or its agents, with respect to the Property to:
(a) Insurance. Keep the Property insured against fire and other
hazards covered by the insurance policies maintained by City Center LLC on
the date of this Agreement, and continue to maintain in effect City Center
LLC's comprehensive general liability insurance policy maintained on the
date hereof.
(b) Operation. Operate and maintain the Property in a businesslike
manner and substantially in accordance with the City Center LLC's past and
present practices with respect to the Property.
(c) New Contracts. Not enter into, nor cause City Center LLC to
enter into, third party or other contracts relating to the Property,
without the prior written consent of the Buyer, which consent shall not be
unreasonably withheld, except that no such consent shall be required if
such contract (i) is necessary as a result of an emergency at the Property
(and such contract is not binding post-closing), or (ii) is terminable
without payment of a termination fee upon no more than 30 days prior
written notice and provided that the amount payable under all such
contracts for the 30 day period does not exceed, in the aggregate,
$25,000, unless such contract is terminable at will. If City Center LLC
enters into any third party contracts after the date of this Agreement,
then Sellers shall promptly provide written notice and a copy thereof to
the Buyer and unless such contract required the Buyer's approval pursuant
to this paragraph and such approval was not obtained and subject to
Buyer's right to terminate such contracts in a timely manner as described
above, the Buyer shall assume such contract at Closing, such contract
shall be deemed added to Schedule E attached hereto and Schedule E shall
be deemed amended at the Closing to include such contracts. If a new
contract requires the Buyer's approval and the Buyer does not object
within ten Business Days after receipt of a copy of such contract, then
the Buyer shall be deemed to have approved such contract. Notwithstanding
the foregoing and except in connection with Union Contracts, the Sellers
shall
<PAGE>
18
terminate, on or before the Closing Date, any Contracts listed on Schedule
E-1 hereto and the Sellers shall be responsible for any termination fees
and penalties due in connection with such terminations.
(d) New Space Leases. (i) Cause City Center LLC to continue, its
present rental program and efforts at the Property to rent vacant space,
except with respect to Contemplated Leases (which Contemplated Leases are
deemed consented to by the Buyer hereunder) and further provided that
without the prior consent of the Buyer, which consent shall not be
unreasonably withheld, the Seller will not execute, or cause City Center
LLC to execute, any new lease or amend, terminate or accept the surrender
of any existing tenancies or approve any subleases, except that City
Center LLC is authorized to accept the termination of Leases at the end of
their existing terms or the termination of any Space Lease subject to an
existing unilateral termination right exercised by any tenant under any
Space Lease. If a new Space Lease or an amendment, renewal or extension of
an existing Space Lease requires the Buyer's consent and the Buyer does
not object within ten Business Days after receipt of a copy of such lease,
amendment, extension or renewal and financial and credit and other
information relating to the tenant reasonably requested by Buyer, then the
Buyer shall be deemed to have approved such Space Lease.
(ii) If City Center LLC enters into any Space Leases after the date
of this Agreement in accordance with the provisions of clause (i) above,
the Buyer shall assume such Space Lease at Closing, such Space Lease shall
be deemed added to Schedule F attached hereto and Schedule F shall be
deemed amended at the Closing to include such Space Lease.
(e) Litigation. Advise the Buyer promptly of any litigation,
arbitration proceeding or administrative hearing, or upon receipt of any
written notice of an intention to institute same (including condemnation
and eminent domain), before any court or governmental agency which affects
the Asset or the Property in any respect, which is instituted after the
date of this Agreement and which, if adversely determined, would adversely
affect (1) the Sellers' ability to consummate the transactions
contemplated by this Agreement, (2) the ownership of the Asset or the
Property, or (3) in a materially adverse manner, the operation or value of
the Property or the Asset.
(f) Sale of Tangible Personal Property. Not transfer or dispose of,
or permit to be sold, transferred or otherwise disposed of, any item or
group of items constituting Tangible Personal Property
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19
associated with the Property, except for the use and consumption of
inventory, office and other supplies and spare parts, and the replacement
of worn out, obsolete and defective tools, equipment and appliances, in
the ordinary course of business.
(g) Performance Under Space Leases. Perform, or cause City Center
LLC, or any of its agents, to perform all material obligations of landlord
or lessor under the Space Leases for the Property.
(h) Updated Estoppel Certificates. Sellers shall, or cause City
Center LLC to, request from tenants under Space Leases and from the City
Center Ground Lessor updated, confirmatory estoppel certificates
confirming the information certified to by said tenants and the City
Center Ground Lessor in the estoppel certificates previously delivered to
Buyer (the "Updated Estoppel Certificates"); provided, however, that the
delivery of any one or more of such Updated Estoppel Certificates shall
not be deemed a condition to Buyer's obligation to Close, and further,
provided that neither the failure by Seller to deliver any one or more of
the Updated Estoppel Certificates, nor the contents of any one or more of
such Updated Estoppel Certificates, shall give Buyer a reason to delay the
Closing or terminate this Agreement.
(i) Loan Documents. City Center LLC will not, and the Sellers will
cause City Center LLC not to enter into any amendment or modification of
any Loan Documents without the Buyer's prior written consent, which
consent will not be unreasonably withheld or delayed.
(j) Security Deposits. Except with respect to the ongoing use and
application of Security Deposits as disclosed on Schedule I, the Seller
shall, or cause City Center LLC to, notify Buyer upon the use or
application by City Center LLC of any security deposit being held by such
City Center LLC in connection with a Space Lease.
(k) Due Diligence Requests. Unless such items have been previously
delivered by or on behalf of Sellers to Buyer, within three Business Days
after written request by facsimile or otherwise, Sellers shall deliver, or
cause City Center LLC to deliver, to Buyer, all leases, operating
statements, loan documents, ground leases, title and survey documentation
and such other documentation related to the Property as Buyer may
reasonably request from time to time.
(l) Updating Information. Sellers and City Center LLC shall make a
good faith effort to deliver to Buyer any information of which Sellers or
City Center LLC become aware concerning material events subsequent to the
date of this Agreement which is necessary to supplement the information
<PAGE>
20
contained in or made a part of the representations and warranties
contained herein.
(m) Review of Books and Records. Sellers and City Center LLC shall
cooperate in good faith with Buyer and Buyer's accountants in connection
with Buyer's accountants review of Sellers' and City Center LLC's books,
records and financial statements and information. To enable accountants to
better meet reporting obligations required by Rule 3-14 of the federal
securities laws and in such connection Sellers shall cause City Center LLC
to provide to Buyer's auditors a certification in the form of Exhibit D
attached hereto stating that the statement of revenues and certain
expenses which City Center LLC furnishes to such auditors, with respect to
City Center LLC's property, fairly represents such information as was
contained on the statements, except as noted, and further, City Center LLC
shall provide access to City Center LLC's books and records as is
necessary for Buyer's auditors to do a Rule 3-14 review. Notwithstanding
anything to the contrary contained herein, except for the above-referenced
certification, neither Sellers, nor City Center LLC, shall be obligated to
make any other statement or certification to Buyer's auditors or otherwise
in connection with this Section 3.3(m).
(n) Entity Status. City Center LLC shall preserve, renew and keep in
full force and effect its existence and qualification in the State of
Delaware and, if the absence of such qualification would materially
adversely affect City Center LLC's ownership or ability to convey the
Property or the performance by City Center LLC or the Sellers of their
respective obligations under this Agreement, in the State of Ohio.
(o) Property Management Employees. Seller or City Center LLC shall
permit Buyer, upon notice to Seller to interview employees that Buyer
intends to retain after the Closing.
(p) Tax Returns, Taxes. All federal, state, municipal and other tax
returns and reports required by law to be filed by City Center LLC before
the date hereof have been duly executed and filed and, except with respect
to any real estate taxes, all taxes, levies, imposts, deductions, or
withholdings, and all liabilities with respect thereto, interest and
penalties due thereon have been paid in full. No such returns have been
subject to written requests for material data by, notice for audit by, or
are under audit by any taxing authority.
ARTICLE IV
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21
REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE BUYER
Section IV.1 Representations, Warranties and Covenants of the Buyer.
The Buyer hereby represents, warrants and covenants to the Sellers as of the
date hereof and as of the Closing Date as follows:
(a) Formation; Existence. Buyer is a limited partnership duly
organized, validly existing and in good standing under the laws of the
State of Delaware.
(b) Power; Authority. The Buyer has all requisite power and
authority to enter into this Agreement, to perform its obligations
hereunder and to consummate the transactions contemplated hereby. The
execution, delivery and performance of this Agreement, the purchase of the
relevant Asset and the consummation of the transactions provided for
herein have been duly authorized by all necessary action on the part of
the Buyer. This Agreement has been duly executed and delivered by the
Buyer and constitutes the legal, valid and binding obligation of the Buyer
enforceable against the Buyer in accordance with its terms, except as such
enforceability may be limited by bankruptcy, insolvency, reorganization,
moratorium or other laws affecting creditors' rights and by general
principles of equity (whether applied in a proceeding at law or in
equity).
(c) No Consents. Other than the filing of this Agreement with the
Securities and Exchange Commission, no consent, license, approval, order,
permit or authorization of, or registration, filing or declaration with,
any court, administrative agency or commission or other governmental
authority or instrumentality, domestic or foreign, is required to be
obtained or made in connection with the execution, delivery and
performance of this Agreement or any of the transactions required or
contemplated hereby.
(d) No Conflicts. The execution, delivery and compliance with, and
performance of the terms and provisions of, this Agreement, and the
purchase of the Assets, will not (a) conflict with or result in any
violation of its organizational documents, (b) conflict with or result in
any violation of any provision of any bond, note or other instrument of
indebtedness, contract, indenture, mortgage, deed of trust, loan
agreement, lease or other agreement or instrument to which it is a party
in its individual capacity, or (c) violate any existing term or provision
of any order, writ, judgment, injunction, decree, statute, law, rule or
regulation applicable to it or its assets or properties.
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22
(e) Examination; No Contingencies. In entering into this Agreement,
the Buyer has not been induced by and has not relied upon any written or
oral representations, warranties or statements, whether express or
implied, made by BREA, the Sellers, City Center LLC, any partner of BREA
or the Sellers, or any agent, employee, or other representative of any of
the foregoing or by any broker or any other person representing or
purporting to represent BREA and/or the Sellers or City Center LLC with
respect to the Assets, the Condition of the Assets or any other matter
affecting or relating to the transactions contemplated hereby, other than
those expressly set forth in this Agreement (for purposes of this Section
(e) only the term "Seller" shall include the "City Center LLC" and "Asset"
and "Condition of the Asset" shall include the Property and all
Asset-Related Property with respect to the Property). The Buyer's
obligations under this Agreement shall not be subject to any
contingencies, diligence or conditions except as expressly set forth in
this Agreement. The Buyer acknowledges and agrees that, except as
expressly set forth herein, the Sellers make no representations or
warranties whatsoever, whether express or implied or arising by operation
of law, with respect to the Assets or the Condition of the Assets. The
Buyer agrees that each Asset will be sold and conveyed to (and accepted
by) the Buyer at Closing in the then existing condition of the Asset, AS
IS, WHERE IS, WITH ALL FAULTS, AND WITHOUT ANY WRITTEN OR VERBAL
REPRESENTATIONS OR WARRANTIES WHATSOEVER, WHETHER EXPRESS OR IMPLIED OR
ARISING BY OPERATION OF LAW, other than representations and warranties of
the Seller expressly set forth in this Agreement or in any closing
documents delivered at Closing. Without limiting the generality of the
foregoing, except for the representations and warranties of the Seller
contained in this Agreement, the transactions contemplated by this
Agreement are without statutory, express or implied warranty,
representation, agreement, statement or expression of opinion of or with
respect to (A) the Condition of the Assets or any aspect thereof,
including, without limitation, any and all statutory, express or implied
representations or warranties related to the suitability for habitation,
merchantability, or fitness for a particular purpose, (B) the nature or
quality of construction, structural design or engineering of the
improvements included in the Property, (C) the quality of labor or
materials included in the improvements included in the Property, (D) the
soil conditions, drainage, topographical features, flora, fauna, or other
conditions of or which affect the Property, (E) any conditions at or which
affect the Property with respect to a particular use, purpose,
development, potential or otherwise, (F)
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23
areas, size, shape, configuration, location, access, capacity, quantity,
quality, cash flow, expenses, value, condition, make, model, composition,
accuracy, completeness, applicability, assignability, enforceability,
exclusivity, usefulness, authenticity or amount, (G) any statutory,
express or implied representations or warranties created by any
affirmation of fact or promise, by any description of the Assets, the
Property or by operation of law, (H) any environmental, botanical,
zoological, hydrological, geological, meteorological, structural, or other
condition or hazard or the absence thereof heretofore, now or hereafter
affecting in any manner the Property and (I) all other statutory, express
or implied representations or warranties by the Seller whatsoever. The
Buyer acknowledges that the Buyer has knowledge and expertise in financial
and business matters that enable the Buyer to evaluate the merits and
risks of the transactions contemplated by this Agreement.
(f) For purposes of this Agreement and with respect to each Asset,
the term "Condition of the Asset" means the following matters:
(A) Physical Condition of the Property. The quality, nature
and adequacy of the physical condition of the Property, including,
without limitation, the quality of the design, labor and materials
used to construct the improvements included in the Property; the
condition of structural elements, foundations, roofs, glass,
mechanical, plumbing, electrical, HVAC, sewage, and utility
components and systems; the capacity or availability of sewer,
water, or other utilities; the geology, flora, fauna, soils,
subsurface conditions, groundwater, landscaping, and irrigation of
or with respect to the Property, the location of the Property in or
near any special taxing district, flood hazard zone, wetlands area,
protected habitat, geological fault or subsidence zone, hazardous
waste disposal or clean-up site, or other special area, the
existence, location, or condition of ingress, egress, access, and
parking; the condition of the personal property and any fixtures;
and the presence of any asbestos or other Hazardous Materials,
dangerous, or toxic substance, material or waste in, on, under or
about the Property and the improvements located thereon. "Hazardous
Materials" means (A) those substances included within the
definitions of any one or more of the terms
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24
"hazardous substances," "toxic pollutants", "hazardous materials",
"toxic substances", and "hazardous waste" in the Comprehensive
Environmental Response, Compensation and Liability Act, 42 U.S.C.
ss. 9601 et seq. (as amended), the Hazardous Materials
Transportation Act, as amended, 49 U.S.C. Sections 1801 et seq., the
Resource Conservation and Recovery Act of 1976 as amended, 42 U.S.C.
Section 6901 et seq., Section 311 of the Clean Water Act and any
similar state laws or any regulations issued under any such laws and
(B) petroleum, radon gas, lead based paint, asbestos or asbestos
containing material and polychlorinated biphenyls.
(B) Adequacy of the Asset. The economic feasibility, cash flow
and expenses of the Asset, and habitability, merchantability,
fitness, suitability and adequacy of the Property for any particular
use or purpose.
(C) Legal Compliance of the Asset. The compliance or
non-compliance of the Seller, City Center LLC or the operation of
the Property or any part thereof in accordance with, and the
contents of, (i) all codes, laws, ordinances, regulations,
agreements, licenses, permits, approvals and applications of or with
any governmental authorities asserting jurisdiction over the
Property, including, without limitation, those relating to zoning,
building, public works, parking, fire and police access, handicap
access, life safety, subdivision and subdivision sales, and
Hazardous Materials, dangerous, and toxic substances, materials,
conditions or waste, including, without limitation, the presence of
Hazardous Materials in, on, under or about the Property that would
cause state or federal agencies to order a clean up of the Property
under any applicable legal requirements and (ii) all agreements,
covenants, conditions, restrictions (public or private), condominium
plans, development agreements, site plans, building permits,
building rules, and other instruments and documents governing or
affecting the use, management, and operation of the Property.
(D) Matters Disclosed in the Scheduled Documents and Asset
File. Those matters referred to in this Agreement and the documents
listed on the Schedules attached hereto and the matters disclosed in
the Asset File.
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25
(E) Insurance. The availability, cost, terms and coverage of
liability, hazard, comprehensive and any other insurance of or with
respect to the Property.
(F) Condition of Title. The condition of title to the
Property, including, without limitation, vesting, legal description,
matters affecting title, title defects, liens, encumbrances,
boundaries, encroachments, mineral rights, options, easements, and
access; violations of restrictive covenants, zoning ordinances,
setback lines, or development agreements; the availability, cost,
and coverage of title insurance; leases, rental agreements,
occupancy agreements, rights of parties in possession of, using, or
occupying the Property; and standby fees, taxes, bonds and
assessments.
(g) Buyer's Affiliate/Assignee. In the event that Buyer, in
accordance with the terms of, and as permitted by, Section 15.7 hereof,
shall designate an "Affiliate" or an assignee or designee to which the
Asset will be transferred at Closing, the representations and warranties
and all covenants and obligations set forth in this Agreement, including,
without limitation, the provisions of this Section 4.1, shall apply with
respect to Buyer's Affiliate or assignee or designee as if Buyer's
Affiliate or assignee or designee was named as Buyer hereunder, and all
representations and warranties shall be true, complete and accurate as of
the Closing Date. Notwithstanding the foregoing, nothing contained herein
shall be construed as relieving Buyer of any of its obligations or
liabilities under this Agreement.
(h) Like Kind Exchange. In the event that Sellers elect to utilize a
like-kind exchange (within the meaning of Section 1031 of the Internal
Revenue Code of 1986, as amended), Buyer shall reasonably cooperate with
Sellers in connection with Sellers' election and shall execute any and all
documents reasonably requested by Seller in connection therewith.
Notwithstanding anything to the contrary contained herein, including the
representations and covenants regarding this Agreement or similar
understandings on the part of Buyer, the Sellers may enter into
intermediate contracts or other agreements to sell the Interests to the
third party that enters into such contract or agreement with Sellers and
Buyer shall proceed to purchase the Interests from such third party on the
same terms and conditions as set forth in this Agreement, provided,
however, that Buyer shall not incur any cost or liability if Seller elects
to utilize a like-kind exchange as provided for herein.
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26
(i) NY Life Loan. Buyer hereby agrees that it will not enter into
any agreement with the Third Party lender or in connection with the NY
Life Loan pursuant to which Buyer agrees to pay an increased prepayment
fee or charge in connection with the prepayment of the NY Life Loan in
exchange for another benefit to Buyer and Buyer shall disclose to Seller
any agreement with the Third Party lender with respect to such NY Life
Loan.
ARTICLE V
CONDITIONS PRECEDENT TO CLOSING
Section V.1 Conditions Precedent To Seller's Obligations. The
obligation of each Seller to consummate the transfer of the Asset to the Buyer
on the applicable Closing Date is subject to the satisfaction (or waiver) by the
Seller as of the Closing of the following conditions:
(a) Each of the representations and warranties made by the Buyer in
this Agreement shall be true and correct in all material respects when
made and on and as of the Closing Date as though such representations and
warranties were made on and as of the Closing Date.
(b) The Buyer shall have performed or complied in all material
respects with each obligation and covenant required by this Agreement to
be performed or complied with by the Buyer on or before the Closing.
(c) No order or injunction of any court or administrative agency of
competent jurisdiction nor any statute, rule, regulation or executive
order promulgated by any governmental authority of competent jurisdiction
shall be in effect as of the Closing which restrains or prohibits the
transfer of the Asset or the consummation of any other transaction
contemplated hereby.
(d) The Sellers shall have received all of the documents required to
be delivered by the Buyer under Article VI.
(e) The Sellers shall have received the Purchase Price in accordance
with subsection 2.2(b) and all other amounts due to the Sellers hereunder.
Section V.2 Conditions to the Buyer's Obligations. (a) The
obligation of the Buyer to purchase and pay for the Asset is subject to the
satisfaction (or waiver) by the Buyer as of each Closing of the following
conditions:
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27
(1) Each of the representations and warranties made by the Sellers
in this Agreement, with respect to the Asset and the Property being
conveyed on the Closing Date, shall be true and correct in all material
respects when made and on and as of such Closing Date as though such
representations and warranties were made on and as of the Closing Date.
(2) The Sellers shall have performed or complied in all material
respects with each obligation and covenant required by this Agreement to
be performed or complied with by Sellers with respect to the Asset and the
Property on or before the Closing.
(3) No order or injunction of any court or administrative agency of
competent jurisdiction nor any statute, rule, regulation or executive
order promulgated by any governmental authority of competent jurisdiction
shall be in effect as of the Closing which restrains or prohibits the
transfer of the Asset at Closing or the consummation of any other
transaction scheduled to occur at Closing.
(4) With respect to the Property title shall be, at the time of
Closing, in the form, required under Section 9.1, as evidenced by a
Complying Title Policy;
(5) The Buyer shall have received all of the documents required to
be delivered by the Sellers under Article VI.
(6) The Property shall be in the same material condition as the day
hereof subject to reasonable wear and tear and the provisions of Section
10.2.
ARTICLE VI
CLOSING DELIVERIES
(a) At the Closing, the Buyer shall deliver, the following
documents:
(i) an Assignment and Assumption of Interests substantially in the
form of Exhibit A hereto; and
(ii) amendments to the limited liability company agreement and
articles of organization for City Center LLC reflecting the assignment of
membership Interests.
(iii) such other assignments, instruments of transfer, and other
documents as the Seller may reasonably require in order to complete the
transactions contemplated hereunder or to evidence compliance by the Buyer
with the covenants, agreements,
<PAGE>
28
representations and warranties made by it hereunder, in each case, duly
executed by the Buyer;
(iv) a duly executed and sworn Secretary's Certificate from the
Buyer (or the managing general partner or the administrative member of the
Buyer, where appropriate) certifying that the Buyer has taken all
necessary action to authorize the execution of all documents being
delivered hereunder and the consummation of all of the transactions
contemplated hereby and that such authorization has not been revoked,
modified or amended;
(v) an executed and acknowledged Incumbency Certificate from the
Buyer (or the managing general partner or administrative member of the
Buyer, where appropriate) certifying the authority of the officers of the
Buyer (or the general partner of the Buyer, where appropriate) to execute
this Agreement and the other documents delivered by the Buyer to the
Seller at the Closing;
(vi0 such other proof as Seller may reasonably request from time to
time to evidence the authority of the Buyer and its officers and directors
to execute all documents being delivered hereunder and consummate the
transactions contemplated hereby;
(vii0 all consents, approvals or waivers listed on Schedule J on
terms satisfactory to the Sellers;
(viii0 all transfer tax returns which are required by law and the
regulations issued pursuant thereto in connection with the payment of all
state or local real property transfer taxes that are payable or arise as a
result of the consummation of the transactions contemplated by this
Agreement, as prepared, determined and apportioned by Sellers and duly
executed by the Buyer;
(ix0 any forms or affidavits required to be filed with respect to
the transfer of the Interests;
(x0 a closing statement prepared by Seller in accordance with the
terms hereof (such delivery may be waived by Seller as to the condition
precedent benefitting it); and
(xi0 with respect to the NY Life Loan being assumed or taken subject
to by Buyer at Closing:
(A) such documents as the holder of such NY Life Loan shall
require in connection with the assumption or retention of such NY
Life Loan by the Buyer, including,
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29
without limitation, replacement guaranties, letters of credit or
other credit support to the extent such credit support has been
provided by the Seller or their affiliates;
(B) letters of credit necessary in order to obtain the return
of any letters of credit provided with respect to the NY Life Loan
currently being held by or for the benefit of the Third Party
lender; and
(C) releases in the form of Exhibit D, executed by the holders
of the NY Life Loan being assumed by the Buyer at that Closing,
releasing Seller and its affiliates, officers, directors and agents
from all liability which may accrue or arise from and after the
applicable Closing Date with respect to the NY Life Loan or under
any of the Loan Documents (including all guaranties, indemnities and
letters of credit provided by the Sellers).
(b At the Closing, the Sellers shall deliver the following
documents:
(i0 an Assignment and Assumption of Interests substantially in the
form of Exhibit A attached hereto; and
(ii0 a true and complete copy of the Limited Liability Company
Agreement.
(iii0 all keys and keycards to the Property which are in the
Seller's possession;
(iv0 an affidavit that the Sellers are not a "foreign person" within
the meaning of the Foreign Investment in Real Property Tax Act of 1980, as
amended, in substantially the form of Exhibit C hereto;
(v0 copies, or to the extent available originals, of all Ground
Leases, Space Leases, Contracts, Licenses and Asset Files (at Seller's
option such items will be made available at the Property);
(vi0 evidence that each terminated contract has been terminated or
that all actions necessary to terminate such contract have been taken; and
(vii0 a closing statement prepared by Sellers in accordance with the
terms hereof (such delivery may be waived by Buyer, as to the condition
precedent benefitting it);
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30
(viii0 evidence of termination of Property Management Agreement
affecting the Property;
(ix0 evidence that all steps have been taken by Sellers with respect
to the termination of the employees of the Property other than(i)
employees pursuant to Union Contracts, whose Contracts shall not be
terminated and (ii) those being assumed by Buyer hereunder;
(x0 a legal opinion from Sellers' counsel opining as to the
partnership or corporate power and authority, as the case may be, of each
of the Sellers;
(xi0 such other assignments, instruments of transfer, and other
documents as the Buyer may reasonably require in order to complete the
transactions contemplated hereunder or to evidence compliance by the
Seller with the covenants, agreements, representations and warranties made
by it hereunder;
(xii0 a duly executed certificate from either an officer or a duly
authorized Person of City Center certifying that City Center has taken all
necessary action to authorize the execution of all documents being
delivered hereunder and the consummation of all of the transactions
contemplated hereby and that such authorization has not been revoked,
modified or amended;
(xiii0 an executed unanimous written consent of the Founding Members
of BREA II L.L.C., as general partner of Blackstone Real Estate Management
Associates II L.P., as general partner of Blackstone Real Estate
Associates II L.P., as general partner of Sellers, except Blackstone Real
Estate Investors (City Center) Inc., authorizing the execution of this
Agreement and the other documents delivered by the Seller to the Buyer at
the Closing;
(xiv0 a duly executed unanimous written consent of the Board of
Directors of Blackstone Real Estate Investors (City Center) Inc.
authorizing the execution of this Agreement and the other documents
delivered by Blackstone Real Estate Investors (City Center) Inc. to Buyer
at the Closing; and
(xv0 all transfer tax returns which are required by law and the
regulations issued pursuant thereto in connection with the payment of all
state or local real property transfer taxes that are payable or arise as a
result of the consummation of the transactions contemplated by this
Agreement, in each case, as prepared, and duly executed by the Sellers.
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31
In the event any Asset-Related Property is not assignable (such as a
letter of credit that is not transferable), the Sellers shall use
commercially reasonable efforts to provide the Buyer, at no cost to the
Sellers, with the economic benefits of such property by enforcing their
rights with respect to such property (solely at the Buyer's direction) for
the benefit and at the expense of the Buyer. Sellers' obligations under
this paragraph only shall survive after Closing and shall be subject to
the provisions of section 12.3 hereof, but not section 12.4.
ARTICLE VII
PURCHASE OPTION
Buyer hereby acknowledges that Sellers have delivered to National
City Bank a notice informing National City Bank of the intent of the Sellers to
sell the Interests and giving National City Bank an option to purchase the
Interests or the Property which letter is attached hereto as Exhibit J and that
National City Bank has executed and delivered to Sellers the waiver letter
attached hereto as Exhibit J. Buyer hereby approves of the form and delivery of
same.
ARTICLE VIII
INSPECTIONS
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32
Section VIII.1 Right of Inspection. Prior to the Closing Date, the
Buyer and its agents shall have the right to inspect the Property (including
conducting environmental and engineering inspections) at reasonable times agreed
upon by the Sellers and Buyer, upon reasonable notice (at least twenty-four (24)
hours in advance), provided, however, (a) the Buyer shall permit a
representative of City Center LLC to accompany the Buyer and/or its agents
during any such inspection if the Sellers shall cause City Center LLC to make
such a representative available; (b) such inspection or interview shall not
unreasonably impede the normal day-to-day business operations of the Property;
(c) Buyer shall not conduct any testing or inspections with respect to property
or premises of tenants, subtenants, licensees or other occupants of the Property
to the extent not permitted by a Space Lease and without the reasonable prior
consent of the Sellers; (d) Buyer shall not contact, or have discussions, either
directly or indirectly, with any tenants, subtenants, licensees or other users
or occupants of the Property, without the prior written consent of City Center
LLC, which consent shall not be unreasonably withheld; and (e) Buyer shall
obtain from City Center LLC, its prior written consent, which consent will not
be unreasonably withheld, before conducting any invasive testing at the Property
which testing shall be subject to conditions imposed by City Center LLC in its
reasonable discretion. The Buyer's right of inspection of the Property shall be
subject to the rights of tenants, subtenants, licensees or other occupants of
the Property. Prior to entering of the Property, Buyer shall deliver to City
Center LLC certificates satisfactory to City Center LLC evidencing that Buyer
maintains general liability insurance policies acceptable to City Center LLC in
its reasonable discretion, naming the Sellers and City Center LLC as additional
insured and loss payees thereunder. The Buyer hereby indemnifies and agrees to
defend and hold the Sellers and City Center LLC harmless from all loss, cost
(including, without limitation, reasonable attorneys' fees), claim or damage
arising in connection with or from any such inspection by the Buyer or its
agents and any breach of this Article by Buyer. In the event Buyer fails to
purchase the Interests as provided for in this Agreement, upon any Seller's
request, Buyer shall return to such Seller copies of all reports and documents
delivered to Buyer in connection with the transaction or any inspections of the
Property. The provisions of this Article shall survive the Closing or any
earlier termination of this Agreement.
ARTICLE IX
TITLE AND PERMITTED EXCEPTIONS
Section IX.1 Permitted Exceptions. The Asset shall be sold and is to
be conveyed, and the Buyer agrees to purchase the Asset, subject to the
Permitted Exceptions.
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33
Section IX.2 Title Report, Survey and Searches. (a) The Buyer has
received and/or reviewed a copy of the Existing Title Commitment and the
Existing Survey. If not previously ordered, promptly after the date of this
Agreement the Buyer shall order, if desired, a survey redate and an updated
title commitment with respect to the Property and Seller shall order updated
UCC, federal and state tax lien, judgment and pending litigation searches with
respect to the Sellers and City Center LLC and, in addition, the Buyer shall (a)
instruct Title Associates and surveyor delivering such updated items to furnish
copies of all updated commitments and surveys to Sellers' counsel at the address
set forth in Section 15.9 hereof and (b) within three Business Days after the
later of (i) receipt of any such updated documents and (ii) receipt of the
updated survey, give notice to the relevant Seller specifying all title
exceptions set forth in such updated documents which the Buyer claims are not
Permitted Exceptions. Subject to Section 9.6, Buyer's right to give notice of
objection as set forth above for any such title exception, for all purposes
under this Agreement, including purposes of a Complying Title policy, shall be
limited to the title exceptions which materially interfere with the continued
use of the Property or materially adversely affect the value of the Property
(the "Material Objections"); and any title exceptions contained in the updated
documents which are not Material Objections shall be deemed Permitted
Exceptions.
(b Sellers shall order and deliver, or cause to be delivered, to
Buyer updated UCC, federal, state, judgment and lien, pending litigation and
bankruptcy searches for City Center LLC and the Sellers; however, the delivery
of such searches to Buyer shall not be deemed a condition to Closing.
Section IX.3 Use of Purchase Price to Discharge Title Exceptions.
Subject to the provisions of Section 9.6, if, at the Closing, there are any
title exceptions applicable to the Property which are not Permitted Exceptions
and which the Sellers are obligated by this Agreement or elect to pay and
discharge, the Sellers may use any portion of the Purchase Price to satisfy the
same, provided that the Sellers shall have delivered to the Buyer at the Closing
instruments in recordable form sufficient to satisfy such title exceptions of
record, together with the cost of any applicable recording or filing fees. The
existence of any such liens or encumbrances shall not be deemed objections to
title if the Sellers shall comply with the foregoing requirements. Any unpaid
liens for taxes, water charges and assessments applicable to the period prior to
the applicable Closing Date shall not be objections to title, but the amount
thereof plus any interest and penalties thereon shall be deducted from the
balance of the Purchase Price, subject to the provisions for apportionment of
taxes, water charges and assessments contained in Article XI of this Agreement.
Section IX.4 Inability to Convey. Except as expressly set forth in
Section 9.6, nothing contained in this Agreement
<PAGE>
34
shall be deemed to require the Sellers to take or bring, or to cause City Center
LLC to take or bring, any legal action or proceeding or any other steps to
remove any title exception or to expend any moneys therefor, nor shall the Buyer
have any right of action against the Sellers or City Center LLC, at law or in
equity, with respect to, and only to the extent that the Sellers have an
interest in the Property, the Sellers', inability to convey title, or to
transfer the Interests, subject only to the Permitted Exceptions.
Section IX.5 Rights in Respect of Inability to Convey. In the event
that Sellers shall be unable to convey the Asset as a result of the existence of
a title exception that Sellers are not required to remove pursuant to this
Agreement, subject only to the Permitted Exceptions and the Buyer shall not, on
or before the Closing Date (as it may have been adjourned in accordance with
this Agreement), give notice to the Sellers that the Buyer is willing to waive
objection to each title exception which is not a Permitted Exception and close
this transaction without abatement of the Purchase Price, credit or allowance of
any kind or any claim or right of action against the Sellers for damages or
otherwise, the Sellers shall have the right, at the Sellers' election, to either
(l) take, or cause City Center LLC to take, such action as the Sellers shall
deem advisable to discharge each such title exception which is not a Permitted
Exception or (2) terminate this Agreement. In the event the Sellers shall elect
to take, or cause the City Center LLC to take, action to discharge each such
title exception which is not a Permitted Exception, the Sellers shall be
entitled to one or more adjournments of the Closing Date for a period not to
exceed 45 days in the aggregate (inclusive of any adjournments made by the
Sellers pursuant to Section 9.6 below) and the Closing shall be adjourned to a
date mutually agreed upon by the Sellers and Buyer not beyond such 45 day
period. If, for any reason whatsoever, the Sellers shall not have succeeded in
discharging each such title exception at the expiration of such adjournment(s)
and if the Buyer shall not, prior to the expiration of the last of such
adjournments, give notice to the Sellers that the Buyer is willing to waive
objection to each such title exception and to close this transaction without
abatement of the Purchase Price, credit or allowance of any kind or any claim or
right of action against the Sellers for damages or otherwise, then this
Agreement shall be deemed to be terminated as of the last date to which the
Closing Date was adjourned by the Sellers pursuant to this Article IX. Upon any
termination of this Agreement pursuant to this Section, (I) the Earnest Money
shall be refunded to the Buyer and (II) neither party shall have any further
rights or obligations with respect to the Property for which the provisions of
this Agreement are being terminated, except those obligations which expressly
survive the termination of this Agreement. No action taken by the Sellers or
City Center LLC to discharge, or attempt to discharge, or cause the City Center
LLC to discharge or attempt to discharge, any purported title exception shall be
an admission that any such purported title exception is not a
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35
Permitted Exception. The provisions of this Section 9.5 shall be subject to
Sellers' and Purchaser's rights and obligations with respect to Voluntary/De
Minimis Title Exceptions set forth in Section 9.6. It is understood and agreed
that a discharge of a title exception shall include the elimination of the title
exception itself, the omission of the exception from the Complying Title Policy
or affirmative insurance against any loss due to the existence of such exception
provided such form of affirmative insurance is reasonably approved by Buyer.
Section IX.6 Voluntary/De Minimis Title Exceptions. If, from time to
time prior to the Closing, the Buyer shall become aware of any Voluntary/De
Minimis Title Exceptions, then the Buyer shall promptly notify the Sellers
thereof, which notice shall describe in reasonable detail the Voluntary/De
Minimis Title Exceptions(s). The Sellers shall discharge, or cause the City
Center LLC to discharge, or subject to Buyer's approval, provide title
endorsements over, all Voluntary/De Minimis Title Exceptions on or prior to
Closing. The Seller shall be entitled to one or more adjournments of the Closing
Date not to exceed 45 days in the aggregate (inclusive of any adjournments made
by the Seller pursuant to Section 9.5 hereof) to discharge Voluntary/De Minimis
Title Exceptions.
Section IX.7 The Buyer's Right to Accept Title. Notwithstanding the
foregoing provisions of this Article IX, the Buyer may, by notice given to the
Sellers at any time on or prior to the Closing Date (as it may have been
adjourned by the Sellers pursuant to this Article IX) or within five (5) days
after receipt from Sellers of a notice to terminate this Agreement, elect to
accept such title as the Sellers can convey, notwithstanding the existence of
any title exceptions which are not Permitted Exceptions. In such event, this
Agreement shall remain in effect and the parties shall proceed to Closing but,
except to the extent set forth in Section 9.6, the Buyer shall not be entitled
to any abatement of the Purchase Price, any credit or allowance of any kind or
any claim or right of action against the Sellers or City Center LLC for damages
or otherwise by reason of the existence of any title exceptions which are not
Permitted Exceptions.
Section IX.8 Cooperation. The Buyer and the Sellers shall cooperate
with Title Associates in connection with obtaining title insurance or an update
of title insurance insuring title to the Property subject only to the Permitted
Exceptions and otherwise in the form and of the substance of a Complying Title
Policy. In furtherance and not in limitation of the foregoing, at or prior to
the Closing, the Buyer and the Sellers shall deliver, or cause City Center LLC
to deliver, to Title Associates such affidavits, certificates and other
instruments as are reasonably requested by such title company and customarily
furnished in connection with the issuance of owner's policies of title
insurance, including, without limitation, (i) evidence sufficient to establish
(x) the legal existence of the
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Buyer and the Sellers and City Center LLC and (y) the authority of the
respective signatories of the Sellers and the Buyer to bind the Sellers and the
Buyer, as the case may be, (ii) certificates of good standing of the Sellers,
(iii) necessary affidavits required by Title Associates Inc. to issue a
Non-Imputation Endorsement and (iv) an ALTA Statement and Personal (GAP)
undertakings.
ARTICLE X
TRANSACTION COSTS; RISK OF LOSS
Section X.1 Transaction Costs. The Buyer and the Sellers agree to
comply with, or cause compliance with, all real estate transfer tax laws
applicable to the sale of the Asset. At the Closing, the real property transfer
taxes, deed stamps, conveyance taxes, documentary stamp taxes and other taxes or
charges payable as a result of the conveyance of the Asset being transferred to
Buyer at that Closing pursuant to this Agreement (collectively, the "Transfer
Taxes") shall be paid for entirely by the Buyer. In addition to the foregoing
and their respective apportionment obligations hereunder, (a) the Sellers and
the Buyer shall each be responsible for the payment of the costs of their
respective legal counsel, advisors and other professionals employed thereby in
connection with the sale of the Assets, (b) the Sellers shall be responsible (i)
for the title insurance policy premiums in respect of any fee and leasehold
title insurance, including extended coverage obtained by the Buyer only,
excluding the cost of any endorsements which the Buyer elects to obtain and (ii)
the cost and expense of obtaining UCC searches, federal and state tax lien,
judgment, pending litigation and bankruptcy searches for each Seller and for
City Center LLC and (c) the Buyer shall be responsible for all costs and
expenses associated with (i) the Buyer's due diligence, (ii) title reports or
abstracts with respect to the Property, all title endorsements which Buyer
elects to obtain and all survey and search costs and updates related to title
insurance, in each case commissioned by the Buyer, (iii) the policy premiums in
respect of any mortgage title insurance obtained by the Buyer (if any), (iv)
payment, at the Closing, of the recording charges and fees and recordation taxes
for the documents necessary to transfer the Asset, (v) all costs and expenses of
obtaining any financing the Buyer may elect to obtain, take subject to, and/or
assume from the Sellers (including any fees, financing costs, Repayment Costs,
transfer taxes, mortgage and recordation taxes and intangible taxes in
connection therewith) and (vi) all other costs which are the responsibility
under applicable law for the Buyer to pay (including, without limitation, all
sales and use taxes due as a result of the sale of the Asset). The Buyer and
Sellers shall indemnify the other and their respective successors and assigns
from and against any and all loss, damage, cost, charge, liability or expense
(including court costs and reasonable attorneys' fees) which such other party
may sustain or
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incur as a result of the failure of the indemnifying party to timely pay any of
the aforementioned taxes, fees or other charges for which it has assumed
responsibility under this Section. Although the parties do not believe that any
transfer taxes will be due with respect to the sale of the Interests, the Buyer
hereby agrees to pay any transfer, deed or conveyance taxes if assessed in
connection with the sale of the Interests and the Buyer hereby indemnifies and
holds the Sellers harmless from and against any and all loss, damage, cost,
charge, liability or expense (including court costs and reasonable attorneys'
fees) with respect to any transfer, deed stamp or other conveyance taxes Buyer
is obligated to pay under this Agreement with respect to the Interests as a
result of a determination that the transfer taxes, deed stamp taxes or other
conveyance taxes payable in connection with this transaction that are in excess
of the amount originally determined and paid by the parties hereto. This
indemnification shall survive the Closing.
Section X.2 Risk of Loss. (a) If, on or before the Closing Date, the
Property or any portion thereof shall be (i) damaged or destroyed by fire or
other casualty or (ii) taken or threatened to be taken as a result of any
condemnation or eminent domain proceeding, the Sellers shall promptly notify the
Buyer.
(b As soon as practicable after the occurrence of such casualty or
an actual condemnation, as opposed to a threatened condemnation , Sellers shall
notify Buyer of (i) the estimated cost of restoration of the Property with
respect to any casualty as determined by written estimate of an independent
construction contractor chosen by Sellers or City Center LLC with Buyer's
approval not to be unreasonably withheld or (ii) the estimated loss in value of
the Property as a result of such condemnation as determined by written estimate
of an independent appraisal firm chosen by Sellers or the City Center LLC, with
Buyer's approval not to be unreasonably withheld. If the estimated cost of
restoration arising out of a casualty or estimated loss in value arising out of
a condemnation, shall be $5,000,000 or less, then notwithstanding any provision
in this Agreement to the contrary, the Sellers will credit against the Purchase
Price payable by the Buyer an amount equal to the net proceeds, if any, received
by the Sellers from such casualty or condemnation less any amounts spent by the
Sellers or City Center LLC prior to Closing with respect to a restoration of the
subject Property. If as of the Closing Date, the Sellers or City Center LLC have
not received any such insurance or condemnation proceeds then the parties shall
nevertheless consummate on the Closing Date the conveyance of the Asset (without
any deduction for such insurance or condemnation proceeds) and the Sellers will
at Closing assign to the Buyer all rights of the Sellers, if any, to the
insurance or condemnation proceeds and to all other rights or claims arising out
of or in connection with such casualty or condemnation. If the estimated cost of
restoration arising from a casualty or the loss in value of the Property arising
from a condemnation exceeds $5,000,000, then Buyer shall have the option
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to either (i) terminate this Agreement and the Earnest Money being held shall be
immediately returned to Buyer, and thereupon this Agreement shall terminate and
be of no further force and effect or (ii) accept the Property "as is" together
with an assignment of the insurance or condemnation proceeds.
ARTICLE XI
ADJUSTMENTS
Unless otherwise provided below, the following are to be adjusted
and prorated between each Seller and the Buyer as of 11:59 P.M. on the day
preceding each Closing Date, based upon a 365 day year, and the net amount
thereof shall be added to (if such net amount is in the Sellers' favor) or
deducted from (if such net amount is in the Buyer's favor) the Purchase Price
payable at Closing:
Section XI.1 Fixed Rents.
(a Fixed rents (collectively, "Fixed Rents") paid or payable by
tenants under the Space Leases in connection with their occupancy of the
Property shall be adjusted and prorated on and if, as and when collected basis.
Any Fixed Rents collected by the Buyer or a Seller after the Closing from any
tenant who owes Fixed Rents for periods prior to the Closing, shall be applied
(i) first, in payment of Fixed Rents owed by such tenant for the month in which
the Closing Date occurs, (ii) second, in payment of Fixed Rents owed by such
tenant for the month prior to the month in which the Closing Date occurs but not
more than 30 days prior to the Closing Date (iii) third, in payment of Fixed
Rents owed by such tenant for the period (if any) after the month in which the
Closing Date occurs and (iv) fourth, in payment of any other Fixed Rents owed by
such tenant for periods more than thirty (30) days prior to the Closing Date.
Each such amount, less any costs of collection (including reasonable counsel
fees) reasonably allocable thereto, shall be adjusted and prorated as provided
above, and the party who receives such amount shall promptly pay over to the
other party the portion thereof to which it is so entitled.
(b The Buyer shall bill tenants who owe Fixed Rents for periods
prior to the Closing on a monthly basis for a period of six consecutive months
following the Closing Date and shall use commercially reasonable efforts to
collect such past due Fixed Rents (related to periods of time prior to the
Closing Date). Notwithstanding the foregoing, if the Buyer shall be unable to
collect such past due Fixed Rents within six (6) months after the Closing Date,
any Seller shall have the right, upon prior written notice to the Buyer, to
pursue tenants to collect such delinquencies (including, without limitation, the
prosecution of one or more lawsuits for delinquencies in amounts of not more
than $100,000 with Buyer's prior reasonable consent,
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which consent shall not be unreasonably withheld) but the Seller shall not be
entitled to evict (by summary proceedings or otherwise) any such tenants. Any
payment by a tenant in an amount less than the full amount of Fixed Rents and
Overage Rent (as defined below) then due and payable by such tenant shall be
applied first to Fixed Rents (in the order of priority as to time periods as is
set forth above) to the extent of all such Fixed Rents then due and payable by
such tenant, and thereafter to Overage Rents (in the order of priority as to
time periods as is set forth in Section 11.2 below).
(c Notwithstanding the foregoing, Sellers will consider using any
alternative reasonable proposals offered by Buyer with respect to determining
the adjustment in the collection of any arrearages or delinquencies in fixed
rent, which proposals are designed to achieve the same economic effect as the
formulas provided above.
Section XI.2 Overage Rents.
(a With respect to any Space Lease that provides for (ii) so-called
common area maintenance or "CAM" charges or (iii) so-called "escalation rent" or
additional rent based upon increases in real estate taxes or operating expenses
or labor costs or cost of living or porter's wages or otherwise (such percentage
rent, CAM charges, escalation rent and additional rent being collectively called
"Overage Rent"), such Overage Rent shall be adjusted and prorated on an if, as
and when collected basis.
(b As to any Overage Rent in respect of an accounting period that
shall have expired prior to the Closing but which shall be paid after the
Closing, the Buyer agrees that it will pay the entire amount over to the Sellers
upon receipt thereof, less any costs of collection (including reasonable counsel
fees) reasonably allocable thereto. The Buyer agrees that it shall (i) promptly
render bills for any Overage Rent in respect of an accounting period that shall
have expired prior to the Closing but which shall be paid after the Closing,
(ii) bill tenants such Overage Rent attributable to an accounting period that
shall have expired prior to the Closing on a monthly basis for a period of six
consecutive months thereafter and (iii) use commercially reasonable efforts to
collect Overage Rent. Notwithstanding the foregoing, if the Buyer shall be
unable to collect such Overage Rent within six (6) months after the Closing
Date, any Seller shall have the right, upon prior written notice to the Buyer,
to pursue tenants to collect such delinquencies (including, without limitation,
the prosecution of one or more lawsuits), but the Seller shall not be entitled
to evict (by summary proceedings or otherwise) any such tenants. The Sellers and
Buyer shall furnish to each other all information relating to the period prior
to the Closing that is reasonably necessary for the billing of such Overage Rent
and the Buyer will deliver to the Seller,
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concurrently with the delivery to tenants, copies of all statements relating to
Overage Rent for the period prior to the Closing. The Buyer shall bill tenants
for Overage Rents for accounting periods prior to the Closing in accordance with
and on the basis of such information furnished by the Sellers.
(c If, prior to the Closing, the Sellers shall have received any
installments of Overage Rent attributable to Overage Rent for periods from and
after the Closing Date, such sum shall be apportioned at the Closing. If, after
the Closing, the Buyer shall receive any installments of Overage Rent
attributable to Overage Rent for periods prior to the Closing, such sum (less
any costs and expenses (including reasonable counsel fees) incurred by the Buyer
in the collection of such Overage Rent) shall be paid by the Buyer to the Seller
promptly after the Buyer receives payment thereof.
(d Any payment by a tenant on account of Overage Rent (to the extent
not applied against Fixed Rents due and payable by such tenant in accordance
with subsection 11.1(b) above) shall be applied to Overage Rents then due and
payable in the same order of priority that Fixed Rents are applied under
subsection 11.1(b) above.
(e To the extent that any portion of Overage Rent is required to be
paid monthly by tenants on account of estimated amounts for any calendar year
(or, if applicable, any lease year or tax year or any other applicable
accounting period), and at the end of such calendar year (or lease year, tax
year or other applicable accounting period, as the case may be), such estimated
amounts are to be recalculated based upon the actual expenses, taxes and other
relevant factors for that calendar (lease or tax) year or other applicable
accounting period, with the appropriate adjustments being made with such
tenants, then such portion of the Overage Rent shall be prorated between the
Sellers and the Buyer at the Closing based on such estimated payments actually
paid by tenants (i.e., with the Sellers entitled to retain all monthly or other
periodic installments of such amounts paid by tenants with respect to periods
prior to the calendar month or other applicable installment period in which the
Closing occurs, the Seller to pay to the Buyer at the Closing all monthly or
other periodic installments of such amounts theretofore received by the Sellers
with respect to periods following the calendar month or other applicable
installment period in which the Closing occurs and the Sellers and the Buyer to
apportion as of the Closing Date all monthly or other periodic installments of
such amounts paid by tenants with respect to the calendar month or other
applicable installment period in which the Closing occurs). At the time(s) of
final calculation and collection from (or refund to) each tenant of the amounts
in reconciliation of actual Overage Rent for a period for which estimated
amounts paid by such tenant have been prorated, there shall be a re-proration
between the Seller and the Buyer. Buyer and Sellers agree to cooperate with each
other in connection with preparing such re-
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proration. If, with respect to any tenant, the recalculated Overage Rent exceeds
the estimated amount paid by such tenant, upon collection from the tenant, (i)
the entire excess shall be paid by the Buyer to the Seller, if the accounting
period for which such recalculation was made expired prior to the Closing and
(ii) such excess shall be apportioned between the Sellers and the Buyer as of
the Closing Date (on the basis described in the first sentence of subsection
11.2 above), if the Closing occurred during the accounting period for which such
recalculation was made, with the Buyer paying to the Seller the portion of such
excess which the Sellers are so entitled to receive. If, with respect to any
tenant, the recalculated Overage Rent is less than the estimated amount paid by
such tenant, (1) the entire shortfall shall be paid by the Sellers to the Buyer
(or, at the Sellers' option, directly to the tenant in question), if the
accounting period for which such recalculation was made expired prior to the
Closing and (2) such shortfall shall be apportioned between the Sellers and the
Buyer as of the Closing Date (on the basis described in the first sentence of
subsection 11.2(c) above), if the Closing occurred during the accounting period
for which such recalculation was made, with the Sellers paying to the Buyer (or,
at the Sellers' option, directly to the tenant in question) the portion of such
shortfall so allocable to the Sellers.
(f Until such time as all amounts required to be paid to the Seller
by the Buyer pursuant to Section 11.1 and this Section 11.2 shall have been paid
in full, the Buyer shall furnish to the Sellers from time to time upon request
of a Seller a reasonably detailed accounting of such amounts payable by the
Buyer. The Sellers shall have the right from time to time following the Closing,
on prior notice to the Buyer, during ordinary business hours on Business Days,
to review the Buyer's rental records with respect to the Property to ascertain
the accuracy of such accountings.
(g With respect to any payments of additional rent based upon a
percentage of the tenant's business during a specified annual or other period
(sometimes referred to as "percentage rent") being made under Space Leases for
either Property, Sellers and Buyer hereby agree to adjust and prorate such
percentage rent as of 11:59 P.M. on the day immediately preceding each Closing
Date, based upon estimates of such percentage rent for the year. Sellers and
Buyer agree to adjust such determination at the end of the year based upon
actual percentage rent collected for the year in which the Closing Date occurs.
Section XI.3 Ground Lease Rents. All rents and other charges payable
by City Center LLC as the tenant under the National City Bank Lease shall be
adjusted and prorated between the Sellers and Buyer as of 11:59 p.m. on the day
preceding each Closing.
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Section XI.4 Taxes and Assessments. Real estate taxes and
assessments payable in the year in which each Closing occurs shall be, with
respect to the Property that is the subject of said Closing, based on (a) the
periods of ownership of the Asset by the Sellers and Buyer during such year and
(b) the amount of real property tax actually payable during that year (i.e., on
a cash basis rather than an accrual or lien year basis). In the event that the
Property or any part thereof shall be or shall have been affected by an
assessment or assessments, whether or not the same become payable in annual
installments, the Sellers shall be responsible at the Closing for any
installments due prior to the Closing and the Buyer shall be responsible for any
installments due on or after the Closing subject to the foregoing proration. In
the event that there is a refund of any real estate taxes and/or assessments
paid by Sellers or City Center hereunder prior to the date hereof, such refund
shall be deemed to be the property of Sellers and if Buyer receives any such
refund, Buyer shall promptly notify Sellers and deliver to Sellers the amount of
such refund less (x) amounts that Buyer is required, pursuant to Space Leases,
to return to tenants of the Property and (y) Buyer's reasonable costs of
collection. Notwithstanding anything to the contrary contained herein, Buyer
shall be responsible for the payment of all real estate taxes which become
payable (in accordance with the determination set forth in this Section 11.4)
any time from or after the Closing Date and Buyer hereby indemnifies and holds
Sellers harmless from and against any and all loss, damage, charge, liability or
expense (including court costs and reasonable attorneys' fees) which the Sellers
may sustain or incur as a result of the failure of Buyer to timely pay the
aforementioned taxes and assessments. Buyer's obligation under the previous
sentence shall survive the applicable Closing Date.
Section XI.5 Water and Sewer Charges. Water rates, water meter
charges, sewer rents and vault charges, if any (other than any such charges,
rates or rents which shall have been paid by tenants of the Property pursuant to
such tenants' Space Leases), shall be adjusted and prorated on the basis of the
fiscal period for which assessed. If there is a water meter, or meters, on the
Property, Sellers agree that they shall at the Closing furnish, or cause to be
furnished, a reading of same to a date not more than 30 days prior to the
Closing and the unfixed meter charges and the unfixed sewer rent thereon for the
time intervening from the date of the last reading shall be apportioned on the
basis of such last reading, and shall be appropriately readjusted after the
Closing on the basis of the next subsequent bills. Unmetered water charges shall
be apportioned on the basis of the charges therefor for the same period of the
preceding calendar year, but applying the current rate thereto. As to any unpaid
water charges or sewer rents payable directly by tenants, the Buyer shall
consummate the Closing subject to such unpaid charges and rents and any lien
resulting therefrom, without credit against the Purchase Price or any claim or
right of action against the Sellers.
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Section XI.6 Utility Charges. Gas, steam, electricity and other
public utility charges (other than any such charges which are payable by tenants
of the Property pursuant to such tenants' Space Leases) will be paid by the
Sellers to the utility company to the Closing Date. Sellers shall arrange for a
final reading of all utility meters (covering gas, water, steam and electricity)
as of the Closing, except meters the charges of which are payable by tenants of
the Property pursuant to such tenants' Space Leases. Sellers' and the Buyer
shall jointly execute a letter to each of such utility companies advising such
utility companies of the termination of the Sellers' responsibility for such
charges for utilities furnished to the Property as of the date of the Closing
and commencement of the Buyer's responsibilities therefor from and after such
date. If a bill is obtained from any such utility company as of the Closing, the
Seller shall pay such bill on or before the Closing. If such bill shall not have
been obtained on or before the Closing, the Seller shall, upon receipt of such
bill, pay all such utility charges as evidenced by such bill or bills pertaining
to the period prior to the Closing, and the Buyer shall pay all such utility
charges pertaining to the period thereafter. Any bill which shall be rendered
which shall cover a period both before and after the date of Closing shall be
apportioned between the Buyer and the Sellers as of the Closing.
Section XI.7 Contracts. Charges and payments under all Contracts
being assumed by Buyer in accordance with the terms of this Agreement, including
the Union Contracts.
Section XI.8 Miscellaneous Revenues. Revenues, if any, arising out
of telephone booths, vending machines, or other income-producing agreements.
Section XI.9 Supplies. Maintenance supplies in unopened containers
based on the Seller's actual cost therefor, including sales and/or use tax.
Section XI.10 Security Deposits. The actual amounts of the security
deposits (including all interest or other amounts earned thereon and required to
be returned to any tenants pursuant to the terms of Space Leases) held by the
Sellers as of the Closing Date shall be assigned to the Buyer by, at the
Sellers' option, (i) payment of the amount thereof to the Buyer or (ii) a credit
to the Buyer against the balance of the Purchase Price. Any such tenants'
securities in form other than cash shall be transferred to the Buyer by way of
appropriate instruments of transfer or assignment.
Section XI.11 Employee Costs. All salaries, wages, vacation pay and
other fringe benefits (including, without limitation, payments and deposits, if
any, with respect to social security, unemployment compensation, employee
health, life and disability insurance, sick pay and welfare and pension fund
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contributions) of the employees with respect to the Property in connection with
the management, operation or maintenance of the Property under the Union
Contracts shall be adjusted and prorated between the Seller and the Buyer as of
11:59 P.M. on the day preceding the Closing Date. The Buyer acknowledges that
such employees are union employees and agrees to be responsible for all
severance pay and other obligations arising as a result of any termination by
the Buyer of any such employees. Notwithstanding anything to the contrary
contained herein, and except with respect to employees being assumed by Buyer
pursuant to the provisions hereof, including, without limitation, employees
under Union Contracts, Buyer shall not be liable for, and shall not be
responsible any liabilities related to, employees of the Property or Sellers or
City Center LLC.
Section XI.12 Leasing Costs. (a) With respect to Space Leases
entered into after the date of this Agreement in accordance with the terms
hereof, or renewals or expansions of Space Leases after the date of this
Agreement (including any renewals or expansions exercised pursuant to options
contained in existing Space Leases), the Buyer will be responsible for all
Leasing Expenses and shall assume the economic effect of any "free rent" or
other concessions pertaining to the period from and after the Closing Date
relating to such Space Leases (the foregoing, "Buyer's Leasing Costs"). In
addition, Buyer shall be responsible for all Leasing Expenses and Buyer's
Leasing Costs with respect to all Contemplated Leases more particularly set
forth on Schedule F-2 hereto and all deferred tenant improvement work with
respect to existing Space Leases more particularly set forth on Schedule F-3
hereof ("Deferred Tenant Improvements"). To the extent that the Seller has paid
any of the Buyer's Leasing Costs prior to Closing, the Purchase Price will be
increased at Closing by the aggregate amount of such expenditures upon
presentation by Sellers of an invoice therefor and reasonable evidence of
payment thereof. The Buyer will pay all other Buyer's Leasing Costs as and when
the same are due. Notwithstanding the foregoing, it is understood and agreed
that, with respect to that certain that letter of credit (the "Letter of
Credit") in the amount of Two Hundred Seventy Five Thousand Three Hundred Eighty
Six Dollars ($275,386.00) (the "LC Amount") delivered by City Center pursuant to
the terms of that certain Letter of Credit Agreement dated as of February 10,
1998 and executed by City Center (the "LC Agreement") (i) the Letter of Credit
will not be terminated prior to Closing and at Closing, the Purchase Price due
to Sellers shall be increased at Closing by an amount equal to the LC Amount,
and (ii) promptly after the Closing, the parties shall reasonably cooperate with
each other to facilitate the replacement of the Letter of Credit by Buyer and
the return of the Letter of Credit (regardless of whether it was delivered by
City Center or another entity) to Sellers. Upon a return of the Letter of Credit
to Sellers, Sellers shall promptly deliver to Buyer that portion of the LC
Amount that, as of the date said Letter of Credit is returned, has not been
drawn upon, less all expenses, costs and other fees charged to Sellers in
connection
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with said Letter of Credit after the Closing Date and Sellers reasonable
out-of-pocket costs in connection with the Letter of Credit and the replacement
thereof, including reasonable attorney's fees.
(b Except as otherwise set forth in Clause (a) of this Section and
except with respect to any of the Leases listed on Schedule F-2, Seller shall be
responsible for all Leasing Costs with respect to Space Leases in effect as of
the date of this Agreement, including, without limitation, those set forth on
Schedule F-1, Schedule F-4 and Schedule G, (collectively, "Seller's Leasing
Costs"). To the extent such items are incomplete or not fully paid at Closing,
Seller shall give Buyer a credit against the Purchase Price for such remaining
costs and Buyer shall assume the obligations to pay such costs or perform such
obligations. Notwithstanding the foregoing, however, with respect to that
certain Tenant Improvement Allowance in the amount of $407,440.00 set forth on
Schedule F-1 hereto, if the entire Tenant Improvement Allowance is not collected
by National City Bank from the Landlord or used by Tenant in accordance with the
provisions of its lease relating to said Tenant Improvement Allowance, or if
National City Bank returns any portion of the Tenant Improvement Allowance to
Buyer or notifies Buyer that National City Bank will not demand from Buyer any
portion of the Tenant Improvement Allowance, then Buyer shall promptly deliver
to Sellers the amount of the Tenant Improvement Allowance less such amounts
actually delivered to National City Bank pursuant to Landlord's obligation under
the NCB Space Lease to deliver to National City Bank the Tenant Improvement
Allowance referenced on Schedule F-1, such obligation to survive the Closing or
earlier termination of this Agreement.
Section XI.13 NY Life Loan Escrows. With respect to the NY Life
Loan, all escrows deposited with, or being held by or for the benefit of the
applicable Third Party lender, including, without limitation, all tax and
insurance escrows, shall be adjusted and prorated between Buyer and Sellers by
crediting the balances to Seller as of 11:59 on the day preceding the applicable
Closing.
Section XI.14 Other. If applicable, the Purchase Price shall be
adjusted at Closing in accordance with subsection 11.12 and Section 10.2 and to
reflect the adjustment of any other item which, under the terms of this
Agreement, is to be apportioned at Closing.
Section XI.15 Re-Adjustment. Except for re-adjustments of Overage
Rent to be made pursuant to subsection 11.2(e), if any such items are not
determinable at the Closing, the adjustment shall be made subsequent to the
Closing when the charge is determined. Any errors or omissions in computing
adjustments at the Closing shall be promptly corrected, provided that the party
seeking to correct such error or omission shall have notified the other party of
such error or omission on or
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prior to the date that is 180 days following the Closing Date. The provisions of
this Article XI shall survive the Closing.
ARTICLE XII
INDEMNIFICATION
Section XII.1 Indemnification by the Seller. With respect to the
Asset and Property, the Seller thereof shall indemnify and hold the Buyer, its
affiliates, members and partners, and the partners, shareholders, officers,
directors, employees, representatives and agents of each of the foregoing
(collectively, "Buyer-Related Entities") harmless from and against any and all
costs, fees, expenses, damages, deficiencies, interest and penalties (including,
without limitation, reasonable attorneys' fees and disbursements) suffered or
incurred by any such indemnified party in connection with any and all losses,
liabilities, claims, damages and expenses ("Losses"), arising out of, or in any
way relating to, (i) any breach of any representation or warranty of the Seller
or City Center LLC contained in this Agreement or in any Schedule, certificate,
instrument or other document delivered pursuant hereto, (ii) any breach of any
covenant of the Seller or City Center LLC contained in this Agreement, and (iii)
matters under any of the Space Leases which arise prior to the Closing Date,
such obligation to survive the Closing subject to Section 12.4.
Section XII.2 Indemnification by the Buyer. The Buyer shall
indemnify and hold the Sellers, their affiliates, members and partners, and the
partners, shareholders, officers, directors, employees, representatives and
agents of each of the foregoing (collectively, "Seller-Related Entities")
harmless from any and all Losses arising out of, or in any way relating to, (i)
any breach of any representation or warranty by the Buyer contained in this
Agreement or in any Schedule, certificate, instrument or other document
delivered pursuant hereto or in connection herewith, (ii) any breach of any
covenant of the Buyer contained in this Agreement, (iii) matters under any of
the Space Leases which arise from and after the Closing Date and (iv) Sellers'
delivery of a notice to prepay the NY Life Loan to the NY Life lender and,
without regard to any other provisions of this Agreement (including, without
limitation, the provisions of Article XIV), Buyer's default under this
Agreement, such obligation to survive the Closing or termination of this
Agreement subject to Section 12.4.
Section XII.3 Limitations on Indemnification. Notwithstanding the
foregoing provisions of Section 12.1, (a) the Sellers, collectively, shall not
be required to indemnify the Buyer or any Buyer-Related Person under this
Agreement unless the aggregate of all amounts for which an indemnity would
otherwise be payable by, collectively, the Sellers, under this Agreement exceeds
the applicable Basket Limitation and, in such event,
<PAGE>
47
collectively, the Sellers shall be responsible for only the amount in excess of
the applicable Basket Limitation and (b) in no event shall the liability of,
collectively, the Sellers, with respect to the indemnification provided for in
Section 12.1 above exceed in the aggregate the applicable Cap Limitation and (c)
the Sellers shall not be responsible for or indemnify Buyer for any other
matters which accrue or arise with respect to events or occurrences at the
Property from and after the Closing Date.
Section XII.4 Survival. The representations and warranties contained
in this Agreement and the indemnification by Seller with respect to matters
arising under any of the Space Leases prior to the Closing Date shall survive
for a period of 225 days after the Closing (the "Survival Period") provided, any
action, suit or proceeding with respect to the representations and warranties is
properly commenced within the Survival Period. The covenants contained in this
Agreement to the extent to be performed prior to or at Closing shall not survive
after the Closing. All other covenants, indemnities and provisions of this
Agreement shall survive the Closing unless otherwise provided herein.
Notwithstanding anything to the contrary contained herein, Seller's obligation
to indemnify Buyer shall terminate and be null and void unless Buyer files an
action, suit or proceeding against Seller seeking recovery from Seller for its
obligations under this Article 12 if properly commenced by Buyer within the
appropriate survival period more particularly set forth in this subsection 12.4.
Section XII.5 Indemnification as Sole Remedy. If the Closing has
occurred, the sole and exclusive remedy available to a party in the event of a
breach by the other party to this Agreement of any representation, warranty,
covenant or other provision of this Agreement which survives the Closing shall
be the indemnifications provided for under this Article XII.
ARTICLE XIII
TAX CERTIORARI PROCEEDINGS
Section XIII.1 Prosecution and Settlement of Proceedings. If any tax
reduction proceedings in respect of the Property, relating to any fiscal years
ending prior to the fiscal year in which the Closing occurs are pending at the
time of the Closing, the Sellers reserves and shall have the right to continue
to prosecute and/or settle the same in the name of City Center LLC. If any tax
reduction proceedings in respect of the Property, relating to the fiscal year in
which the Closing occurs, are pending at the time of Closing, then the Sellers
reserve and shall have the right to continue to prosecute and/or settle the
same; provided, however, that the Sellers shall not settle any such proceeding
without the Buyer's prior written consent, which consent shall not be
unreasonably withheld or delayed. The Buyer shall reasonably cooperate with the
Sellers
<PAGE>
48
in connection with the prosecution of any such tax reduction proceedings and
Sellers shall not, to effectuate a reduction of such taxes, specifically agree
with the relevant authorities to an increase in such taxes for fiscal years
ending after the year during which the Closing occurs. Sellers' obligation set
forth in the preceding sentence shall survive Closing.
Section XIII.2 Application of Refunds or Savings. Any refunds or
savings in the payment of taxes resulting from such tax reduction proceedings
applicable to taxes payable during the period prior to the date of the Closing
(as such period is determined in accordance with Section 11.4 of this Agreement)
shall belong to and be the property of the Sellers, and any refunds or savings
in the payment of taxes applicable to taxes payable from and after the date of
the Closing (as such period is determined in accordance with Section 11.4 of
this Agreement)shall belong to and be the property of the Buyer; provided,
however, that if any such refund creates an obligation to reimburse any tenants
under Space Leases for any rents or additional rents paid or to be paid, that
portion of such refund equal to the amount of such required reimbursement (after
deduction of allocable expenses as may be provided in the Space Lease to such
tenant) shall, at the Sellers' election, either (a) be paid to the Buyer and the
Buyer shall disburse the same to such tenants or (b) be paid by the Sellers or
City Center LLC directly to the tenants entitled thereto, after payment of
Buyer's costs related thereto. All attorneys' fees and other expenses incurred
in obtaining such refunds or savings shall be apportioned between the Sellers
and the Buyer in proportion to the gross amount of such refunds or savings
payable to the Sellers and the Buyer, respectively (without regard to any
amounts reimbursable to tenants).
Section XIII.3 Survival. The provisions of this Article XIII shall
survive the Closing.
ARTICLE XIV
DEFAULT
Section XIV.1 Default. Notwithstanding anything to the contrary
contained in this Agreement, including the provisions of Section 7.1, (a) if the
Buyer shall default (i) in the performance of its obligations under this
Agreement to purchase the Asset on the Closing Date or (ii) the performance of
its obligations under the option agreement entered into between Buyer and
BRE/Wabash L.L.C. (the "Option Agreement") prior to or through the Closing Date,
the Sellers, as their sole and exclusive remedy hereunder (except as set forth
in the last sentence of this subsection (a)), at law or in equity, shall be
entitled to terminate this Agreement and the Option Agreement, to retain the
Earnest Money as liquidated damages, at which time this Agreement shall be
terminated and of no further force and
<PAGE>
49
effect except for the provisions which explicitly survive such termination. The
Buyer agrees that the Seller shall have the right to retain the Earnest Money as
liquidated damages without the necessity of proving actual damages due to the
difficulty of proving actual damages resulting from the Buyer's default
hereunder, the Earnest Money being the parties best estimate of Seller's
damages. Nothing in this Section shall be deemed to limit the Seller's remedies
with respect to a breach by the Buyer of any of its obligations which survive
the Closing but such remedies shall be limited as provided in Section 12.5.
(b) If the Seller shall default in the performance of its
obligations under this Agreement to cause the sale of the Asset or the Property
by the Closing Date, the Buyer, as its sole and exclusive remedy, shall be
entitled at its option, either (i) to terminate this Agreement, direct Seller to
deliver the Earnest Money to the Buyer and retain the Earnest Money, at which
time this Agreement shall be terminated and of no further force and effect
except for the provisions which explicitly survive such termination or (ii)
specifically enforce the terms and conditions of this Agreement by injunctive
relief or otherwise. Nothing in this Section shall be deemed to limit the
Buyer's remedies with respect to a breach by the Seller of any of the Seller's
obligations which survive the Closing but such remedies shall be limited as
provided in Section 11.5.
ARTICLE XV
MISCELLANEOUS
Section XV.1 Use of Blackstone Name and Address. Subject to the
provisions of Section 15.4 hereof, the Buyer hereby acknowledges and agrees that
neither the Buyer nor any affiliate, successor, assignee or designee of Buyer
shall be entitled to use the name "Blackstone" in any way whatsoever.
Section XV.2 Exculpation of the Seller.
(a) Notwithstanding anything to the contrary contained herein, Buyer
acknowledges that Sellers have jointly executed this Agreement for
administrative efficiency, and Buyer hereby acknowledges and agrees that the
liability of each of the Sellers hereunder shall be several only and nothing
contained herein shall be construed to impose joint liability upon the Sellers.
(b) Notwithstanding anything to the contrary contained herein, the
Seller's shareholders, partners, the partners of such partners, the shareholders
of such partners, and the trustees, officers, directors, employees, agents and
security holders of the Seller and the partners of the Seller assumes no
personal liability for any obligations entered into on behalf of the Seller and
its individual assets shall not be subject to any
<PAGE>
50
claims of any person relating to such obligations. The foregoing shall govern
any direct and indirect obligations of the Seller under this Agreement.
Section XV.3 Brokers. (a) Each Seller and the Buyer each represent
and warrant to the other that it has dealt with no broker, salesman, finder or
consultant with respect to this Agreement or the transactions contemplated
hereby other than Eastdil, whose commission shall be paid by Sellers pursuant to
the terms of a separate agreement to which the Purchaser is not a party, if and
only if the Closing occurs. Each Seller agrees to indemnify, protect, defend and
hold the Buyer harmless from and against all claims, losses, damages,
liabilities, costs, expenses (including reasonable attorneys' fees and
disbursements) and charges resulting from the Seller's breach of the foregoing
representation in this subsection (a). The provisions of this subsection (a)
shall survive the Closing and any termination of this Agreement.
(b) The Buyer represents and warrants to the Seller that it has
dealt with no broker, salesman, finder or consultant with respect to this
Agreement or the transactions contemplated hereby other than Eastdil. The Buyer
agrees to indemnify, protect, defend and hold the Seller harmless from and
against all claims, losses, damages, liabilities, costs, expenses (including
reasonable attorneys' fees and disbursements) and charges resulting from the
Buyer's breach of the foregoing representations in this subsection (b). The
provisions of this subsection (b) shall survive the Closing and any termination
of this Agreement.
Section XV.4 Confidentiality; Press Release; IRS Reporting
Requirements. (a) The Buyer and the Sellers shall hold as confidential all
information disclosed in connection with the transaction contemplated hereby and
concerning each other, the Asset, this Agreement and the transactions
contemplated hereby and shall not release any such information to third parties
without the prior written consent of the other parties hereto, except (i) any
information which was previously or is hereafter publicly disclosed (other than
in violation of this Agreement or other confidentiality agreements to which
affiliates of the Buyer are parties), (ii) to their partners, advisers,
underwriters, analysts, employees, affiliates, officers, directors, consultants,
lenders, investors, potential investors, accountants, legal counsel or other
advisors of any of the foregoing, provided that they are advised as to the
confidential nature of such information and are instructed to maintain such
confidentiality, (iii) to comply with any law, rule or regulation, (iv) to
analysts covering Buyer and the REIT industry and (v) to governmental bodies and
regulatory agencies, including the Securities and Exchange Commission or
required by court or other binding order. The foregoing shall constitute a
modification of any prior confidentiality agreement that may have been entered
into by the parties. The provisions of this
<PAGE>
51
Section shall survive the Closing or the termination of this Agreement for a
period of 180 days. Notwithstanding the foregoing, Buyer shall be entitled prior
to the Closing(after having provided a copy thereof to Seller at least two
Business Days prior to issuance and having given good faith consideration to
Seller's comments) to file any applicable forms with the Securities and Exchange
Commission that accurately set forth such factual information pertaining to the
Property and the transaction contemplated hereby that Buyer concludes, in good
faith, to be necessary or prudent in order to comply with Buyer's legal
disclosure obligations. Seller shall have no liability whatsoever for the
accuracy of any information contained in such filings or disclosure documents.
(b) Neither Sellers and/or the Buyer may issue a press release with
respect to this Agreement and the transactions contemplated hereby except (i) in
the form of Exhibit K hereto and (ii) as consented to in writing by the other
party to this Agreement (such approval not to be unreasonably withheld or
delayed). In no event shall any press release issued by the Buyer disclose the
identity of the Seller's direct or indirect beneficial owners by name.
(c) For the purpose of complying with any information reporting
requirements or other rules and regulations of the IRS that are or may become
applicable as a result of or in connection with the transaction contemplated by
this Agreement, including, but not limited to, any requirements set forth in
proposed Income Tax Regulation Section 1.6045-4 and any final or successor
version thereof (collectively, the "IRS Reporting Requirements"), the Seller and
the Buyer hereby designate and appoint the Designated Assignor to act as the
"Reporting Person" (as that term is defined in the IRS Reporting Requirements)
to be responsible for complying with any IRS Reporting Requirements. The
Designated Assignor hereby acknowledges and accepts such designation and
appointment and agrees to fully comply with any IRS Reporting Requirements that
are or may become applicable as a result of or in connection with the
transaction contemplated by this Agreement. Without limiting the responsibility
and obligations of the Designated Assignor as the Reporting Person, the Sellers
and the Buyer hereby agree to comply with any provisions of the IRS Reporting
Requirements that are not identified therein as the responsibility of the
Reporting Person, including, but not limited to, the requirement that the Seller
and the Buyer each retain an original counterpart of this Agreement for at least
four (4) years following the calendar year of the Closing.
Section XV.5 Intentionally Omitted.
Section XV.6 Successors and Assigns; No Third-Party Beneficiaries.
The stipulations, terms, covenants and agreements contained in this Agreement
shall inure to the benefit of, and shall be binding upon, the parties hereto and
their respective
<PAGE>
52
permitted successors and assigns (including any successor entity after a public
offering of stock, merger, consolidation, purchase or other similar transaction
involving a party hereto) and nothing herein expressed or implied shall give or
be construed to give to any person or entity, other than the parties hereto and
such assigns, any legal or equitable rights hereunder.
Section XV.7 Assignment. This Agreement may not be assigned by the
Buyer except: (a) at Closing, provided Buyer designates an Affiliate of Buyer to
which the Asset will be transferred at the Closing; or if not to an Affiliate,
(b) Buyer receives Sellers' prior written consent to the assignment, which
consent shall be in Seller's sole discretion. In addition, Buyer may name a
nominee or designee to whom the Asset will be transferred at Closing, provided
that Buyer does not assign this Agreement to such nominee or designee and Seller
is only required to deal with Buyer in connection with this Agreement and the
transactions contemplated herein. For purposes of this Section 15.7, the term
"Affiliate" shall mean a Person which controls, is controlled by or is under
common control with Buyer. Notwithstanding the foregoing, nothing herein shall
be construed as limiting the liability of Buyer hereunder and Buyer shall remain
primarily liable to Sellers with respect to this Agreement. The word "control"
means, with respect to a Person that is a corporation, the right to exercise the
twenty-five percent of the voting shares of the controlled corporation and, with
respect to a Person that is not a corporation, the possession of a twenty-five
percent ownership interest in the controlled Person. Notwithstanding the
foregoing, nothing herein shall prevent a Buyer from transferring to another
Person, pursuant to requirements under the NY Life Loan or other loan for which
either Property is pledged as security, a nominal one percent interest in such
Affiliate.
Section XV.8 Further Assurances. From time to time, as and when
requested by any party hereto, the other party shall execute and deliver, or
cause to be executed and delivered, all such documents and instruments and shall
take, or cause to be taken, all such further or other actions as such other
party may reasonably deem necessary or desirable to consummate the transactions
contemplated by this Agreement.
Section XV.9 Notices. All notices, demands or requests made pursuant
to, under or by virtue of this Agreement must be in writing and shall be (i)
personally delivered, (ii) delivered by express mail, Federal Express or other
comparable overnight courier service, (iii) facsimile or (iv) mailed to the
party to which the notice, demand or request is being made by certified or
registered mail, postage prepaid, return receipt requested, as follows:
<PAGE>
53
(a) To the Seller:
c/o Blackstone Real Estate Advisors L.P.
345 Park Avenue
New York, New York 10154
Attention: Mr. Steven Orbuch
Facsimile: 212-754-8726
with copies thereof to:
Simpson Thacher & Bartlett
425 Lexington Avenue
New York, New York 10017
Attention: Glenn D. Kesselhaut, Esq.
Facsimile: 212-455-2502
(b) To the Buyer:
c/o Prime Group Realty Trust
77 West Wacker Drive
Suite 3900
Chicago, Illinois 60601
Attention: Jeffrey A. Patterson
Facsimile: 312-917-0460; and
Attention: James F. Hoffman
Facsimile: 312-917-1684
with copies thereof to:
Jones, Day, Reavis & Pogue
77 West Wacker Drive
35th Floor
Chicago, Illinois 60601
Attention: Julie O. Ehrlich
Facsimile: 312-782-8585
All notices (i) shall be deemed effective upon receipt or refusal of delivery in
accordance with the provisions of this Section and (ii) may be given either by a
party or by such party's attorneys. Any party may, from time to time, specify as
its address for purposes of this Agreement any other address upon the giving of
10 days' notice thereof to the other parties.
Section XV.10 Entire Agreement. This Agreement, along with the
Exhibits and Schedules hereto contains all of the terms agreed upon between the
parties hereto with respect to the subject matter hereof, and all understandings
and agreements heretofore had or made among the parties hereto are merged in
this Agreement which alone fully and completely expresses the agreement of the
parties hereto.
Section XV.11 Amendments. This Agreement may not be amended,
modified, supplemented or terminated, nor may any of the
<PAGE>
54
obligations of the Seller or the Buyer hereunder be waived, except by written
agreement executed by the party or parties to be charged.
Section XV.12 No Waiver. No waiver by either party of any failure or
refusal by the other party to comply with its obligations hereunder shall be
deemed a waiver of any other or subsequent failure or refusal to so comply.
Section XV.13 Governing Law. With respect to matters affecting the
Property only, this Agreement shall be governed by, interpreted under, and
construed and enforced in accordance with, the laws of the State in which the
Property is located, and with respect to all other matters hereunder, the laws
of the State of New York.
Section XV.14 Submission to Jurisdiction.
(a) Each of the Sellers and Buyer irrevocably submits to the
jurisdiction of (i) the Supreme Court of the State of New York, New York County
and (ii) the United States District Court for the Southern District of New York
for the purposes of any suit, action or other proceeding arising out of this
Agreement or any transaction contemplated hereby. Each of the Sellers and the
Buyer further agrees that service of any process, summons, notice or document by
U.S. registered mail to such party's respective address set forth above shall be
effective service of process for any action, suit or proceeding in New York with
respect to any matters to which it has submitted to jurisdiction as set forth
above in the immediately preceding sentence.
(b) Each of the Buyer and each Seller irrevocably and
unconditionally waives trial by jury and agrees that any suit, action or
proceeding with respect to this Agreement or the transactions contemplated
hereby may be brought only in (i) the Supreme Court of the State of New York,
New York County and (ii) the United States District Court for the Southern
District of New York, and hereby further irrevocably and unconditionally waives
any objection that it may have to the venue of such suit, action or proceeding
in any such court or that such suit or proceeding in such court was brought in
an inconvenient court and agrees not to plead or claim same.
Section XV.15 Severability. If any term or provision of this
Agreement or the application thereof to any person or circumstances shall, to
any extent, be invalid or unenforceable, the remainder of this Agreement or the
application of such term or provision to persons or circumstances other than
those as to which it is held invalid or unenforceable shall not be affected
thereby, and each term and provision of this Agreement shall be valid and
enforceable to the fullest extent permitted by law.
Section XV.16 Section Headings. The headings of the various Sections
of this Agreement have been inserted only for
<PAGE>
55
purposes of convenience, are not part of this Agreement and shall not be deemed
in any manner to modify, explain, expand or restrict any of the provisions of
this Agreement.
Section XV.17 Counterparts. This Agreement may be executed in two or
more counterparts, each of which shall be deemed an original, and it shall not
be necessary in making proof of this Agreement to produce or account for more
than one such counterpart.
Section XV.18 Acceptance of Assignment. The acceptance of the
Assignment and Assumption of Interests to the City Center LLC membership
interests by the Buyer shall be deemed full compliance by the Sellers of all of
Sellers' Obligations under this Agreement except for those obligations of
Sellers which are specifically stated to survive the delivery of the Assignment
and Assumption of Interests.
Section XV.19 Payment of Purchase Price. The receipt and
confirmation of receipt by the Sellers of the Purchase Price shall be deemed
full compliance by Buyer of all of Buyer's obligations except for those
obligations of the Buyer which are specifically stated to survive the payment of
the Purchase Price.
Section XV.20 Construction. The parties acknowledge that the parties
and their counsel have reviewed and revised this Agreement and that the normal
rule of construction to the effect that any ambiguities are to be resolved
against the drafting party shall not be employed in the interpretation of this
Agreement or any exhibits or amendments hereto.
Section XV.21 Recordation. Neither this Agreement nor any memorandum
or notice of this Agreement may be recorded by any party hereto without the
prior written consent of the other party hereto. The provisions of this Section
shall survive the Closing or any termination of this Agreement.
Section XV.22 Waiver of Jury Trial. The Seller and the Buyer hereby
waive trial by jury in any action, proceeding or counterclaim brought by any
party against another party on any matter arising out of or in any way connected
with this Agreement.
Section XV.23 Covenants/Simultaneous Closing. With respect to all of
the obligations and covenants which, pursuant to the terms of this Agreement,
are to be complied with prior to or as of the Closing, such obligations and
covenants shall become effective obligations of the Sellers on the date of this
Agreement. In the event that the Closing occurs on the same day as the date of
this Agreement, then, in any event, the obligations and covenants referenced in
the first sentence of this Section 15.23 shall be deemed performed, in every and
all respects, in compliance with the terms of this Agreement.
<PAGE>
56
IN WITNESS WHEREOF, this Agreement has been duly executed by the
parties hereto as of the day and year first above written.
BUYER:
PRIME GROUP REALTY, L.P. a Delaware
limited partnership
By: Prime Group Realty Trust, a
Maryland real estate investment
trust, its Managing General Partner
By:___________________________________
Name:
Title:
SELLERS:
BLACKSTONE REAL ESTATE
PARTNERS TWO L.P., a Delaware limited
partnership
By: Blackstone Real Estate
Associates II L.P., a Delaware
limited partnership, general partner
By: Blackstone Real Estate
Management Associates II L.P., a
Delaware limited partnership,
general partner
By: BREA II L.L.C., a Delaware
limited liability company,
general partner
By:________________________________
Name: Steven E. Orbuch
Title: Authorized Person
<PAGE>
BLACKSTONE REAL ESTATE HOLDINGS II L.P., a
Delaware limited partnership
By: Blackstone Real Estate
Management Associates II L.P., a
Delaware limited partnership,
general partner
By: BREA II L.L.C., a Delaware
limited liability company,
general partner
By: __________________________
Name: Steven E. Orbuch
Title: Authorized Person
BLACKSTONE REAL ESTATE
PARTNERS II.TE.1 L.P., a Delaware limited
partnership
By: Blackstone Real Estate
Associates II L.P., a Delaware
limited partnership, general partner
By: Blackstone Real Estate
Management Associates II L.P., a
Delaware limited partnership,
general partner
By: BREA II L.L.C., a Delaware
limited liability company,
general partner
By:______________________
Name: Steven E. Orbuch
Title: Authorized Person
<PAGE>
BLACKSTONE REAL ESTATE
PARTNERS II.R (City Center), a New York general
partnership
By: Blackstone Real Estate
Associates II L.P., a Delaware limited
partnership, general partner
By: Blackstone Real Estate
Management Associates II L.P., a
Delaware limited partnership, general
partner
By: BREA II L.L.C., a Delaware
limited liability company, general
partner
By: ____________________
Name: Steven E. Orbuch
Title: Authorized Person
BLACKSTONE REAL ESTATE
PARTNERS II.TE.3 L.P., a Delaware limited
partnership
By: Blackstone Real Estate
Associates II L.P., a Delaware limited
partnership, general partner
By: Blackstone Real Estate
Management Associates II L.P., a
Delaware limited partnership, general
partner
By: BREA II L.L.C., a Delaware
limited liability company, general
partner
By: __________________________
Name: Steven E. Orbuch
Title: Authorized Person
<PAGE>
BLACKSTONE REAL ESTATE
PARTNERS II.TE.4 L.P., a Delaware limited
partnership
By: Blackstone Real Estate
Associates II L.P., a Delaware
limited partnership, general partner
By: Blackstone Real Estate
Management Associates II L.P., a
Delaware limited partnership,
general partner
By: BREA II L.L.C., a Delaware
limited liability company,
general partner
By: ___________________________
Name: Steven E. Orbuch
Title: Authorized Person
BLACKSTONE REAL ESTATE
PARTNERS II.TE.5 L.P., a Delaware limited
partnership
By: Blackstone Real Estate
Associates II L.P., a Delaware
limited partnership, general partner
By: Blackstone Real Estate
Management Associates II L.P., a
Delaware limited partnership,
general partner
By: BREA II L.L.C., a Delaware
limited liability company,
general partner
By: _________________________
Name: Steven E. Orbuch
Title: Authorized Person
<PAGE>
BLACKSTONE REAL ESTATE
INVESTORS (City Center) INC.
By: ___________________________________
Name: Steven E. Orbuch
Title: Authorized Person
JOINDER
BRE/CITY CENTER L.L.C., a Delaware limited liability company, hereby
joins in the execution of this Agreement and accepts and, to the extent such
provisions are applicable to BRE/City Center L.L.C., agrees to be bound by the
provisions of the following Sections only:
Section 3.1
Section 3.2
Section 3.3
Section 4.1
BRE/CITY CENTER L.L.C.
By:__________________________
Name: Steven E. Orbuch
Title: Authorized Person
<PAGE>
TABLE OF CONTENTS
Page
ARTICLE I DEFINITIONS............................1
Section 1.1 Defined Terms...............................................1
ARTICLE II.................................7
SALE, PURCHASE PRICE AND CLOSING.............................................7
Section 2.1 Sale of Asset...................................................7
Section 2.2 Purchase Price; Earnest Money...................................8
Section 2.3 The Closing....................................................10
ARTICLE III REPRESENTATIONS, WARRANTIES AND COVENANTS
OF THE SELLER ...........................11
Section 3.1 General Seller Representations and Warranties..................11
(a) Formation; Existence..................................11
(b) Power and Authority...................................11
(c) No Consents...........................................11
(d) No Conflicts..........................................12
(e) Subsidiaries/ Authority to Conduct Business...........12
(f) Limited Liability Company Agreement...................12
(g) Sellers...............................................12
(h) Restrictions upon Acquisition of Interests............13
(i) Transferability of Interests..........................13
(j) Liabilities...........................................13
(k) Financial Statements..................................13
(l) Obligations...........................................14
(m) Income Taxes..........................................14
(n) Foreign Person........................................14
Section 3.2 Representations and Warranties of Sellers as to the Assets ....14
(a) Ownership of the Asset................................14
(b) Contracts.............................................15
(c) Space Leases..........................................15
(d) Brokerage Commissions.................................16
(e) Condemnation..........................................16
(f) Litigation............................................16
(g) Environmental Violations..............................17
(h) Loan Documents........................................17
Section 3.3 Covenants of the Sellers Prior to Closing......................17
(a) Insurance.............................................17
(b) Operation.............................................17
(c) New Contracts.........................................17
(d) New Space Leases......................................18
(e) Litigation............................................18
(f) Sale of Tangible Personal Property....................19
(g) Performance Under Space Leases........................19
(h) Updated Estoppel Certificates.........................19
(i) Loan Documents........................................19
(j) Security Deposits.....................................19
(k) Due Diligence Requests................................20
(l) Updating Information..................................20
-i-
<PAGE>
(m) Review of Books and Records...........................20
(n) Entity Status.........................................20
(o) Property Management Employees.........................20
(p) Tax Returns, Taxes....................................21
ARTICLE IV REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE
BUYER ...............................21
Section 4.1 Representations, Warranties and Covenants of the Buyer ........21
(a) Formation; Existence..................................21
(b) Power; Authority......................................21
(c) No Consents...........................................21
(d) No Conflicts..........................................22
(e) Examination; No Contingencies.........................22
(f) ......................................................23
(g) Buyer's Affiliate/Assignee............................25
(h) Like Kind Exchange....................................26
(i) NY Life Loan..........................................26
ARTICLE V CONDITIONS PRECEDENT TO CLOSING................26
Section 5.1 Conditions Precedent To Seller's Obligations...................26
Section 5.2 Conditions to the Buyer's Obligations..........................27
ARTICLE VI CLOSING DELIVERIES.......................28
ARTICLE VII PURCHASE OPTION........................31
ARTICLE VIII INSPECTIONS.........................32
Section 8.1 Right of Inspection............................................32
ARTICLE IX TITLE AND PERMITTED EXCEPTIONS.................33
Section 9.1 Permitted Exceptions...........................................33
Section 9.2 Title Report, Survey and Searches..............................33
Section 9.3 Use of Purchase Price to Discharge Title Exceptions............33
Section 9.4 Inability to Convey............................................34
Section 9.5 Rights in Respect of Inability to Convey.......................34
Section 9.6 Voluntary/De Minimis Title Exceptions..........................35
Section 9.7 The Buyer's Right to Accept Title..............................35
Section 9.8 Cooperation....................................................35
ARTICLE X TRANSACTION COSTS; RISK OF LOSS.................36
Section 10.1 Transaction Costs.............................................36
Section 10.2 Risk of Loss..................................................37
ARTICLE XI ADJUSTMENTS..........................38
Section 11.1 Fixed Rents...................................................38
Section 11.2 Overage Rents.................................................39
Section 11.3 Ground Lease Rents............................................42
Section 11.4 Taxes and Assessments.........................................42
Section 11.5 Water and Sewer Charges.......................................42
Section 11.6 Utility Charges...............................................43
Section 11.7 Contracts.....................................................43
Section 11.8 Miscellaneous Revenues........................................43
Section 11.9 Supplies......................................................44
Section 11.10 Security Deposits.............................................44
<PAGE>
Section 11.11 Employee Costs................................................44
Section 11.12 Leasing Costs.................................................44
Section 11.13 NY Life Loan Escrows..........................................46
Section 11.14 Other.........................................................46
Section 11.15 Re-Adjustment.................................................46
ARTICLE XII INDEMNIFICATION........................46
Section 12.1 Indemnification by the Seller.................................46
Section 12.2 Indemnification by the Buyer..................................46
Section 12.3 Limitations on Indemnification................................47
Section 12.4 Survival......................................................47
Section 12.5 Indemnification as Sole Remedy................................47
ARTICLE XIII TAX CERTIORARI PROCEEDINGS..................48
Section 13.1 Prosecution and Settlement of Proceedings.....................48
Section 13.2 Application of Refunds or Savings.............................48
Section 13.3 Survival......................................................49
ARTICLE XIV DEFAULT............................49
Section 14.1 Default.......................................................49
ARTICLE XV MISCELLANEOUS.........................50
Section 15.1 Use of Blackstone Name and Address ...........................50
Section 15.2 Exculpation of the Seller.....................................50
Section 15.3 Brokers.......................................................50
Section 15.4 Confidentiality; Press Release; IRS Reporting
Requirements..................................................51
Section 15.5 Intentionally Omitted.........................................52
Section 15.6 Successors and Assigns; No Third-Party Beneficiaries..........52
Section 15.7 Assignment....................................................52
Section 15.8 Further Assurances............................................53
Section 15.9 Notices.......................................................53
Section 15.10 Entire Agreement..............................................54
Section 15.11 Amendments....................................................54
Section 15.12 No Waiver.....................................................54
Section 15.13 Governing Law.................................................54
Section 15.14 Submission to Jurisdiction....................................54
Section 15.15 Severability..................................................55
Section 15.16 Section Headings..............................................55
Section 15.17 Counterparts..................................................55
Section 15.18 Acceptance of Assignment......................................55
Section 15.19 Payment of Purchase Price.....................................55
Section 15.20 Construction..................................................56
Section 15.21 Recordation...................................................56
Section 15.22 Waiver of Jury Trial..........................................56
Section 15.23 Covenants/Simultaneous Closing................................56
-iii-
<PAGE>
Page
----
-iv-
<PAGE>
Page
----
-v-
<PAGE>
Exhibits
Exhibit A - Assignment and Assumption of Interests
Exhibit B - Release
Exhibit C - FIRPTA Certificate
Exhibit D - Auditors' Certification
Exhibit E - Press Release
Schedules
Schedule A - City Center Assignors
Schedule A-1 - Description of City Center Fee Parcel
Schedule A-2 - Description of City Center Leasehold Parcel
Schedule B - Existing Title Policy and Survey
Schedule C - NY Life Loan
Schedule C-1 - Instruments Encumbering City Center Interests
Schedule D - Consents
Schedule E - Contracts
Schedule E-1 - Contracts to be Terminated
Schedule F - Space Leases
Schedule F-1 - Landlord's Work in Progress
Schedule F-2 - Contemplated Leases
Schedule F-3 - Deferred Tenant Improvements
Schedule F-4 - Base Building Work
Schedule G - Brokerage Commissions
Schedule H - Litigation
Schedule I - Security Deposits Held By Seller
Schedule J - Buyer Consents
-vi-
<PAGE>
AGREEMENT OF PURCHASE AND SALE
among
THE SELLERS NAMED HEREIN
and
PRIME GROUP REALTY, L.P., the BUYER
As of February ____, 1999
<PAGE>
EXHIBIT A
ASSIGNMENT AND ASSUMPTION AGREEMENT
[OMITTED]
<PAGE>
EXHIBIT B
CONSENT, RELEASE AND REACKNOWLEDGEMENT AGREEMENT
[OMITTED]
<PAGE>
EXHIBIT C
ENTITY TRNASFEROR FOREIGN INVESTORS
REAL PROPERTY TAX ACT CERTIFICATION AND AFFIDAVIT
[OMITTED]
<PAGE>
EXHIBIT D
AUDITORS' CERTIFICATION
[OMITTED]
<PAGE>
EXHIBIT E
PRESS RELEASE
[OMITTED]
<PAGE>
SCHEDULE A
CITY CENTER ASSIGNORS
Interest
--------
Blackstone Real 345 Park Avenue, 31st Floor 28.4709%
Estate Partners New York, New York 10154
Two L.P.
Blackstone Real 345 Park Avenue, 31st Floor 10.5093%
Estate Holdings New York, New York 10154
II L.P.
Blackstone Real 345 Park Avenue, 31st Floor 25.8242%
Estate Partners New York, New York 10154
II.TE.1 L.P.
Blackstone Real 345 Park Avenue, 31st Floor 8.9501%
Estate Partners New York, New York 10154
II.R (City Center)
Blackstone Real 345 Park Avenue, 31st Floor 3.3387%
Estate Partners New York, New York 10154
II.TE.3 L.P.
Blackstone Real 345 Park Avenue, 31st Floor 1.7317%
Estate Partners New York, New York 10154
II.TE.4 L.P.
Blackstone Real 345 Park Avenue, 31st Floor 15.2562%
Estate Partners New York, New York 10154
II.TE.5 L.P.
Blackstone Real 345 Park Avenue, 31st Floor 5.9191%
Estate Investors New York, New York 10154
(City Center) Inc.
<PAGE>
SCHEDULE A-1
DESCRIPTION OF FEE PARCEL
[OMITTED]
<PAGE>
SCHEDULE A-2
DESCRIPTION OF LEASEHOLD PARCEL
[OMITTED]
<PAGE>
SCHEDULE B
EXISTING TITLE POLICY AND SURVEY
[OMITTED]
<PAGE>
SCHEDULE C
NY LIFE LOAN DOCUMENTS
[OMITTED]
<PAGE>
SCHEDULE C-1
INSTRUMENTS ENCUMBERING CITY CENTER INTERESTS
National City Center Right of First Refusal.
<PAGE>
SCHEDULE D
CONSENTS
[OMITTED]
<PAGE>
SCHEDULE E
CONTRACTS
[OMITTED]
<PAGE>
SCHEDULE E-1
CONTRACTS TO BE TERMINATED
NONE.
<PAGE>
SCHEDULE F
SPACE LEASES
[OMITTED]
<PAGE>
SCHEDULE F-1
LANDLORD'S WORK IN PROGRESS
<TABLE>
<CAPTION>
TENANT DOCUMENT DESCRIPTION OUTSTANDING AMOUNT
- ------ -------- ----------- ------------------
<S> <C> <C> <C>
National City Bank 4th Expansion Tenant Improvement allowance $407,440
of $20/RSF on 20,372 RSF
</TABLE>
<PAGE>
SCHEDULE F-2
CONTEMPLATED LEASES
NONE.
<PAGE>
SCHEDULE F-3
DEFERRED TENANT IMPROVEMENTS
<TABLE>
<CAPTION>
TENANT DOCUMENT DESCRIPTION OUTSTANDING AMOUNT
- ------ -------- ----------- ------------------
<S> <C> <C> <C>
Baker & Hostetler 9th Addendum to Tenant Improvement Payments 1999 $91,794
Lease 2000 $91,794
2001 $91,794
</TABLE>
<PAGE>
SCHEDULE F-4
BASE BUILDING WORK
NONE.
<PAGE>
SCHEDULE G
BROKERAGE COMMISSIONS
NONE.
<PAGE>
SCHEDULE H
LITIGATION
[OMITTED]
<PAGE>
SCHEDULE I
SECURITY DEPOSITS HELD BY SELLER
[OMITTED]
<PAGE>
SCHEDULE J
BUYER CONSENTS
NONE.
<PAGE>
Exhibit 12.1
Prime Group Realty Trust and The Predecessor
Statements Regarding Computation of Ratios of Earnings
to Combined Fixed Charges and Preferred Share Distributions
(Dollars in Thousands)
<TABLE>
<CAPTION>
Prime Group Realty Trust - Historical
-----------------------------------------------------------------
Period from
November 17,
March 31, Year ended 1997 through
------------------------------- December 31, December 31,
1999 1998 1998 1997
-----------------------------------------------------------------
<S> <C> <C> <C> <C>
Earnings:
Income before preferred share distributions and
minority interests per the consolidated
financial statements $ 8,068 $ 5,191 $30,866 $1,427
Interest expense 10,378 6,415 30,901 1,680
Amortization of debt issuance costs 474 281 1,230 140
-----------------------------------------------------------------
Earnings $18,920 $11,887 $62,997 $3,247
-----------------------------------------------------------------
-----------------------------------------------------------------
Fixed charges:
Interest expense $10,378 $ 6,415 $30,901 $1,680
Capitalization of interest expense 1,117 80 2,498 -
Amortization of debt issuance costs 474 281 1,230 140
Preferred share distributions 3,000 700 7,971 345
-----------------------------------------------------------------
Total fixed charges $14,969 $ 7,476 $42,600 $2,165
-----------------------------------------------------------------
-----------------------------------------------------------------
Ratio of earnings to combined fixed charges and
preferred share distributions 1.26 1.59 1.48 1.50
-----------------------------------------------------------------
-----------------------------------------------------------------
Excess of earnings to combined fixed charges and
preferred share distributions $ 3,951 $ 4,411 $20,397 $1,082
-----------------------------------------------------------------
-----------------------------------------------------------------
Funds from operations:
Funds from operations $13,209 $ 9,769 $46,762 $3,619
Interest expense 10,378 6,415 30,901 1,680
Amortization of debt issuance costs 474 281 1,230 140
Preferred share distributions 3,000 700 7,971 345
-----------------------------------------------------------------
Adjusted funds from operations $27,061 $17,165 $86,864 $5,784
-----------------------------------------------------------------
-----------------------------------------------------------------
Fixed charges:
Interest expense $10,378 $ 6,415 $30,901 $1,680
Capitalization of interest expense 1,117 80 2,498 -
Amortization of debt issuance costs 474 281 1,230 140
Preferred share distributions 3,000 700 7,971 345
-----------------------------------------------------------------
Total fixed charges $14,969 $ 7,476 $42,600 $2,165
-----------------------------------------------------------------
-----------------------------------------------------------------
Ratio of funds from operations to combined fixed
charges and preferred share distributions 1.81 2.30 2.04 2.67
-----------------------------------------------------------------
-----------------------------------------------------------------
Excess of funds from operations to combined fixed
charges and preferred share distributions $12,092 $ 9,689 $44,264 $3,619
-----------------------------------------------------------------
-----------------------------------------------------------------
</TABLE>
- 22 -
<PAGE>
Exhibit 12.1
Prime Group Realty Trust and The Predecessor
Statements Regarding Computation of Ratios of Earnings
to Combined Fixed Charges and Preferred Share Distributions
(Dollars in Thousands)
<TABLE>
<CAPTION>
Predecessor - Historical
-----------------------------------------------------------------
Period from
January 1,
1999 through Year ended December 31,
November 16, -------------------------------------------------
1997 1996 1995 1994
-----------------------------------------------------------------
<S> <C> <C> <C> <C>
Earnings:
Loss before preferred share distributions and
minority interests per the combined
financial statements $(29,050) $(31,417) $(29,576) $(22,062)
Interest expense 34,417 37,217 36,234 33,387
Amortization of debt issuance costs 630 594 1,148 714
-----------------------------------------------------------------
Earnings $ 5,997 $ 6,394 $ 7,806 $ 12,039
-----------------------------------------------------------------
-----------------------------------------------------------------
Fixed charges:
Interest expense $ 34,417 $ 37,217 $ 36,234 $ 33,387
Capitalization of interest expense - - - -
Amortization of debt issuance costs 630 594 1,148 714
Preferred share distributions - - - -
-----------------------------------------------------------------
Total fixed charges $ 35,047 $ 37,811 $ 37,382 $ 34,101
-----------------------------------------------------------------
-----------------------------------------------------------------
Ratio of earnings to combined fixed charges and
preferred share distributions - - - -
-----------------------------------------------------------------
-----------------------------------------------------------------
Deficit of earnings to combined fixed charges and
preferred share distributions $(29,050) $(31,417) $(29,576) $(22,062)
-----------------------------------------------------------------
-----------------------------------------------------------------
Funds from operations:
Funds from operations $(14,461) $(17,367) $(12,733) $(12,930)
Interest expense 34,417 37,217 36,234 33,387
Amortization of debt issuance costs 630 594 1,148 714
Preferred share distributions - - - -
-----------------------------------------------------------------
Adjusted funds from operations $ 20,586 $ 20,444 $ 24,649 $ 21,171
-----------------------------------------------------------------
-----------------------------------------------------------------
Fixed charges:
Interest expense $ 34,417 $ 37,217 $ 36,234 $ 33,387
Capitalization of interest expense - - - -
Amortization of debt issuance costs 630 594 1,148 714
Preferred share distributions - - - -
-----------------------------------------------------------------
Total fixed charges $ 35,047 $ 37,811 $ 37,382 $ 34,101
-----------------------------------------------------------------
-----------------------------------------------------------------
Ratio of funds from operations to combined fixed
charges and preferred share distributions - - - -
-----------------------------------------------------------------
Deficit of funds from operations to combined
fixed charges and preferred share
distributions $(14,461) $(17,367) $(12,733) $(12,930)
-----------------------------------------------------------------
-----------------------------------------------------------------
</TABLE>
- 23 -
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> MAR-31-1999
<CASH> 12,634
<SECURITIES> 0
<RECEIVABLES> 115,059
<ALLOWANCES> 0
<INVENTORY> 118,159<F1>
<CURRENT-ASSETS> 0
<PP&E> 1,114,723
<DEPRECIATION> 31,692
<TOTAL-ASSETS> 1,328,883
<CURRENT-LIABILITIES> 224,645<F2>
<BONDS> 755,977
0
60
<COMMON> 151
<OTHER-SE> 348,050
<TOTAL-LIABILITY-AND-EQUITY> 1,328,883
<SALES> 0
<TOTAL-REVENUES> 49,636
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 33,246<F3>
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 10,378
<INCOME-PRETAX> 6,012
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 6,012
<EPS-PRIMARY> 0.20
<EPS-DILUTED> 0.20
<FN>
<F1>Amount includes restricted cash escrows ($28,693), net deferred costs
($33,061), loans receivable from Services Company ($6,383) and other assets
($50,022).
<F2>Amount includes accrued interest payable ($3,281) accrued real estate taxes
($38,792), accounts payable and accrued expenses ($21,344), liabilities for
leases assumed ($4,162), dividends payable ($8,104), other liabilities ($4,307)
and minority interests of ($144,655).
<F3>Amount includes property operations ($10,650), real estate taxes ($9,375),
depreciation and amortization ($7,958), loss on treasury lock termination
($557), loss on land development option ($600), general and administrative
expenses ($2,050) and minority interests allocation ($2,056).
</FN>
</TABLE>
