<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
Current Report
Filed pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported) June 17, 1999
BRANDYWINE REALTY TRUST
-----------------------
(Exact name of registrant as specified in its charter)
MARYLAND 1-9106 23-2413352
(State or Other Jurisdiction (Commission (I.R.S. Employer
of Incorporation) file number) Identification Number)
14 Campus Boulevard, Newtown Square, Pennsylvania 19073
(Address of principal executive offices)
(610) 325-5600
(Registrant's telephone number, including area code)
<PAGE>
Item 5. Other Events.
(i) Industrial Property Sale
On June 17, 1999, the Company, through Brandywine Operating
Partnership, L.P. (the "Operating Partnership"), sold 17 industrial properties
(collectively, the "Properties") for an aggregate cash payment of approximately
$82.9 million. The Properties contain an aggregate of approximately 2.0 million
net rentable square feet and are specifically identified below.
The purchaser of the Properties is a newly-formed limited partnership
(the "Industrial Partnership") between BB&K GP Business Trust, as the sole
general partner and BB&K LP Business Trust as a limited partner (collectively,
the "Investor"), and the Operating Partnership as an additional limited partner.
The Industrial Partnership funded its purchase of the Properties through an
equity contribution by Investor in the amount of approximately $32.0 million and
from a portion of the proceeds of a non-recourse mortgage loan on the Properties
in the amount of approximately $51.0 million. The Operating Partnership has no
obligation to make contributions to the capital of the Industrial Partnership.
As a limited partner in the Industrial Partnership, the Operating Partnership
has no control over the management of the Industrial Partnership.
Investor is entitled to an 11.5% preferred return on its equity
contribution to the Industrial Partnership. After Investor has received its
preferred return, 65% of any remaining operating cash flow is distributable to
Investor, and the remaining 35% is distributable to the Operating Partnership.
After Investor has received both its preferred return and a return of its
current and any future equity contributions to the Industrial Partnership, 60%
of any remaining extraordinary cash flow (i.e., net proceeds of a capital
transaction, such as a sale of one or more of the Properties) is distributable
to Investor until Investor has received an 18% internal rate of return on its
equity contribution, and the remaining 40% is distributable to the Operating
Partnership. After Investor has received an 18% internal rate of return on its
equity contribution, any remaining extraordinary cash flow is distributable 40%
to Investor, and the remaining 60% is distributable to the Operating
Partnership. There can be no assurance as to the internal rate of return that
Investor will receive on its equity contribution.
The following table sets forth certain information about the
Properties.
<TABLE>
<CAPTION>
Property Identification Location Net Rentable Square Feet
----------------------- -------- ------------------------
<S> <C> <C>
2250 Cabot Boulevard Langhorne, PA 40,000
201/221 Kings Manor King of Prussia, PA 124,960
650 Clark Avenue King of Prussia, PA 50,000
741 Third Avenue King of Prussia, PA 50,000
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C>
780 Third Avenue King of Prussia, PA 72,000
820 Third Avenue King of Prussia, PA 56,200
300 - 600 Highland Drive Westhampton, NJ 388,767
1200 Highland Drive Westhampton, NJ 181,127
7055 Ambassador Drive Allentown, PA 153,600
6670 Grant Way Allentown, PA 72,885
6690 Grant Way Allentown, PA 88,000
6755 Snowdrift Way Allentown, PA 125,000
6845 Snowdrift Way Allentown, PA 93,000
7020 Snowdrift Way Allentown, PA 41,390
6810 Tilghman Street Allentown, PA 54,844
1510 Gehman Road Lansdale, PA 152,625
4612 Navistar Drive Frederick, MD 208,774
-------
1,953,172
</TABLE>
The Operating Partnership holds a right of first offer to purchase each
of the Properties. Generally, this right will allow the Operating Partnership to
elect to acquire any of the Properties that the Industrial Partnership proposes
to sell on terms substantially comparable to the terms on which the Industrial
Partnership proposes to sell any of these Properties.
As part of the transaction, the Industrial Partnership engaged
Brandywine Realty Services Corporation (the "Management Company"), a 95%-owned
subsidiary of the Operating Partnership, to manage operations of the Properties.
In exchange for its management services, the Management Company will generally
be entitled to receive a management fee equal to 1% of gross rental receipts for
single tenant properties and 3% of gross rental receipts for multi-tenant
properties and reimbursement for certain project administrative and personnel
costs. In addition, the Industrial Partnership engaged the Management Company to
provide exclusive leasing and construction management services to the
Properties. In exchange for its leasing services, the Management Company will be
entitled to receive customary leasing commissions for leasing activity at the
Properties.
In addition, the Operating Partnership and Invesco Realty Advisors Inc.
("Invesco") entered into a development agreement pursuant to which they have
agreed to jointly pursue acquisition and development opportunities relating to
industrial and warehouse properties located in Pennsylvania, Maryland, Delaware
and three counties in southern New Jersey. If a party identifies an acquisition
or development opportunity in the applicable area that meets certain specified
criteria, the parties have agreed to negotiate with each other for a limited
period of time to determine whether to form a joint venture through which to
jointly pursue the
<PAGE>
opportunity. If the parties elect not to pursue jointly, each will be free to
pursue the opportunity independently of the other. The development agreement
contemplates that Invesco will contribute up to $25 million in the aggregate for
agreed upon opportunities and that the Operating Partnership will have a right
to match the contribution of Invesco. The development agreement also
contemplates that the joint venture agreement that the parties enter into
relating to an opportunity will provide for distributions of operating cash flow
to each partner pro rata based on its actual equity contributions. After each
party has received a 12% internal rate of return on its equity contributions,
net sales or refinancing proceeds will be distributed 60% to Invesco and the
Operating Partnership pro rata in accordance with their respective equity
contributions and 40% to the Operating Partnership until Invesco has received an
18% internal rate of return on its equity contribution and thereafter any
remaining net proceeds will be distributed 40% to Invesco and the Operating
Partnership pro rata in accordance with their equity contributions and 60% to
the Operating Partnership. There can be no assurance that the parties will agree
to pursue any opportunities during the term of the development agreement or that
the terms of any joint venture which the parties form to pursue a joint venture
will not vary from the terms contemplated by the development agreement. The term
of the development agreement extends to the earlier of the third anniversary of
the date of the agreement or the date in which Invesco has contributed an
aggregate of $25 million for agreed upon opportunities.
The Operating Partnership has granted an option to the Industrial
Partnership for a 14.4 acre site adjacent to 7055 Ambassador Drive in the
Iron Run Corporate Center, Lehigh, Pennsylvania. The option price is $460,800
and the option is only exerciseable if the tenant in 7055 Ambassador Drive
exercises an expansion option under its lease. The Operating Partnership is
permitted under the option to subdivide the option property and remove, for no
cost, any vacant land which is unnecessary for purposes of complying with the
tenant's expansion right (the "Excess Option Land")
The Operating Partnership has also granted an option to Invesco for the
benefit of a joint venture that they may form pursuant to the development
agreement. The option is exercisable during the term of the development
agreement to purchase the Excess Option Land and certain other undeveloped land
containing an aggregate of approximately 20.6 acres for a price of $6.00
multiplied by the number of approved buildable square feet at the land subject
to purchase. The option may be exercised only as to that portion of the land
which the Operating Partnership and Invesco have agreed to include in a
development joint venture. The land subject to the option is located at the Iron
Run Corporate Center, Lehigh, Pennsylvania and Highlands Business Park,
Westhampton, New Jersey.
For more details of the transaction summarized above, reference is made
to the documents attached as exhibits to this Current Report on Form 8-K.
(ii) 7000 Geerdes Boulevard Sale
On June 18, 1999, the Company sold an office property located in King
of Prussia, Pennsylvania (known as 7000 Geerdes Boulevard) containing
approximately 112,905 net rentable square feet for approximately $16.9 million
which was determined by arm's-length negotiation between the Company and an
unaffiliated buyer.
Item 7. Financial Statements, Pro Forma Financial Information and Exhibits.
(c) Exhibits.
10.1 - Contribution Agreement
10.2 - Limited Partnership Agreement
<PAGE>
10.3 - Management Agreement
10.4 - Leasing Agreement
10.5 - Development Agreement
SIGNATURE
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 hereunto duly authorized.
BRANDYWINE REALTY TRUST
Date: June 25, 1999 By: /s/ Gerard H. Sweeney
------------------------------------
Title: President and Chief Executive
Officer
<PAGE>
CONTRIBUTION AGREEMENT
BETWEEN
INVESCO REALTY ADVISORS, INC.
AND
BRANDYWINE OPERATING PARTNERSHIP, L.P.,
NICHOLS LANSDALE LIMITED PARTNERSHIP, III
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C>
1. CONTRIBUTION OF PROPERTY................................................................................1
1.1 Description of the Property....................................................................1
1.2 Limitation on Property.........................................................................3
1.3 Schedule of Values and Removal of a Parcel.....................................................3
2. FORMATION OF COMPANY; CONTRIBUTION OF FUNDS.............................................................3
2.1 Contribution Procedures........................................................................3
2.2 Tax Treatment of Contribution..................................................................4
2.3 Future Development Deals.......................................................................4
3. SURVEY, TITLE COMMITMENT AND INSPECTIONS................................................................5
3.1 Title..........................................................................................5
3.2 Survey.........................................................................................5
3.3 Other Information..............................................................................5
3.4 Inspection Period..............................................................................5
3.5 Inspections....................................................................................6
3.6 Review of Service Contracts and Personal Property Leases.......................................6
3.7 Approval of Additional Service Contracts and Personal Property Leases..........................6
3.8 Tenant Lease Approvals.........................................................................7
3.9 Permanent Loan.................................................................................7
4. REPRESENTATIONS, WARRANTIES AND COVENANTS...............................................................8
4.1 Developer's Representations and Warranties.....................................................8
4.2 Knowledge Defined.............................................................................13
4.3 Developer's Covenants.........................................................................13
4.4 Indemnity For Breach by Developer.............................................................16
4.5 Investor's Representations and Warranties.....................................................16
5. CONDITIONS OF CLOSING..................................................................................16
5.1 Closing Conditions For Investor's Benefit; Removal of a Parcel................................16
5.2 Conditions Precedent for Developer's Benefit..................................................19
6. CLOSING................................................................................................20
6.1 Closing.......................................................................................20
6.2 Title Assurance...............................................................................22
6.3 Delivery of Documents, Possession, Keys and Other Items.......................................22
6.4 Closing Costs; Transfer Taxes.................................................................23
6.5 Security Deposits.............................................................................23
</TABLE>
i
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C>
7. PRORATIONS.............................................................................................23
7.1 Taxes.........................................................................................23
7.2 Rents.........................................................................................23
7.3 Operating Costs...............................................................................23
7.4 Utility Deposits..............................................................................24
7.5 Insurance Premiums............................................................................24
7.6 Leasing Commissions...........................................................................24
7.7 Other Income and Expenses.....................................................................24
7.8 Adjustments; Reproration......................................................................24
8. SURVIVAL...............................................................................................24
8.1 Survival......................................................................................24
9. COMMISSIONS............................................................................................24
9.1 Developer's Indemnity.........................................................................24
9.2 Investor's Indemnity..........................................................................25
10. FURTHER INSTRUMENTS....................................................................................25
10.1 Further Instruments...........................................................................25
11. TERMINATION AND REMEDIES...............................................................................25
11.1 Developer's Default...........................................................................25
11.2 Investor's Default............................................................................26
11.3 Costs and Expenses; Limitation................................................................27
12. RISK OF LOSS...........................................................................................27
12.1 Casualty Prior to Closing.....................................................................27
12.2 Condemnation..................................................................................28
13. PROVISIONS REGARDING HAZARDOUS SUBSTANCES..............................................................28
13.1 Definitions...................................................................................28
13.2 Developer's Representations and Warranties....................................................30
13.3 Environmental Covenant........................................................................32
13.4 Environmental Indemnification.................................................................32
13.5 Rights Cumulative.............................................................................34
14. NO ASSUMPTION..........................................................................................34
14.1 No Assumption.................................................................................34
15. NOTICES................................................................................................34
15.1 Notices.......................................................................................34
</TABLE>
ii
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C>
16. MISCELLANEOUS..........................................................................................35
16.1 Entire Agreement..............................................................................35
16.2 Counterparts..................................................................................35
16.3 Time of the Essence...........................................................................35
16.4 Assignment....................................................................................35
16.5 Dates.........................................................................................35
16.6 Binding on Successors and Assigns.............................................................35
16.7 Records.......................................................................................35
16.8 Attorneys' Fees...............................................................................36
16.9 Confidentiality and Public Disclosure.........................................................36
16.10 Termination...................................................................................36
16.11 Reporting Person..............................................................................36
16.12 Paragraph Headings............................................................................36
16.13 Approvals.....................................................................................36
16.14 Facsimile Signatures..........................................................................36
16.15 Exculpation...................................................................................37
16.16 AS IS.........................................................................................37
16.17 Governing Law.................................................................................38
Exhibit A - List of Properties By Address and Value
Exhibit B - Legal Descriptions
Exhibit C-1 - Exceptions to Developer Warranties
Exhibit C-2 - Exceptions to End of Inspection Period
Exhibit D - Due Diligence Items
Exhibit E - Special Warranty Deed
Exhibit F - Bill of Sale
Exhibit G-1 - Tenant Estoppel Letter
Exhibit G-2 - Subordination and Non-Disturbance Agreement
Exhibit H - Partnership Agreement
Exhibit I - Management and Leasing Agreement
Exhibit J - Escrow Agreement
</TABLE>
iii
<PAGE>
CONTRIBUTION AGREEMENT
----------------------
THIS CONTRIBUTION AGREEMENT (the "Agreement") is entered into between
INVESCO REALTY ADVISORS, INC., a Delaware corporation, (the "Investor") and
BRANDYWINE OPERATING PARTNERSHIP, L.P., a Delaware limited partnership ("BOP")
and NICHOLS LANSDALE LIMITED PARTNERSHIP, III, a Pennsylvania limited
partnership ("NLL" and, together with BOP, the "Developer").
1. CONTRIBUTION OF PROPERTY
1.1 Description of the Property. In consideration of the terms and
conditions hereinafter set forth, Developer shall contribute, or cause to be
contributed, to the limited partnership (the "Company") to be formed pursuant to
the Agreement of Limited Partnership (as hereinafter defined) the various
existing industrial properties expressly identified on Exhibit A attached hereto
and being all of the following described property (collectively, the
"Property"):
(a) Land. The real property at the addresses identified on Exhibit A
attached hereto and more fully described on Exhibit B attached hereto, together
with all rights and appurtenances pertaining to such real property, including,
without limitation, all cross access/reciprocal access easements and any and all
right, title, and interest of Developer in and to adjacent roads, alleys,
easements, streets and ways (collectively, the "Land");
(b) Improvements. All physical improvements, structures and fixtures
owned by Developer and placed, constructed or installed on the Land
(collectively, the "Improvements");
(c) Personal Property. All (i) mechanical systems and related equipment
owned by Developer and either attached to the Improvements or located upon the
Land, including, but not limited to, electrical systems, plumbing systems,
heating systems and air conditioning systems, (ii) maintenance equipment,
supplies and tools owned by Developer and used in connection with the
Improvements, (iii) other machinery, equipment, fixtures, supplies (including
marketing supplies) and tangible personal property owned by Developer and
located in or on or used in connection with the Land or the Improvements or the
operations thereon; and (iv) Developer's residual or lien rights in personal
property of tenants under leases (but excluding any personal property of tenants
in which the landlord has no rights) (collectively the "Personal Property");
(d) Tenant Leases. Developer's interest in leases and rental agreements
with tenants occupying space situated in the Improvements or otherwise having
contractual rights with regard to use of the Land or the Improvements, (copies
of all such leases and agreements entered into as of the date hereof having been
provided to Investor) and those additional tenant leases approved or deemed
approved by Investor pursuant to the terms hereof between the date hereof and
<PAGE>
Closing (as defined in Section 6.1 hereof) (collectively, the "Tenant Leases"),
and all existing unapplied security deposits or like payments, if any, paid by
tenants under the Tenant Leases or other security provided in connection with
the Tenant Leases and identified on the Rent Roll (as defined in Section 4.1
hereof);
(e) Service Contracts. Developer's interest in all (i) brokerage
contracts relating to the Land or Improvements; (ii) maintenance, repair,
service and pest control contracts (including but not limited to janitorial,
elevator and landscaping agreements) relating to the Land or Improvements; and
(iii) other contracts pursuant to which services or goods are provided to the
Land or Improvements, not to include any management agreement affecting the Land
or Improvements (the "Service Contracts"); provided, at the Closing the Company
shall, unless Investor otherwise consents, be obligated to acquire and assume
obligations under, only those Service Contracts under which Developer is not in
default on the Closing Date and which are approved or deemed approved by
Investor pursuant to Section 3.6 of this Agreement;
(f) Personal Property Leases; Leased Personalty. Developer's interest
in all leases (the "Personal Property Leases") covering furniture, fixture and
equipment located in or on and used in connection with the Land or the
Improvements or the operations thereon (the "Leased Personalty"), which shall
survive the Closing; provided, at the Closing the Company shall be obligated to
acquire and assume obligations under only the Personal Property Leases under
which Developer is not in default on the Closing Date and which are approved or
deemed approved by Investor pursuant to Section 3.6 of this Agreement;
(g) Warranties, etc. Developer's interest in all warranties, guaranties
and bonds relating to the Land, the Improvements, the Personal Property or the
Leased Personalty, to the extent the same are assignable through reasonable
efforts by Developer; provided, however, for all construction contracts executed
by Developer after the date hereof relating to the Improvements all contractor's
and manufacturer's warranties for Improvements must be assignable and assigned
at Closing to the Company;
(h) Plans. All site plans, surveys, plans and specifications
(including, but not limited to the Plans and Specifications as defined in
Section 3.3), floor plans, art work, brochures, and tenant correspondence files
in Developer's possession or in the possession of Developer's leasing and
management agents for the Property and which relate specifically to the Land,
the Improvements or the Personal Property; and
(i) Intangible Property. All intangible property owned or held by
Developer or in which Developer has an interest, if any, to the extent
exclusively used in connection with any of the Land or the Improvements or the
operations thereon, and the right to the use thereof, including but not limited
to Developer's rights under governmental permits or approvals (to the extent
same are assignable), and the right to the use of (without warranty as to
exclusivity or otherwise) the names, trade marks, trade names and telephone
numbers and listings employed exclusively in connection with the Land or the
Improvements or the operations thereon (the "Intangible Property").
2
<PAGE>
1.2 Limitation on Property. Investor hereby acknowledges that Developer
owns other properties, some of which are adjacent to certain parcels of the Land
("Developer's Other Land") and that Developer has no obligation to convey any
portion of Developer's Other Land in connection with this transaction, or any of
the rights which may be associated with Developer's Other Land, such as
easements or residual interest in streets or roads. In the event there are any
Service Contracts, Personal Property Leases, warranties or other items which are
included in the definition of the Property but which also apply to Developer's
Other Land and which Investor does not object to pursuant to Section 3.6,
Developer shall amend such agreements to separate the Property from Developer's
Other Land prior to Closing. In the event that there is any Personal Property
which Developer utilizes at both the Property and Developer's Other Property,
the parties shall make an appropriate allocation of such Personal Property such
that the Company receives either Personal Property or other consideration equal
to the value of the Personal Property utilized at the Property (e.g. if
Developer uses two pieces of equipment, both of equal value and both equally
between the Property and Developer's Other Property, Developer would transfer
one piece to the Company at Closing and retain the other piece). The Property
shall not include Tenant Leases, Service Contracts and Personal Property Leases
that are terminated or expire prior to Closing.
1.3 Schedule of Values and Removal of a Parcel. The Property consists
of separate parcels in various jurisdictions, each of which is herein referred
to as a "Parcel". Each Parcel has a portion of the Contribution Amount (as
defined in Section 2.1) ascribed to it, as set forth on Exhibit A and designated
thereon as "Final", which ascribed amount is referred to herein as the "Parcel
Value". If a Parcel is removed from the Property pursuant to the provisions of
this Agreement, the Contribution Amount will be reduced, dollar for dollar by
the Parcel Value of the Parcel so removed. It is of material importance to this
transaction that a sufficient number of Parcels remain part of the Property.
Therefore, if two Parcels in any one geographic area designated as such on
Exhibit A are removed from the Property, all other Parcels in such geographic
area shall be considered "Key Parcels". In addition, if the Parcel Value of a
Parcel being removed exceeds or is less than the "Preliminary" amounts for such
Parcel designated on Exhibit A, by more than $200,000 and the parties are unable
to agree on a mutually acceptable Parcel Value after good-faith discussions,
either Investor or Developer may elect to terminate this Agreement by written
notice thereof to the other and, except for such obligations and indemnities
that expressly survive the termination of this Agreement, the parties shall have
no further right or obligation hereunder. The Parcel Values are solely for
purposes of determining the amount by which the Contribution Amount should be
reduced in the event that a Parcel is removed from the Property but are not
otherwise indicative of the value of any Parcel for any other purpose.
1.4 Contribution of Partnership Interests. Developer may elect, with
the approval of Investor, which shall not be unreasonably withheld, to
contribute the portion of the Land and Improvements which are located in the
State of New Jersey to a newly-formed Delaware limited liability company of
which BOP is the sole member and, in lieu of deeding such Property to the
Company, transferring all of its interest in such limited liability company to
the Company.
3
<PAGE>
2. FORMATION OF COMPANY; CONTRIBUTION OF FUNDS
2.1 Contribution Procedures. When the conditions to Closing set forth
in Sections 5.1 and 5.2 have been satisfied or waived by the party for whose
benefit the conditions are included, the following shall occur:
(a) Execution of Partnership Agreement. Investor shall create two
entities, or shall assign its interest in this Agreement to such entities
pursuant to Section 16.4. One of such entities (the "General Partner") shall
execute the Partnership Agreement in the form of Exhibit H attached hereto and
made a part hereof (the "Partnership Agreement") as a general partner, another
of such entities (the "Limited Partner") and Developer shall execute the
Partnership Agreement as limited partners.
(b) Contribution of Funds. Subject to the adjustments provided for
herein, Investor shall contribute to the Company an amount (herein referred to
as the "Contribution Amount") in cash equal to the sum of (A) $101,612,491.00,
less the net proceeds of the Permanent Loan applied under Section 2.1(d), and
(B) the amount of Investor's share of the Closing Costs. The Contribution Amount
is subject to reduction by reason of the removal of a Parcel from the Property
as described in Section 1.3. Although General Partner and Limited Partner shall
be jointly and severally liable for the obligation to contribute the
Contribution Amount, it is intended that General Partner shall contribute 1% of
the Contribution Amount and Limited Partner shall contribute the remainder.
(c) Contribution of Property. Developer shall contribute and convey, or
cause to be contributed and conveyed, the Property to the Company pursuant to
the terms hereof.
(d) Application of Contribution Amount. The Contribution Amount and the
net proceeds of the Permanent Loan shall be applied by the Company as follows:
(1) first, to pay the Closing Costs, (2) second, to pay in full the lesser of
the release price or the principal balance of any existing mortgage loans on the
Property, (3) third, the remainder directly to the Developer at Closing.
(e) Management and Leasing Agreement. The Company and Brandywine Realty
Services Corporation ("BRSCO"), or another entity designated by Developer and
reasonably approved by Investor, shall enter into the Management and Leasing
Agreement in the form of Exhibit I, attached hereto (the "Management
Agreement").
2.2 Tax Treatment of Contribution. Upon completion of the events
described in Section 2.1, the transaction contemplated hereby will be treated as
a sale for federal income tax purposes.
2.3 Deposit. Within two (2) business days after the end of the
Inspection Period (as hereinafter defined), Investor will deposit with the Title
Company (as hereinafter defined), pursuant to an Escrow Agreement in the form
attached as Exhibit J, the sum of Two Million Dollars ($2,000,000) (together
with interest earned thereon, the "Deposit"). At Closing, the Deposit will be
made available to the Company for application in accordance with Section 2.1(d)
and will be credited to the Contribution Amount due from Investor. If Investor
timely and properly terminates this Agreement pursuant to any provision hereof,
the Deposit will be released to Investor. If Investor defaults under this
Agreement, the Deposit will be applied pursuant to Section 11.2.
4
<PAGE>
3. SURVEY, TITLE COMMITMENT AND INSPECTIONS
3.1 Title. Developer has delivered existing title reports and/or
policies and current title commitments to Investor (the "Title Commitment") from
Commonwealth Title Insurance Company, Beverly Greisse, National Title Division,
Dallas, Texas (the "Title Company") for an ALTA Owner's Title Policy (1970 Form)
(the "Owner's Policy"), with extended coverage, accompanied by true, correct and
legible copies of all recorded instruments affecting title to the Property, and
committing to issue the Owner's Policy to the Company in the approximate amount
of $102,912,491.00, (herein called the "Title Policy Amount"). Investor has
reviewed the Title Commitment and notified Developer of exceptions appearing in
the Title Commitment, or if any aspect of the Survey (as defined in Section 3.2
hereof), which are unacceptable to Investor (the "Title Objections"). Developer
shall use reasonable efforts to attempt to eliminate or modify the Title
Objections, but shall have no obligation to remove exceptions of a non-monetary
nature. Developer will notify Investor within five (5) business days of
Developer's receipt of Investor's notice as to which, if any of the Title
Objections will not be removed. In the event Developer is unable or unwilling to
modify and/or eliminate any Title Objections to Investor's satisfaction and
Developer and Investor have not entered into a written agreement in regard to
the modification or elimination of such Title Objections, Investor shall be
entitled to terminate this Agreement or proceed to Closing, in which event the
Company will accept title to the Property subject to such unacceptable
exceptions without offset or deduction from the Contribution Amount. In the
event of such termination, the parties shall have no further right or obligation
hereunder. All exceptions appearing in the Title Commitment (or any update) or
the Survey which are not Title Objections (or as to which Investor relinquishes
its objection) are herein referred to as the "Permitted Exceptions." Developer
shall be obligated to eliminate at or prior to the Closing all mortgage liens,
absolute and/or collateral assignments and other similar monetary exceptions to
the title to the Property, which Developer may do by application of the
Contribution Amount in accordance with Section 2.1.
3.2 Survey. Developer has delivered to Investor its historic surveys of
the Land prepared and certified by a duly licensed engineer or land surveyor.
Investor has ordered updated surveys of the Land (the "Survey"). Upon completion
of the Survey and Investor's approval thereof, the legal description on Exhibit
B shall be modified, if necessary, to conform to the legal description set forth
on the Survey; provided, however, that such new legal description will be used
only in a quitclaim deed and not in the deed described in Section 6.1(a)(i).
3.3 Other Information. Developer has furnished Investor with the items
described on Exhibit D attached hereto (collectively, the "Due Diligence Items")
including, without limitation, the plans and specifications of the Improvements
(the "Plans and Specifications").
3.4 Inspection Period. As of June 4, 1999 (the period up to and
including such date being herein called the "Inspection Period"), Investor has
obtained investment committee approval for this transaction, subject to the
exceptions set forth on Exhibit C-2 attached hereto. Subject to the last
sentence of Section 5.1, if Investor is not satisfied as to any condition set
forth on Exhibit C-2 and designated as a "Condition of Closing", Investor may,
in its sole discretion, terminate this Agreement with respect to the Property
5
<PAGE>
affected by such condition by delivering written notice to Developer, time being
of the essence. If Investor does not elect to terminate this Agreement with
respect to the Property affected by such condition prior to Closing, Investor
shall be deemed to have waived its right to terminate this Agreement pursuant to
this Section 3.4 and the condition contained in Section 5.1(c) shall be deemed
to have been satisfied. Investor and Developer acknowledge and agree that,
notwithstanding the first sentence of this Section 3.4, Investor shall have
until 5:00 p.m. EST on June 11, 1999 (the "Metropolitan Additional Period") to
complete its environmental due diligence on the Metropolitan Industrial Park,
Trevose, PA. If Investor is not satisfied with the result of its environmental
investigation, Investor, prior to the expiration of the Metropolitan Additional
Period, shall advise Developer in writing of its specific concerns, provide
Developer with copies of its Phase I and Phase II reports for such site, and
elect to remove the Metropolitan Industrial Park from the transaction (the
"Metro Termination Notice"), all other terms and conditions of this transaction
continuing to remain in full force and effect. If Investor gives the Metro
Termination Notice to Developer, the Contribution Amount shall automatically be
reduced to $82,912,491, the term "Property" shall be deemed to exclude the
Metropolitan Industrial Park, and, subject to the remaining terms hereof, the
parties shall proceed to Closing on the remaining Parcels in the Property.
3.5 Inspections. Upon at least 24 hours' prior notice to Developer,
Investor may during normal business hours, prior to the Closing Date (as defined
in Section 6.1 hereof), personally, or through others, make such inspections,
tests and investigations of the Property (including, without limitation, borings
and physical samplings) and such examinations of the books, records, leasing
files, contracts, agreements and other instruments of Developer relating to the
development, construction and operation of the Property as Investor deems
necessary or advisable, which tests may include, among other examinations, a
Phase I Environment Site Assessment (the "Phase I ESA"). For purposes of the
inspections, tests and investigations contemplated by this Section 3.5, upon
receiving a telephonic or written request from Investor in advance, Developer
shall give those persons inspecting the Property, at Investor's request,
reasonable access to the Property and to the leased premises located thereon,
which access shall not unreasonably interfere with contractors and tenants in
possession, if any, or violate the terms of any Tenant Leases or construction
contracts. Access to the Property for any such inspection shall be conditioned
upon Investor or the inspector providing Developer with acceptable evidence of
liability insurance naming Developer and Brandywine Realty Trust ("BRT") as
additional insureds. The actual, third party costs of the inspections, tests and
investigations undertaken by Investor pursuant to this Section 3.5 (the
"Inspection Costs") shall be borne by Investor and shall be included in the
Closing Costs to be funded by Investor under Section 2.1(b) hereof. Investor
shall indemnify and hold Developer, BRT and their subsidiaries harmless from and
against any and all liens, loss, costs, claims, damage and expense, including
reasonable attorneys' fees, for the costs of such inspections, tests and
investigations and for physical damage to property or bodily injury to persons
caused by Investor's or Investor's agents' inspection, testing and/or
investigation of the Property prior to the Closing Date. The indemnities and
reimbursement obligations of Investor contained in this Section 3.5 shall
survive the Closing or the earlier termination of this Agreement. The right of
access to the Property granted hereby shall in no way be construed as giving
Investor or the Company possession of or any legal or equitable title to the
Property prior to the Closing.
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3.6 Review of Service Contracts and Personal Property Leases. Investor
has reviewed and approved all Service Contracts or Personal Property Leases.
3.7 Approval of Additional Service Contracts and Personal Property
Leases. After the date hereof, Developer shall deliver to Investor copies of any
Service Contracts and Personal Property Leases not previously approved by
Investor which Developer desires to enter into. Investor shall determine whether
any of such Service Contracts or Personal Property Leases are objectionable to
Investor and, if so, inform Developer in writing within seven (7) business days
of receipt of same of its election not to have the Company acquire and assume
obligations under such objectionable Service Contracts or Personal Property
Leases and the reasons therefor. Within five (5) days after its receipt of such
written notice or such longer period as may reasonably be required, but in no
event later than the date which is two (2) business days before the Closing
Date, Developer, at Developer's sole cost and expense, shall either (i) not
enter into such Service Contracts and/or Personal Property Leases or (ii) take
the necessary steps to cure such objections or assure that such objectionable
Service Contracts or Personal Property Leases will not encumber the Property or
be an obligation of the Company on or after the Closing. Failure of Investor to
object to any such Service Contracts or Personal Property Leases within such
seven (7) day period, shall constitute Investor's approval of such Service
Contract or Personal Property Leases; provided, however, in no event shall any
such Service Contract be approved or deemed approved that (x) would violate or
not comply with the provisions of Section 3.3 of the Partnership Agreement,
and/or (y) is not terminable on 30 days' notice without penalty. The provisions
of this Section 3.7 shall not apply to any additional Service Contract or
Personal Property Lease if: (i) the net present value (using an 8% discount
rate) of anticipated payments thereunder would be less than $100,000; and (ii)
it is terminable on thirty (30) days' notice without penalty; and (iii) it does
not create any unrelated business taxable income for Investor or the Company.
3.8 Tenant Lease Approvals. After the date hereof, as soon as Developer
commences discussion with any prospective tenant or any broker for any
prospective tenant Developer shall deliver to Investor an outline of the
business terms (the "Lease Terms") being discussed for Investor's review and
approval. In addition, each time Developer (i) circulates a draft of a lease
agreement with a prospective tenant Developer shall furnish Investor a copy of
such lease draft, or (ii) proposes a lease agreement to be executed with respect
to each Tenant Lease Developer desires to enter into and which has not been
previously approved by Investor, Developer shall furnish a copy to Investor for
Investor's approval. Investor shall notify Developer of its approval or
disapproval (a) of the Lease Terms within five (5) business days following
receipt of same, and (b) of any lease agreement within seven (7) business days
following receipt of the final form of same. Investor's failure to respond
within either such period shall constitute Investor's approval of such Lease
Terms and lease agreement, respectively; provided, however, in no event shall
any lease be approved or deemed approved that would violate or not comply with
the provisions of Section 3.3 of the Partnership Agreement.
3.9 Permanent Loan. Investor shall have the right to seek permanent
financing (herein, the "Permanent Loan") and shall use commercially reasonable
efforts to obtain and consummate the Permanent Loan. The terms of the Permanent
Loan and the documents evidencing, governing and securing the Permanent Loan
shall be subject to Investor's sole discretion, provided in no event shall the
principal balance of the Permanent Loan be less than fifty-five percent (55%)
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nor exceed seventy percent (70%) of the Title Policy Amount, as such may be
reduced due to a Parcel removal pursuant to Section 5.1. The Investor will bear
all costs of obtaining the Permanent Loan. The net proceeds of the Permanent
Loan which are made available to the Company for application in accordance with
Section 2.1(d) will be credited to the Contribution Amount pursuant to Section
2.1(b). The Permanent Loan will be completely non-recourse to Developer.
Investor agrees to deposit with the lender that commits to make the Permanent
Loan a non-refundable interest rate standby fee pursuant to a loan application
substantially in the form of the Prudential application previously delivered to
Developer if Investor has not previously exercised its right to terminate this
Agreement pursuant to Section 3.4.
4. REPRESENTATIONS, WARRANTIES AND COVENANTS
4.1 Developer's Representations and Warranties. Developer represents
and warrants to Investor (and to the Company, as of the Closing Date) as follows
(which representations and warranties shall be true and correct as of the date
hereof and as of the Closing Date):
(a) Title. Developer, directly or through subsidiaries, owns a fee
simple interest in the Land and the Improvements. All Personal Property located
on the Land (other than Leased Personal Property and property of Tenants) is
owned by Developer, directly or through subsidiaries, except to the extent
otherwise specifically noted in the inventory which will be delivered to
Investor pursuant to Section 3.3 hereof.
(b) Existence; Authority. BOP has been formed as a limited partnership
under the laws of the State of Delaware and is in good standing under the laws
of such state and is duly qualified or registered to do business in the States
of Maryland, New Jersey, New York, Ohio, Pennsylvania and Virginia. NLL has been
formed as a limited partnership under the laws of the Commonwealth of
Pennsylvania and is in good standing under the laws of such state and is duly
qualified or registered to do business in such state. The execution and delivery
of, and Developer's performance under, this Agreement are within Developer's
powers and have been duly authorized by all requisite action. The persons
executing this Agreement on behalf of Developer have the authority to do so.
This Agreement constitutes the legal, valid and binding obligation of Developer
enforceable against Developer in accordance with its terms, subject to laws
applicable generally to creditor's rights. Performance of this Agreement will
not result in any breach of, or constitute any default under, or result in the
imposition of any lien or encumbrance upon the Property under, any agreement or
other instrument to which Developer is a party or by which Developer or the
Property is bound.
(c) Litigation; No Consent. There is no pending or, to the knowledge of
Developer, threatened litigation or administrative proceedings which, if
resolved adversely to Developer, would adversely affect title to the Property or
any part thereof or the ability of Developer to perform any of its obligations
hereunder or the use of the Property by the Company as it is presently being
used or otherwise materially and adversely affect the Property. Except as
disclosed on Exhibit C hereto, no consent or approval of any person or entity or
of any governmental authority is required with respect to the execution and
delivery of this Agreement by Developer or the consummation by Developer of the
transactions contemplated hereby or the performance by Developer of its
obligations hereunder.
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(d) Notice of Liens. Developer has not received written notice of the
intention of any governmental authority to, nor to Developer's knowledge, are
there any facts or circumstances which would allow any governmental authority
the right to file or impose any liens (other than statutory liens for real
estate taxes not yet due and payable) or special assessments against any of the
Property.
(e) Rent Roll; Tenant Leases. The rent roll provided to Investor
pursuant to Section 3.3 hereof (the "Rent Roll") is a complete and correct list
of all Tenant Leases in effect as of the date of this Agreement setting forth
with respect to each of the Tenant Leases (i) the type of space covered thereby,
(ii) the date thereof, (iii) the term thereof, (iv) renewal options, if any, (v)
the rents and other charges payable thereunder, (vi) any rents or other charges
in arrears or prepaid thereunder and the period for which such rents and other
charges are in arrears or have been prepaid, (vii) the amount of the security
deposit thereunder, (viii) the utilities which are furnished as part of the base
rent, (ix) any brokerage or leasing fees then due and payable thereunder, and
(x) any amendments thereto. Except as disclosed in the Rent Roll, no Tenant
Lease has been modified, altered or amended in any respect, no Tenant has the
right to renew or extend its lease or to exclude others from using the Property
for any lawful purpose. Except as noted in the Rent Roll or set forth in the
Leases, no tenant has the right to cancel or terminate its lease, to exclude
others from using the Property for any lawful purpose, or to expand its leased
premises or any interest in the Property other than a leasehold possessory
interest. Except as may be noted in the Rent Roll, all of the Tenant Leases are
the result of bona fide arm's length negotiations between the parties. There are
no leases, tenancies or other rights of occupancy or use for any portion of the
Property other than pursuant to Tenant Leases and the Permitted Exceptions,
copies of which have been delivered to Investor.
(f) Encumbrances on Tenant Leases. None of the Tenant Leases and none
of the rents or other amounts payable thereunder has been assigned, pledged or
encumbered by Developer, except for any assignment, pledge or encumbrance that
Developer will cause to be terminated or released at or prior to Closing.
(g) Brokerage or Leasing Commissions. No brokerage or leasing
commissions or other compensations are due or payable by Developer to any
person, firm, corporation or other entity with respect to or on account of the
current term of any of the Tenant Leases, except as may be noted in the Rent
Roll. Except as disclosed in the Rent Roll or set forth in the Tenant Leases, no
brokerage or leasing commissions or other compensations are due or payable by
the landlord on any extension or expansion of any Tenant Lease.
(h) Obligations to Tenants under Tenant Leases. With respect to tenants
in occupancy under Tenant Leases as of the Closing Date, except as set forth on
Exhibit C, there will be no unperformed obligations to provide any tenant under
any Tenant Lease with any painting, repair, alteration, carpeting, appliance or
any other equipment or work of any kind, under any Tenant Lease or under any
other oral or written agreement whatsoever that would excuse such tenant from
accepting its Premises under the terms of its lease, except for obligations (i)
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which will be performed and paid for by Developer before the Closing or (ii) to
complete any portion of the premises covered by the Tenant Lease not yet
occupied by the tenant thereunder and not required to be completed under the
terms of the Tenant Lease as of the Closing Date or pursuant to renewal rights
under Tenant Leases.
(i) Enforceability of Tenant Leases. To Developer's knowledge, each of
the Tenant Leases is valid and subsisting and in full force and effect in
accordance with its terms, provisions and conditions and constitutes the legal,
valid, binding and enforceable obligation of the tenant thereunder. As of the
date of this Agreement, neither Developer nor, to the knowledge of Developer,
the tenant is in default thereunder, except as shown on the Rent Roll. As of the
date of this Agreement, (i) each tenant under a Tenant Lease scheduled to be in
possession as of the date hereof has accepted the premises covered by its Tenant
Lease and is in possession of such premises in accordance with its Tenant Lease
and (ii) all initial installation work, if any, required of Developer in order
for the tenant to accept the premises then in actual occupancy by a tenant under
the terms of its lease has been fully performed, paid for and accepted by each
such tenant. To the knowledge of Developer, no tenant under a Tenant Lease that
has been signed as of the date hereof has any pending litigation, offsets or
counterclaims against Developer which, if successfully asserted, would reduce
the rent payable thereunder or result in the cancellation or termination
thereof. No tenant has given any written notice to Developer of such tenant's
intention of instituting litigation with respect to any Tenant Lease or
terminating its tenancy, except as may be set forth in the Rent Roll.
(j) Agreements to Acquire or Possess the Property. No tenant or other
occupant under the Tenant Leases and no other person, firm, corporation or other
entity (other than, pursuant to this Agreement, the Company) has any right or
option to acquire any fee or leasehold ownership interest in the Property, or
any part thereof, from Developer. Except as reflected within the Permitted
Exceptions, Developer has not entered into any agreement with any person, firm,
corporation or entity granting the right to possess the Property, other than (i)
tenants in possession pursuant to the Tenant Leases described in the Rent Roll
provided to Investor pursuant to Section 3.3, or (ii) tenants under Tenant
Leases entered into by Developer after the date hereof as permitted by Section
3.8.
(k) Defects; Violations; Condemnation Proceedings. With respect to the
Property, Developer has not received any written notice from any insurance
company, governmental agency or any other person of, nor, to the knowledge of
Developer, are there any facts or circumstances which are reasonably likely to
give rise to, (i) any condition, defect, or inadequacy affecting the Property
that, if not corrected, would result in termination of insurance coverage or
materially increase its cost, (ii) any pending or threatened condemnation
proceedings, or (iii) any proceedings that could or would cause the change,
redemption, or other material modification of the zoning classification or other
legal requirements, applicable to the Property or any part thereof which would
materially and adversely affect the Property. There does not exist any court
order nor does there exist any restriction or restrictive covenant (recorded or
otherwise, save and except the Permitted Exceptions) or other private or public
limitation which is reasonably likely to adversely affect the use of the
Property as presently being operated.
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(l) Mechanic's Liens. At Closing, except for payments currently due or
to become due under existing contracts for tenant improvements under the Tenant
Leases in force and effect as of the date hereof (which payments shall be the
responsibility of Developer) there will not be any unpaid charges, debts,
liabilities, claims or obligations of Developer arising from the construction,
occupancy, ownership, use or operation of the Property which could give rise to
any mechanics' or materialmen's or other statutory liens against any of the
Property that will not be paid by Developer at the Closing (or bonded over in a
manner acceptable to Investor and the Title Company and in accordance with the
provisions of any applicable statutes or regulations or affirmatively insured
against by the Title Company to Investor's reasonable satisfaction or for which
Developer may be willing to escrow funds, to the reasonable satisfaction of
Investor).
(m) Governmental Requirements. Based solely on the zoning letters or
reports delivered to Investor, to Developer's knowledge, the Property is in
compliance with all restrictive covenants, deed restrictions and all zoning
requirements affecting the Property. Developer has not received any written
notices advising it that any portion of the Property is in violation of any
applicable building, health, traffic, flood control, fire safety, handicap and
other applicable Governmental Requirements (as defined in Section 13.1(b)
hereof).
(n) Utilities. At Closing, to Developer's knowledge, all water, sewer,
electric, telephone, drainage facilities and all other utilities required for
the current use of the Property are (or will be) installed to the Property, will
be connected with valid permits, and will be adequate to service the Property
for its intended use. All utilities lines servicing the Property (other than
internal lines located within the Property) are (i) located either within the
boundaries of the Property or within lands dedicated to the public use, or
within recorded easements for such purpose and (ii) serviced and maintained by
the appropriate public or quasi-public entity.
(o) Streets and Highways. Developer has received no written notice of
any existing plans to, and, to Developer's knowledge, there are no proposed
plans to widen, modify or realign any street adjoining the Property. The
Property has full and free access to and from public highways, streets and roads
and Developer has no knowledge of any pending or threatened governmental
proceeding or any other fact or condition which would materially limit or result
in the termination of the Property's access to and from public roads.
(p) Foreign Person. Developer is not a "foreign person" within the
meaning of Sections 1445 and 7701 the Internal Revenue Code of 1986, as amended
(hereinafter, the "Code").
(q) Delivery of Documents. To Developer's knowledge, all of the
documents submitted by or on behalf of Developer to Investor hereunder which
Developer or Developer's employees or agents prepared shall be true, correct and
complete in all material respects. Developer has no knowledge that any of the
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documents submitted by or on behalf of Developer to Investor hereunder which
were prepared by third parties contain material inaccuracies or omissions. The
copies of documents submitted shall be complete and correct copies of the
documents in Developer's possession.
(r) Governmental Action. Developer has received no written notice nor
does Developer have any knowledge of any change contemplated in any Governmental
Requirements applicable to the Property or any judicial or administrative action
specifically applicable to the Property, or any action by adjacent landowners
affecting the Property, or any natural or artificial conditions upon the
Property (or any significant adverse fact or condition relating to the Property
or its current use, excluding general economic conditions), which has not been
disclosed in writing to Investor by Developer and which would prevent, or
materially limit, materially impede or render materially more costly the
Company's continued use of the Property. If Developer receives any such notice
prior to Closing, it will promptly notify Investor of same in writing.
(s) Compliance with Plans; Licenses. All licenses, permits,
authorizations and approvals required by all governmental authorities having
jurisdiction over the Property, and the requisite certificates of the local
board of fire underwriters (or other body exercising similar functions) have
been issued or will at Closing be issued for the Improvements and have been or
will at Closing have been paid for and all of the foregoing are, or will be at
Closing, in full force and effect. To Developer's knowledge, the Property is not
within an area determined by the Department of Housing and Urban Development to
be flood prone under the Federal Flood Disaster Protection Act of 1973, except
as shown on the Survey. Developer has received no written notice that the
parking available at the Improvements has not been approved by each of the
tenants under Tenant Leases (if any Tenant Leases give tenants a right to
approve such parking) or will not meet or exceed the parking ratios required (if
any) by each of the Tenant Leases existing on the date hereof, and any Tenant
Leases that may be entered into after the date hereof. In any event, the parking
must be in accordance with all current Governmental Requirements, or Developer
shall have obtained an appropriate site plan waiver approving the parking in
place from all applicable governmental authorities. Developer has delivered to
Investor all certificates of occupancy relating to the Property in Developer's
possession. To the best of Developer's knowledge, based on the zoning reports
prepared by PZR and municipal estoppels received by Developer and delivered to
Investor, there are no outstanding violations at the Property in connection with
the aforesaid certificates of occupancy. Developer shall continue to use its
commercially reasonable efforts to obtain the certificates of occupancy not
previously obtained and delivered.
(t) Unfulfilled Binding Commitments. No commitments have been made by
Developer to any governmental authority, utility company, school board, church
or other religious body, or any homeowners or homeowners' association, or any
other organization, group or individual, relating to the Property which would
impose an obligation upon the Company or its successors or assigns to make any
contribution or dedications of money or land or to construct, install or
maintain any improvements of a public or private nature on or off the Property,
except for obligations due under declarations of record as shown on the Title
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Commitment. No governmental authority has imposed any requirement that any
developer and/or owner of the Property pay directly or indirectly any special
fees or contributions or incur any expenses or obligations in connection with
any development of the Property or any part thereof; the provisions of this
subparagraph shall not apply to any regular or nondiscriminatory local real
estate or school taxes assessed against the Property.
(u) Service Contracts, Tenant Leases, etc. There are no other contracts
(including collective bargaining agreements), other than the Service Contracts,
the Tenant Leases, the Personal Property Leases and the Permitted Exceptions,
relating to and affecting the Property or the operation thereof except as
provided to Investor pursuant to Sections 3.3 and 3.6 hereof.
(v) Personal Property. At Closing there will be no Personal Property
which is not conveyed by Bill of Sale (as defined in Section 6.1(a)(ii) hereof)
to the Company, except to the extent contemplated by Section 1.2 hereof.
(w) Employees. Developer employs no employees who manage, maintain or
service the Property and whom the Company would be obligated to employ
subsequent to Closing.
4.2 Knowledge Defined. Whenever a representation or warranty is made
herein as being "to the knowledge of" or "known" to Developer, such phrase shall
mean facts known to Gerard H. Sweeney, John M. Adderly, Jr., Anthony A. Nichols,
Jr., H. Jeffrey DeVuono, Philip Schenkel and George Sowa (the "Key Personnel"),
after consultation with those employees of Developer most likely to have
knowledge of the subject matter of such representation and warranty; provided,
however, if in the course of such investigation or consultation, Developer
uncovers an issue or fact that in its reasonable judgment warrants an
investigation beyond the scope of the foregoing, Developer shall perform
whatever further investigation it deems appropriate.
4.3 Developer's Covenants. Developer hereby covenants and agrees with
Investor that, after the date of this Agreement and until the earlier of the
termination of this Agreement or the Closing:
(a) Service Contracts and Personal Property Leases. Developer shall not
enter into any Service Contracts (except those which are terminable with or
without cause on thirty (30) days' notice without penalty) or Personal Property
Leases relating to the Land or Improvements which would continue for a period
subsequent to the Closing Date without the prior written consent of Investor,
which consent shall not be unreasonably withheld or delayed and Developer will
punctually perform and discharge each and every material obligation or
undertaking of Developer under the Service Contracts and Personal Property
Leases and will not cause a default to occur thereunder (or will cure such
default prior to the expiration of any applicable cure period) and will not
materially change or modify any Service Contract or Personal Property Lease in
any manner without the express prior written consent of Investor, which consent
shall not be unreasonably withheld or delayed.
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(b) Tenant Leases. Developer will punctually perform and discharge each
and every material obligation or undertaking of Developer under the Tenant
Leases, will not cause a default by Developer thereunder (or will cure such
default prior to the expiration of any applicable cure period), and will not
terminate or modify any Tenant Lease in any manner, without the prior written
consent of Investor. Developer will not grant a renewal or extension of any
existing Tenant Lease without the prior written approval of Investor. Developer
agrees to act with reasonable diligence to cure any default by Developer under a
Tenant Lease of which Developer becomes aware.
(c) No Assignment or Transfer. Developer shall not convey the Property
except to Investor or its permitted assigns. Developer shall neither transfer
nor remove any Personal Property from the Property, except for any of such
Personal Property as is replaced by Developer by an article of equal suitability
and value, free and clear of any lien or security interest (except as otherwise
expressly permitted herein), and Developer shall not make any material
alterations to any portion of the Property except as otherwise expressly
permitted under this Agreement.
(d) Construction; Operation and Management of the Property. Developer
will not cause or permit any grading, excavation or construction upon the
Property or any addition, alteration or removal of any improvements, fixtures or
equipment forming a part of the Property. Notwithstanding the foregoing,
Developer may, without Investor's consent: (i) construct improvements pursuant
to Tenant Leases; (ii) complete ongoing landscaping work; and (iii) complete
punch list items on recently constructed properties. Developer will cause the
Property to be maintained and operated in a good and workmanlike manner in
accordance in all material respects with all Governmental Requirements (which
term, as used in this Agreement, shall include Environmental Laws as defined in
Section 13.1 hereof), will keep the improvements and equipment forming a part of
the Property in good order and operating condition, causing all necessary
repairs, renewals and replacements to be made as soon as reasonably practical.
Developer will not use or occupy, or allow the use or occupancy of, the Property
in any manner which violates any Governmental Requirements or which constitutes
waste or a public or private nuisance or which makes void, voidable or
cancelable, or increase the premium thereof, any insurance then in force with
respect thereto. Without the prior written consent of Investor, Developer will
not initiate or permit any zoning reclassification of the Property or seek any
variance under existing zoning ordinances applicable to the Property to use or
permit the use of the Property in such a manner which would result in such use
becoming a nonconforming use under applicable zoning ordinances or other
Governmental Requirements. Developer will not impose any restrictive covenants
or encumbrances (other than Tenant Leases) on the Property or execute or file
any subdivision plat affecting the Property (other than the previously approved
plat for Highlands Business Park) without the prior written consent of Investor.
Developer shall lease and operate the Property in accordance with the practices
of a prudent real estate operator of an industrial portfolio of similar quality.
(e) Insurance. Developer hereby agrees that from the date hereof until
the Closing, it will maintain in full force and effect builder's risk and/or all
risk (with permission to occupy riders) fire and extended coverage insurance
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upon the Property and public liability insurance (in an amount not less than
$10,000,000) with respect to damage or injury to persons or property occurring
on the Property in such amounts as is maintained by Developer on the date of
this Agreement (such amounts to be increased upon further construction).
(f) No Solicitation. Developer, on behalf of itself, its agents,
contractors and representatives, agrees that during the term hereof, it will not
accept any offers to purchase or otherwise acquire the Property from any party
other than the Company and will not market the Property to any other parties.
(g) Taxes. Developer will cause to be paid any unpaid taxes and
assessments heretofore levied or assessed against the Property or any part
thereof, including ad valorem taxes due and payable prior to Closing unless
Developer is contesting such taxes and provided that (i) any such contest shall
not result in a lien being placed on the Property and (ii) Developer establishes
an escrow or provides other security satisfactory to Investor that is adequate
to pay such taxes if Developer's contest is adversely determined.
(h) Condemnation; Injury; Damages. Promptly upon obtaining knowledge of
the institution of any proceedings for the condemnation of the Property, or any
portion thereof, or any other proceedings arising out of injury or damage to the
Property, or any portion thereof, Developer will notify Investor of the pendency
of such proceedings.
(i) Governmental Requirements; Litigation. Developer will advise
Investor promptly of any change in any Governmental Requirements specifically
applicable to the Property, which is reasonably likely to adversely affect the
value or use of the Property as currently used and of which Developer obtains
knowledge. Developer will also advise Investor promptly of any litigation,
arbitration or administrative hearing concerning or affecting the Property or
the ownership and/or operation thereof of which Developer has knowledge or
written notice.
(j) Liens. Except for liens which Developer shall be obligated to
release at or prior to Closing, Developer shall not grant, consent or permit the
filing of any lien or encumbrance against the Property or any portion thereof
subsequent to the date hereof. Developer will not, without the prior written
consent of Investor, sell, lease, exchange, assign, transfer, convey or
otherwise dispose of all or any part of the Property or any interest therein, or
permit any of the foregoing, except pursuant to Tenant Leases and other leases
approved in writing in advance by Investor pursuant to the terms hereof.
(k) Books and Records. Developer will keep or cause to be kept accurate
books and records of the operation of the Property in accordance with sound
accounting principles in which full, true and correct entries shall be made as
soon as reasonably practical as to all operations on the Property, and all such
books and records shall at all times during reasonable business hours be subject
to inspection by Investor and its duly authorized representatives.
(l) Tenant Estoppel Letters. Developer shall obtain and deliver to
Investor on or before three (3) days prior to the Closing Date an estoppel
letter substantially in the form attached hereto as Exhibit G-1 or as otherwise
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required by the applicable lease (herein called "Tenant Estoppel Letter"), with
changes to same as are required by tenants and approved by Investor in its
reasonable discretion, dated no earlier than thirty (30) days prior to Closing
from each of the tenants under the Tenant Leases which occupy in excess of
50,000 square feet (the "Key Tenants") and from at least seventy percent (70%)
of the remaining tenants.
(m) Subordination Agreements. Developer shall obtain and deliver to
Investor on or before three (3) days prior to the Closing Date a Subordination
Non-Disturbance and Attornment Agreement (an "SNDA") in substantially the form
attached hereto as Exhibit G-2, with changes to same as are required by tenants
and approved by Investor in its reasonable discretion, dated no earlier than
thirty (30) days prior to Closing from the number or percentage of the tenants
under the Tenant Leases which are required to be delivered pursuant to the
Permanent Loan (or such fewer number as the permanent lender may choose to
accept).
(n) Existence. Developer will continuously maintain Developer's
corporate or partnership existence, as the case may be, and Brandywine Realty
Trust will remain as sole general partner of BOP and BOP shall maintain control
and/or ultimate ownership of all the entities which constitute Developer.
(o) Diligent Efforts. Developer will use diligent efforts to satisfy
those conditions to Closing set forth in Section 5.1.
4.4 Indemnity For Breach by Developer. Subject to the other provisions
hereof, Developer shall indemnify Investor and the Company and their successors
and assigns, against and shall defend and hold Investor and the Company and
their successors and assigns, harmless from, all costs, expenses, and actual
damages, including reasonable attorneys' fees, which Investor, Company and/or
Investor's or Company's successors or assigns actually incur because of any
breach of any of the representations, warranties or covenants of Developer
herein contained, whether incurred prior to or after the Closing.
Notwithstanding the foregoing, if Investor has actual knowledge of any such
breach prior to Closing and nonetheless proceeds with the Closing, then in such
event any such breach shall be deemed waived by Investor.
4.5 Investor's Representations and Warranties. Investor represents and
warrants to Developer as follows (which representations and warranties shall be
true and correct as of the date hereof and as of the Closing Date):
(a) Authority. Investor has duly and validly authorized and executed
this Agreement, and it has full right, title, power and authority to enter into
this Agreement and to carry out all of its terms; and
(b) No Violation; Consent. The execution and delivery by Investor of,
consummation of transactions provided for in, and compliance by Investor with
all of the provisions of this Agreement will not violate the organizational
documents of Investor or do not require any approval or consent of any trustee
or holders of any of its debt (except for approvals already obtained).
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(c) Sophisticated Investor. Investor is a sophisticated investor
experienced in commercial real estate investments. Investor has sufficient
experience of and knowledge about the operations of multi-tenant commercial
properties to be able to exercise its approval powers in this Agreement and
under the Partnership Agreement in a commercially reasonable manner and without
delay.
5. CONDITIONS OF CLOSING
5.1 Closing Conditions For Investor's Benefit; Removal of a Parcel. The
obligations of Investor to consummate the transaction contemplated hereby are
subject to the following conditions, any of which, if not fulfilled by the
Closing or as otherwise provided herein, shall entitle Investor (at its option)
to terminate this Agreement as provided below:
(a) Absence of Judicial Action. The transactions contemplated under
this Agreement to be effected on the Closing Date shall not have been restrained
or prohibited by any injunction or order or judgment rendered by any court or
other governmental agency of competent jurisdiction and no proceeding shall have
been instituted and be pending in which any creditor of Developer or any other
person seeks to restrain such transactions or otherwise to attach any of the
Property, provided that any such proceeding or action contemplated by this
Section 5.1(a) shall not be deemed to include any proceeding or action brought
by, through or under Investor.
(b) Absence of Changes. No change shall have occurred, without
Investor's written approval or consent (except as otherwise permitted or
provided for herein), in (i) the state of title matters disclosed in the Title
Commitment and the Survey, (ii) the Service Contracts, (iii) Tenant Leases, (iv)
Personal Property Leases (unless specifically provided by this Agreement) or (v)
any of the Due Diligence Items inspected by Investor pursuant to Section 3.3
hereof unless such change to the matters described in this subsection (b) does
not have a material adverse effect on the operation or condition (financial or
otherwise) of the Property.
(c) Due Diligence Items. Subject to the last sentence of this Section
5.1 and relative to the particular Parcels identified on Exhibit C-2, Investor
shall have received and approved (or deemed approved) the items listed as
"Conditions of Closing" on Exhibit C-2, pursuant to the standards set forth on
Exhibit C-2.
(d) Tenant Estoppel Letters. Developer shall obtain and deliver to
Investor on or before three (3) days prior to the Closing Date Tenant Estoppel
Letters and SNDAs as required under Sections 4.3(l) and 4.3(m) and a Tenant
Estoppel Letter signed by Developer for any tenants who do not execute a Tenant
Estoppel Letter..
(e) Representations and Warranties. All representations and warranties
made by Developer herein shall at the time of Closing be true and correct in all
material respects.
(f) Zoning Matters. As of the Closing Date: (i) Developer shall not
have received a notice from an applicable governmental authority that there is
any judicial, quasi-judicial, administrative or other proceeding which is
reasonably likely to adversely affect the validity of the zoning of the Property
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for its current use; and (ii) the Property is in compliance with all
Governmental Requirements; provided, however, that Investor shall not have the
right to terminate this Agreement pursuant to this subparagraph (f) if Investor
had actual knowledge of the non-compliance of the Property with Governmental
Requirements prior to the end of the Inspection Period.
(g) Acts of God. Subject to Section 12.1 hereof, on the Closing Date,
the Property, or any material part thereof, shall not have been adversely
affected in any way as a result of any uninsured fire, explosion, earthquake,
disaster, accident or flood.
(h) Absence of Litigation. On the Closing Date, there shall be no
litigation pending or threatened, (i) to recover title to the Property, or any
part thereof or any interest therein, or (ii) to enjoin a material violation
concerning the Property of any law, rule, regulation, restrictive covenant or
zoning ordinance that may be applicable to the Property, the loss of which would
have a material adverse effect on the Property.
(i) Approval of Use of Property. On the Closing Date, any and all
permits, licenses, or qualifications from any state or other political
subdivision having jurisdiction over the Property, required of Developer for the
transfer of the Property (including, but not limited to, no further action
letters or letters of non-applicability under the New Jersey ISRA statute),
shall have been obtained.
(j) Covenants of Developer. On the Closing Date, all of the covenants
and agreements herein on the part of Developer to be complied with or performed
on or before the Closing Date shall have been fully complied with and performed
in all material respects, and there shall exist no material default or material
breach by Developer under this Agreement.
(k) Insolvency. On the Closing Date, Developer shall not be insolvent
(i.e., unable to pay its debts as they become due), shall not have been held or
alleged to have made a transfer in fraud of creditors and shall not have made a
general assignment for the benefit of creditors.
(l) Receiver. On the Closing Date, neither a receiver nor a trustee nor
a custodian shall have been appointed for, or shall have taken possession of,
all or substantially all of the assets of Developer or any of the Property,
either in a proceeding brought by Developer or in a proceeding brought against
Developer.
(m) Bankruptcy. On the Closing Date, neither Developer nor any Key
Tenants nor other tenants under Tenant Leases totalling in excess of 40,000
square feet shall have filed a petition for relief under the Federal Bankruptcy
Code or any other present or future federal or state insolvency, bankruptcy or
similar law (all of the foregoing hereinafter collectively called "Applicable
Bankruptcy Law") nor shall an involuntary petition for relief have been filed
against Developer or any such tenant under any Applicable Bankruptcy Law and not
been dismissed, nor shall any order for relief naming Developer or any such
tenant have been entered under any Applicable Bankruptcy Law, nor shall any
composition, rearrangement, extension, reorganization or other relief of debtors
now or hereafter existing have been requested or consented to by Developer or
any such tenant.
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(n) Execution. On the Closing Date, neither the Property nor any part
thereof or any interest therein shall have been taken by execution or other
process of law in any action against Developer.
(o) Completion of the Partnership Agreement. All Exhibits not attached
to the form of the Partnership Agreement attached hereto as Exhibit H shall be
completed and such Exhibits reasonably approved by Developer and Investor.
If any one or more of the above conditions is not satisfied by the Closing Date
(as extended, if applicable), Investor may at its option either (i) waive such
remaining conditions and proceed to Closing; (ii) if such failure of conditions
relates to only one or more Parcels but not to the entire Property, Investor may
remove any or all of the affected Parcels from the Property (and the
Contribution Amount shall be adjusted accordingly, based on the Parcel Value),
or (iii) if such failure is not satisfied within thirty (30) days after written
notice thereof from Investor to Developer and Investor has not elected (ii)
above, Investor may terminate this Agreement by written notice thereof to
Developer and, except for such obligations and indemnities that expressly
survive the termination of this Agreement, the parties shall have no further
right or obligation hereunder; provided, however, if such failure to satisfy any
condition is a result of a default or breach by Developer under this Agreement,
Investor shall also have the rights provided under Section 11.1(b) hereof.
Notwithstanding the foregoing, in the event that the failure of condition
relates only to one or more Parcels, but not to all of the Property and not to
any of the Key Parcels, and if Investor has elected to terminate this Agreement
pursuant to (iii) above, such election shall be ineffective if Developer elects
to remove all (but not less than all) of the affected Parcels from the Property
and the Contribution Amount will thereupon be adjusted accordingly based on the
Parcel Value.
5.2 Conditions Precedent for Developer's Benefit. The obligations of
Developer to consummate the transaction contemplated hereby are subject to the
following conditions which, if not fulfilled by the Closing or as otherwise
provided herein, shall entitle Developer, at its option, to terminate the
Agreement:
(a) Covenants of Investor. All of the covenants and agreements herein
on the part of Investor to be complied with or performed on or before the
Closing Date shall have been fully complied with and performed.
(b) Representations and Warranties. All representations and warranties
made by Investor herein shall have been and remain true and correct in all
material respects.
(c) Completion of the Partnership Agreement. All Exhibits not attached
to the form of the Partnership Agreement attached hereto as Exhibit H shall be
completed and such Exhibits reasonably approved by Developer and Investor.
(d) Absence of Judicial Action. The transactions contemplated under
this Agreement to be effected on the Closing Date shall not have been restrained
or prohibited by any injunction or order or judgment rendered by any court or
other governmental agency of competent jurisdiction.
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6. CLOSING
6.1 Closing. The closing of the transaction contemplated herein shall
be held on June 15, 1999 (the "Closing Date" or the "Closing"); provided,
however, in the event that any of the conditions contained in Section 5.1 have
not been met or if the lender of the Permanent Loan is not prepared to close,
either party may elect to extend the Closing Date by notice to the other party
for up to a maximum of fifteen (15) days. If conditions contained in Section 5.1
remain unfulfilled as of the extended Closing Date, Investor shall have the
rights set forth in the penultimate paragraph of Section 5.1 (subject, however,
to the limitations contained in the last paragraph of Section 5.1). Failure of
the Permanent Loan to close as of the extended Closing Date will not affect
Investor's obligation to close; however Investor shall elect in such event to
either fund such loan out of its own funds, other funds or cause Developer to
make the Bridge Loan, as set forth in Section 6.6. If any of the conditions
contained in Section 5.1 have not been met as of Closing and Investor fails to
notify Developer of its election of any of the foregoing options, Investor will
be deemed to have elected to terminate this Agreement. The Closing shall be held
at the offices of the Title Company (which agrees to perform the services of
escrow agent for such Closing), or at such other location as may be acceptable
to Developer and Investor.
(a) Developer Closing Documents. At Closing, Developer shall deliver
for the benefit of the Company the items specified herein (with copies to
Investor) and the following documents and instruments, each duly executed and
acknowledged:
(i) a special warranty deed or bargain and sale deed, as the case may
be,in the form of Exhibit E attached hereto, dated as of the Closing Date,
conveying the Land and the Improvements to the Company, subject only to the
Permitted Exceptions;
(ii) a Bill of Sale and Blanket Assignment (the "Bill of Sale") in the
form of Exhibit F attached hereto conveying and assigning to the Company the
property described therein, subject only to the Permitted Exceptions;
(iii) tenant notification agreements, dated the Closing Date,
containing Developer's authorization to the tenants of the Property for payment
of rental directly to the Company or the Company's managing agent, in form
acceptable to Investor (the "Tenant Notices");
(iv) a current rent roll for the Property containing all the matters
described in Section 4.1(e), certified by Developer, to be true, complete and
correct in all material respects as of the Closing Date and showing no changes
in the Rent Roll, except for additional Tenant Leases, terminations of Tenant
Leases that have expired by their terms and other changes approved by Investor
in writing or otherwise permitted pursuant to the terms hereof, or which do not
constitute a material adverse effect;
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(v) evidence acceptable to the Title Company authorizing the
consummation by Developer of the transaction contemplated hereby and the
execution and delivery of the closing documents on behalf of Developer;
(vi) such documents, if any, as may be required to assign or withdraw
Developer's right to use the trade names, if any, of the Property;
(vii) an executed certificate with respect to Developer's non-foreign
status sufficient to comply with the requirements of Section 1445 of the Code,
commonly known as the Foreign Investment in Real Property Tax Act of 1980, and
regulations applicable thereto;
(viii) all other documents or things reasonably required to be
delivered to the Company by the Title Company to evidence Developer's ability to
contribute or sell and convey the Property to the Company; provided that if
Developer receives notice of such requirement less than ten (10) days prior to
the Closing Date, Developer shall have the right to extend the Closing Date for
a period of time not to exceed ten (10) days in order to obtain such other
documents or things;
(ix) an executed copy of Internal Revenue Service Form 1099 as required
by the Tax Reform Act of 1986, and all regulations applicable thereto;
(x) the executed Tenant Leases;
(xi) letters executed by Developer addressed to each utility company
servicing the Property advising of the change of ownership of the Property; and
(xii) executed counterparts of the Partnership Agreement.
(b) Investor Closing Obligations. At the Closing, Investor, or its
permitted assignee, shall do the following:
(i) deposit with the Title Company the Contribution Amount, adjusted as
provided herein, by wire transfer in immediately available funds to a bank
account designated by the Title Company;
(ii) deposit with the Title Company the net proceeds of the Permanent
Loan which are to be credited to the Contribution Amount, by wire transfer in
immediately available funds to a bank account designated by the Title Company;
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(iii) deliver executed counterparts of the Partnership Agreement; and
(iv) cause the Company to deliver executed counterparts of the
Management Agreement with BRSCO or any other related entity that Developer may
designate.
(c) Company Obligations. At the Closing, Investor shall cause the
Company to assume all obligations of Developer under the Tenant Leases, Service
Contracts and Personal Property Leases. In addition, at Closing, Investor shall
cause the Company to deliver the following:
(i) evidence acceptable to the Title Company and reasonably acceptable
to Developer, authorizing the consummation by the Company of the transaction
contemplated hereby and the execution and delivery of the closing documents on
behalf of the Company;
(ii) an executed original of the Bill of Sale; and
(iii) executed originals of the Tenant Notices.
To the extent the consent of Investor is required under the Partnership
Agreement in order for the Company to deliver any of any of the above items,
Investor shall provide such consent.
(d) Further Assurances. At the Closing, Developer and Investor shall
execute and deliver such other instruments and documents as may be necessary in
order to complete the Closing of the transactions contemplated hereunder, the
form and content of which shall be reasonably acceptable to Developer and
Investor.
(e) Delivery of Closing Documents. Developer and Investor acknowledge
and agree to use their best efforts to execute and deliver to the Title Company
to hold in escrow all documents required to be delivered at the Closing pursuant
to this Section 6.1 at least two (2) business days prior to the Closing Date. If
such items are not timely delivered, the Closing Date will be extended to the
date two (2) business days following their receipt.
6.2 Title Assurance. At the Closing, Developer shall cause the Title
Company at Investor's expense to furnish Investor with a UCC Search Report
certified by the Secretary of State of the state in which the Property is
located indicating that, as of the Closing Date, there are no filings against
any of the Personal Property. At the Closing, Investor shall cause the Title
Company to furnish the Company with the Owner's Policy in accordance with the
final approved Title Commitment in an amount equal to the Title Policy Amount,
wherein the Title Company shall insure that fee simple title to the Land and
Improvements is vested in the Company, subject only to the Permitted Exceptions,
together with such endorsements as may be reasonably required by Investor, and
as are available in the state where the Property is located.
6.3 Delivery of Documents, Possession, Keys and Other Items. At the
Closing, Developer shall provide the Company with the originals of all available
documents, copies of which were provided to Investor pursuant to Section 3.3
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hereof, shall deliver possession of the Property to the Company subject only to
the Permitted Exceptions and the rights of tenants under the Tenant Leases;
shall provide the Company with all keys to the Property; and shall deliver or
cause to be delivered to the Company all books and records pertaining to the
operation of the Property and all documents and records pertaining to the
construction of the Improvements. All such documents which are located at the
Property may be delivered with the Property. Any other such documents shall be
made available to the Company by Developer at a mutually convenient time and
place, and Developer may retain additional copies of such items as it deems
necessary or convenient. Investor acknowledges that the Company and the
Developer have the same principal offices and that no physical transfer of such
documents will be required.
6.4 Closing Costs; Transfer Taxes. Investor and Developer shall each
pay one half (1/2) of the transfer taxes incurred by reason of the transactions
contemplated by this Agreements. The closing costs listed on Schedule 6.4 hereof
(to be delivered at Closing and which shall include Investor's title, survey,
due diligence, any mortgage recordation taxes and one half of the transfer
taxes) shall be paid by the Company in the amounts specified on Schedule 6.4 or
in such additional amounts as may be reasonably approved by Investor (the
"Closing Costs"). If the actual Closing Costs are less than the amount budgeted
for same, the Contribution Amount shall be reduced by the amount of the savings.
6.5 Security Deposits. All security and other deposits, advances or
prepaid rentals or deposits paid by tenants (such deposits which are paid over
to the Company being hereinafter referred to as the "Deposits"), future rent
concessions or rebates due to tenants (which have not been included in the
projections delivered to Investor by Developer), and tenant escrows, if any, for
taxes, insurance, and common area maintenance in excess of expenses (as provided
in Section 7.3 below) shall be itemized by Developer and such amount shall be
paid over to the Company in cash at Closing.
6.6 Bridge Loan. If, pursuant to Section 6.1, Investor elects to close
this transaction subject to financing from Developer, Developer will make a loan
to Investor (the "Bridge Loan") of 60% of the Contribution Amount for a term of
one year. The interest rate on the Bridge Loan will be 7.5% per annum (the "Base
Rate") for the first ninety (90) days, the Base Rate plus 1% for the second
ninety (90) days, the Base Rate plus 1.5% for the third ninety days and the Base
Rate plus 2% for the remainder of the term. The Bridge Loan will be secured by a
first priority mortgage on the Property and an assignment of leases and rents.
7. PRORATIONS
7.1 Taxes. Subject to Section 7.8 hereof, all real estate taxes that
are payable (but not yet due) with respect to the Property for the calendar year
in which the Closing occurs, shall be assumed by the Company.
7.2 Rents. Rents for the Property or portions thereof shall be prorated
as of the Closing Date, except that no proration shall be made for rents
delinquent as of the Closing Date (hereinafter called the "Delinquent Rents").
The Company shall have no liability to Developer for the Delinquent Rents and
shall have no obligation to collect same, provided, however, amounts collected
by the Company from tenants owing Delinquent Rents shall be applied first to
rents owed by such tenant accruing after the Closing Date and then to Delinquent
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Rents. Any such amounts applicable to Delinquent Rents received by the Company
shall be forwarded to Developer within fifteen (15) days of receipt thereof.
Developer reserves the right to pursue legal remedies against tenants owing
Delinquent Rents so long as pursuit of its legal remedies does not cause the
tenant to be evicted.
7.3 Operating Costs. Developer, as landlord under the Tenant Leases,
may collect from tenants under the Tenant Leases (but only as allowed under said
Tenant Leases) additional rent to cover real estate taxes, insurance, utilities
(to the extent not paid directly by tenants), common area maintenance and other
operating costs and expenses (collectively "Operating Costs") incurred by
Developer in connection with the ownership, operation, maintenance and
management of the Property. Developer shall be paid by the Company an amount
equal to the operating expenses paid by Developer, but not collected from
tenants under the Tenant Leases for periods prior to the Closing Date. Operating
Costs that are not paid by tenants either directly or reimbursed under the
Tenant Leases shall be prorated between Developer and the Company as of the
Closing.
7.4 Utility Deposits. All security or similar deposits held by utility
or similar companies paid by Developer that are transferable shall be
transferred by Developer to the Company at the Closing and Developer shall
receive a credit for such amounts as part of the prorations.
7.5 Insurance Premiums. Insurance premiums shall be prorated as of the
Closing Date in which event, the Company shall assume the premiums for future
periods and the insurance policies shall be transferred to the Company. If the
Company elects to not continue the present insurance coverage on the Property,
such coverage shall be terminated as of the Closing Date and there shall be no
proration of insurance premiums.
7.6 Leasing Commissions. Subject to Section 7.8 hereof, brokerage
commissions under Tenant Leases currently existing shall be assumed by the
Company.
7.7 Other Income and Expenses. All other income from, and expenses of,
the Property, including but not limited to public utility charges, interest,
maintenance charges and service charges, shall be prorated as of the Closing
Date and the Company shall assume such expenses for periods subsequent to
Closing.
7.8 Adjustments; Reproration. After (a) year-end (or other applicable
period) adjustments with tenants under Tenant Leases for Operating Costs and (b)
receipt of final tax and other operating bills, Developer shall prepare and
present to Investor a calculation of the reproration of such items, based upon
the actual amount of such items charged to or received by the parties for the
year or other applicable fiscal period. The parties shall make the appropriate
adjusting payment between them within 30 days after presentment to Investor of
Developer's calculation. This provision shall survive the Closing.
8. SURVIVAL
8.1 Survival. All warranties, representations, covenants, obligations
and agreements contained in this Agreement shall survive the execution and
delivery of this Agreement and shall survive the Closing for a period of five
years and any right of action for the breach of any representation, warranty or
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covenant contained herein shall not merge with the Deed but shall survive the
Closing for a period of five years and may be enforced by the Company. In
addition to all other remedies which Investor and/or Company may have at law or
in equity, the Company may offset any final, non-appealable judgment it obtains
against Developer against any distributions due to Developer from the Company.
Notwithstanding the foregoing, the following representations and warranties from
Section 4.1 shall survive the Closing only for a period of twelve (12) months:
(d), (e), (f), (h), (i), (k), (l), (m), (n), (o), (r), (s), (u) and (v).
9. COMMISSIONS
9.1 Developer's Indemnity. DEVELOPER SHALL INDEMNIFY INVESTOR AND THE
COMPANY AND HOLD AND DEFEND INVESTOR AND THE COMPANY HARMLESS FROM AND AGAINST
ANY AND ALL CLAIMS, LOSSES, LIABILITIES, DAMAGES, DEMANDS, COSTS AND EXPENSES
(INCLUDING ACTUAL, REASONABLE ATTORNEYS' FEES AT OR BEFORE THE TRIAL LEVEL AND
ANY APPELLATE PROCEEDINGS) ARISING OUT OF ANY CLAIM MADE BY ANY REALTOR, BROKER,
FINDER, OR ANY OTHER INTERMEDIARY WHO CLAIMS TO HAVE BEEN ENGAGED, CONTRACTED OR
UTILIZED BY DEVELOPER IN CONNECTION WITH THE TRANSACTION WHICH IS THE SUBJECT
MATTER OF THIS AGREEMENT. THIS INDEMNIFICATION SHALL SURVIVE THE CLOSING.
9.2 Investor's Indemnity. INVESTOR SHALL INDEMNIFY, HOLD HARMLESS AND
DEFEND DEVELOPER AND THE COMPANY FROM AND AGAINST ANY AND ALL CLAIMS, LOSSES,
LIABILITIES, DAMAGES, DEMANDS, COSTS AND EXPENSES (INCLUDING ACTUAL, REASONABLE
ATTORNEYS' FEES AT OR BEFORE THE TRIAL LEVEL AND ANY APPELLATE PROCEEDINGS)
ARISING OUT OF ANY CLAIM MADE BY ANY REALTOR, BROKER, FINDER OR ANY OTHER
INTERMEDIARY WHO CLAIMS TO HAVE BEEN ENGAGED, CONTRACTED OR UTILIZED BY INVESTOR
IN CONNECTION WITH THE TRANSACTION WHICH IS THE SUBJECT MATTER OF THIS
AGREEMENT. THIS INDEMNIFICATION SHALL SURVIVE THE CLOSING.
10. FURTHER INSTRUMENTS
10.1 Further Instruments. Developer will, whenever reasonably requested
by Investor; and Investor will, whenever reasonably requested by Developer,
execute, acknowledge and deliver, or cause to be executed, acknowledged and
delivered, any and all conveyances, assignments and all other instruments and
documents as may be reasonably necessary in order to complete the transaction
herein provided and to carry out the terms and provisions of this Agreement.
11. TERMINATION AND REMEDIES
11.1 Developer's Default.
(a) If prior to or at the Closing, Developer defaults hereunder or
shall have failed to have performed any of the material covenants and/or
agreements contained herein which are to be performed by Developer, or if any
warranty or representation made by Developer herein is not true and correct in
all material respects, Investor may, at its option, as its sole and exclusive
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remedies, either (i) seek specific performance of this Agreement or (ii)
terminate this Agreement and bring suit against Developer to recover third party
out-of-pocket costs and expenses actually incurred or paid by Investor, or its
permitted assigns (and not refunded to Investor due to the termination), as
evidenced by invoices or paid receipts, as applicable, such amount not to exceed
$2,500,000.
(b) Notwithstanding anything in Section 11.1(a) to the contrary, if the
Developer in bad faith fails or refuses to complete the transaction in
accordance with the provisions of this Agreement on or before the Closing Date,
in addition to all other remedies that Investor may have hereunder, Investor
shall be entitled to terminate this Agreement and in addition to the damages
under Section 11.1(a)(ii), receive $500,000.00 as liquidated damages (which the
parties acknowledge shall constitute just compensation as liquidated damages due
to the inconvenience of ascertaining and measuring actual damages, and the
uncertainty thereof).
(c) If, after the Closing, Developer defaults hereunder by its failure
to have performed any of the material covenants and/or agreements contained
herein which are to be performed after Closing or defaults hereunder because any
warranty or representation made by Developer herein is not true and correct, and
if the actual damages to Investor caused thereby exceed One Hundred Fifty
Thousand Dollars ($150,000) then, Investor, subject to Section 4.5, may enforce
all remedies available at law or in equity for actual damages (including the
first $150,000 of actual damages) up to a maximum of Twenty Million Dollars
($20,000,000). Investor hereby waives any claim for consequential, exemplary or
punitive damages. If Investor has not made any claim hereunder within five (5)
years (or twelve (12) months as to the representations restricted to such time
period under Section 8.1), Investor shall be deemed to have waived and released
any claim under this Section 11.1(c) as to such matters.
(d) Notwithstanding anything in Section 11.1(a) to the contrary,
Investor will, prior to the exercise of the remedies contained in Section
11.1(a), give Developer written notice ("Investor's Default Notice") specifying
the nature of such default. Until the date which is five (5) days after receipt
of Investor's Default Notice, Developer may, at its option, elect to cure such
default or waive the option to cure the default; provided, however, Developer's
failure to give Investor written notice of its election within this time period
shall be deemed an election by Developer to waive its right to cure the default.
If Developer waives or is deemed to have waived its right to cure the default,
Investor shall thereafter be entitled to exercise the remedies in accordance
with the terms of Section 11.1(a). If Developer elects to cure the default
specified in Investor's Default Notice, Developer shall commence to cure such
default within fifteen (15) days from the date of such election and diligently
pursue such cure to completion within forty-five (45) days ("Developer's Cure
Period"); provided, however, (i) in no event shall the Developer's Cure Period
extend beyond September 15, 1999 and to the extent necessary, Developer's Cure
Period will be shortened accordingly, and (ii) if Developer fails to cure such
default within Developer's Cure Period to Investor's reasonable satisfaction,
Investor may exercise its remedies in accordance with the terms of Section
11.1(a) hereof.
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11.2 Investor's Default.
(a) If Investor has not terminated this Agreement pursuant to any of
the provisions hereof authorizing such termination, and Investor defaults
hereunder and fails to perform any of the covenants and/or agreements contained
herein which are to be performed by Investor, Developer shall be entitled to at
its option either (i) seek specific performance of this Agreement or (ii)
terminate this Agreement and receive the Deposit as liquidated damages.
Developer hereby specifically waives any and all rights which it may have to
exemplary, punitive or consequential damages as a result of Investor's default
under this Agreement.
(b) Notwithstanding anything in Section 11.2(a) to the contrary,
Developer will, prior to the exercise of the remedies contained in Section
11.2(a), give Investor written notice ("Developer's Default Notice") specifying
the nature of such default. Until the date which is five (5) days after receipt
of Developer's Default Notice, Investor may, at its option, elect to cure such
default or waive the option to cure the default; provided, however, Investor's
failure to give Developer written notice of its election within this time period
shall be deemed an election by Investor to waive its right to cure the default.
If Investor waives or is deemed to have waived its right to cure the default,
Developer shall thereafter be entitled to exercise the remedies in accordance
with the terms of Section 11.2(a). If Investor elects to cure the default
specified in Developer's Default Notice, Investor shall commence to cure such
default within fifteen (15) days from the date of such election and shall
thereafter diligently pursue such cure to completion within forty-five (45) days
("Investor's Cure Period"); provided, however, (i) in no event shall the
Investor's Cure Period extend beyond September 15, 1999 and to the extent
necessary, Investor's Cure Period will be shortened accordingly, and (ii) if
Investor is unable to cure such default within Investor's Cure Period to
Developer's reasonable satisfaction, Developer may exercise its remedies in
accordance with the terms of Section 11.2(a) hereof.
11.3 Costs and Expenses; Limitation. In the event of any default or
alleged default by either Developer or Investor hereunder which results a party
seeking to exercise its rights or remedies pursuant to Section 11.1 or Section
11.2 above, the prevailing party under this Agreement shall be able to recover
from the nonprevailing party on demand all actual, reasonable and necessary
out-of-pocket expenses actually paid or incurred by the prevailing party in
connection with the transaction evidenced by this Agreement including, without
limitation, reasonable attorneys' fees. In no event shall either party hereto,
or any direct or indirect partner, member, shareholder, beneficiary, owner or
affiliate thereof, or any officer, director, employee, trustee, or agent of any
of the foregoing or any affiliate or controlling person thereof, be liable to
any indemnified party in contract, tort or otherwise with respect to any
indirect, consequential, punitive or exemplary damages arising from or relating
to this Agreement or any closing document.
12. RISK OF LOSS
12.1 Casualty Prior to Closing. Developer bears the risk of loss of the
Property prior to Closing. If any time prior to the Closing any portion of the
Property is destroyed or damaged by fire or any other casualty whatsoever,
Developer shall give notice thereof to Investor. Investor shall give notice to
Developer within ten (10) business days of Investor's receipt of the written
determination of the cost of repair and restoration of Investor's election to
either (1) require Developer to proceed with the necessary repairs or (2) for
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the Company to accept the insurance proceeds payable because of the destruction
or damage; provided, however, that if Investor elects the second option,
Investor shall indemnify Developer and the Company from any claim from tenants
regarding a failure to restore the Property when such restoration was required
by a Tenant Lease. If Investor elects to have Developer make such repairs,
Developer shall endeavor to repair such damage as promptly as is reasonably
possible following receipt of such proceeds, restoring the damaged Property to
the condition contemplated by this Agreement; and in such event, the Closing
shall be deferred until the Property has been restored to at least its condition
prior to such damage or destruction but in no event beyond November 1, 1999
(subject to extension due to force majeure, but not to exceed thirty (30)
additional days in any event). If Developer fails to restore and repair the
damaged Property by such date or if the estimated time necessary to complete the
required repairs will be later than November 1, 1999 (subject to extension due
to force majeure, but not to exceed thirty (30) additional days in any event),
Investor shall have the right to terminate this Agreement. If Investor elects
for the Company to accept the insurance proceeds, then Developer shall be
excused from making repairs, but shall pay or assign to the Company at Closing
any and all claims and insurance proceeds payable for such damage, plus an
amount equal to any deductible payable under any policy of insurance maintained
(or required to be maintained) by Developer and the sale shall be closed without
Developer repairing such damage.
Notwithstanding the foregoing, if Investor elects to have the insurance proceeds
applied to restoration, but Developer believes that it will be unable to
complete the restoration by November 1, 1999, and the Parcel is not a Key
Parcel, Developer may remove the affected Parcel from the Property (and the
Contribution Amount will be adjusted accordingly based on the Parcel Value).
12.2 Condemnation. Promptly upon obtaining knowledge of the institution
of any proceedings for the condemnation of the Property or any portion thereof,
Developer will notify Investor of the pendency of such proceedings. Investor may
participate in any such proceedings, and Developer shall from time to time
deliver to Investor all instruments requested by it to permit such
participation. If (a) the whole or any part of the Property or any material
interest in the Property is taken by condemnation or right of eminent domain
prior to the Closing (or if any such taking is threatened) and (b) in Investor's
reasonable determination the Property is rendered unsuitable for the Company's
intended use (which shall specifically include Investor's anticipated return on
investment) (or would be rendered unsuitable if the threatened taking occurs),
Investor shall have the right to terminate this Agreement within ten (10)
business days of receipt of written notice of such contemplated condemnation and
the amount of the proposed award. Investor's failure to terminate within such
ten (10) business day period shall be deemed to be a waiver by Investor of its
termination right under the preceding sentence. If Investor elects not to
terminate this Agreement, the transaction contemplated by this Agreement shall
be closed in accordance with the terms of this Agreement notwithstanding any
such taking, but at the Closing, Developer shall pay to or assign to the Company
any awards collected in connection with such taking and shall assign to the
Company all of Developer's rights to collect any awards which thereafter may be
payable as a result of, or to recover against others for, such taking.
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13. PROVISIONS REGARDING HAZARDOUS SUBSTANCES
13.1 Definitions. Unless the context otherwise specifies or requires,
the following terms shall have the respective meanings herein specified:
(a) "Environmental Losses" means Losses suffered or incurred by any
indemnified party, directly or indirectly, relating to or arising out of, based
on or as a result of: (i) any Hazardous Substance Activity by Developer or any
third party that occurred on or subsequent to the Acquisition Date (as
hereinafter defined); (ii) any violation by Developer (or any third party) on or
subsequent to the Acquisition Date of any applicable Hazardous Materials Laws
relating to the Property or to the ownership, use, occupancy or operation
thereof; or (iii) any investigation, inquiry, order, hearing, action, or other
proceeding by or before any governmental or quasi-governmental agency or
authority in connection with any Hazardous Substance Activity by Developer (or
any third party) that occurred in whole or in part on or subsequent to the
Acquisition Date.
(b) The term "Governmental Requirements" shall mean all laws,
ordinances, statutes, codes, rules, regulations, orders and decrees of the
United States, the state, the county, the city, or any other political
subdivision in which the Property is located, and any other political
subdivision, agency or instrumentality exercising jurisdiction over Developer or
the Property, including Hazardous Materials Laws.
(c) The term "Hazardous Materials" shall mean (i) any "hazardous waste"
as defined by the Resource Conservation and Recovery Act of 1976 (42 U.S.C.
Section 6901 et seq.), as amended from time to time, and regulations promulgated
thereunder ("RCRA"); (ii) any "hazardous substance" as defined by the
Comprehensive Environmental Response, Compensation and Liability Act of 1980 (42
U.S.C. Section 9601 et seq.), as amended from time to time, and regulations
promulgated thereunder ("CERCLA") (including petroleum-based products as
described therein); (iii) other petroleum and petroleum-based products; (iv)
asbestos in any quantity or form which would subject it to regulation under any
applicable Hazardous Materials Law (hereinafter defined); (v) polychlorinated
biphenyls; (vi) any substance, the presence of which on the Property is
prohibited by any Hazardous Materials Law; (vii) any "extremely hazardous
substance" or "hazardous chemical" as those terms are defined in the Emergency
Planning and Community Right-To-Know Act (42 U.S.C. Section 11001 et seq.) as
amended from time to time, and regulations promulgated thereunder ("EPCRA");
(viii) any "chemical substance" as that term is defined in the Toxic Substances
Control Act (15 U.S.C. Section 2601) as amended from time to time, and
regulations promulgated thereunder ("TSCA"); (ix) any hazardous substances
identified under the law of the state in which the Property is located; and (x)
any other substance, including toxic substances, which, by any Hazardous
Materials Laws, requires special handling in its collection, storage, treatment,
management, recycling or disposal.
(d) The term "Hazardous Materials Contamination" shall mean the
contamination (whether presently existing or hereafter occurring) of the
Improvements, facilities, soil, groundwater, air or other elements on or of the
Property by Hazardous Materials, or the contamination of the buildings,
facilities, soil, groundwater, air or other elements on or of any other property
as a result of Hazardous Materials at any time emanating from the Property in
either event above levels permitted under or otherwise in violation of Hazardous
Materials Laws.
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(e) The term "Hazardous Materials Laws" shall mean all Governmental
Requirements, including, without limitation, RCRA and CERCLA, relating to the
handling, storage, existence of or otherwise regulating any hazardous wastes,
hazardous substances, toxic substances, radioactive materials, pollutants,
chemicals, contaminants or industrial substances or relating to the removal or
remediation of any of the foregoing.
(f) "Hazardous Substance Activity" means any actual, proposed, or
threatened use, storage, holding, existence, location, or release, in each case
in violation of Hazardous Materials Laws including, without limitation, any
spilling, leaking (not to include oil, transmission, or other fluid leaks from
automobiles), leaching, pumping, pouring, emitting, emptying, dumping, disposing
into the environment, and the continuing migration into or through soil, surface
water, groundwater or any body of water, discharge, deposit, placement,
generation, processing, construction, treatment, abatement, removal, disposal,
disposition, handling, or transportation of any Hazardous Materials from, under,
in, into, or on the Property, including, without limitation, the movement or
migration of any Hazardous Materials from surrounding property, surface water,
groundwater or any body of water under, in, into, or onto the Property and any
residual Hazardous Materials Contamination in, on, or under the Property.
(g) "Losses" means any and all losses, liabilities, damages (whether
actual, consequential, punitive or otherwise denominated), demands, claims,
actions, judgments, causes of action, assessments, fines, penalties, costs, and
out-of-pocket expenses (including, without limitation, attorneys' fees and the
fees of environmental consultants), of any and every kind or character,
foreseeable and unforeseeable, liquidated and contingent, proximate and remote.
(h) The terms "release," "disposal," "storage" and "treatment" shall
have the meaning set forth in CERCLA, RCRA, the regulations promulgated
thereunder and any other similar Hazardous Materials Laws.
13.2 Developer's Representations and Warranties. Developer hereby represents and
warrants to Investor that except as set forth on Exhibit C-2 or in those certain
Phase I Environmental Site Assessments delivered to Investor by Developer and
listed on Schedule 13.2 attached hereto (collectively, the "Environmental
Report"):
(a) No Hazardous Materials have been released into the environment, or
deposited, discharged, placed or disposed of at, on, from or under the Property
by Developer or, to Developer's knowledge, by any third party in violation of
Hazardous Materials Laws, and to Developer's knowledge, there occurred no such
release, deposit, discharge, placement or disposal in violation of Hazardous
Materials Laws prior to the date hereof. To Developer's knowledge, no part of
the Property has ever been used for the disposal, storage, treatment,
processing, manufacturing or other handling of Hazardous Materials, except de
minimus quantities in accordance with applicable law. No Hazardous Materials
Contamination has occurred on the Property since the Acquisition Date or to
Developer's knowledge, prior to the Acquisition Date.
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(b) To Developer's knowledge, no property adjoining the Property has
been used for the disposal, storage, treatment, processing, manufacturing or
other handling of Hazardous Materials, and to Developer's knowledge no property
adjoining the Property is materially affected by Hazardous Materials
Contamination.
(c) No asbestos or asbestos-containing materials have been placed on or
in the Property by Developer and to Developer's knowledge, no asbestos or
asbestos-containing materials are present on or in the Property.
(d) No polychlorinated biphenyls have been placed on the Property by
Developer and to Developer's knowledge, no polychlorinated biphenyls are present
on the Property.
(e) No underground storage tanks have been placed on or under the
Property by Developer, and to Developer's knowledge, no underground storage
tanks are present on or under the Property.
(f) Developer has received no written notice of any administrative
order or notice, consent order and agreement, litigation or settlement with
respect to Hazardous Materials or Hazardous Materials Contamination with respect
to the Property, nor, to Developer's knowledge, is any of such action proposed
or threatened with respect to the Property. Developer has received no written
notice and has no knowledge of any such action regarding any property adjacent
to the Property. To Developer's knowledge, no investigation with respect to the
Hazardous Materials or Hazardous Materials Contamination is proposed, threatened
or anticipated with respect to the Property. Developer has not violated any
Governmental Requirements relating to Hazardous Materials with respect to the
Property and Developer has received no written notice that any third party has
violated any Governmental Requirements relating to Hazardous Materials with
respect to the Property. To Developer's knowledge, no condition occurred on the
Property prior to the date Developer acquired the Property (the "Acquisition
Date") which is or was in violation of any applicable Governmental Requirements
relating to Hazardous Materials. Developer has received no written communication
from or on behalf of any Governmental Authority or any other person or entity
indicating that any applicable Governmental Requirements relating to Hazardous
Materials have been or may have been violated with respect to the Property. The
Property is not currently on, and has never been on, any federal or state
"Superfund" or "Superlien" list, and Developer has no knowledge that the
Property is anticipated or threatened to be placed on any such list. Developer
has received no notice of any third party claims regarding damage to property or
persons resulting from any Hazardous Materials Contamination affecting the
Property.
(g) Developer has received no written notice from any tenants regarding
the existence of Hazardous Materials on the Property nor has Developer received
written notice of a threat of release of Hazardous Materials from or into the
Property.
(h) Developer has obtained all governmental approvals required for the
operation of the Property by any applicable Hazardous Materials Laws.
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(i) Developer (i) has no liability for response or corrective action,
natural resource damage, or other harm pursuant to CERCLA, RCRA or any other
Hazardous Materials Laws at the Property, and (ii) is not subject to and is not
required to give any notice of any environmental claim or release of Hazardous
Materials involving Developer at the Property, other than to its lenders.
(j) The Property is not subject to any restriction on the ownership,
occupancy, use or transferability of the Property which is recorded or to which
Developer is a party in connection with any (i) Hazardous Materials Laws or (ii)
release, threatened release, treatment, management, storage, handling, recycling
or disposal of a Hazardous Material.
(k) Developer has provided or otherwise made available to Investor any
environmental record concerning Developer or the Property which Developer
possesses.
13.3 Environmental Covenant. Developer shall not conduct or authorize
and shall use its reasonable efforts to prevent Hazardous Materials
Contamination at the Property on or prior to the Closing Date, and shall
promptly notify Investor in writing of any existing or pending investigation or
inquiry by any governmental authority in connection with any Hazardous Materials
Laws relating to the Property.
13.4 Environmental Indemnification.
(a) Environmental Losses for Pre-Existing Conditions Not Caused by
Developer. With respect to any Environmental Losses from a condition that
existed at the time of Closing, which arise within two (2) years after the
Closing and which were not caused by Developer, Developer hereby agrees to
indemnify, defend and hold harmless Investor and Company from and against all
such Environmental Losses, subject only to the provisions of Sections 13.4(d)
and 13.4(e) below.
(b) Environmental Losses for Pre-Existing Conditions Caused or Known by
Developer. With respect to any Environmental Losses from a condition that
existed at the time of Closing, which arise after the Closing and which were
caused by Developer or of which Developer had knowledge prior to Closing,
Developer hereby agrees to indemnify, defend and hold harmless Investor and
Company from and against all such Environmental Losses, subject only to the
provisions of Sections 13.4(d) and 13.4(e) below.
(c) Other Environmental Losses. All other Environmental Losses,
including those that arise from a post-Closing condition or event and those
which arise from a condition existing at the time of Closing but that arise more
than two years after Closing and which were not caused or known by Developer,
shall be the responsibility of the Company and Developer shall not be
responsible therefor and the Company hereby agrees to indemnify, defend and hold
Developer harmless from and against all such Environmental Losses, subject only
to the provisions of Sections 13.4(d) and 13.4(e) below..
(d) Assumption of Defense.
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(i) If a party entitled to indemnification hereunder (the "Indemnified
Party") notifies the party liable for such indemnification (the "Indemnifying
Party") of any claim, demand, action, administrative or legal proceeding,
investigation or allegation as to which the indemnity provided for in this
Section 13.4 applies (a "Potential Claim"), Indemnifying Party shall assume on
behalf of Indemnified Party and conduct with due diligence and in good faith the
investigation and defense thereof and the response thereto with counsel
reasonably satisfactory to Indemnified Party; provided, that Indemnifying Party
shall have the right to cure such matter that is the subject of the Potential
Claim (subject to the rights of the owner of the Property at the time of such
cure to approve the manner of such cure) if such cure will not result in
additional liability or loss of rights to Indemnified Party, and provided
further that Indemnified Party have the right to be represented by advisory
counsel of its own selection and at its own expense; and provided further, that
if any such claim, demand, action, proceeding, investigation or allegation
involves both Indemnifying Party and Indemnified Party and Indemnified Party
shall have reasonably concluded that there may be legal defenses available to it
which are inconsistent with or in addition to those available to Indemnifying
Party, then Indemnified Party shall have the right to select separate counsel to
participate in the investigation and defense of and response to such claim,
demand, action, proceeding, investigation or allegation on its own behalf at
Indemnifying Party's expense.
(ii) If any claim, demand, action, proceeding, investigation or
allegation arises as to which the indemnity provided for in this Section 13.4
applies, and Indemnifying Party fails to assume as soon as reasonably practical
(and in any event within fifteen (15) days after being notified of the claim,
demand, action, proceeding, investigation or allegation) the defense of
Indemnified Party, then Indemnified Party may contest (or, with the prior
written consent of Indemnifying Party, settle) the claim, demand, action,
proceeding, investigation or allegation at Indemnifying Party's expense using
counsel selected by Indemnified Party; provided, that after any such failure by
Indemnifying Party which continues for thirty (30) days or more no such contest
need be made by Indemnified Party and settlement or full payment of any claim
may be made by Indemnified Party without Indemnifying Party's consent and
without releasing Indemnifying Party from any obligations to Indemnified Party
under this Section 13.4 if, in the written opinion of reputable counsel to
Indemnified Party, the settlement or payment in full is clearly advisable.
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(e) Notice of Losses. If Indemnified Party receives a written notice of
Losses that Indemnified Party believes are covered by this Section 13.4, then
Indemnified Party shall promptly furnish a copy of such notice to Indemnifying
Party. The failure to so provide a copy of the notice to Indemnifying Party
shall not excuse Indemnifying Party from its obligations under this Section
13.4; provided, that if Indemnifying Party is unaware of the matters described
in the notice and such failure renders unavailable defenses that Indemnifying
Party might otherwise assert, or precludes actions that Indemnifying Party might
otherwise take, to minimize its obligations hereunder, then Indemnifying Party
shall be excused from its obligation to indemnify Indemnified Party against
assessments, fines, costs and expenses, if any, which would not have been
incurred but for such failure. For example, if Indemnified Party fails to
provide Indemnifying Party with a copy of a notice of an obligation covered by
the indemnity set out in Sections 13.4(a) or (b) and Indemnifying Party is not
otherwise already aware of such obligation, and if as a result of such failure
Indemnified Party becomes liable for penalties and interest covered by the
indemnity in excess of the penalties and interest that would have accrued if
Indemnifying Party had been promptly provided with a copy of the notice, then
Indemnifying Party will be excused from any obligation to Indemnified Party to
pay the excess and Indemnified Party shall indemnify Indemnifying Party with
respect to any such excess.
13.5 Rights Cumulative. The rights of Investor and the Company under
this Article 13 shall be in addition to any other rights and remedies of
Investor and the Company against Developer pursuant to CERCLA and Investor and
the Company each expressly retain any right of reimbursement or contribution
thereunder.
14. NO ASSUMPTION
14.1 No Assumption. The Company is not and is not deemed to be, a
successor of Developer, it being understood that Developer is contributing to
and the Company is acquiring only the Property and the rights and obligations
arising thereunder; and it is expressly understood and agreed that, except as
may otherwise be expressly provided in this Agreement and in the documents
delivered at the Closing, Investor has not and does not hereby assume or agree
to assume any liability whatsoever of Developer.
15. NOTICES
15.1 Notices. Any notice, request, demand, instruction or other
communication to be given to either party hereunder, except those required to be
delivered at the Closing, shall be in writing, and shall be deemed to be
delivered (a) upon receipt, if delivered by facsimile, (b) upon receipt if hand
delivered, (c) on the first business day after having been delivered to a
national overnight air courier service, or (d) three business days after deposit
in registered or certified mail, return receipt requested, addressed as follows:
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If to Investor: Invesco Realty Advisors
One Lincoln Centre, Suite 700
5400 LBJ Freeway, LB-2
Dallas, Texas 75240
Attention: Ron Ragsdale
Fax: 972/715-5811
with additional copies to: D'Ancona & Pflaum LLC
111 E. Wacker Drive, Suite 2800
Chicago, Illinois 60601-4205
Attention: J. Kelly Bufton, Esq.
Fax: 312/602-3078
If to Developer: Brandywine Operating Partnership, L.P.
14 Campus Boulevard, Suite 100
Newtown Square, Pennsylvania 19073
Attention: President and Chief
Executive Officer and General Counsel
Fax: 610-325-5622
16. MISCELLANEOUS
16.1 Entire Agreement. This Agreement and the exhibits attached hereto
contain the entire agreement between the parties and supersede all prior and
contemporaneous agreements or understandings. No modification or amendment of
this Agreement shall be of any force or effect unless made in writing and
executed by Investor and Developer.
16.2 Counterparts. This Agreement may be executed in any number of
counterparts which together shall constitute the agreement of the parties.
16.3 Time of the Essence. Time is of the essence with respect to the
performance of all obligations provided herein and the consummation of all
transactions contemplated hereby.
16.4 Assignment. This Agreement, and the rights and obligations of
Investor hereunder, may be assigned by Investor at any time without the consent
of Developer to Bailard, Biehl & Kaiser Properties II, Inc. or to any entity for
which Invesco Realty Advisors acts as investment advisor and is of comparable
financial capability as Bailard, Biehl & Kaiser Properties II, Inc. Upon any
such assignment by Investor, Investor shall have no further obligation or
liability hereunder; provided, however, any agreements, waivers or consents made
or given by Investor under this Agreement shall be binding upon Investor or any
such approved assignee. In the event of any such assignment, Developer agrees to
close the transaction contemplated hereunder with the assignee of Investor.
Developer may not assign this Agreement without the prior written consent of
Investor.
16.5 Dates. Whenever any determination is to be made or action is to be
taken on a date specified in this Agreement, if such date shall fall on
Saturday, Sunday or legal holiday under the laws of the Commonwealth of
Pennsylvania, then in such event said date shall be extended to the next day
which is not a Saturday, Sunday or legal holiday. All references in this
Agreement to "the date hereof," "the date of this Agreement" or similar
references shall be deemed to refer to the date on which this Agreement, having
been executed by Developer and Investor, is received into escrow by the Title
Company.
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16.6 Binding on Successors and Assigns. This Agreement and the terms
and provisions hereof shall inure to the benefit of and be binding upon the
parties hereto and their respective successors and permitted assigns whenever
the context so requires or admits.
16.7 Records. Investor shall not file this Agreement, nor any
memorandum hereof, in any public records without the prior written consent of
Developer, and any such memorandum which is filed without such consent shall be,
in Developer's sole discretion, automatically deemed null and void; provided,
that BRT may file a copy of the Agreement as an exhibit to a filing it may make
with the Securities and Exchange Commission (the "SEC").
16.8 Attorneys' Fees. Should either party hereto institute any action
or proceeding in court to enforce any provision hereof or for damages by reason
of any alleged breach of any provision of this Agreement or for any other
judicial remedy, the prevailing party shall be entitled to receive from the
losing party all reasonable attorneys' fees and all court costs in connection
with said proceeding.
16.9 Confidentiality and Public Disclosure. Investor shall hold, and
shall instruct all of its employees and agents to hold, all information
furnished to it pursuant to this Agreement, and all information which it obtains
pursuant to its inspection, testings and investigations contemplate by Article 3
in confidence except as and to the extent required by law. Developer and
Investor covenant and agree that they will not issue any press releases or make
similar disclosures to any reporting publication disclosing the terms of this
Agreement and that they will each hold this Agreement and the particulars
thereof and the parties thereto in confidence, except as may be required by law,
provided that the foregoing will not restrict the ability of BRT to file this
Agreement (and some or all of the exhibits) as an exhibit to a filing it may
make with the SEC and to make disclosures regarding the transactions provided
for by this Agreement to the extent BRT reasonably believes necessary to enable
BRT to comply with SEC regulations. Upon execution and delivery of this
Agreement, the parties shall issue a press release approved by both parties with
respect to the subject matter of this Agreement.
16.10 Termination. Upon any termination permitted under the terms of
this Agreement by Investor pursuant to the terms of this Agreement, Investor and
Developer shall be automatically released and discharged from all further
liability and obligations under and in connection with this Agreement, subject
however, to the express provisions of this Agreement that provide for survival
of certain agreements and indemnities. No termination of this Agreement shall be
effective unless executed by the terminating party and delivered to the other
party.
16.11 Reporting Person. The Title Company is hereby designated as the
"Reporting Person" pursuant to Section 6045 of the Code and the regulations
promulgated thereunder.
16.12 Paragraph Headings. The paragraph headings contained in the
Agreement are for convenience only and shall in no way enlarge or limit the
scope or meaning of the various and several paragraphs hereof.
16.13 Approvals. During the term of this Agreement, until Investor
notifies Developer that Investor has terminated its agreement with Invesco
Realty Advisors, Inc. ("Invesco"), any agreements, waivers, or consents required
to be given by Investor, may be given by Invesco, and any such consents, waivers
or agreements made or given by Invesco in writing as agent for Investor and on
behalf of Investor shall be binding upon Investor or any approved assignee.
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16.14 Facsimile Signatures. Executed facsimile copies of this Agreement
shall be binding upon the parties herein, and facsimile signatures appearing
hereon shall be deemed to be original signatures. Following execution by
facsimile by both parties, Investor shall execute four (4) originals of this
Agreement and forward by overnight courier to Developer; Developer shall execute
such counterparts and deliver same to Escrow Agent the day following receipt
thereof from Investor.
16.15 Exculpation. No recourse shall be had for any obligation of
Developer under this Agreement or under any document executed in connection
herewith or pursuant hereto, or for any claim based thereon or otherwise in
respect thereof, against any past, present or future trustee, shareholder,
officer or employee of Developer or Brandywine Realty Trust, whether by virtue
of any statute or rule of law, or by the enforcement of any assessment or
penalty or otherwise, all such liability being expressly waived and released by
Investor and all parties claiming by, through or under Investor.
16.16 AS IS. THE PROPERTIES ARE BEING CONTRIBUTED ON AN "AS IS, WHERE
IS" BASIS, AND DEVELOPER MAKES NO REPRESENTATIONS OR WARRANTIES, EXPRESS OR
IMPLIED, WITH RESPECT TO THE PHYSICAL CONDITION, FITNESS FOR USE, TITLE OR ANY
OTHER MATTER RELATING TO THE PREMISES OR THE PROPERTY, EXCEPT AS EXPRESSLY AND
SPECIFICALLY SET FORTH IN THIS AGREEMENT. INVESTOR REPRESENTS THAT IT IS
KNOWLEDGEABLE OF REAL ESTATE AND THAT IT IS RELYING SOLELY ON ITS OWN EXPERTISE,
THAT OF INVESTOR'S CONSULTANTS, AND THE REPRESENTATIONS AND WARRANTIES OF
DEVELOPER CONTAINED IN THIS AGREEMENT, SUBJECT, HOWEVER, TO THE LIMITATIONS
CONTAINED HEREIN UPON SUCH REPRESENTATIONS AND WARRANTIES, AND THAT DEVELOPER
HAS OR SHALL HAVE AFFORDED INVESTOR WITH A FULL AND COMPLETE OPPORTUNITY TO MAKE
ITS OWN INDEPENDENT INVESTIGATION OF THE PROPERTY AND ALL MATTERS PERTAINING
THERETO DURING THE INSPECTION PERIOD INCLUDING, BUT NOT LIMITED TO, THE PHYSICAL
AND ENVIRONMENTAL CONDITIONS THEREOF AND, UPON CLOSING, SHALL ASSUME THE RISK
THAT ADVERSE MATTERS, INCLUDING, BUT NOT LIMITED TO, ADVERSE PHYSICAL AND
ENVIRONMENTAL CONDITIONS, MAY NOT HAVE BEEN REVEALED BY INVESTOR'S INSPECTIONS
AND INVESTIGATIONS. INVESTOR ACKNOWLEDGES AND AGREES THAT, UPON CLOSING,
DEVELOPER SHALL CONVEY TO THE COMPANY THE PROPERTY "AS IS, WHERE IS" WITH ALL
FAULTS, AND THERE ARE NO ORAL AGREEMENTS, WARRANTIES OR REPRESENTATIONS (EXCEPT
AS HEREIN SPECIFICALLY PROVIDED), COLLATERAL TO OR AFFECTING ANY OF THE PROPERTY
BY DEVELOPER ANY AGENT OF OR ANY THIRD PARTY, INVESTOR EXPRESSLY AGREES THAT THE
TERMS AND CONDITIONS OF THIS PARAGRAPH SHALL SURVIVE THE CLOSING AND NOT MERGE
THEREIN AND DEVELOPER IS NOT LIABLE OR BOUND IN ANY MANNER BY ANY VERBAL OR
WRITTEN STATEMENTS, REPRESENTATIONS, OR INFORMATION PERTAINING TO THE PROPERTY
FURNISHED BY ANY REAL ESTATE BROKER, AGENT, EMPLOYEE, SERVANT OR OTHER PERSON,
UNLESS THE SAME ARE SPECIFICALLY SET FORTH OR REFERRED TO IN THIS AGREEMENT.
37
<PAGE>
16.17 Governing Law. This Agreement shall be governed by and construed
in accordance with the laws of the Commonwealth of Pennsylvania, and the laws of
the United States applicable to transactions in Pennsylvania.
EXECUTED by Investor on the 8th day of June, 1999.
INVESTOR:
INVESCO REALTY ADVISORS, INC.
By: /s/ Ron Ragsdale
------------------------------------------------
Name: Ron Ragsdale
----------------------------------------------
Title: Vice President
---------------------------------------------
EXECUTED by Developer on the 8th day of June, 1999.
DEVELOPER:
BRANDYWINE OPERATING PARTNERSHIP, L.P.
By: Brandywine Realty Trust, its general partner
By: /s/ Gerard H. Sweeney
------------------------------------------------
Name: Gerard H. Sweeney
----------------------------------------------
Title: President and Chief Executive Officer
--------------------------------------------
NICHOLS LANSDALE LIMITED PARTNERSHIP, III
By: Witmer Operating Partnership I, L.P.,
its general partner
By: Brandywine Witmer, L.L.C., its general partner
-----------------------------------------------
By: /s/ Gerard H. Sweeney
------------------------------------------------
Title: President and Chief Executive Officer
---------------------------------------------
38
<PAGE>
The undersigned hereby acknowledges receipt of a fully executed
original counterpart of this Agreement and agrees to perform the functions of
Title Company hereunder as of June 8, 1999. The undersigned further assumes
the duties of the "Reporting Person" as described in Section 6045 of the Code
and the regulations promulgated thereunder.
TITLE COMPANY:
COMMONWEALTH LAND TITLE INSURANCE COMPANY
By: /s/ M. Gordon Daniels
------------------------------------------------
Name: M. Gordon Daniels
----------------------------------------------
Title: Vice President
--------------------------------------------
<PAGE>
Exhibit 10.2
---------------------
LIMITED PARTNERSHIP AGREEMENT
OF
BRANDYWINE INDUSTRIAL PARTNERSHIP, L.P.
<PAGE>
LIMITED PARTNERSHIP AGREEMENT OF
BRANDYWINE INDUSTRIAL PARTNERSHIP, L.P.
THIS LIMITED PARTNERSHIP AGREEMENT OF BRANDYWINE INDUSTRIAL
PARTNERSHIP, L.P., (the "Agreement") is made as of the 17th day of June, 1999,
by and among BB&K GP Business Trust, a Pennsylvania business trust as the
general partner (the "General Partner"), BB&K LP Business Trust, a Pennsylvania
business trust as the Class A Limited Partner (the "Class A Limited Partner")
and Brandywine Operating Partnership, L.P., a Delaware limited partnership and
Nichols Lansdale Limited Partnership, III, a Pennsylvania limited partnership,
as the Class B limited partners (collectively, the "Class B Limited Partner") .
R E C I T A L S
WHEREAS, the parties desire to form a limited partnership with the
General Partner as the general partner and the Class A Limited Partner and the
Class B Limited Partner as limited partners (collectively, the "Limited
Partners") under the provisions of the Delaware Revised Uniform Limited
Partnership Act, as amended from time to time (the "Act");
WHEREAS, the parties hereto desire to set forth herein their respective
rights, duties and responsibilities with respect to such limited partnership;
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, and in consideration of the mutual
agreements set forth herein, the parties hereto, intending to be legally bound,
do hereby agree as follows:
ARTICLE 1
DEFINITIONS
Section 1.1 Certain Defined Terms. The following terms wherever used in
this Agreement shall have the following meanings:
1.1.1 "Act" shall have the meaning set forth in the Recitals of this
Agreement.
1.1.2 "Additional Capital Contribution" means any contribution to the
capital of the Partnership made by the Class A Limited Partner pursuant to
Section 5.1.4.
1.1.3 "Adjusted Capital Account Deficit" means, with respect to any
Partner, the deficit balance, if any, in such Partner's Capital Account as of
such date, after giving effect to the following adjustments:
1.1.3.1 Such Capital Account shall be increased to reflect any amounts,
if any, which such Partner is obligated to restore to the Partnership or is
deemed to be obligated to restore pursuant to Sections 1.704-2(g)(1) and
1.704-2(i)(5) of the Regulations; and
<PAGE>
1.1.3.2 Such Capital Account shall be reduced to reflect any items
described in Sections 1.704-1(b)(2)(ii)(d)(4), (5) and (6) of the Regulations.
1.1.3.3 Such Capital Account shall be increased by such Partner's
allocable share (as determined under Section 752 of the Code) of any recourse
indebtedness of the Partnership to the extent that such indebtedness could not
be repaid out of the Partnership's assets if all of the Partnership's assets
were sold at their respective Book Values as of the end of the Fiscal Year or
Adjustment Period and the proceeds from the sales were used to pay the
Partnership's liabilities.
1.1.4 "Adjustment Period" shall mean a period of time as determined in
this Section 1.1.4. The first Adjustment Period shall commence on the Closing
Date. Each succeeding Adjustment Period shall commence on the day immediately
following the last day of the immediately preceding Adjustment Period. Each
Adjustment Period shall end on the earliest to occur after the commencement of
such Adjustment Period of (i) the last day of each Fiscal Year, (ii) a Capital
Date, (iii) the day immediately preceding the date of the "liquidation" of a
Partner's interest in the Partnership (within the meaning of Section
1.704-1(b)(2)(ii)(g) of the Regulations), or (iv) the date on which the
Partnership is terminated under Article 9 hereof.
1.1.5 "Affiliate" shall mean (i) any Person more than ten percent (10%)
of the issued and outstanding stock of which, or more than a ten percent (10%)
interest in which, is owned, directly or indirectly, by any Partner, or (ii) any
Person which owns, directly or indirectly, more than ten percent (10%) of the
issued and outstanding stock of, or more than a ten percent (10%) interest, in
any Partner, or (iii) any Person who is an agent, officer, director, employee,
partner or shareholder (or any member of the family of any agent, officer,
director, employee, partner or shareholder) of any Partner, but only for so long
as such Person serves in such capacity, or (iv) any Person that directly or
indirectly through one or more intermediaries, controls, or is controlled by, or
is under common control with, any Partner. As used in this paragraph only, the
term "control" (including the terms "controlled by" and "under common control
with") means the possession, direct or indirect, of the power to direct or cause
the direction of the management and policies of a Person, whether through the
ownership of voting securities, by contract or otherwise. As used in this
paragraph only, the term "family" means the spouses, children, parents, brothers
and sisters, and the spouse, children, parents, brothers and sisters of such
spouses, children, parents, brothers and sisters.
1.1.6 "Agreement" shall have the meaning set forth in the first
sentence herein.
1.1.7 "Approve" and "Approval" when referring to a Partner shall mean
approval in writing by such Partner within the applicable time period specified
herein, and if any Partner is requested to approve any item or matter pursuant
to this Agreement and such Partner fails to approve such item in writing, such
failure shall constitute and be deemed a rejection of the applicable request.
1.1.8 "Auditor" shall mean the firm of independent certified public
accountants which shall be selected by the General Partner as provided in
Section 4.7 and engaged annually to audit the books and records of the
Partnership and prepare the tax returns of the Partnership.
2
<PAGE>
1.1.9 "Book Depreciation" for each Adjustment Period shall mean an
amount equal to the depreciation, amortization or other cost recovery deduction
allowable with respect to a Partnership asset for such Adjustment Period, except
that if the Book Value of an asset differs from its adjusted basis for federal
income tax purposes at the beginning of such Adjustment Period, Book
Depreciation with respect to that asset shall be an amount that bears the same
ratio to such beginning Book Value as the federal income tax depreciation,
amortization or other cost recovery deduction with respect to that asset for
such Adjustment Period bears to such beginning adjusted tax basis; provided,
however, that if the federal income tax depreciation, amortization or other cost
recovery deduction with respect to that asset for such Adjustment Period is
zero, Book Depreciation shall be determined with reference to such beginning
Book Value using the traditional method as set forth in Regulation Section
1.704-3.
1.1.10 "Book Gain" and "Book Loss" shall mean the gain or loss
recognized by the Partnership for book purposes in any Adjustment Period by
reason of a sale or other disposition of any Partnership asset. Such Book Gain
and Book Loss shall be computed by reference to the Book Value of such asset as
of the date of such sale or other disposition, rather than by reference to the
tax basis of the asset as of such date. If a Partnership asset is distributed to
a Partner, the difference between the fair market value of such asset and its
Book Value shall be considered a Book Gain or a Book Loss.
1.1.11 "Book Value" of a Partnership asset shall mean, as of any
particular date, the value at which the asset is properly reflected on the books
of the Partnership, as of such date in accordance with the provisions of Section
1.704-1(b) of the Regulations. The initial Book Values of the assets shall be
the gross fair market value of such assets (without reduction for indebtedness
to which such assets may be subject) as determined by the General Partner,
provided that the initial Book Value of assets contributed by a Partner to the
Partnership shall be the fair market value as set forth in the Contribution
Agreement. Such Book Value shall be adjusted for Book Depreciation with respect
to such assets, rather than for the cost recovery deductions to which the
Partnership is entitled for income tax purposes with respect to such assets.
1.1.12 "BRSCO" means Brandywine Realty Services Corporation, a
Pennsylvania corporation.
1.1.13 "Capital Account" shall mean the Capital Account maintained by
the Partnership for each Partner. The balance of each Partner's Capital Account,
as of any particular date, shall be an amount equal to the sum of the following:
1.1.13.1 The cumulative amount of cash that has been contributed to the
capital of the Partnership by such Partner as of such date; plus
1.1.13.2 The agreed upon net fair market value (net of any indebtedness
encumbering any property) as of the date of contribution of any property as set
forth in the Contribution Agreement, other than cash, that has been contributed
to the capital of the Partnership by such Partner as of such date; plus
3
<PAGE>
1.1.13.3 The cumulative amount of Gross Income, Net Profit and other
items of income and gain for all Adjustment Periods ending prior to such date
that have been, or are required to be, allocated to such Partner under Article 7
hereof; minus
1.1.13.4 The cumulative amount of Net Loss and other items of loss and
deduction for all Adjustment Periods ending prior to such date that have been,
or are required to be, allocated to such Partner under Article 7 hereof; and
minus
1.1.13.5 The cumulative amount of cash and the agreed upon net fair
market value (as of the date of distribution) of all other property that has
been distributed to such Partner by the Partnership as of such date under
Sections 7.2, 7.3, 7.4 and 7.5 hereof.
A Partner's Capital Account shall also be increased or decreased as of such date
to reflect any items described in Section 1.704-1(b)(2)(iv) of the Regulations
that are required to be reflected in such Partner's Capital Account under such
Regulation and which are not otherwise taken into account in computing such
Capital Account under this Section 1.1.12.
1.1.14 "Capital Date", when used with respect to any Book Gain or Book
Loss recognized by the Partnership during any Adjustment Period, shall mean the
date on which such Book Gain or Book Loss is recognized by the Partnership.
1.1.15 "Capital Transaction" shall mean the sale, exchange,
condemnation (or similar eminent domain taking or disposition in lieu thereof),
destruction by casualty, refinancing or disposition of the Project or any
portion thereof.
1.1.16 "Class A Limited Partner Additional Contribution Account" shall
mean an account to be maintained by the Partnership for the Class A Limited
Partner and to which will be credited the amount of all Additional Capital
Contributions made by the Class A Limited Partner pursuant to Section 5.1.4
hereof and from which will be debited the amount of any distributions to the
Class A Limited Partner pursuant to Sections and 7.3.3 and 7.4.3 (to the extent
attributable to Section 7.3.3).
1.1.17 "Class A Limited Partner Equity Contribution" shall mean that
portion of the Contribution Amount allocated to the Class A Limited Partner
under the Contribution Agreement
1.1.18 "Class A Limited Partner Equity Contribution Account" shall mean
an account to be maintained by the Partnership for the Class A Limited Partner
and to which will be credited the amount of the Class A Limited Partner Equity
Contribution and from which will be debited the amount of any distributions to
the Class A Limited Partner pursuant to Sections 7.3.2 and 7.4.3 (to the extent
attributable to Section 7.3.2).
1.1.19 "Class A Limited Partner Preferred Return Account" shall mean an
account to be maintained by the Partnership for the Class A Limited Partner and
to which will be credited an amount calculated like interest at a per annum rate
equal to the Preferred Return Rate on the average daily balance of the Class A
Limited Partner Equity Contribution Account and the Class A Limited Partner
Additional Contribution Account commencing with the Closing Date and from which
will be debited the amount of any distributions to the Class A Limited Partner
4
<PAGE>
pursuant to Sections 7.2.1, 7.3.1 and 7.4.3 (to the extent attributable to
Section 7.3.1). The amount to be credited to the Class A Limited Partner
Preferred Return Account for any period shall be cumulative, but shall not be
compounded.
1.1.20 "Class B Limited Partner Equity Contribution" shall have the
meaning set forth in the Contribution Agreement.
1.1.21 "Class B Limited Partner Equity Contribution Account" shall mean
an account to be maintained by the Partnership for the Class B Limited Partner
and to which will be credited the amount of the Class B Limited Partner Equity
Contribution and from which will be debited the amount of any distributions to
the Class B Limited Partner pursuant to Sections 5.1.2.3, 7.3.4 (but only to the
extent of the credit balance in such Account), 7.3.5 and 7.4.3 (to the extent
attributable to Sections 7.3.4 and 7.3.5).
1.1.22 "Closing Date" shall mean the date on which the Partnership
acquires the Projects pursuant to the Contribution Agreement.
1.1.23 "Code" means the Internal Revenue Code of 1986, as amended from
time to time.
1.1.24 "Competitor" means a real estate operating company whose primary
business is the ownership and management of office or industrial buildings and
thirty-five percent (35%) or more of the assets of which, in the aggregate, are
located in metropolitan areas where Brandywine Realty Trust, directly or through
subsidiaries, also own real estate assets, but shall not include any pension
fund advisor or other entity that manages real estate for plans that meet the
requirements of Section 401(a) of the Code, governmental plans (within the
meaning of Section 414(d) of the Code) or life insurance companies (as defined
in Section 816(a) of the Code).
1.1.25 "Contribution Agreement" shall mean the Contribution Agreement
dated as of June 8, 1999 by and among the General Partner, the Class A Limited
Partner, Brandywine Operating Partnership, L.P., a Delaware limited partnership,
and Nichols Lansdale Limited Partnership, III, a Pennsylvania limited
partnership, which provides, among other things, for the conveyance of the
Projects to the Partnership.
1.1.26 Intentionally omitted.
1.1.27 "Execution Date" shall mean the date this Agreement is executed
by all of the parties hereto.
1.1.28 "Extraordinary Cash Flow" shall have the meaning assigned to it
in Section 7.1.2 below.
1.1.29 "Fiscal Year" shall mean the fiscal year of the Partnership, as
set forth in Section 4.6.
1.1.30 "General Partner" shall have the meaning set forth in the first
paragraph of this Agreement.
5
<PAGE>
1.1.31 "General Partner Equity Contribution" shall mean that portion of
the Contribution Amount that is allocated to the General Partner under the
Contribution Agreement.
1.1.32 "General Partner Equity Contribution Account" shall mean an
account to be maintained by the Partnership for the General Partner and to which
will be credited the amount of the General Partner Equity Contribution and from
which will be debited the amount of any distributions to the General Partner
pursuant to Sections 7.3.2 and 7.4.3 (to the extent attributable to Section
7.3.2).
1.1.33 "General Partner Preferred Return Account" shall mean an account
to be maintained by the Partnership for the General Partner and to which will be
credited an amount calculated like interest at a per annum rate equal to the
Preferred Return Rate on the average daily balance of the General Partner Equity
Contribution Account commencing with the Closing Date and from which will be
debited the amount of any distributions to the General Partner pursuant to
Sections 7.2.1, 7.3.1 and 7.4.3 (to the extent attributable to Section 7.3.1).
The amount to be credited to the General Partner Preferred Return Account for
any period shall be cumulative, but shall not be compounded
1.1.34 "Gross Income" shall mean, for each Adjustment Period, an amount
equal to the Partnership's gross income as determined for federal income tax
purposes for such Adjustment Period but computed with the adjustments specified
in Section 1.1.41.1 and 1.1.41.4.
1.1.35 "IRR" means the annual discount rate that results in a
difference of zero (0), when subtracting the sum of the present values of all
amounts contributed to the Partnership by the General Partner and the Class A
Limited Partner pursuant to Sections 5.1.2.1, 5.1.2.2, and 5.1.4 using such rate
from the sum of the present values of all amounts distributed to such Partner
pursuant to Sections 7.2., 7.3.1, 7.3.2, 7.3.3, 7.3.4, 7.3.6 and 7.4.3 and 7.4.4
(but, as to Sections 7.4.3 and 7.4.4, only to the extent attributable to
Sections 7.3.1, 7.3.2, 7.3.3, 7.3.4 and 7.3.6) using such rate.
1.1.36 "Initial Capital Contributions" means the capital contributions
made by the Partners to the Partnership pursuant to Section 5.1.1 hereof.
1.1.37 "Limited Partners" shall have the meaning set forth in the
Recitals provision of this Agreement.
1.1.38 "Loan" means (i) the loan to be obtained by the Partnership in
the principal amount of not less than fifty-five percent (55%) of the Title
Policy Amount or more than seventy percent (70%) of the Title Policy Amount,
with interest at a rate of not more than seven and forty five one hundredths
percent (7.45%) per annum, and (ii) until such loan is obtained, the Bridge Loan
(as defined in the Contribution Agreement).
1.1.39 "Management Agreement" means the Management and Leasing
Agreement between the Partnership and BRSCO.
1.1.40 "Manager" means BRSCO or any successor thereto under the
Management Agreement.
6
<PAGE>
1.1.41 "Net Profit" or "Net Loss" shall mean, for each Adjustment
Period, the Partnership's taxable income or taxable loss for such Adjustment
Period, as determined under Section 703(a) of the Code, and Section 1.703-1 of
the Regulations (and for this purpose all items of income, gain, loss, or
deduction required to be stated separately pursuant to Section 703(a)(1) of the
Code shall be included in taxable income or taxable loss), but with the
following adjustments:
1.1.41.1 Any tax-exempt income, as described in Section 705(a)(l)(B) of
the Code, realized by the Partnership during such Adjustment Period shall be
taken into account in computing such taxable income or taxable loss as if it
were taxable income.
1.1.41.2 Any expenditures of the Partnership described in Section
705(a)(2)(B) of the Code for such Adjustment Period, including any items treated
under Section 1.704-1(b)(2)(iv)(i) of the Regulations as items described in
Section 705(a)(2)(B) of the Code, shall be taken into account in computing such
taxable income or taxable loss as if they were deductible items.
1.1.41.3 Book Depreciation for such Adjustment Period shall be taken
into account in computing such taxable income or taxable loss in lieu of any
amortization, depreciation or cost recovery deduction to which the Partnership
is entitled for such Adjustment Period with respect to Partnership assets.
1.1.41.4 Any Book Loss or Book Gain recognized by the Partnership
during such Adjustment Period by reason of a sale or other disposition of all or
part of the Property shall be taken into account in computing such taxable
income or taxable loss in lieu of any tax gain or tax loss recognized by the
Partnership during any Adjustment Period by reason of such sale or other
disposition.
1.1.41.5 Any Gross Income and item of income, gain, loss or deduction
required to be allocated to the Partners under Sections 6.4 and 6.5 shall not be
taken into account in computing such taxable income or taxable loss.
If the Partnership's taxable income or taxable loss for such Adjustment Period,
as adjusted in the manner provided in Sections 1.1.41.1 through 1.1.41.4 above,
is a positive amount, such amount shall be the Partnership's Net Profit for such
Adjustment Period; and if negative, such amount shall be the Partnership's Net
Loss for such Adjustment Period.
1.1.42 "Net Profit from Capital Transactions" or "Net Loss from Capital
Transactions" means for each Adjustment Period, the Net Profit or Net Loss for
such Adjustment Period calculated solely by reference to gains and losses from
Capital Transactions.
1.1.43 "Net Profit from Operations" or "Net Loss from Operations" means
for each Adjustment Period, the Net Profit or Net Loss for such Adjustment
Period calculated without regard to Net Profit from Capital Transactions and Net
Loss from Capital Transactions.
1.1.44 "Operating Cash Flow" has the meaning assigned to it in Section
7.1.1 below.
7
<PAGE>
1.1.45 "Partner" or "Partners"" means the General Partner, the Class A
Limited Partner, the Class B Limited Partner, and such successors, assigns or
additional partners as may be admitted to the Partnership pursuant to the terms
of this Agreement.
1.1.46 "Partner Nonrecourse Debt" means any nonrecourse debt of the
Partnership for which any Partner bears the economic risk of loss as determined
pursuant to Regulations Sections 1.704-2(b)(4) and 1.752-2.
1.1.47 "Partner Nonrecourse Debt Minimum Gain" means the minimum gain
attributable to Partner Nonrecourse Debt as determined under Regulations Section
1.704-2(i)(3).
1.1.48 "Partner Nonrecourse Deductions" means any loss, deduction, or
Code Section 705(a)(2)(B) expenditure, or item thereof, that is attributable to
a Partner Nonrecourse Debt as determined under Regulations Section
1.704-2(i)(2).
1.1.49 "Partnership" means Brandywine Industrial Partnership, L.P., the
Delaware limited partnership created pursuant to this Agreement.
1.1.50 "Partnership Interest" means a Partner's interest in the
Partnership that entitles the Partner to allocations of Net Profit, Net Loss,
and distributions from the Partnership, together with the rights and obligations
of a Partner under the Act and this Agreement.
1.1.51 "Partnership Minimum Gain" means the amount computed under
Regulations Section 1.704-2(d).
1.1.52 "Partnership Nonrecourse Deductions" means any loss, deduction,
or Code Section 705(a)(2)(B) expenditure, or item thereof, that is attributable
to nonrecourse liabilities of the Partnership as defined in Regulations Section
1.752-1(a)(2).
1.1.53 "Partnership Obligations" shall mean any and all obligations,
expenses and losses incurred by the Partnership which are obligations of the
Partnership and any and all obligations, expenses and losses assumed by the
Partnership.
1.1.54 "Person" shall mean any corporation, partnership, limited
liability company, joint venture, individual, trust, real estate investment
trust, banking association, federal or state savings and loan institution and
any other legal entity, whether or not a party hereto.
1.1.55 "Preferred Return" shall mean an amount calculated like interest
at a per annum rate equal to the Preferred Return Rate on the average daily
balance of the General Partner Equity Contribution Account, the Class A Limited
Partner Equity Contribution Account, and the Class A Limited Partner Additional
Contribution Account.
1.1.56 "Preferred Return Rate" means an annual rate of eleven and
one-half percent (11.50%).
1.1.57 "Primary Sharing Ratios" means one percent (1%) in the case of
the General Partner, sixty-four percent (64%) in the case of the Class A Limited
Partner and thirty-five percent (35%) in the case of the Class B Limited
Partner.
8
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1.1.58 "Projects" means the properties described in Exhibits A and B to
the Contribution Agreement, and "Project" means any of the Projects.
1.1.59 "Qualified Organizations" shall mean an entity described in
Section 514(c)(9)(C) of the Code.
1.1.60 "Residual Sharing Ratios" means one percent (1%) in the case of
the General Partner, fifty-nine percent (59%) in the case of the Class A Limited
Partner and forty percent (40%) in the case of the Class B Limited Partner.
1.1.61 "Secondary Sharing Ratios" means one percent (1%) in the case of
the General Partner, thirty-nine percent (39%) in the case of the Class A
Limited Partner and sixty percent (60%) in the case of the Class B Limited
Partner.
1.1.62 "Title Policy Amount" shall have the meaning set forth in the
Contribution Agreement.
Section 1.2 Other Terms. All terms used in this Agreement which are not
defined in this Article 1 shall have the meanings set forth elsewhere in this
Agreement or as defined in the Contribution Agreement. To the extent there is a
conflict between the definition of terms defined in this Agreement and those
defined in the Contribution Agreement, the definitions contained herein shall
control.
ARTICLE 2
FORMATION AND PURPOSE
Section 2.1 Formation. The parties hereto hereby form the Partnership
as a limited partnership pursuant to the Act. The General Partner shall file or
cause to be filed the Certificate of Limited Partnership (the "Certificate of
Limited Partnership") with the Delaware Secretary of State and shall execute
such other documents and perform such other acts as shall constitute compliance
with all requirements for the operation of the Partnership pursuant to the Act
and otherwise under the laws of the State of Delaware and any other jurisdiction
in which the Partnership conducts business.
Section 2.2 Name. The name of the Partnership shall be Brandywine
Industrial Partnership, L.P. and all business of the Partnership shall be
conducted in such name.
Section 2.3 Place of Business, Registered Agent and Registered Office.
The business office of the Partnership shall be located at Invesco Realty
Advisors, One Lincoln Centre, Suite 700, 5400 LBJ Freeway, LB-2, Dallas, Texas
75240 Attention: Ron Ragsdale or at such other place as may be designated from
time to time by the General Partner. The name of the registered agent of the
Partnership and the address of the registered office of the Partnership shall be
as set forth in the Certificate of Limited Partnership.
Section 2.4 Purpose.
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2.4.1 The sole purpose of the Partnership shall be to acquire, own and
hold for production of income, improve, operate, lease and manage the Projects
and to sell and otherwise deal in and with each and all of the Projects and to
undertake any and all actions necessary or incidental to any of the foregoing
activities, and to take or cause to be taken all actions and to perform or cause
to be performed all functions necessary or appropriate to promote the business
of the Partnership and to realize and carry out its purposes.
2.4.2 The Partnership shall be a partnership only for the purposes
specified hereinabove and this Agreement shall not be deemed to create a
partnership or other business arrangement between the Partners with respect to
any activities whatsoever other than the activities within the purposes of the
Partnership as specified above.
2.4.3 No Partner shall have the power to bind, to act for or to assume
any obligation or responsibility on behalf of the other Partners or the
Partnership, except as specifically authorized by this Agreement.
2.4.4 The credit and assets of the Partnership shall be used solely for
the benefit of the Partnership and shall not be used to further the personal
gain of any Partner unless specifically provided for under the terms of this
Agreement. No asset of the Partnership shall be transferred or encumbered for or
in payment of any individual obligation of a Partner unless specifically
provided for under the terms of this Agreement.
Section 2.5 General Partner. The General Partner shall be the sole
general partner of the Partnership. No other Person may become a general partner
of the Partnership except by way of a transfer, removal or resignation permitted
under and effected in compliance with this Agreement. Subject to the provisions
of this Agreement and the Act, the General Partner shall have the sole and
exclusive right to manage, supervise, operate and control the Partnership's
properties and business.
Section 2.6 Limited Partner. The Class A Limited Partner and the Class
B Limited Partner shall be the only limited partners of the Partnership. No
other Person may become a limited partner of the Partnership except by way of a
transfer permitted under and effected in compliance with this Agreement.
Section 2.7 Duration. The term of the Partnership shall commence upon
the filing for record of a Certificate of Limited Partnership for and on behalf
of the Partnership in the office of the Secretary of State of Delaware and
continue until the first to occur of the following events:
2.7.1 December 31, 2049.
2.7.2 At such time as there is only one Partner.
2.7.3 The termination of this Partnership in accordance with the terms
hereof or by the agreement of the General Partner and the Limited Partners.
2.7.4 The sale, exchange or other disposition of all or substantially
all of the Project, unless such sale or other disposition involves the
acquisition of any additional property or any deferred payment of the
consideration for such sale or disposition, in which latter event this
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Agreement shall terminate on the last day of the month during which the
balance of such deferred payment is received by the Partnership.
2.7.5 Entry of a final and nonappealable decree of judicial dissolution
under the Act.
Section 2.8 Disclosure; Conflicts Waiver.
2.8.1 Except as otherwise expressly provided elsewhere in this
Agreement, nothing in this Agreement shall be deemed to restrict in any way the
rights of any Partner, or of any Affiliate of any Partner, to conduct any
business or activity whatsoever (including the acquisition, development, sale,
and operation of real property, whether for operation as an office building
development or other purposes) without any accountability to the Partnership or
to any Partner even if such business or activity competes with the business of
the Partnership, it being understood by each Partner that the other Partners and
their Affiliates may be interested, directly or indirectly, in various other
businesses and undertakings not included in the Partnership.
2.8.2 Each Partner understands and acknowledges that the conduct of the
business of the Partnership may involve business dealings with other businesses
or undertakings of a Partner or its Affiliates, including the entering into of
contracts or other agreements with such businesses or undertakings. The creation
of the Partnership and the assumption by each of the Partners of its duties
hereunder shall be without prejudice to their respective rights (or the rights
of their respective Affiliates) to maintain such other interests and activities
and to receive and enjoy profits or compensation therefrom, and of the
Partnership to enter into contracts or agreements with such businesses or
undertakings, and each Partner waives any rights it might otherwise have to
share or participate in such other interests or activities of any other Partner
or its Affiliates.
Section 2.9 Statutory Compliance. The Partnership shall exist under and
be governed by and this Agreement shall be construed in accordance with the
applicable laws of the State of Delaware. The Partnership shall make all filings
and disclosures required by, and shall otherwise comply with, all such laws. All
real or personal property owned by the Partnership shall be deemed owned by the
Partnership as an entity, in its name, and no Partner shall have any ownership
interest in such property in its individual name or right.
Section 2.10 General Representations and Warranties of the General
Partner. As an inducement to the Limited Partners to enter into this Agreement,
the General Partner represents and warrants that as of the date hereof, it is a
duly organized and legally existing limited liability company under the laws of
the State of Delaware, qualified to do business in the States of Maryland, New
Jersey and Pennsylvania and has the requisite power and authority to enter into
and carry out the terms of this Agreement.
Section 2.11 Type of Income. The General Partner hereby acknowledges
that (i) Brandywine Realty Trust, the general partner of one of the limited
partnerships that comprises the Class B Limited Partner, is a real estate
investment trust as defined in Section 856 of the Code, and (ii) as long as the
Class B Limited Partner is a partner of the Partnership, the Partnership shall
manage its affairs in a manner such that the Partnership does not intentionally
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earn any income for tax purposes or acquire any assets which would cause, or
could reasonably be expected to cause, Brandywine Realty Trust to violate any of
the provisions of Section 856 of the Code or cease to remain qualified as a real
estate investment trust.
ARTICLE 3
CONTROL AND MANAGEMENT
Section 3.1 General Partner.
3.1.1 Subject to the terms of this Agreement, the General Partner shall
have full and exclusive discretionary right, power and authority in the
management and control of the affairs of the Partnership and shall make all
decisions affecting the Partnership. The General Partner shall have all of the
rights, powers and authorization of a general partner as provided in the Act
and, in addition, shall have the right, power and authority to do, on behalf of
the Partnership, all things which, in its reasonable judgment, are necessary or
desirable to carry out its duties and responsibilities, including, but not
limited to, the following:
(1) Arrange for the Loan and all other loans (including refinancing) as
it deems necessary or desirable for the Partnership, upon such terms and
conditions as it determines are appropriate, provided that such terms shall be
in accordance with the limitations set forth in Section 1.1.38 hereof, and, in
connection therewith, to mortgage or pledge any or all of the assets of the
Partnership as security for the Partnership's indebtedness;
(2) Negotiate leases of portions of the Partnership property upon such
terms and conditions as it may, in the exercise of reasonable business judgment,
determine to be appropriate from time to time;
(3) Coordinate all management and operational functions relating to the
Partnership property;
(4) Execute any documents, agreements or other instruments in any way
related to the Partnership's business; and
(5) Except as provided in Section 8.5, sell, exchange or otherwise
dispose of all or any part of the assets of the Partnership, at such price, and
upon such terms and conditions, as the General Partner, in its sole discretion,
determines.
In furtherance thereof, the Partnership shall enter into the Management
Agreement with the Manager substantially in the form of Exhibit A attached
hereto (the "Management Agreement").
3.1.2 The Limited Partners are investors only and shall have no right,
power or authority over the control or management of the Partnership's affairs.
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Section 3.2 Tax Matters Partner. The General Partner is hereby
designated as the Tax Matters Partner, within the meaning of Section 6231(a)(7)
of the Code. The Tax Matters Partner shall generally serve as the liaison
between the Partnership and the Internal Revenue Service in the event of an
audit of the Partnership, and as the primary coordinator of Partnership actions
in connection with such audit. The Tax Matters Partner has full authority to
bind the Limited Partners to a settlement of the tax audit, provided that any
adjustment is allocated among the Partners in proportion to their Primary,
Residuary or Secondary Sharing Ratios, as may be appropriate. The Tax Matters
Partner shall provide to the Limited Partners copies of all notices sent to the
Partnership by the Internal Revenue Service and shall keep the Limited Partners
informed of the progress of any tax audit provided that it shall have full
authority to settle or compromise any audit without the Approval of the Limited
Partners.
Section 3.3 Authority of Partner.
3.3.1 No Partner shall, without the approval of the other Partners,
take any action on behalf of or in the name of the Partnership, or enter into
any contract, lease, commitment or other obligation binding upon the
Partnership, except for (i) actions expressly provided for in this Agreement,
and (ii) actions by the General Partner within the scope of its authority
granted hereunder.
3.3.2 No Partner shall have the power to bind, to act for or to assume
any obligation or responsibility on behalf of the other Partners or the
Partnership, except as specifically provided in this Agreement.
3.3.3 The General Partner shall not contract with or employ on behalf
of the Partnership any Affiliate of the General Partner or the Class A Limited
Partner except arms-length, reasonably competitive terms and on the basis of
actual need and demonstrated ability to perform.
Section 3.4 Indemnification of the General Partner. The Partnership
shall indemnify, hold harmless and pay all judgments and claims against the
General Partner arising from any actions or decisions performed or made by it in
connection with the business of the Partnership; provided, however, such actions
or decisions were taken or made with a good faith belief that they were within
the scope of the purposes of the Partnership and the authority granted to the
General Partner, and such actions or decisions do not constitute gross
negligence or willful misconduct in connection with the business and affairs of
the Partnership, fraud or a breach of the representations and warranties set
forth in Article 2. This indemnification shall include, without limitation,
payment of reasonable attorneys' fees and other expenses incurred in connection
with the defense of any claim or proceeding based on any such action or
decision, which attorneys' fees and expenses shall be paid as incurred.
ARTICLE 4
ACCOUNTING
Section 4.1 Partnership Books. Proper books of account shall be kept
for the Partnership on an accrual basis for federal income tax purposes and
financial accounting purposes. Entries shall be made therein of all monies
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expended and received by the Partnership as well as all other matters relating
to the Partnership usually or properly entered in books of account. Such books
and all papers, correspondence and other instruments relating or belonging to
the Partnership, shall be kept at the business office of the Partnership, and
each Partner shall have the full right and power to examine and inspect the
books, records, accounts and other papers of the Partnership at all times during
normal business hours.
Section 4.2 Audit. A general accounting and audit shall be taken by the
Auditor for each Fiscal Year, at the expense of the Partnership. The audit shall
be conducted in accordance with generally accepted auditing standards, and shall
cover all of the assets, properties, liabilities and net worth of the
Partnership as well as its dealings, transactions and operations during such
Fiscal Year, together with all other matters customarily included in such
accountings and audits.
Section 4.3 Financial Statements. The General Partner shall cause the
Partnership to deliver the following to the Limited Partners:
4.3.1 On an annual basis within forty-five (45) days after the close of
each Fiscal Year:
4.3.1.1 Annual audited statements of the operation of the Partnership
including the following:
4.3.1.2 Statement of Assets, Liabilities and Partners' Equity (Balance
Sheet);
4.3.1.3 Statement of Revenues and Expenses;
4.3.1.4 Statement of Cash Flows;
4.3.1.5 Statement of Changes in Partners' Equity; and
4.3.1.6 Computation of the Preferred Return for the General and Class A
Limited Partners;
with the opinion of the Auditor that (A) such annual statements fairly represent
the financial condition of the Partnership, (B) such statements have been
prepared in accordance with generally accepted accounting principles
consistently applied and (C) an examination has been made by such accounting
firm in accordance with generally accepted auditing standards and includes such
tests of the accounting records and such other auditing procedures as were
considered necessary in the circumstances, with a detailed explanation of any
qualifications contained in such opinion, and
4.3.1.7 Such additional financial statements, reports and other
information as the Class B Limited Partner may reasonably request.
4.3.2 On a monthly basis, by the twenty-fifth (25th) day of each
calendar month, for the prior monthly period beginning on the first day of the
preceding calendar month and ending on the last day of such calendar month, the
following, unaudited but all in reasonable detail:
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4.3.2.1 A current rent roll in form reasonably satisfactory to the
Class B Limited Partner;
4.3.2.2 Statement of Assets, Liabilities and Partners' Equity (Balance
Sheet);
4.3.2.3 Statement of Revenues and Expenses;
4.3.2.4 Computation of the Preferred Return for the General and Class A
Limited Partners;
all certified to be correct by the Manager; and
4.3.2.5 Such additional financial statements, reports and other
information as the Class B Limited Partner may reasonably request.
Section 4.4 Tax Elections. Except as otherwise provided in this
Agreement, all elections required or permitted to be made by the Partnership
under the Code, including the election of methods of depreciation, shall be
timely determined by the General Partner, and shall be made by the Partnership
in accordance with said timely determination. The Partnership shall make an
election pursuant to Section 709 of the Code for the amortization of its
organizational expenses. The General Partner may, in its sole discretion, cause
the Partnership to make an election under Section 754 of the Code.
Section 4.5 Tax Returns. Each return and other statement to be filed by
the Partnership with the Internal Revenue Service or any other taxing authority
shall be prepared by or at the direction of the General Partner. If applicable,
each of the Partners shall, in its respective income tax return and other
statements filed with the Internal Revenue Service, report taxable income or
loss in accordance with the Partnership returns and statements.
Section 4.6 Fiscal Year. The Fiscal Year of the Partnership shall be
the year ending December 31 or such other taxable year as shall be required
under Section 706 of the Code as may be determined by the Auditor.
Section 4.7 Accountants. The initial Auditor shall be Pricewaterhouse
Coopers LLP. The General Partner shall have the right to change the Auditor to
any other so-called "Big Six Accounting Firm" or, with the Approval of the Class
B Limited Partner, to any other firm of independent certified public
accountants.
Section 4.8 Partnership Funds. The funds of the Partnership will be
kept in such banking and other accounts as Approved by the Limited Partner and
withdrawals shall be made only in the regular course of Partnership business and
as otherwise authorized in this Agreement. Withdrawals from any account will be
made on the manual or facsimile signature of one or more individuals designated
by the General Partner. There shall be no commingling of the assets of the
Partnership with the assets of any other person or entity, and the General
Partner shall not employ, or permit any other person to employ, such funds in
any manner except for the benefit of the Partnership.
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ARTICLE 5
CAPITAL
Section 5.1 Capital Contributions.
5.1.1 Initial Capital Contributions. On the Execution Date the General
Partner shall make a contribution in the amount of Ten Dollars ($10) to the
Partnership, the Class A Limited Partner shall make a contribution in the amount
of Five Hundred and Ninety Dollars ($590) to the Partnership and the Class B
Limited Partner shall make a contribution in the amount of Four Hundred Dollars
($400) to the Partnership. The Capital Accounts of the General Partner and the
Limited Partner shall be credited with the amount of such contributions. The
Initial Capital Contributions shall be returned to the Partners when each
Partner has made its Equity Contribution pursuant to Section 5.1.2, and their
Capital Accounts shall be debited with the amount so returned.
5.1.2 General Partner Equity Contribution and Limited Partners Equity
Contributions.
5.1.2.1 General Partner Contribution. On the Closing Date, the General
Partner shall make the General Partner Equity Contribution to the Partnership
and the General Partner's Equity Contribution Account shall be credited with the
amount of such Contribution.
5.1.2.2 Class A Limited Partner Equity Contribution. On the Closing
Date, the Class A Limited Partner shall make the Class A Partner Equity
Contribution to the Partnership and the Class A Limited Partner Equity
Contribution Account shall be credited with the amount of such Contribution.
5.1.2.3 Class B Limited Partner Equity Contribution. On the Closing
Date, the Class B Limited Partner shall cause the conveyance of the Projects to
the Partnership pursuant to the Contribution Agreement and the Partnership shall
distribute to the Class B Limited Partner the amount due it pursuant to Section
2.1(d) of the Contribution Agreement. The General Partner and the Class B
Limited Partner acknowledge that the net fair market value of the Projects is
equal to the amount to be distributed to the Class B Limited Partner by the
Partnership and, accordingly, that after giving effect to the conveyance of the
Projects to the Partnership by the Class B Limited Partner and the distribution
to the Class B Limited Partner by the Partnership, the balance in the Class B
Limited Partner Equity Contribution Account and in the Class B Limited Partner's
Capital Account will be zero (0).
5.1.3 Loan. The Class B Limited Partner acknowledges that as an
accommodation to the General Partner and the Class A Limited Partner, a portion
of the funds necessary to pay the Class B Limited Partner as provided in Section
5.1.2.3 will be the net proceeds of the Loan, and that the mortgage securing
repayment of the Loan will encumber the entire interest of the Partnership in
the Projects. Notwithstanding any provision in this Agreement to the contrary,
no modification shall be made in the terms of the Loan or any replacement or
refinancing thereof without the Approval of the Class B Limited Partner, and any
payment made by the Partnership with respect to the Loan, other than a repayment
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of principal or a payment of interest at a rate not in excess of the maximum
rate permissible for the Loan, shall be treated as a distribution to the General
Partner and the Class A Limited Partner pursuant to Section 7.3.2.
5.1.4 Additional Capital Contributions. The Class A Limited Partner
shall make Additional Capital Contributions to the Partnership from time to time
as may be required to meet the demands of the business of the Partnership and to
operate and maintain the Projects in a commercially reasonable manner consistent
with industry standards for tenant improvements, leasing commissions, working
capital needs, pro-forma short-falls and budgeted capital improvements, after
giving due consideration to the cash reserves of the Partnership and the cash
expected to be available from operations. The Class A Limited Partner shall
contribute in cash such Additional Capital Contribution to the Partnership
within thirty (30) days after the General Partner's call therefor.
5.1.5 Benefit of Obligations. Any obligation of the Partners to make
capital contributions hereunder shall not inure to the benefit of, or be
enforceable by, any Person other than the Partnership and the Partners.
5.1.6 Partnership Borrowings. If the Partnership incurs any costs,
expenses or charges which it does not have sufficient funds to satisfy, the
General Partner may seek to borrow the amount necessary to pay the same on
acceptable terms; provided, however, that the Partnership may not borrow any
funds if such borrowing would cause any income allocated to the Class A Limited
Partner hereunder to be considered unrelated business taxable income within the
meaning of Sections 512 through 514 of the Code.
5.1.7 Interest on Capital Contributions. No interest shall be paid on
any capital contribution to the Partnership by any Partner; provided, however,
that this provision shall not prevent the payment of the Preferred Return.
Section 5.2 No Further Capital Contributions. The Partners shall not be
required to contribute additional capital to the Partnership, except as
expressly provided herein, and no individual shall have any personal liability
for any failure by a Partner to make a requested capital contribution.
Section 5.3 Deficit Capital Accounts. If, upon distribution of
liquidation proceeds, any Partner has a deficit in its Capital Account, such
Partner shall not be required to restore such deficit amount to the Partnership,
and no Partner shall have any liability to make any contribution to any Partner
or the Partnership for any deficit balance which may exist in such Partner's
Capital Account at any time.
ARTICLE 6
ALLOCATIONS
Section 6.1 Allocation of Net Profit and Net Loss.
6.1.1 Intentionally omitted.
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6.1.2 Allocation of Net Profit From Operations. Net Profit From
Operations for any Adjustment Period shall be allocated in the following order
and priority:
6.1.2.1 first, if any Net Loss from Operations previously has been
allocated to any Partner, then to such Partner, or among such Partners, so as to
reverse the effect of the prior allocation of Net Loss from Operations in the
following order of priority:
6.1.2.1.1 first, to the extent the General Partner was allocated Net
Loss from Operations pursuant to Section 6.1.3.5 for any prior Adjustment
Period, Net Profit from Operations shall be allocated to the General Partner to
offset such previously allocated Net Loss from Operations;
6.1.2.1.2 second, to the extent the Partners were allocated Net Loss
from Operations pursuant to Section 6.1.3.4 for any prior Adjustment Period, Net
Profit from Operations shall be allocated to them to offset such previously
allocated Net Loss from Operations (in proportion to their respective shares of
the Net Loss from Operations being offset);
6.1.2.1.3 third, to the extent the Class A Limited Partner was
allocated Net Loss from Operations pursuant to Section 6.1.3.3 for any prior
Adjustment Period, Net Profit from Operations shall be allocated to the Class A
Limited Partner to offset such previously allocated Net Loss from Operations;
6.1.2.1.4 fourth, to the extent the General Partner and the Class A
Limited Partner were allocated Net Loss from Operations pursuant to Section
6.1.3.2 for any prior Adjustment Period, Net Profit from Operations shall be
allocated to them to offset such previously allocated Net Loss from Operations
(in proportion to their respective shares of Net Loss from Operations being
offset); and
6.1.2.1.5 fifth, to the extent that the Partners were allocated Net
Loss from Operations pursuant to Section 6.1.3.1 for any prior Adjustment
Period, Net Profit from Operations shall be allocated to them to offset such
previously allocated Net Loss from Operations in proportion to their respective
shares of the Net Loss from Operations being offset;
6.1.2.2 second, to the General Partner and the Class A Limited Partner
in proportion to their Preferred Returns for such Adjustment Period and all
previous Adjustment Periods until the aggregate amount allocated to each such
Partner pursuant to this Section 6.1.2.2 and Sections 6.1.2.1.4, 6.1.4.1 (but
only to the extent attributable to Section 6.1.3.2) 6.1.4.3 and 6.1.4.4, net of
any Net Loss from Operations and any Net Loss from Capital Transactions
previously allocated to such Partner pursuant to Sections 6.1.3 and 6.1.5 and
not offset by previous allocations of Net Profit from Operations and Net Profit
from Capital Transactions pursuant to Sections 6.1.2 and 6.1.4, is equal to such
Partner's cumulative Preferred Return since the inception of the Partnership;
and then
6.1.2.3 third, the balance, if any, to the Partners in accordance with
their Primary Sharing Ratios.
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6.1.3 Allocation of Net Loss from Operations. Net Loss from Operations
for any Adjustment Period shall be allocated in the following order and
priority:
6.1.3.1 first, to the extent Net Profit from Operations has been
allocated pursuant to Section 6.1.2.3 for prior Adjustment Periods, Net Loss
from Operations shall be allocated among the Partners to offset such previously
allocated Net Profit from Operations in proportion to their respective shares of
Net Profit from Operations being offset;
6.1.3.2 second, to the General Partner and the Class A Limited Partner
in proportion to and to the extent of their respective Preferred Return
Accounts;
6.1.3.3 third, to the Class A Limited Partner to the extent of the
Class A Limited Partner Additional Contribution Account;
6.1.3.4 fourth, to the Partners in proportion to and to the extent of
their respective Equity Contribution Accounts; and then
6.1.3.5 fifth, the balance, if any, to the General Partner.
6.1.4 Allocation of Net Profit from Capital Transactions. Net Profit
From Capital Transactions for any Adjustment Period shall be allocated in the
following order and priority:
6.1.4.1 first, to the extent that (i) the amount of Net Loss from
Operations previously allocated to any Partner pursuant to Section 6.1.3 and
(ii) the aggregate amount distributed, in the case of the General Partner and
the Class A Limited Partner, to such Partner pursuant to Sections 7.3.2, 7.3.3
and, in the case of the Class B Limited Partner, to such Partner pursuant to
Sections 7.3.4 (but only to the extent that the amount so distributed does not
exceed the Class B Limited Partner Equity Contribution) and 7.3.5, exceeds the
amount of Net Profit from Operations previously allocated to such Partner (for
the current and all previous Adjustment Periods) pursuant to Section 6.1.2, Net
Profit from Capital Transactions shall be allocated to such Partner (pro rata in
proportion to and to the extent of such excess if such allocations were made to
more than one Partner);.
6.1.4.2 second, to the extent that any Net Loss from Capital
Transactions has been allocated to the Partners pursuant to Sections 6.1.5.5,
6.1.5.6 and 6.1.5.7, for prior Adjustment Periods, Net Profit from Capital
Transactions shall be allocated to them to offset such previously allocated Net
Loss from Capital Transactions in the inverse order in which such Net Loss was
so allocated;
6.1.4.3 third, to the extent that any Net Loss from Capital
Transactions has been allocated to the General Partner and the Class A Limited
Partner pursuant to Section 6.1.5.4 for prior Adjustment Periods, Net Profit
from Capital Transactions shall be allocated to them to offset such previously
allocated Net Loss from Capital Transactions (in proportion to their respective
shares of Net Loss from Capital Transactions being offset);
6.1.4.4 fourth, to the General Partner and the Class A Limited Partner
in proportion to their Preferred Returns for such Adjustment Period and all
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previous Adjustment Periods until the aggregate amount allocated to each such
Partner pursuant to this Section 6.1.4.4 and Sections 6.1.2.1.4, 6.1.2.2,
6.1.4.1 (but only to the extent attributable to Section 6.1.3.2) and 6.1.4.3,
net of any Net Loss from Operations and any Net Loss from Capital Transactions
previously allocated to such Partner pursuant to Sections 6.1.3 and 6.1.5 and
not offset by previous allocations of Net Profit from Operations and Net Profit
from Capital Transactions pursuant to Sections 6.1.2 and 6.1.4, is equal to such
Partner's cumulative Preferred Return since the inception of the Partnership;
6.1.4.5 fifth, to the Partners in accordance with their Residual
Sharing Ratios until the Partners have been allocated Net Profit from Capital
Transactions pursuant to this Section 6.1.4.5 equal to the amount distributed
(or that would be distributed, if cash equal to the amount to be allocated
pursuant to this Section 6.1.4.5 were available for distribution) in accordance
with their Residual Sharing Ratios pursuant to Section 7.3.4 (but, in the case
of the Class B Limited Partner, only to the extent that such distributions
exceed the Class B Limited Partner Equity Contribution); and then
6.1.4.6 sixth, to the Partners in accordance with their Secondary
Sharing Ratios.
6.1.5 Allocation of Net Loss from Capital Transactions. Net Loss from
Capital Transactions for any Adjustment Period shall be allocated in the
following order and priority:
6.1.5.1 first, to the extent that the amount of Net Profit from
Operations previously allocated to any Partner pursuant to Section 6.1.2 exceeds
(i) the amount of Net Loss from Operations previously allocated to such Partner
pursuant to Section 6.1.3 and (ii) the aggregate amount distributed, in the case
of the General Partner and the Class A Limited Partner, to such Partner pursuant
to Sections 7.3.2 and 7.3.3 and, in the case of the Class B Limited Partner, to
such Partner pursuant to Sections 7.3.4 (but only to the extent that the amount
so distributed does not exceed the Class B Limited Partner Equity Contribution)
and 7.3.5, Net Loss from Capital Transactions shall be allocated to such Partner
(pro rata in proportion to and to the extent of such excess if such allocations
were made to more than one Partner);
6.1.5.2 second, to the extent Net Profit from Capital Transactions has
been allocated to the Partners pursuant to Section 6.1.4.6 for prior Adjustment
Periods, Net Loss from Capital Transactions shall be allocated to them to offset
such previously allocated Net Profit from Capital Transactions in proportion to
their respective shares of Net Profit from Capital Transactions being offset;
6.1.5.3 third, to the extent Net Profits from Capital Transactions has
been allocated to the Partners pursuant to Section 6.1.4.5 for prior Adjustment
Periods, Net Loss from Capital Transactions shall be allocated to them to offset
such previously allocated Net Profit from Capital Transactions in proportion to
their respective shares of Net Profit from Capital Transactions being offset;
6.1.5.4 fourth, to the General Partner and the Class A Limited Partner
in proportion to and to the extent of their respective Preferred Return
Accounts;
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6.1.5.5 fifth, to the Class A Limited Partner to the extent of the
Class A Limited Partner Additional Contribution Account;
6.1.5.6 sixth, to the Partners in proportion to and to the extent of
their respective Equity Contribution Accounts; and then
6.1.5.7 seventh, the balance, if any, to the General Partner.
Section 6.2 Allocations of Profits or Losses for the Taxable Year of
Liquidation of the Partnership. Notwithstanding the other provisions of this
Article 6 (other than Section 6.7), the Net Profits or Net Losses of the
Partnership for the taxable year of liquidation of the Partnership shall be
allocated (and such allocations shall be taken into account in determining the
final liquidating distributions of the Partnership), to the extent possible, in
a manner such that the Capital Account of each Partner immediately prior to the
final liquidating distribution is equal to the amount which would have been
distributable to such Partner under Article 7 hereof (if Article 7 applied to
such final liquidating distribution without regard to Section 7.4), so that the
distribution of positive Capital Account balances pursuant to Section 7.4 will,
to the maximum extent possible, be in the same amounts if the distribution had
been made under Article 8 without regard to Section 7.4; provided, however, that
the allocation of any Net Losses to the Class B Limited Partner hereunder shall
be made only to the extent permitted by the requirements of Section 514(c)(9)(E)
of the Code.
Section 6.3 Limitation on Allocation of Net Losses. Notwithstanding the
provisions of Sections 6.1.3 or 6.1.5 hereof, (A) if the amount of Net Loss for
any Adjustment Period that would otherwise be allocated to the Limited Partner
under Section 6.1.3 or 6.1.5 hereof would cause or increase an Adjusted Capital
Account Deficit of the Limited Partner as of the last day of such Adjustment
Period, then an amount of such Net Loss equal to the amount which would cause or
increase such Adjusted Capital Account Deficit shall be allocated to the General
Partner, and the remainder of such Net Loss, if any, shall be allocated to the
Limited Partners; provided that whenever a Qualified Organization is a Limited
Partner this limitation on the Net Losses which may be allocated to the Limited
Partners is intended to comply with Section 1.514(c)-2(h) of the Regulations
(regarding provisions preventing deficit capital account balances), or any
similar successor provision, and shall be applied consistently therewith and in
accordance with Section 6.8 hereof; and (B) pursuant to Section 6.8, Net Loss
shall be allocated to the General Partner only to the extent permitted by
Sections 1.514(c)-2(e), (f) and (g) of the Regulations.
Section 6.4 Special Allocations. The following special allocations
shall be made in the following order before allocations of Net Profit or Net
Loss are made:
6.4.1 Minimum Gain Chargeback. Notwithstanding any other provision of
this Agreement to the contrary, if in any Adjustment Period there is a net
decrease in Partnership Minimum Gain, then each Partner shall first be allocated
items of Gross Income for such Adjustment Period (and, if necessary, subsequent
Adjustment Periods) in an amount equal to the portion of such Partner's share of
the net decrease in Partnership Minimum Gain, determined in accordance with
Regulations Section 1.704-2(g), that is attributable to the disposition of
Partnership property subject to one or more nonrecourse liabilities of the
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Partnership that are not Partner Nonrecourse Debts; provided, however, if there
is insufficient Gross Income in an Adjustment Period to make the above
allocation for all Partners for such Adjustment Period, the Gross Income shall
be allocated among the Partners in proportion to the respective amounts they
would have been allocated had there been an unlimited amount of Gross Income for
such Adjustment Period.
6.4.2 Minimum Gain Chargeback for Partner Nonrecourse Debt.
Notwithstanding any other provision of this Agreement to the contrary other than
Section 6.4.1, if in any Adjustment Period there is a net decrease in Partner
Nonrecourse Debt Minimum Gain, then each Partner shall first be allocated items
of Gross Income for such Adjustment Period (and, if necessary, subsequent
Adjustment Periods) in an amount equal to the portion of such Partner's share of
the net decrease in such Minimum Gain during such Adjustment Period (as
determined in accordance with Regulations Section 1.704-2(i)) attributable to
the disposition of Partnership property subject to one or more Partner
Nonrecourse Debts; provided, however, if there is insufficient Gross Income in
an Adjustment Period to make the above allocation for all Partners for such
year, the Gross Income shall be allocated among the Partners in proportion to
the respective amounts they would have been allocated had there been an
unlimited amount of Gross Income for such Adjustment Period.
6.4.3 Qualified Income Offset. After application of Sections 6.4.1 and
6.4.2, if in any taxable year the Limited Partner unexpectedly receives any
adjustment, allocation or distribution described in Regulations Sections
1.704-1(b)(2)(ii)(d)(4), (5) or (6) of the Regulations, and if the Limited
Partner has an Adjusted Capital Account Deficit, items of Gross Income shall be
allocated to the Limited Partner in the amount and in the manner sufficient to
eliminate such Adjusted Capital Account Deficit as quickly as possible;
provided, however, that an allocation pursuant to this Section 6.4.3 shall be
made only if and to the extent that the Limited Partner would have an Adjusted
Capital Account Deficit after all other allocations provided for in this Article
6 have been tentatively made as if this Section 6.4.3 were not in this
Agreement.
6.4.4 Partnership Nonrecourse Deductions. Partnership Nonrecourse
Deductions for any Adjustment Period shall be allocated among the Partners in
proportion to their respective Primary Sharing Ratios.
6.4.5 Partner Nonrecourse Deductions. Partner Nonrecourse Deductions
for any Adjustment Period or other period shall be allocated to the Partner who
bears the economic risk of loss with respect to the Partner Nonrecourse Debt to
which such Partner Nonrecourse Deductions are attributable.
Section 6.5 Curative Allocations. In the event that any Gross Income,
Net Profit (or items thereof), Net Loss (or items thereof) are allocated
pursuant to Sections 6.3 or 6.4 subsequent Gross Income, Net Profit (or items
thereof), or Net Loss (or items thereof) will first be allocated (subject to
Sections 6.3 and 6.4) to the Partners in a manner that will result in each
Partner having a Capital Account balance equal to that which would have resulted
if the original allocation of Gross Income, Net Profit (or items thereof), Net
Loss (or items thereof) or deductions pursuant to Sections 6.3 or 6.4 had not
occurred; provided, however, no allocations pursuant to this Section 6.5 that
are intended to offset allocations pursuant to Sections 6.4.1 or 6.4.2 shall be
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made prior to the taxable year during which there is a net decrease in Partner
Nonrecourse Debt Minimum Gain or Partnership Minimum Gain, and then only to the
extent necessary to avoid any potential economic distortions caused by such net
decrease in Partner Nonrecourse Debt Minimum Gain or Partnership Minimum Gain,
and no such allocation pursuant to this Section 6.5 shall be made to the extent
that the General Partner reasonably determines that it is likely to duplicate a
subsequent mandatory allocation pursuant to Section 6.4.1 or 6.4.2.
Section 6.6 Tax Allocations - Code Section 704(c). In accordance with
Code Section 704(c) and the related Regulations, income, gain, loss and
deduction with respect to any property contributed to the capital of the
Partnership will be allocated, solely for tax purposes, among the Partners so as
to take account of any variation between the adjusted basis to the Partnership
of the property for federal income tax purposes and the Book Value of the
property. Any elections or other decisions relating to allocations under this
Section 6.6 will be made in any manner that the General Partner with the
Approval of the Limited Partner determines reasonably reflects the purpose and
intention of this Agreement. Allocations under this Section 6.6 are solely for
purposes of federal, state and local taxes and will not affect, or in any way be
taken into account in computing, any Partner's Capital Account or share of Net
Profit, Net Loss or other items or distributions under any provision of this
Agreement.
Section 6.7 Other Allocation Rules. For purposes of determining the Net
Profit, Net Loss, or any other item allocable to any period, Net Profit, Net
Loss, and any such other item shall be determined on a daily, monthly, or other
basis, as determined by the General Partner with the Approval of the Limited
Partner using any permissible method under Section 706 of the Code and the
Regulations thereunder.
Section 6.8 Compliance with Section 514 of the Code. It is the intent
of the Partners that the tax allocations of the Partnership will meet the
requirements for "substantial economic effect" of Section 704 of the Code and
the Treasury Regulations or similar authority promulgated thereunder, and
further that whenever a Qualified Organization is a Partner the allocations will
satisfy the provisions of Section 514(c)(9)(E) of the Code, or any similar
successor provision. The allocations set forth herein shall be interpreted
consistently with the foregoing intent, and shall be amended, if necessary, in
order to accomplish this purpose; provided, however, that if the Partnership
does not have a Qualified Organization as a Partner or does not incur
"acquisition indebtedness" within the meaning of Section 514(c) of the Code,
then the allocations of Profits and Losses shall not be affected by any
provision in this Article 6 which, if applicable, would alter the otherwise
applicable allocation of Profits and Losses to comply with Section 514(c)(9)(E)
of the Code.
ARTICLE 7
DISTRIBUTIONS
Section 7.1 Definitions.
7.1.1 Operating Cash Flow Defined. For the purposes of this Article 7,
the cash flow available for distribution by the Partnership with respect to
operations ("Operating Cash Flow") for any Fiscal Year shall be deemed to mean
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the amount by which gross cash receipts from operations (excluding cash proceeds
from Capital Transactions and any security or lease deposits until forfeited or
otherwise applied to rent due under the Leases, but including excess reserves,
if any, carried over from the prior Fiscal Year to the extent hereinafter
provided) of the Partnership during such Fiscal Year exceed the aggregate of (i)
all operating costs and expenses (not including interest on borrowed money) of
the Partnership paid in cash during such Fiscal Year (without deduction for any
charge for cost recovery, depreciation or other expenses not paid in cash), (ii)
the cost of debt service, including both principal and interest and any
applicable fees and penalties under any indebtedness permitted herein, paid
during such Fiscal Year, (iii) any reasonable amounts that are customary in the
location in which the Project are located and which the Partnership requires for
working capital, and (iv) the amount of any reserves that are customary in the
locations in which the Project is located as determined by the General Partner
based upon the reasonably foreseeable cash needs of the Partnership. Any amounts
previously set aside as reserves shall be additions to Operating Cash Flow when
such reserves are no longer necessary to the proper conduct of the affairs of
the Partnership.
7.1.2 Extraordinary Cash Flow Defined. The cash proceeds (including any
applicable condemnation, insurance and refinancing proceeds) realized by the
Partnership as a result of a Capital Transaction, increased by the cash interest
payments received on such proceeds, decreased by the sum of the following: (i)
the amount of such proceeds used, set aside or committed by the Partnership for
immediate restoration and repair of any of the Projects; (ii) any additions to
the reserve for taxes and insurance premiums that are customary in the location
in which the Project is located; and (iii) any expenses, costs or liabilities
incurred by the Partnership in effecting or obtaining any such Capital
Transaction or the proceeds thereof (including, without limitation, reasonable
attorneys' and accountants' fees, court costs, brokerage fees, commissions,
recording fees, and transfer taxes), all of which expenses, costs and
liabilities shall be paid from the gross amount of such cash proceeds to the
extent thereof.
Section 7.2 Distribution of Operating Cash Flow. Except as provided in
Section 7.4, Operating Cash Flow shall be distributed by the Partnership in the
following order of priority:
7.2.1 To the General Partner and the Class A Limited Partner pro rata
to the extent of the outstanding balance in the General Partner Preferred Return
Account and the Class A Limited Partner Preferred Return Account, respectively;
and then
7.2.2 To the Partners pro rata in accordance with their Primary Sharing
Ratios.
Not later than sixty (60) days following the end of each Fiscal Year, the
General Partner shall prepare an accounting of the respective amounts
distributed and distributable to the Partners for such Fiscal Year pursuant to
this Section 7.2. Any Partner who has received, in respect of such Fiscal Year,
an aggregate amount pursuant to this Section 7.2 in excess of the amount to
which it is entitled under such accounting shall forthwith return such excess to
the Partnership. If the Partnership has, in respect of such Fiscal Year,
distributed to any Partner pursuant to this Section 7.2 an aggregate amount
which is less than the amount distributable to such Partner pursuant to such
accounting, the Partnership shall forthwith distribute the amount of such
shortfall to such Partner.
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Section 7.3 Distributions of Extraordinary Cash Flow. Except as
provided in Section 7.4, Extraordinary Cash Flow shall be distributed by the
Partnership in the following order of priority:
7.3.1 To the General Partner and the Class A Limited Partner pro rata
to the extent of the outstanding balance in the General Partner Preferred Return
Account and the Class A Limited Partner Preferred Return Account, respectively;
7.3.2 To the General Partner and the Class A Limited Partner pro rata
to the extent of the outstanding balance in the General Partner Equity
Contribution Account and the Class A Limited Partner Equity Contribution
Account, respectively;
7.3.3 To the Class A Limited Partner to the extent of the balance in
the Class A Limited Partner Additional Contribution Account;
7.3.4 To the Partners pro rata in accordance with their Residual
Sharing Ratios until the General Partner and the Class A Limited Partner have
each received an eighteen percent (18%) IRR;
7.3.5 To the Class B Limited Partner to the extent of the outstanding
balance in the Class B Limited Partner Equity Contribution Account; and then
7.3.6 To the Partners pro rata in accordance with their Secondary
Sharing Ratios.
Distributions pursuant to this Section 7.3 shall be paid by the Partnership to
the Partners within thirty (30) days following the event giving rise to
Extraordinary Cash Flow.
Section 7.4 Distributions in Liquidation. Distributions in connection
with the liquidation and winding up of the Partnership shall be made in the
following order or priority:
7.4.1 To the reasonable expenses incurred in dissolution and
termination;
7.4.2 To the payment of creditors of the Partnership (excluding the
lender under the Loan and Partners) but excluding secured creditors whose
obligations will be assumed or otherwise transferred on a liquidation of the
Partnership property or assets;
7.4.3 In accordance with the provisions of Sections 7.3.1 through 7.3.6
(provided that the amounts to be distributed pursuant to this Section 7.4.3 to a
Partner shall not exceed the positive Capital Account balance of such Partner as
determined for the purposes of Section 7.4.4); and
7.4.4 To the Partners in proportion to the positive balances of their
Capital Accounts after Capital Accounts have been adjusted for the allocation of
Gross Income, Net Profit and Net Loss (and items thereof), and for the amount of
any prior distributions, for the Fiscal Year during which such liquidation
occurs.
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Section 7.5 In-Kind Distribution. Except as otherwise provided herein,
assets of the Partnership (other than cash) shall not be distributed in kind to
the Partners unless Approved by all Partners. If any assets of the Partnership
are distributed to the Partners in kind, such assets shall be valued on the
basis of the fair market value thereof on the date of distribution, and any
Partner entitled to any interest in such assets shall receive such interest as a
tenant-in-common with the other Partner. The fair market value of such assets
shall be determined by an independent appraiser Approved by all Partners.
ARTICLE 8
TRANSFER OF PARTNERSHIP INTERESTS; SALE OF
PROJECTS WITHIN FOUR YEARS
Section 8.1 Restrictions on Transfer of Partnership Interests.
8.1.1 Consent Required. Except as provided in this Article 8, no
Partner may, without the consent of the other Partners (which consent may be
withheld in the sole discretion of any of the other Partners), sell, convey,
transfer, assign, mortgage, pledge, hypothecate or otherwise encumber in any way
(hereinafter referred to as a "Transfer") all or any portion of its Partnership
Interest or any interest it may have in any property of the Partnership or
withdraw or retire from the Partnership. Any such attempted transfer, withdrawal
or retirement not permitted hereunder shall be null and void.
8.1.2 No Defaults. Notwithstanding anything to the contrary in this
Agreement, at law or in equity, no Partner shall transfer or otherwise deal with
any Partnership Interest in a way that would cause a default under any agreement
to which the Partnership is a party or by which it is bound, provided that such
Partner consented to such agreement prior to its execution.
8.1.3 Permitted Transfers by the Limited Partner. Without the consent
of the General Partner, any Limited Partner may transfer all or any portion of
its Partnership Interest to any Affiliate of such Limited Partner; provided,
however, that any such transfer shall be reported to the General Partner at
least ten (10) days prior to the transfer.
Section 8.2 Right of First Refusal. For purposes of this Section 8.2,
except as provided in Sections 8.2.5 and 8.2.6 the General Partner and the Class
A Limited Partner shall be treated as one Partner.
8.2.1 Offering Notice. If any Partner desires to transfer all (but not
less than all) of its Partnership Interest, then except as provided in Section
8.2.7, such Partner (the "Selling Partner") shall notify ("Offering Notice") the
other Partner ("Non-selling Partner") of its intention to do so. The Offering
Notice shall specify the nature of the transfer, the consideration to be
received therefor, the identity of the proposed purchaser (or lender, as the
case may be), the terms upon which it intends to undertake such transfer, and
shall include a photocopy of the agreement or commitment letter, if any,
relating to such transfer.
8.2.2 Non-selling Partner's Response. The Non-selling Partner shall
have the right to elect to purchase from the Selling Partner all (but not less
than all) of the Partnership Interest referred to in the Offering Notice at the
same price on the same terms as specified in the Offering Notice for a period of
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thirty (30) days after the giving of the Offering Notice (or make the loan, if
the same involves an encumbrance, hypothecation or mortgage, upon the same terms
on which said loan was to be made therefor) by delivering in writing to the
Selling Partner an offer to purchase (or loan) that portion of the Partnership
Interest of the Selling Partner covered by the Offering Notice. To the extent
that the consideration to be received by the Selling Partner consists of
anything other than cash, the Auditor shall determine the fair market value
thereof and the price payable by the Non-selling Partner shall include cash
equal to such fair market value rather than the non-cash consideration.
8.2.3 Non-selling Partner's Failure to Respond; Rejection. If within
such thirty (30) day period, the Non-selling Partner does not make such
election, then the Selling Partner, within sixty (60) days after the expiration
of said thirty (30) day period, may undertake and complete the transfer to any
Person the identity of which was disclosed in the Offering Notice but only on
the terms disclosed in the Offering Notice. If the Selling Partner does not then
consummate the original proposed transfer within ninety (90) days after the date
of the Offering Notice, or within the time scheduled for closing by the
purchasing Person, whichever is earlier, then all restrictions of this Section
8.2 shall apply as though no Offering Notice had been given.
8.2.4 Non-selling Partner's Acceptance. If the Non-selling Partner
elects within such thirty (30) day period to purchase the interest of the
Selling Partner on the terms outlined in the Offering Notice, the parties shall
consummate the purchase by the Non-selling Partner of said Partnership Interest,
on the terms and conditions set forth in the Offering Notice of the Selling
Partner (or if the same involves a mortgage, encumbrance or other hypothecation,
the loan shall be consummated upon the terms and conditions of the loan set
forth in the Offering Notice) within forty-five (45) days after such election.
8.2.5 Effect of Transfer of the Partnership Interest of General
Partner. The transferee of the Partnership Interest of the General Partner shall
be admitted as the general partner under this Agreement, and thereafter all
references under this Agreement to the General Partner shall refer to such
transferee.
8.2.6 Restriction on Transfer of Partnership Interest of a Limited
Partner Notwithstanding any provision of Section 8.2 or 8.3 to the contrary, no
transferee of all or any portion of the Partnership Interest of a Limited
Partner shall be admitted as a substituted limited partner under this Agreement
without the consent of the General Partner which consent may not be unreasonably
withheld. Any transferee which is not admitted as a substituted limited partner
shall have no voting rights or other approval rights hereunder and shall be
treated as an assignee under the Act but shall have the right to such
distributions and allocations to which the holder of the transferred interest is
entitled. If at the time of the transfer the General Partner has the right to
call for Additional Capital Contributions for which such Limited Partner may be
liable hereunder, such Limited Partner shall remain liable for such Contribution
unless the transferee posts sufficient security to cover such calls or the
General Partner and the Class B Limited Partner waive security based on the
financial condition of the transferee, such waiver not to be unreasonably
withheld.
8.2.7 Offer From a Competitor. If at any time the General Partner and
the Class A Limited Partner desire to sell all (and they shall not have the
right to sell less than all without the consent of the Class B Limited Partner,
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which consent may be withheld in the sole discretion of the Class B Limited
Partner) of their Partnership Interests to a Competitor, they shall cause such
Competitor to specify the amount that it would be willing to pay for the
Partnership Interests of all of the Partners, including the Class B Limited
Partner (the "Aggregate Purchase Price"). Thereupon, the General Partner shall
determine the amount that each Partner would receive if the Partnership were to
liquidate and sell all of its assets, pay all of its liabilities, and distribute
the Aggregate Purchase Price to the Partners pursuant to Sections 7.4.3 and
7.4.4, and any offer from such Competitor to purchase the Partnership Interests
of the General Partner and the Class A Limited Partner shall also include an
offer to purchase the Partnership Interest of the Class B Limited Partner, in
each case for a price equal to the amount such Partner would receive upon such
liquidating distribution. The receipt of such offer by the Class B Limited
Partner shall constitute the Offering Notice referred to in Section 8.2.1, and
the Class B Limited Partner shall have the right to (i) elect to purchase the
Partnership Interests of the General Partner and the Class A Limited Partner
pursuant to Sections 8.2.2 and 8.2.4, (ii) accept the offer to sell its
Partnership Interest to such Competitor in accordance with the terms of such
offer, or (iii) continue as a Partner with the same Partnership Interest that it
had before such offer.
Section 8.3 General Transfer Provisions. All transfers shall be by
instruments in form and substance satisfactory to counsel for the Partnership
containing an obligation by the assignee to accept and assume all of the terms
and provisions of this Agreement, as the same may have been amended, and shall
provide for the payment by assignor of all reasonable expenses incurred by the
Partnership in connection with such assignment, including but not limited to the
necessary amendments to this Agreement to reflect such transfer. The transferor
shall execute and acknowledge all such instruments, in form and substance
reasonably satisfactory to the Partnership's counsel, as may be deemed necessary
or desirable to effectuate such transfer. In no event shall the Partnership
dissolve or terminate upon the admission of any Partner to the Partnership or
upon any permitted assignment of a Partnership Interest by any Partner provided
such assignment or transfer is made in accordance with the provisions of this
Agreement. Each Partner hereby waives its right to dissolve, liquidate or
terminate the Partnership in such event. In the event of any transfer pursuant
to this Article 8, the Partnership Interest so transferred shall remain subject
to all restrictions and rights contained in this Article 8.
Section 8.4 Tax Allocations and Cash Distributions. If a Partnership
Interest is transferred, the Gross Income, Net Profit or Net Loss (not arising
as a result of a Capital Transaction) allocable to the holder of such
Partnership Interest for the then Fiscal Year shall be allocated proportionately
between the transferor and the transferee based upon the number of days during
such Fiscal Year for which each party was the owner of the transferred
Partnership Interest. However, if either the transferor or the transferee
requests that such Gross Income, Net Profit or Net Loss be allocated based upon
an interim closing of the Partnership's books and agrees to pay all expenses
incurred by the Partnership in connection therewith and so notify the
non-transferring Partner, then all such Gross Income, Net Profit or Net Loss
(not arising as a result of a Capital Transaction) shall be allocated between
the transferor and transferee based upon an interim closing of the Partnership's
books and records. Gross Income, Net Profit or Net Loss arising as a result of a
Capital Transaction shall be allocated between the transferor and transferee
based upon an interim closing of the Partnership's books and records. The
transferor shall be entitled to all cash distributed by the Partnership on or
prior to the date of transfer, and the transferee shall be entitled to all cash
distributed by the Partnership after the date of transfer.
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Section 8.5 Sale of Project.
8.5.1 Offer to Sell. If at any time the General Partner desires that
any one or more Projects (collectively, the "Offered Project") be sold, it shall
so notify the Class B Limited Partner, setting forth the price, and the other
terms and conditions, upon which it desires that the Offered Project be listed
for sale (the "Listing Notice"). The Class B Limited Partner shall have the
option, to be exercised by written notice to the General Partner within sixty
(60) days after receipt of the Listing Notice (the "Class B Limited Partner
Option Period"), (i) to purchase (or cause one or more of its Affiliates to
purchase or designate a title holder at closing), the Offered Project at the
price, and upon the other terms and conditions, set forth in the Listing Notice,
or (ii) to submit a written offer to purchase the Offered Project at such price,
and upon such other terms and conditions, as it determines (the "Class B Limited
Partner Offer"). The General Partner shall have thirty (30) days within which to
accept the Class B Limited Partner Offer, if any.
8.5.2 Listing of Offered Project. If the Class B Limited Partner (i)
does not exercise its option to purchase (or cause one or more of its Affiliates
to purchase) the Offered Project or submit the Class B Limited Partner Offer
pursuant to Section 8.5.1 or (ii) if the General Partner does not accept the
Class B Limited Partner Offer as provided in Section 8.5.1, then the General
Partner shall list the Offered Project for sale, and shall use its best efforts
to sell the Offered Project, at a price which is at least equal to, and upon
other terms and conditions which are at least as favorable to the Partnership
as, the price and other terms and conditions set forth in the Listing Notice.
The Class B Limited Partner shall not disclose to any other Person the reason
why it did not exercise its option to purchase the Offered Project or any of the
terms of the Class B Limited Partner Offer if there was such an offer. If the
General Partner fails to enter into a contract for the sale of the Offered
Project within six (6) months after the expiration of the Class B Limited
Partner Option Period, the General Partner shall reissue the Listing Notice to
the Class B Limited Partner and the provisions of Section 8.5.1 shall apply
thereto.
8.5.3 Offer for Offered Project. If the Partnership receives an offer
to purchase the Offered Project which is acceptable to the General Partner (the
"Third Party Offer"), then the following shall apply:
8.5.3.1 If either (i) the Class B Limited Partner has submitted the
Class B Limited Partner Offer and the Third Party Offer is for a price which is
greater than the price contained in the Class B Limited Partner Offer and the
other terms and conditions of the Third Party Offer are not materially less
favorable to the Partnership than those set forth in the Class B Limited Partner
Offer, or (ii) the Class B Limited Partner has not submitted the Class B Limited
Partner Offer and the Third Party Offer is at a price which is not less than
ninety-five percent (95%) of the price set forth in the Listing Notice or upon
other terms and conditions which are not materially less favorable to the
Partnership than the terms and conditions set forth in the Listing Notice, then
the Offered Project may be sold pursuant to the Third Party Offer;
8.5.3.2 If either (i) the Class B Limited Partner has submitted the
Class B Limited Partner Offer and the price contained in the Third Party Offer
is not greater than, or the other terms and conditions of the Third Party Offer
are materially less favorable to the Partnership than, the price or other terms
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and conditions set forth in the Class B Limited Partner Offer, or (ii) the Class
B Limited Partner has not submitted the Class B Limited Partner Offer and the
Third Party Offer is at a price which is less than ninety-five percent (95%) of
the price set forth in the Listing Notice or upon other terms and conditions
which are materially less favorable to the Partnership than the other terms and
conditions set forth in the Listing Notice, then the General Partner shall be
deemed to have submitted a new Listing Notice to the Class B Limited Partner at
such price, and upon such other terms and conditions, and the provisions of
Section 8.5.1 shall apply thereto, except that the Class B Limited Partner
Option Period shall be ten (10) days rather than sixty (60) days, and if the
Class B Limited Partner does not exercise its option within such ten (10) day
period, the Partnership may sell such Project pursuant to the Third Party Offer.
8.5.3.3 If a contract for the sale of the Offered Project is entered
into pursuant to a Third Party Offer and thereafter a reduction in price, or
change in other terms and conditions, is agreed to in good faith by the General
Partner (the "Revised Third Party Offer") and such reduction or change, if part
of the Third Party Offer originally, would have triggered the application of
Section 8.5.3.2, then Section 8.5.3.2 shall apply to the Revised Third Party
Offer except that (i) the Class B Limited Partner Option Period shall be five
(5) days rather than ten (10) days, (ii) any exercise by the Class B Limited
Partner of its option to purchase the Offered Project shall be accompanied by an
earnest money deposit equal to the earnest money deposit previously made
pursuant to the Third Party Offer plus any additional amount required to be
deposited pursuant thereto at the end of the due diligence period, and (iii)
regardless of any provision in the Revised Third Party Offer that might permit
the prospective purchaser to cancel the contract for the purchase of the Offered
Project and receive a refund of all earnest money deposited, the exercise of
such option shall constitute a binding obligation of the Class B Limited Partner
cancelable only in the event of a default by the Partnership.
8.5.4 Closing of Sale. If the Class B Limited Partner exercises its
option to purchase the Offered Project, the purchase shall be consummated at the
office of the Partnership in accordance with the terms and conditions set forth
in the Listing Notice, the Third Party Offer or the Revised Third Party Offer,
as the case may be, but in no event less than ninety (90) days after the date
the option is exercised unless the parties agree to an earlier closing.
8.5.5 Sale Without Approval. If the Class B Limited Partner exercises
its option pursuant to Section 8.5.1, 8.5.3.2 or 8.5.3.3, but the sale of the
Offered Project is not consummated as provided in Section 8.5.4 for any reason
other than the Partnership's default, then the Offered Project may be sold to
any third party, other than an Affiliate of the General Partner, at any price,
and upon any other terms and conditions, that are acceptable to the General
Partner without any need to comply with the provisions of Sections 8.5.1 through
8.5.4.
8.5.6 Partial Sale. Anything herein to the contrary notwithstanding, if
the Offered Project consists of more than one Project, then unless the General
Partner agrees, the Class B Limited Partner shall exercise its option under
8.5.1, if at all, as to all (but not less than all) of such Projects.
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ARTICLE 9
TERMINATION OF THE PARTNERSHIP
Section 9.1 Events of Dissolution. The Partnership shall dissolve upon
the first to occur of the following events:
9.1.1 The expiration of the term of the Partnership as provided in
Section 2.7; or
9.1.2 Any other event of dissolution specified in the Act.
Section 9.2 Effect of Dissolution. Upon dissolution of the Partnership
pursuant to Section 9.1, the Partnership shall not terminate but shall continue
solely for the purposes of liquidating all of the assets owned by the
Partnership (until all such assets have been sold or liquidated) and collecting
the proceeds from such sales and all receivables of the Partnership until the
same have been collected or written off as uncollectible. Upon dissolution, the
Partnership shall engage in no further business thereafter other than that
necessary to cause the Project to be operated on an interim basis and for the
Partnership to collect its receivables, liquidate its assets and pay or
discharge its liabilities.
Section 9.3 Sale of Assets by Liquidating Trustee. Upon dissolution of
the Partnership, the General Partner shall, as "Liquidating Trustee", proceed
diligently to wind up the affairs of the Partnership and distribute its assets
in accordance with the Act and this Agreement
Section 9.4 Compliance with Timing Requirements of Regulations.
Notwithstanding anything in this Article 9 to the contrary, in the event the
Partnership is "liquidated" within the meaning of Regulations Section
1.704-1(b)(2)(ii)(g), distributions will be made to the Partners who have
positive Capital Account balances pursuant to Section 7.4 in a manner that
complies with Regulations Section 1.704-1(b)(2)(ii)(b)(2). However, a
liquidation occurring as a result of a Partnership termination, as defined in
Section 708(b)(1)(B) of the Code, will not require an actual distribution of
Partnership assets, but will instead be treated as a constructive liquidation
and reformation in the manner described in Regulations Section
1.708-1(b)(1)(iv).
ARTICLE 10
MISCELLANEOUS
Section 10.1 Notices. All notices required or permitted by this
Agreement shall be in writing and may be delivered in person or by facsimile to
any party or may be sent by registered or certified mail, with postage prepaid,
return receipt requested, or may be sent by Federal Express or other commercial,
overnight carrier, and addressed as follows:
If to the Partnership, Invesco Realty Advisors
the General Partner or One Lincoln Centre, Suite 700
the Class A Limited Partner: 5400 LBJ Freeway, LB-2
Dallas, Texas 75240
Attention: Ron Ragsdale
Fax: 972/715-5811
with copies to: D'Ancona & Pflaum LLC
111 E. Wacker Drive, Suite 2800
Chicago, Illinois 60601-4205
Attention: Joel D. Rubin
Fax: 312/602-3080
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If to the Class B Limited Partner: Brandywine Operating Partnership, L.P.
14 Campus Boulevard, Suite 100
Newtown Square, Pennsylvania 19073
Attention: President and Chief Executive
Officer and General Counsel
Fax: 610-325-5622
or to such other address as shall, from time to time be supplied in writing by
any party to the others. Notice sent by registered or certified mail, postage
paid, with return receipt requested, addressed as above provided, shall be
deemed given when received, or delivery has been attempted and refused by the
addressee. If any notice is sent by Federal Express or other commercial,
overnight carrier, the same shall be deemed given on the day following the day
on which such notice is deposited with such carrier. Any notice or other
document sent or delivered in any other manner shall be effective only if and
when received.
Section 10.2 Successors and Assigns. Subject to the restrictions on
transfer set forth herein, this Agreement shall bind and inure to the benefit of
the parties hereto and their respective legal representatives, permitted
successors and assigns.
Section 10.3 Waiver of Partition. Unless otherwise expressly authorized
in this Agreement, neither Partner will, either directly or indirectly, take any
action to require partition or appraisement of the Partnership or of any of its
assets or properties or cause the sale of any Partnership property, and
notwithstanding any provisions of applicable law to the contrary, each Partner
(and its legal representative, successor or assign) hereby irrevocably waives
any and all right to maintain any action for partition or to compel any sale
with respect to his interest in, or with respect to any assets or properties of
the Partnership, except as expressly provided in this Agreement.
Section 10.4 No Oral Modifications; Amendments. No oral amendment of
this Agreement shall be binding on the Partners. Any modification or amendment
of this Agreement must be in writing signed by all the Partners.
Section 10.5 Captions. Any article, section, paragraph titles or
captions contained in this Agreement and the table of contents are for
convenience of reference only and shall not be deemed a part of this Agreement.
Section 10.6 Terms. Common nouns and pronouns shall be deemed to refer
to the masculine, feminine, neuter, singular and plural as the identity of the
person or persons, firm or corporation may in the context require. Any reference
to the Internal Revenue Code or other statutes or laws shall include all
amendments, modifications or replacements of the specific sections and
provisions concerned. Unless otherwise specified, all references to "Section" or
"Article" contained in this Agreement shall be deemed to refer to sections or
articles of this Agreement.
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<PAGE>
Section 10.7 Invalidity. If any provision of this Agreement shall be
held invalid, the same shall not affect in any respect whatsoever the validity
of the remainder of this Agreement.
Section 10.8 Counterparts. This Agreement may be executed in
counterparts, each of which shall be deemed an original and all of which, when
taken together, shall constitute one and the same instrument, binding on the
Partners, and the signature of any party to any counterpart shall be deemed a
signature to, and may be appended to, any other counterpart.
Section 10.9 Further Assurances. The parties hereto agree that they
will cooperate with each other and will execute and deliver, or cause to be
delivered, all such other instruments, and will take all such other actions, as
either party hereto may reasonably request from time to time in order to
effectuate the provisions and purposes hereof.
Section 10.10 Governing Law. This Agreement shall be governed by and
construed under the laws of the State of Delaware and the United States of
America. This choice of governing law shall not be determinative of the site of
venue for any litigation between the Partners arising out of or connected with
this Agreement.
Section 10.11 Complete Agreement. This Agreement constitutes the
complete and exclusive statement of the agreement between the Partners. It
supersedes all prior written and oral statements and no representation,
statement, condition or warranty not contained in this Agreement shall be
binding on the Partners or have any force or effect whatsoever.
Section 10.12 Attorneys' Fees. If any litigation is initiated by any
Partner against another Partner relating to this Agreement or the subject matter
hereof, the Partner prevailing in such litigation shall be entitled to recover,
in addition to all damages allowed by law and other relief, all court costs,
reasonable attorneys' fees and all litigation expenses incurred in connection
therewith.
Section 10.13 Creditors Not Benefited. Nothing in this Agreement is
intended to benefit any creditor of the Partnership or a Partner. No creditor of
the Partnership or a Partner will be entitled to require the General Partner to
solicit or accept any loan or additional capital contribution for the
Partnership or to enforce any right which the Partnership or any Partner may
have against a Partner, whether arising under this Agreement or otherwise.
33
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the day and year first above written.
GENERAL PARTNER:
BB&K GP BUSINESS TRUST
By: /s/ William C. Grubbs
-----------------------------------------
Name: William C. Grubbs
--------------------------------------
Title: President
--------------------------------------
CLASS A LIMITED PARTNER:
BB&K LP BUSINESS TRUST
By: /s/ William C. Grubbs
-----------------------------------------
Name: William C. Grubbs
--------------------------------------
Title: President
--------------------------------------
CLASS B LIMITED PARTNER:
BRANDYWINE OPERATING PARTNERSHIP, L.P.
By: Brandywine Realty Trust, its general partner
By: /s/ Gerard H. Sweeney
-----------------------------------------
Name: Gerard H. Sweeney
---------------------------------------
Title: President and Chief Executive Officer
-------------------------------------
NICHOLS LANSDALE LIMITED PARTNERSHIP, III
By: Witmer Operating Partnership I, L.P.,
its general partner
By: Brandywine Witmer, L.L.C., its general partner
By: /s/ Gerard H. Sweeney
-------------------------------------------
Title: President and Chief Executive Officer
----------------------------------------
34
<PAGE>
Commercial Property Management Agreement
By and Between
BRANDYWINE INDUSTRIAL PARTNERSHIP, L.P.
("Owner")
and
BRANDYWINE REALTY SERVICES CORPORATION
("Manager")
for
PROPERTIES SCHEDULED ON EXHIBIT A
(Individually a "Property" and collectively the "Properties")
<PAGE>
COMMERCIAL PROPERTY MANAGEMENT AGREEMENT
TABLE OF CONTENTS
<TABLE>
<CAPTION>
<S> <C> <C>
Article 1 ENGAGEMENT OF MANAGER...........................................................................4
1.1 Engagement......................................................................................4
1.2 Status of Manager; Limitation on Authority......................................................4
1.3 Renting or Sale of Properties...................................................................5
Article 2 DUTIES OF MANAGER...............................................................................5
2.1 Standard of Performance.........................................................................5
2.2 Specific Duties of Manager......................................................................5
2.3 Contracts......................................................................................13
2.4 Affiliates.....................................................................................14
2.5 Use of Properties..............................................................................14
2.6 Operating Account..............................................................................14
2.7 Indemnification................................................................................15
Article 3 ACCOUNTING, RECORDS, REPORTS...................................................................16
3.1 Records........................................................................................16
3.2 Reports and Supporting Documentation...........................................................17
3.3 Budgets........................................................................................17
3.4 Audit..........................................................................................19
Article 4 EXPENSES AND COMPENSATION......................................................................19
4.1 Payment of Expenses............................................................................19
4.2 Expenditure Authorization......................................................................20
4.3 Compensation for Management Services...........................................................20
4.4 Payment of Manager's Compensation..............................................................21
Article 5 TERM...........................................................................................22
5.1 Term...........................................................................................22
5.2 Sale of Properties.............................................................................22
5.3 Termination For Cause..........................................................................22
5.4 Effect of Termination..........................................................................24
Article 6 REPRESENTATIONS AND WARRANTIES OF MANAGER......................................................24
6.1 Organization...................................................................................25
6.2 Manner of Performance..........................................................................25
6.3 Authorization..................................................................................25
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C>
6.4 Validity.......................................................................................25
6.5 Licenses.......................................................................................25
6.6 Conflicts of Interest..........................................................................25
6.7 Independent Contractor.........................................................................25
6.8 Year 2000......................................................................................25
6.9 Unrelated Business Taxable Income .............................................................27
Article 7 MISCELLANEOUS..........................................................................................27
7.1 Owner's Rights.................................................................................27
7.2 Owner's Representative.........................................................................28
7.3 No Personal Liability..........................................................................28
7.4 Nature of Relationship.........................................................................28
7.5 No Third Party Beneficiaries...................................................................28
7.6 Notices........................................................................................29
7.7 Amendments.....................................................................................30
7.8 Exhibits.......................................................................................30
7.9 Laws...........................................................................................30
7.10 No Implied Waivers.............................................................................30
7.11 Severability...................................................................................30
7.12 Governing Law..................................................................................30
7.13 Confidentiality................................................................................30
7.14 Benefit and Assignment.........................................................................30
7.15 Headings.......................................................................................31
7.16 Counterparts...................................................................................31
7.17 Entire Agreement...............................................................................31
7.18 Policy Respecting Business Ethics..............................................................31
7.19 Prevailing Party...............................................................................31
Exhibit A Schedule of Properties
Exhibit B Guidelines for Short-Term Investment of Owner's Funds
Exhibit C Required Reports and Supporting Documentation
Exhibit D Table of Contents to Owner's Required Budget Format
Exhibit E Schedule of Base Management Fee Percentages
Exhibit F Ethics Policy Respecting Consultants
Exhibit G Signature Block for Contracts
Exhibit H Leasing Addendum
</TABLE>
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<PAGE>
COMMERCIAL PROPERTY MANAGEMENT AGREEMENT
THIS COMMERCIAL PROPERTY MANAGEMENT AGREEMENT (the "Agreement") is made
as of June 17, 1999, between BRANDYWINE INDUSTRIAL PARTNERSHIP, L.P., a Delaware
limited partnership ("Owner"), and BRANDYWINE REALTY SERVICES CORP., a
Pennsylvania corporation ("Manager").
RECITALS
A. Owner owns those certain parcels of land scheduled on Exhibit A to
this Agreement, the improvements and fixtures thereon, and all appurtenances
thereto (said land, improvements, fixtures and appurtenances and any personal
property of Owner on said land or in such improvements being herein called
individually a "Property" and collectively the "Properties").
B. Manager has experience in managing, operating, promoting and leasing
space in buildings similar to that comprising the Properties and its personnel
possess the skills and experience necessary for the efficient management,
operation, promotion, and leasing of space in the buildings comprising the
Properties.
C. Owner desires to engage Manager to manage the day-to-day operations
of the Properties consistent with Owner's objective of maximizing the
Properties' economic value. Manager desires to accept such engagement.
D. Manager is an affiliate of Brandywine Operating Partnership, L.P.
and Brandywine Realty Trust (collectively known as "Brandywine"). Brandywine or
other affiliates of Brandywine have an ownership interest in Owner. The rights
of Manager hereunder, and under that certain Commercial Leasing Agreement of
even date herewith (the "Leasing Agreement") between Owner and Manager, are
coupled with an interest and are intended to continue for the duration of
Brandywine's interest in Owner.
NOW, THEREFORE, in consideration of the foregoing and of the full and
faithful performance by Manager of all the terms, conditions, and obligations
imposed upon Manager hereunder, Owner and Manager agree as follows:
Article 1
ENGAGEMENT OF MANAGER
1.1 Engagement. Owner engages Manager to manage the Properties on the
terms in this Agreement, and Manager accepts such engagement and agrees to
perform such service on such terms.
1.2 Status of Manager; Limitation on Authority. Manager shall act under
this agreement as an independent contractor and not as Owner's agent or
employee. Manager shall not have the right, power, or authority to enter into
agreements or incur liability on behalf of Owner except as expressly set forth
herein. Any action taken by Manager that is not expressly permitted by this
Agreement, or is not otherwise consented to by Owner, shall not bind Owner.
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<PAGE>
1.3 Renting or Sale of Properties. Manager is not engaged by this
Agreement to act as a sales broker or agent for Owner, and Manager shall not be
entitled to any fee or compensation under this Agreement for sales brokerage
services. Unless otherwise specifically set forth herein, and except as set
forth in the Leasing Agreement, Manager shall not be entitled to any additional
fee or compensation under this Agreement for leasing services other than the
Management Fee provided in Section 4.3. If Owner executes a listing agreement
with a broker (other than the Manager) for sale of the Properties or any them,
the Manager shall cooperate with such broker to the end that the respective
activities of Manager and broker may be carried on without friction and without
interference with tenants and occupants. Manager will permit the broker to
exhibit the Property provided the broker has secured Manager's permission, and
the applicable tenant's permission (if required), in advance. Manager agrees
that failure on its part to extend cooperation to a broker desiring to show a
Property is a default on its part under this Agreement and, if not cured within
ten days after notice, is grounds for termination under Section 5.3 hereof. No
such cooperation by Manager shall give rise to a claim by Manager for a
commission for such sale, but any incremental expenses which Manager incurs in
complying with the provisions of this Section 1.3 will be paid by Owner.
Article 2
DUTIES OF MANAGER
2.1 Standard of Performance. Manager shall devote its commercially
reasonable best efforts consistent with first-class professional management as
manager of the Properties , and shall perform its duties in a diligent, careful
and professional manner to maximize all potential revenues to Owner and to
minimize expenses and losses to Owner. The services of the Manager are to be of
a scope and quality not less than those generally performed by first class,
professional managers of properties similar in type and quality to the
Properties and located in the same market area as the Properties . The Manager
will make available to the Owner the full benefit of the judgment, experience,
and advice of the members of the Manager's organization. Manager will at all
times act in good faith, in a commercially reasonable manner and in a fiduciary
capacity with respect to the proper protection of and accounting for Owner's
assets.
2.2 Specific Duties of Manager. Without limiting the obligations of
Manager under other provisions of this Agreement, Manager will have the
following specific duties:
A. Orientation. Manager acknowledges receipt of certain books and
records for the Properties , the personal property on the Properties belonging
to the Owner, and the originals or copies of the Property Documents (as defined
in Paragraph D of this Section 2.2). Within thirty (30) days after the earlier
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of: (i) the date of this Agreement; or (ii) if the Properties are to be
constructed, shell completion or certificate of occupancy receipt, Manager will
furnish Owner a complete list of all books, records and personal property
regarding the Properties and any Property Documents then known to Manager.
Manager acknowledges that it is familiar with the construction, operation, and
maintenance of the Properties, including, without limitation, all relevant
permits, approvals, and certificates relating to the development of the
Properties, and the layout, construction, location, character, and operation of
lighting, heating, plumbing, and ventilation systems and all other mechanical
systems and equipment, to the extent necessary to perform its obligations
hereunder.
B. Collection of Moneys; Enforcement of Rights. Manager will collect
all rent and other payments due from tenants in the Properties in accordance
with the tenant's lease agreement and any other sums due Owner regarding the
Properties. To the extent tenant leases affecting the Properties so require,
Manager shall timely make or verify any calculations that are required to
determine the amount of rent due from tenants, including without limitation
calculating operating expense "pass throughs" and consumer price index
adjustments and, where required, shall give timely notice thereof to tenants.
Upon Owner's request, all rents and other income from the Properties
shall be delivered to a lock box at the financial institution approved by Owner
for the Operating Account (hereinafter defined). Manager shall notify and advise
each tenant of the Properties under each lease with respect to a Property
(whether such lease is presently effective or executed after the date hereof),
to send directly to the lock box promptly when due all payments, whether in the
form of checks, cash, drafts, money orders or any other type of payment
whatsoever of rent or any other item payable to Owner.
With the prior consent of Owner, which Owner shall use its reasonable
efforts to give within ten (10) days after the request for approval, and at
Owner's expense (including for attorney's fees), Manager will promptly and
diligently enforce Owner's rights under any tenant leases affecting the
Properties, including without limitation taking the following actions where
appropriate: (i) terminating tenancies, (ii) signing and serving such notices as
are deemed necessary by Manager, (iii) instituting and prosecuting actions, and
evicting tenants, (iv) recovering rents and other sums due by legal proceedings,
and (v) settling, compromising and releasing such actions or suits or
re-instituting such tenancies. If authorized by Owner, Manager shall consult an
owner-designated attorney for the purpose of enforcing Owner's rights or taking
any such actions and Owner shall have the right to designate counsel for any
matter and to control all litigation affecting or arising out of the operation
of the Properties. Manager shall keep Owner informed of any dissatisfaction with
the law firm or such services or the reasonableness of the cost thereof. Manager
shall not write-off any income items without the prior written approval of
Owner. Manager shall submit its recommendation for write-offs in writing to
Owner, together with sufficient documentation to allow Owner to make a prudent
business decision regarding such write-off.
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<PAGE>
C. Leasing. Leasing shall be governed by a separate agreement unless a
leasing addendum is attached hereto. The Manager shall make every reasonable
effort to cooperate with brokers, leasing agents, tenant representatives,
tenants, and prospective tenants in order to obtain and retain desirable tenants
for the Properties. If requested by Owner, Manager shall conduct negotiations
with existing tenants at the Properties for lease renewals and expansions.
Manager shall complete Owner's standard lease analysis form in connection with
any such renewal or expansion, and shall deliver such analysis to Owner,
together with Manager's recommendation regarding Owner's acceptance thereof.
Agreements of tenants to be executed on other than standard renewal or extension
forms shall require the prior approval of Owner. Manager shall not be entitled
to any leasing commissions in connection with such renewals or expansions unless
set forth on an attached leasing addendum.
D. Property Documents. Unless notified otherwise by Owner, Manager will
pay all sums out of the Property Operating Account from time to time due from
the Owner of the Properties and otherwise comply with the obligations of such
Owner under any mortgages, deed of trust, leases, easements, restrictions,
service contracts and other agreements now or hereafter affecting each Property,
copies of which have been supplied to Manager (the "Property Documents").
E. Repairs and Maintenance. At Owner's cost, Manager shall make, or
cause to be made, all repairs and shall perform, or cause to be performed, all
maintenance on the buildings, appurtenances and grounds of the Properties as
required by any tenant leases, service contracts, or by Owner, in a prudent and
timely manner and in accordance with standards reasonably acceptable to Owner,
and in furtherance of maintaining applicable warranties and guaranties in full
force and effect. Manager shall arrange for periodic roofing inspections and
inspections of the building systems by approved contractors who Manager
contemplates may perform services for the Properties and in accordance with
standard practice in the area of the Properties.
F. Services. Manager will make arrangements for all utilities, services,
equipment and supplies necessary or desirable or requested by Owner for the
management, operation, maintenance, and servicing of the Properties. All
utilities shall be in the name of Owner, or in the name of Manager as agent for
Owner, and when so required, Owner shall pay applicable deposits or bonds.
G. Taxes. Manager will promptly send to Owner and to Owner's designated
tax consultant upon receipt all notices regarding taxes or valuations and
recommend from time to time the advisability of contesting either the validity
or the amount of the taxes on a Property or the valuation of a Property. Upon
receiving Owner's approval, and at Owner's cost, Manager in conjunction with
Owner's designated tax consultant shall protest and attempt to reduce the
property taxes or adjust the valuation for the Property through administrative
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<PAGE>
appeal. Owner shall pay all such taxes unless Owner requests Manager to pay such
taxes, in which case Manager shall pay such taxes from the Property Operating
Account or from other funds made available to Manager by Owner for such purpose.
H. Insurance, Reports and Claims. Owner, upon execution of this
Agreement, shall notify Owner's designated insurance company of the insurable
value of the Properties. Owner shall pay all insurance premiums unless Owner
requests Manager to pay such insurance premiums, in which case payments of the
insurance premiums shall be made by Manager from the Operating Account. Upon
Manager's request, Owner shall provide a certificate of insurance showing
Manager as an additional insured. If requested by Owner, however, Manager will
obtain and maintain (i) property insurance against "All Risk" of direct physical
loss or damage to the Properties in the amount of the full replacement value of
each of the Properties; (ii) comprehensive general liability insurance (on an
occurrence basis) as to the Properties in an amount of at least One Million
Dollars ($1,000,000) per occurrence, Two Million Dollars ($2,000,000) aggregate
combined single limit for bodily injury and property damage; (iii) umbrella
liability coverage in the amount of at least Five Million Dollars ($5,000,000);
(iv) all legally required insurance coverage relating to its employees,
including, but not limited to, Workers' Compensation, Employers Liability, and
Non-Occupational Disability Insurance; and (v) Business Auto Liability with a
per accident limit of not less than $1,000,000 covering all owned, non-owned and
hired vehicles used in connection with the Properties. Such insurance shall be
placed with a company or companies acceptable to Owner, with a Best's rating of
A, Class X, and shall be in form and substance satisfactory to Owner and shall
include the Owner as a named insured, with a provision giving Owner thirty (30)
days written notice prior to cancellation or material modification of the
coverage. Manager and Owner's Representative (as defined in Section 7.2) shall
be named as additional insured's on any liability insurance. The original
policies or certified copies thereof (and all renewals) shall be delivered to
Owner. Additionally, Owner covenants and agrees (i) to add Manager, Brandywine
Operating Partnership, L.P. and Brandywine Realty Trust as additional insureds
on its insurance, as their interests may appear, including Owner's environmental
insurance, and (ii) to provide Manager with a certificate evidencing the above
on an annual basis.
Manager shall promptly investigate and make a full, timely, written
report to Owner and Owner's designated insurance company as to all accidents or
claims for damages relating to the ownership or operation and maintenance of the
Properties of which Manager has knowledge, and any damage or destruction to a
Property and the estimated cost of repair thereof. Thereafter, unless otherwise
directed by Owner, Manager will timely process all casualty insurance claims on
behalf of Owner, obtain the necessary documentation therefor and prepare any and
all reports required by any insurance company in connection therewith. All such
reports shall be timely filed with the insurance company as required under the
terms of the insurance policy involved. Manager is authorized to settle (with
the prior written approval of Owner if the amount at issue is greater than
$2,500.00) any and all claims against insurance companies arising out of any
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policies, including the execution of proofs of loss, the adjustment of losses,
signing of receipts and the collection of money. Finally, Manager will fully
cooperate with and assist all liability insurance carriers and their authorized
agents and adjusters in defending, litigating or settling any liability claims.
In addition to workmen's compensation, automobile liability and/or any
other insurance required by Owner or by law, Manager will also maintain during
the entire term of this Agreement liability insurance with bodily injury limits
of not less than One Hundred Thousand Dollars ($100,000) per person and Three
Hundred Thousand Dollars ($300,000) per occurrence and property damage limits of
not less than One Hundred Thousand Dollars ($100,000) per occurrence with
umbrella coverage of not less than Five Million Dollars ($5,000,000) per
occurrence. Manager shall add Owner and Owner's Representative as an Additional
Insured under Manager's liability policy hereunder using an endorsement form at
least as broad as the most recent edition of Additional Insured-Owners, Lessors
or Contractors Form B (CG2010). Copies of all such policies (and all renewals)
shall be provided to Owner. The cost of the insurance required under this
paragraph shall not be an operating expense reimbursable to Manager.
If any contract or tenant lease requires that such party maintain any
insurance coverage, Manager shall enforce such requirement under the lease and
obtain insurance certificates and corresponding endorsements annually (or more
frequently as required pursuant to the applicable contract or lease) from each
such party and review the certificates for compliance with the terms of such
lease or contract. Manager will ensure that Owner, Owner's Representative, and
Manager are named as Additional Insureds using an endorsement form at least as
broad as the most recent edition of Additional Insured-Owners, Lessors or
Contractors Form B (CG2010).
I. Compliance with Laws. From funds available in the Property Operating
Account or otherwise made available to Manager by Owner for such purposes,
Manager will take such action as may be necessary to comply with any and all
federal, state, and municipal laws, ordinances, regulations, and orders
applicable to the use, operation, repair, and maintenance of the Properties,
including but not limited to any and all licensing requirements that are
necessary to perform Manager's duties or obligations herein, and with all orders
regarding a Property of the Board of Fire Underwriters or other similar bodies.
J. Construction. If Owner has authorized any construction or renovation
on a Property, including but not limited to construction of tenant finish-out,
Manager will (i) review and forward to Owner all space planning layouts,
drawings, plans, and specifications pertaining to such construction, together
with a recommendation as to approval thereof by Owner; (ii) supervise third
party managers responsible for construction or renovation work (iii) solicit or
supervise the solicitation of competitive bids for all construction contracts in
accordance with Section 2.3(b); (iv) require that all construction contracts and
subcontracts comply with the provisions of Section 2.3, and contain provisions
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adequately protecting Owner, in accordance with local procedures, against
mechanic's, materialman's or similar liens affecting the Property and requiring
ten percent (10%) retainage until at least thirty (30) days after completion;
(v) inspect all work in place; (vi) prepare and review all draws requested for
submission to Owner and, if requested by Owner, pay all draw requests on
approval by Owner; (vii) require payment and performance bonds for all contracts
exceeding Five Hundred Thousand Dollars ($500,000.00); (viii) require AIA form
contracts if the amount of such contract exceeds Two Hundred Fifty Thousand
Dollars ($250,000.00); and (ix) obtain copies of certificates of insurance for
all contractors and subcontractors including but not limited to (a) Workers'
Compensation (statutory and as required by the State) including not less than
$1,000,000 Employers Liability; (b) Automobile Liability with a per accident
limit of not less than $1,000,000 covering all owned, non-owned and hired
vehicles used in connection with contractor's or subcontractor's business
operations; and (c) Commercial General Liability with not less than a combined
single limit of $2,000,000 per occurrence bodily injury and property damage.
Draw requests shall be paid in time to obtain any applicable discounts. Manager
will be paid a construction management fee equal to five percent (5%) of the
cost of the construction project for performing the services described in this
subsection (J).
K. Employees; Responsible Manager. Manager will designate an individual
who will be responsible for the overall management of the Properties (the
"Responsible Manager"). The Responsible Manager will not be responsible for
management of any real estate other than the Properties. The Responsible Manager
will direct the operation, management and maintenance of the Properties, using
such other employees of Manager as the Responsible Manager from time to time
designates. The costs of the Responsible Manager's salary, expenses and benefits
will be allocated among the Properties and will be contained in the approved
Budget for each year. The costs of salaries, wages and benefits of the other of
Manager's employees utilized by the Responsible Manager will be part of the
Manager's expenses covered by a standard per square foot charge in each Budget,
which initially will be at the rate of $.06 per square foot of gross leasable
space in the Properties. Such personnel shall in every instance be agents or
employees of Manager and not of Owner. Owner shall have no right to supervise or
direct such agents or employees. Manager assumes all responsibility for timely
compliance with all applicable laws regarding such employees, including but not
limited to FLSA, OSHA, Federal withholding tax laws, FICA, and Federal and State
unemployment insurance laws, and, if any violations of such laws occur, any
resulting costs, fines or penalties shall be paid by Manager without
reimbursement by Owner.
Owner shall have the right to approve Manager's selection of a
Responsible Manager. Owner shall act in a commercially reasonable and timely
manner in approving a Responsible Manager. Any disapproval of a proposed
Responsible Manager by Owner must specify the reasons for the disapproval. Owner
hereby approves the selection of John M. Adderly, Jr. as the initial Responsible
Manager.
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If Owner, acting in a commercially reasonable manner, believes that the
Responsible Manager is failing to discharge his duties in a satisfactory manner,
particularly with respect to the timely production of reports, Budgets and other
communications with Owner, Owner may notify Manager of such deficiency. Upon
receipt of such notice, Manager will investigate the past performance of the
Responsible Manager, monitor the current performance of the Responsible Manager
and, if appropriate, adopt a formal improvement plan for Responsible Manager to
correct his deficiencies. Manager shall communicate to Owner the results of such
investigation and monitoring, including, if applicable, a copy of the
improvement plan. Any such improvement plan will contain commercially reasonable
deadlines for the correction of the deficiencies. If the Responsible Manager's
deficiencies set forth in the improvement plan are not corrected by the
deadlines contained in the improvement plan, and if Owner requests that Manager
do so, Manager will remove the incumbent Responsible Manager from his duties and
will designate a new Responsible Manager.
If required by Owner, Manager shall maintain an office in one or more
of the Properties to be designated and known as a "Property Management Office".
This office may not be part of the space used by Manager for its general offices
or other business and shall be used solely by Manager for management and
operation functions pertaining to the Properties. If Manager is also the Leasing
Broker pursuant to a separate agreement, Manager may also conduct at such office
the leasing services pertaining to the Properties. Hours of business operation
are to be similar to those of comparable type properties in the immediate market
area. Owner shall pay only such expenses as stated elsewhere in this Agreement
and in no other event shall Owner pay any expenses relating to Manager's general
offices or the operation of Manager's business, unless expressly and
unequivocally provided in this Agreement. If agreed to in writing by Owner,
Manager may use the Property Management Office for the management of other
properties; and Owner shall pay only the mutually agreed pro-rata share of
management office costs with any other properties that may be managed or
maintained from such on-site office.
L. Bonds. Manager and all personnel of Manager who handle or who are
responsible for handling Owner's monies shall be bonded under a fidelity bond
acceptable to Owner. Such bonding shall provide coverage in the amount of Five
Hundred Thousand Dollars $500,000.00. The bond may at Manager's option have a
Fifty Thousand Dollar ($50,000.00) deductible clause, but Manager will pay any
loss within the deductible amount, which shall not be an operating expense
reimbursable to Manager. The cost of the bonds required by this Paragraph 2.2L
shall not be an operating expense reimbursable to Manager.
M. Notices. Manager will promptly notify Owner of any of the following
occurrences or notices received by the Manager or its employees: (i) notice of
any claim of violation of any governmental or legal requirement; (ii) any notice
of any claim of liability; (iii) any summons or other legal process; (iv) any
damage; (v) any default or alleged default by landlord or tenant under any
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lease; and (vi) any other material information. Manager will fully cooperate
with Owner in all legal and arbitration proceedings relating to the Properties
and will be reimbursed for its costs in connection with such cooperation.
N. Other Services. Manager will, without additional charge (except for
reimbursement of expenses), perform any other services normally performed in
managing properties similar to the Properties in their respective markets or as
may be reasonably requested by Owner, whether or not specifically enumerated
herein, specifically including, without limitation, performing the obligations
of the landlord under all tenant leases, enforcement of tenant obligations under
all tenant leases, and the performance of any services normally provided in the
locality of the Properties to tenants of like properties.
O. Professional Consultants. In regard to the management of the
Properties, Manager will utilize the services of such attorneys, accountants and
financial professionals as and when Owner may from time to time designate, at
Owner's cost.
P. Environmental.
(a) Notice. Manager shall promptly advise Owner in writing of any
information of which Manager has actual knowledge concerning actual or potential
non-compliance with any laws related to Hazardous Materials (as hereinafter
defined), occurring in, on, or at the Properties or in, on, or at any property
adjacent to or in the vicinity of the Properties, together with a written report
of the nature and extent of the non-compliance and the potential damage to the
Properties or the property adjacent to or in the vicinity of the Properties.
(b) Inspection. Manager shall notify Owner if it observes any tenants,
or any other persons, storing, handling, transporting, generating,
manufacturing, using, dumping, releasing or discharging any Hazardous Materials
(hereinafter defined) in, on, or at the Properties, and Manager shall take
appropriate steps in light of the circumstances. The foregoing notification
shall exclude the presence of Hazardous Materials approved in advance in a
written lease or other writing signed by Owner, unless such substance has been
dumped, released, or discharged at the Properties. The term "Hazardous
Materials," as used herein, shall include, without limitation, flammables,
explosives, radioactive materials, asbestos, polychlorinated biphenyls (PCBs),
chemicals known to cause cancer or reproductive toxicity, pollutants,
contaminants, hazardous wastes, toxic substances or related materials, petroleum
and petroleum products, and substances declared to be hazardous or toxic under
any law or regulation now or hereafter enacted or promulgated by any
governmental authority, excluding normal business products used in
non-reportable quantities and in accordance with applicable law.
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(c) Rights; Limitations. Manager shall use commercially reasonable
efforts to enforce Owner's rights under the tenant leases of space at the
Properties insofar as any such tenant's compliance with laws related to
Hazardous Materials are concerned; provided, however, Manager shall not retain
environmental consultants or other professionals or otherwise initiate
environmental reviews by any third parties without Owner's prior written
consent; and provided further, Manager shall hold in confidence all information
bearing on Hazardous Materials except to the extent expressly instructed
otherwise in writing by Owner, or except to the extent necessary to protect
against the imminent threat to the life and safety of persons and/or damage to
the Properties or damage to the property adjacent to or in the vicinity of the
Properties, or except to the extent required by law.
With respect to all actions to be taken by Manager under this Section
2.2 or otherwise under this Agreement, Manager shall be entitled to rely upon
the instructions, approval and consents that it receives from Owner and upon the
legal advice (including interpretation of the Property Documents) given to
Manager or to Owner by the law firm(s) designated by Owner, as described above.
Whenever under this Agreement the approval or instruction of Owner is required,
Owner shall attempt to notify Manager within ten (10) days after Manager has
requested Owner's consent or decision, or within twenty (20) days if the
approval is with respect to a major decision on a lease or leases for at least
100,000 square feet. Any delay by Owner in making a decision or granting an
approval requested by Manager shall have the effect of relieving Manage of
responsibility for its failure take the action in question.
2.3 Contracts.
A. Manager will not execute or otherwise enter into or bind Owner or
the Properties as to any contract or agreement without furnishing a copy of same
to Owner. Additionally, if the contract is for work that is outside the scope
of the Budget for the relevant period, then Manager must obtain the prior
written consent of Owner. All such contracts must: (a) be in the name of Manager
as property manager for the Property in question; (b) be assignable, at Owner's
option, to Owner or Owner's nominee; and (c) contain a provision permitting
termination, with or without cause, and without penalty or premium, on thirty
(30) days' notice or on the closing date (whether sooner or later than thirty
(30) days) if Owner sells or transfers a Property. The signature block for such
contracts shall be as set forth on Exhibit G attached hereto. Manager shall not
hold itself out as having the authority to approve any contract or agreement
without the prior approval of Owner except as provided above. If this Agreement
is terminated, Manager shall, at Owner's option, assign to Owner or Owner's
nominee all service agreements pertaining to the Property or Properties being
sold.
B. All contracts either for capital improvements exceeding $100,000 or
for work outside of the Budget for the relevant period exceeding $25,000, shall
be awarded on the basis of competitive bidding, solicited in the manner as
follows:
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(i) A minimum of two (2) written bids from qualified firms shall be
obtained for each purchase up to $10,000. Purchases over $10,000 will require a
minimum of three (3) bids.
(ii) Each bid will be solicited in a form prescribed by Owner so that
uniformity will exist in the bid quotes.
(iii) Manager may accept the low bid without prior approval from Owner,
if the expenditure is for a budget approved item and will not result in an
excess of the annual budgeted accounting category of the applicable budget.
Prior approval of a bid may be required by Owner.
(iv) If Manager advises acceptance of other than the lowest bidder,
Manager shall adequately support in writing its recommendations to Owner.
(v) Owner shall be free to accept or reject any and all bids.
(vi) Owner may participate in and review the bid process and all
relevant documentation and selection of bidders.
(vii) Manager may request Owner to waive competitive bidding rules.
2.4 Affiliates. Notwithstanding anything to the contrary in Section 2.3
above, Manager will not retain any affiliate of Manager to perform any service
for the Properties without the prior written consent of Owner. If Owner consents
to the furnishing of services by an affiliate of Manager, such services must be
furnished at a fair, reasonable, and competitive cost.
2.5 Use of Properties. Manager will not permit the use of the
Properties for any purpose which are reasonably likely to impair any policy of
insurance on the Properties or which might render any loss insured thereunder
uncollectible or which would be in violation of any applicable law. Manager will
use commercially reasonable efforts to secure compliance by tenants with their
respective leases.
2.6 Operating Account. All monies received by Manager for or on behalf
of Owner shall be deposited immediately in a separate, interest bearing
depository account in Owner's name (the "Operating Account") to be maintained
with a financial institution approved by Owner. Owner hereby approves PNC Bank,
Mellon Bank, First Union Bank and Summit Bank. All such funds shall be invested
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in accordance with the guidelines set forth in Exhibit B to this Agreement. The
signature card for the Operating Account shall indicate that Manager is dealing
with the Operating Account as a fiduciary of Owner. The Operating Account and
all funds therein shall at all times be the property of Owner. The Comptroller
or Assistant Comptroller of Manager or an officer of Owner shall be the only
parties who shall have the authority to withdraw funds from such account.
Manager shall remit by wire transfer to Owner monthly, on or before the
twenty-fifth (25th) day of each month unless otherwise stipulated, all funds
held in the Operating Account and not applied to the payment of Owner's expenses
as herein provided, after retention in said account of the sum of Fifty Thousand
Dollars ($50,000), on a portfolio basis and not per Property, as reserves for
working capital and other contingencies, in addition to any other reserves
specified in the then current Budget. The remittance of funds to Owner shall be
compatible with the financial reports provided by Manager pursuant to Section
3.2. If security deposits or other funds are required by law to be held in a
segregated account and are by law, allowed to be held by Manager, such deposits
or funds shall be held in a separate account at said financial institution,
which account shall be interest-bearing if so required by law or if required by
Owner. All monies held in the Operating Account shall in no event be commingled
with Manager's own funds or with funds held by Manager for the account of other
parties. Manager agrees to pay all invoices directly from the Operating Account.
Manager may draw on the Property Operating Account only to pay (i) operating
expenses permitted by Sections 4.1 and 4.2, (ii) the Management Fee described in
Section 4.3, (iii) amounts payable to Owner, and (iv) amounts reasonably
necessary to perform the responsibilities imposed on Manager by this Agreement,
including actions taken to secure the security and safety of persons and
property in the event of an emergency.
2.7 Indemnification. Owner shall indemnify and hold Manager harmless
from and against all claims, damages and costs (including reasonable counsel
fees) arising out of or in connection with the management of the Properties and
the operation thereof, except for acts of gross negligence, willful misconduct,
or fraud of Manager, its officers, partners, directors, agents, or employees
(collectively "Unauthorized Acts"). Notwithstanding anything to the contrary
stated herein, Manager shall be held strictly accountable for all receipts and
disbursements; and Manager shall indemnify and hold Owner, Owner's
Representative, Owner's investment manager (if any), and their affiliates,
partners, directors, officers, shareholders, agents, and employees harmless from
and against all claims, damages and costs arising out of or in connection with
Unauthorized Acts. The indemnities herein contained shall not apply to any claim
with respect to which and to the extent the indemnified party is covered by
insurance, provided that the foregoing exclusion does not invalidate the
indemnified party's insurance coverage. Each party shall endeavor to procure
from its insurers waivers of subrogation with respect to claims against the
other party under policies in which the other party is not a named insured, and
shall promptly notify the other party in the event that any such waiver is
unobtainable or is obtainable only upon payment of an additional premium. If
such waiver is obtainable only upon payment of an additional premium, the other
party shall have the right at its option to pay such additional premium.
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Article 3
ACCOUNTING, RECORDS, REPORTS
3.1 Records. Manager has developed its own comprehensive system of
office records, books and accounts as well as an accounting and management
reporting system that will duly account for all transactions relating to the
Properties, all of which are based on the MRI software applications. Owner has
requested that Manager make such reports using Owner's chart of accounts based
upon the Skyline software applications, which are compatible with the MRI
system. Owner and others designated by Owner shall at all times have access to
such records, books and accounts and to all vouchers, files and all other
material pertaining to the Properties and this Agreement, all of which Manager
agrees to keep safe, available, and separate from any records not having to do
with the Properties. All of such books, records, and other information shall be
the property of Owner; and within fifteen (15) days following termination of
this Agreement, Manager shall deliver the original copies to Owner or its
designate. Manager or its representatives shall have the right to inspect such
books, records and other information and to make copies thereof during a
two-year period following the termination of this Agreement. Within sixty (60)
days following the expiration or earlier termination of this Agreement, unless
otherwise agreed, Manager shall provide a final accounting to Owner in such form
as requested by Owner.
Owner may from time to time (but not more frequently than annually for
major changes) change the format of the reports to be produced by Manager.
Manager shall make such changes, including conducting whatever staff training
may be necessary to accomplish the changes. Any costs of Manager in adopting the
changes will be at Manager's expense up to a maximum of $10,000. Any excess cost
above $10,000 will be an expense reimbursed from the Operating Account.
The cost of the Skyline software shall be paid from the Operating
Account. Manager, at Manager's expense (and not as an expense reimbursed from
the Operating Account), shall obtain appropriate training for its personnel on
the use of the Skyline software. Manager shall set up and pay for (not as an
expense reimbursed from the Operating Account) a technical support system with
the software company providing the Skyline applications.
If in the future, Owner selects a different series of software
applications, the cost of such software shall be paid from the Operating
Account. If the applications selected by Owner are compatible with MRI, then
Manager, at Manager's expense (and not as an expense reimbursed from the
Operating Account), shall obtain appropriate training for its personnel on the
use of the new software. If the applications selected by Owner are not
compatible with MRI, then the costs of appropriate training shall be paid from
the Operating Account.
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3.2 Reports and Supporting Documentation. On or before the twenty-fifth
(25th) day of each calendar month during the term of this Agreement, Manager
shall deliver to Owner the reports and supporting documentation set forth on
Exhibit C. As applicable, monthly reports shall be prepared on a modified
accrual basis unless otherwise indicated or requested by Owner. Manager shall
also deliver to Owner quarterly reports as may be required by Owner. Such
reports shall be in a specified form as required by Owner and due to Owner as
noted.
Not later than sixty (60) days after the closing of each annual
reporting period, and to the extent permitted or required by leases, Manager
shall provide: (i) each tenant with a reconciliation statement of actual
expenditures for the annual reporting period that are collectible from such
tenant compared to expense payments made by such tenant for the same reporting
period, and the resultant account balance of such tenant; and (ii) Owner with a
summary of actual expenditures for each Property compared to expense payments
made by each Tenant for such annual reporting period. At the same time, or
sooner if at all practicable, Manager shall provide each tenant with the monthly
expense statements for the current year setting forth the payment required to be
made by such tenant pursuant to its lease, based upon the current budget and
estimate of expenses for the then-current year, as approved by Owner as provided
herein.
The Properties are located in various jurisdictions, but are logically
organized into five distinct groups. Manager will prepare Budgets and reports
for each group and on a consolidated basis for the entire portfolio of
Properties. The group Budgets and reports will also contain individual and data
for each within the group. In addition, unless otherwise requested by Owner,
Manager shall segregate and maintain separate and independent files, records,
cash receipts, invoices, ledgers, and accounts, and so forth for each Property,
and all information provided by Manager to Owner under this Section 3.2 shall be
submitted (monthly, quarterly and/or annually, as applicable) in such segregated
manner.
Manager will promptly furnish any other special information as required
from time to time by Owner as well as revisions of existing monthly or annual
reports.
3.3 Budgets. Each year during the term of this Agreement, Manager shall
deliver to Owner for approval an itemized accrual-based statement ("Budget") of
the estimated receipts and disbursements for the next fiscal/calendar year.
Manager shall endeavor to deliver the Budget no later than one hundred twenty
(120) days prior to calendar year-end and in any event shall deliver the Budget
no later than ninety (90) days prior to calendar year-end. Manager shall submit
each Budget in Owner's required format, plus any and all additional supporting
documents and schedules as required by Owner. The format which Owner initially
requires has been delivered by Owner to Manager. The Table of Contents for the
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format is attached as Exhibit D. Further, based on the proposed annual Budget,
upon request by Owner, Manager shall also submit to Owner, for Owner's approval,
proposed monthly operating budgets on a cash basis for the Properties for the
upcoming fiscal/calendar year, which budgets shall project on a monthly basis
all receipts and operating costs and expenses, capital expenditures, and
replacement reserves that Manager, in the exercise of good business judgment,
estimates will be received or necessary to be incurred to operate the Properties
during each such month. However, the estimation of a monthly budget will not
prevent Manager from incurring budgeted costs in a month other than the one
shown on the monthly estimate. As noted in Section 3.2, such Budgets will be
prepared on a group basis, but with a separate breakdown for each Property and
with a consolidation for the entire portfolio of Properties. References in this
Agreement to "the Budget", the "budgeted amount", a "Budget item" or similar
words to that effect shall be a reference to the consolidated Budget for a
group.
Manager has prepared and submitted and Owner has approved Budgets for
the current year.
Without affecting any other limitation imposed by this Agreement and
except as may be expressly provided to the contrary elsewhere in this Agreement,
Manager shall secure the prior written approval of Owner prior to incurring any
liability or obligation for any item not reflected on the Budget approved in
writing by Owner. Owner will approve or disapprove each Budget within a
reasonable time after the receipt of same. Manager will make changes in the
Budget requested by Owner, provided that the requested changes would not prevent
Manager from carrying out its responsibilities under this Agreement. If any
proposed Budget for the upcoming fiscal/calendar year is not approved prior to
the start of such fiscal/calendar year, then until such time as Owner approves a
Budget for such fiscal/calendar year, a temporary Budget shall take effect which
shall be equal to the prior year's approved Budget increased by ten percent
(10%) for all line items, except for taxes and/or any insurance premiums
included in the prior year's approved Budget as well as utilities, each of which
shall equal the amount actually incurred for each such item during the interim
period until a Budget is approved by Owner.
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3.4 Audit. At its option Owner may at any time upon at least 4 days
prior notice, and in no event during the last 15 days of a fiscal quarter, cause
the books and financial operations of the Properties to be audited by an auditor
to be selected by Owner including the internal auditing staff of Owner. Manager
agrees to cooperate with such auditor and to make any of its facilities located
at the Properties available to such auditor. Any adjustments in amounts due and
owing by either Owner or Manager shall be paid promptly but no later than
fifteen (15) days following receipt of the audit. The audit shall be at Owner's
expense unless the circumstances of Section 4.4 apply or unless the audit was
performed by an independent auditor and an error is discovered equal to or
greater than five percent (5%) of gross receipts of the Properties for the
preceding month; and in either case, Manager shall bear the cost of the audit.
ARTICLE 4
EXPENSES AND COMPENSATION
4.1 Payment of Expenses. Notwithstanding any contrary provision of this
Agreement, Manager shall be obligated to make payments required under this
Agreement only to the extent of funds derived from the Properties or provided by
Owner. Manager shall give Owner prompt notice of any expenses for the payment of
which Manager does not have sufficient funds from collections and the Property
Operating Account. Owner shall pay or reimburse Manager for all expenses
properly incurred by Manager under this Agreement and approved by Owner to the
extent Owner's approval is required by this Agreement. The following categories
of expenses will be included within the flat fee per square foot described in
Paragraph K of Section 2.2 hereof (as to items 1, 2 and 3) or will not be
reimbursable to Manager under this Agreement (as to items 4, 5, 6 and 7):
(1) office equipment and supplies other than those located at the
Properties and used exclusively for the Properties;
(2) any overhead expense of Manager incurred in its general offices
with the exception of on-site employee overhead allocation, if applicable;
(3) expenses for accounting, bookkeeping, reporting, accounting
software system, software training, and electronic data processing services;
(4) compensation of executive and supervisory personnel of Manager;
(5) compensation and expenses applicable to time spent on matters other
than the Properties;
(6) compensation and expenses applicable to any personnel for
activities with regard to the leasing of space in the Properties or the sale of
Properties; and
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(7) compensation of any personnel other than personnel located at the
property site, with the exception of roving maintenance personnel (including
Manager's Chief Engineer, if any) who may be needed at the Properties from time
to time.
Owner may, at its sole discretion, expressly approve in writing the
payment or reimbursement to Manager of any specific expense otherwise excluded
or excepted above; and, unless expressly stated to the contrary in such written
approval, such approval shall apply only to the specific expense itemized and/or
up to the amount specified in such approval.
4.2 Expenditure Authorization.
A. General Prohibition. Approval of a Budget by Owner (or the existence
of a temporary Budget as described in Section 4.1) shall constitute
authorization for Manager to expend money except as set forth herein. Except as
contained in the Budget (or temporary Budget) or as specifically authorized
herein, Manager will obtain Owner's specific written authorization before making
any expenditure of Owner's funds.
B. Utilities. Manager will pay the actual amount incurred for utilities
each month, notwithstanding that a lesser amount therefor may have been
projected or allocated in the Budget approved by Owner and without Owner's
further consent or signature on such check or withdrawal.
C. Expenses Per Budget. To the extent set forth in the most recent
Budget approved by Owner, Manager will pay each and every expense properly
incurred in the ordinary course of managing the Properties. Manager shall obtain
Owner's specific written authorization prior to paying for any individual item
of expense not set forth in the budget which exceeds $10,000.00 for any
individual item, or $30,000.00 in the aggregate in any fiscal/calendar year,
unless otherwise specified in writing by Owner.
D. Emergencies. Notwithstanding the foregoing, if emergency action is
necessary to prevent damage to the Properties or danger to persons, Manager may
incur such expenses as are reasonably necessary without the prior written
approval of Owner to protect the Properties or persons and without regard to any
contractual limitations set forth in Article 2. Any such expenditure shall be
incurred only in concert with prompt telephonic, telecopy or electronic mail
notification by Manager to Owner.
4.3 Compensation for Management Services. Owner will pay Manager as
compensation for its management services hereunder an amount (the "Base
Management Fee") equal to the percentages set forth on Exhibit E for the various
Properties of the "Gross Rental Receipts" per month. The term "Gross Rental
Receipts" as used herein means all fixed rents (including parking rents not
excluded below), common area maintenance reimbursements, tax and insurance
reimbursements, any rent increases tied to an index, and any percentage rents,
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actually collected in cash by Owner or by Manager from tenants of the
Properties, net forfeited security deposits, but excluding (i) any income from
investment of cash with the exception of interest on the Property Operating
Account, (ii) security deposits, and any portion of forfeited security deposits
allocable to compensation for loss or damage, (iii) payments for physical
installations or finish-out work, (iv) payments in the nature of indemnification
or compensation for loss, damage, or liability sustained, including but not
limited to insurance proceeds and condemnation awards, except to the extent that
such proceeds are to compensate for lost revenues from the Property which
suffered the casualty (v) receipts and other income from or on account of
vending machines and other concessions, (vi) parking rents or fees or any other
receipts from the rental or operation of the parking garage which may constitute
a part of the Property, if any, paid not to Owner but to an independent
operator, if any, to whom Owner may from time to time lease such parking
facility, (vii) all purchase discounts, rental, and ad valorem tax refunds or
rebates (viii) any expense reimbursement from tenants over and above the
"expense stops" contained in any leases, (ix) any sums which, under normal
accounting practice, are attributable to capital, (x) Executive Suite expenses,
if any, (e.g. personnel, equipment, etc.) paid by tenants, (xi) utility costs
paid directly by tenants or paid by Owner and reimbursed by tenants, (xii) lease
termination payments, except to the extent that such payments exceed the costs
of replacing the tenant whose lease is being terminated and (xiii) all other
receipts of whatever kind and nature. Manager will not be entitled to any
leasing commissions, sales commissions, construction management fees, or similar
fees under this Agreement, but is entering into the Leasing Agreement
contemporaneously with this Agreement.
4.4 Payment of Manager's Compensation. The amount of compensation due
to Manager each month shall be reflected in the monthly reports required to be
submitted to Owner under provision (4) of Exhibit C. Any amount which Owner may
dispute shall not be payable until the dispute has been resolved, but shall be
retained in the Property Operating Account pending resolution; provided, that
the undisputed portion shall be paid as scheduled. The Base Management Fee shall
be payable in arrears on the last day of each month. If there is no current
dispute regarding the amount of the Base Management Fee or if Owner does not
advise Manager of its intent to dispute such amount within ten (10) business
days after Manager delivers the respective monthly reports, then such monthly
fee shall be payable to Manager at such time; however, Owner may from time to
time require an audit of Manager's computation of the Management Fee, and the
parties shall promptly make adjustment for any variances shown by the audit
notwithstanding the fact that Owner did not dispute any amount at or before such
amount was paid to Manager. The cost of such audit shall be borne by Owner
unless it was performed by an independent auditor, and it reflects an overcharge
of Manager's fee in excess of five percent (5%) for any fiscal/calendar year at
the end of such fiscal/calendar year, in which case the cost of the audit shall
be borne by Manager and Manager shall promptly refund the overpayment with
interest at the rate of twelve percent (12%) per annum. Owner may require that
the Base Management Fee be withheld if Manager has failed to deliver reports
which Manager is required to provide to Owner until such reports have been
delivered.
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ARTICLE 5
TERM
5.1 Term. This Agreement shall commence on the date of this Agreement
and, unless sooner terminated as set forth below, shall continue for so long as
Owner owns any Property, Manager remains and affiliate of Brandywine and
Brandywine or its affiliate holds its ownership interest in Owner, unless
earlier terminated in accordance with Section 5.2 or 5.3.
5.2 Sale of Properties. As to any individual Property, this Agreement
shall automatically terminate upon the consummation of any sale or other
disposition of the Property by Owner, and shall terminate entirely upon the
consummation of any sale or disposition of all of the Properties.
5.3 Termination For Cause. Owner may terminate this Agreement at any
time, effective immediately upon notice to Manager, if: (i) Manager defaults in
its obligations under this Agreement; such default is material and adverse and
Manager fails to cure such default within thirty (30) days after notice (ii) a
petition for relief in bankruptcy or reorganization or arrangement is filed by
or against Manager; (iii) Manager causes or suffers to be caused waste to the
Properties; or (iv) any tenant in the Properties shall enter into a lease for
industrial space in any other industrial building in which Manager or an
affiliate of Manager has an ownership or management interest without Owner's
prior written consent, provided that Owner is both able and willing to provide
the space to the tenant upon market terms; (v) there is a dissolution or
termination of the corporate or partnership existence of the Manager by merger,
consolidation, or otherwise, or a dissolution of Brandywine except by merger or
consolidation, or cessation on the Manager's part to continue to do business;
(vi) within one (1) year following a corporate merger of Brandywine, four (4) or
more of the Key Personnel of Manager (as identified in the Contribution
Agreement) are no longer employed by Manager or (vii) there is a termination or
suspension of Manager's real estate brokerage license, if such license is
required as a condition to managing the Properties. Manager may terminate this
Agreement, effective immediately upon notice to Owner, if Owner defaults in its
obligations under this Agreement and the default is not cured within thirty (30)
days after receipt by Owner of written notice thereof setting forth the default.
In addition to the termination rights in the preceding paragraph, Owner
shall have the right to terminate this Agreement if (i) for any period of 14
consecutive months, the Properties are Underperforming, and (ii) the principal
reason that the Properties are Underperforming is the Manager's Dereliction
rather than either the Owner's Decisions or Market Events. The initially
capitalized terms used in this paragraph shall have the following meanings:
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"Underperforming" means that the average vacancy rate for the
Properties for the period in question is 50% or more in excess of the average
vacancy rates for competing properties in the markets in which the Properties
are located. The competing properties shall mean all properties which are of a
similar type in the relevant market, regardless of who owns such properties.
"Manager's Dereliction" means events which are in the Manager's
control, such as Manager's neglect of the Properties or preferential treatment
accorded to other properties by Manager hereunder or under the Leasing
Agreement.
"Owner's Decisions" means events over which Owner has control, either
by being able to direct Manager's decisions or by having rights of approval,
including by way of example and not by way of limitation, decisions and
approvals respecting Budgets and capital spending, rejection of lease proposals
and strategic decisions about lease terms.
"Market Events" means events which are outside of the control of Owner
or Manager, including by way of example and not by way of limitation, the
bankruptcy of a tenant, a rapid overbuilding of the relevant markets or the
decision of a competitor to offer rental rates significantly below market.
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5.4 Effect of Termination. The termination of the Agreement for any
reason shall not affect any right, obligation or liability which has accrued
under this Agreement on or before the effective date of such termination. Upon
termination of this Agreement for any reason, Manager will cooperate with Owner
and do all things reasonably necessary to achieve an efficient transition of the
management of the Properties without detriment to the rights of Owner or to the
continued management of the Properties. Without limiting the foregoing, Manager
will, before receiving final payment of any fees, deliver to Owner or to such
person or persons as Owner may direct all Property Documents, permits, books,
records and accounts, rent rolls, insurance policies, files and other materials
relating to the Properties, including without limitation any bank account
signature cards or other documentation required to transfer sole control over
the Properties Operating Account to Owner or its designate as well as
appropriate assignments, if requested by Owner, to Owner or Owner's designate of
any service and supply contracts. All personal property of Owner, whether on the
Properties or elsewhere, shall be delivered intact to Owner or Owner's
Representative. Within sixty (60) days after the termination of this Agreement,
unless otherwise agreed, Manager will deliver a final accounting to Owner
reflecting all income and expenses of the Properties as of the date of
termination in such form as requested by Owner.
ARTICLE 6
REPRESENTATIONS AND WARRANTIES OF MANAGER
To induce Owner to enter into this Agreement, Manager makes the
following representations and warranties, which shall survive the execution and
termination of this Agreement:
-24-
<PAGE>
6.1 Organization. Manager is duly organized, validly existing and in
good standing under the laws of and is qualified to do business in the State
where the Properties are located. Manager has all power and authority required
to execute, deliver and perform this Agreement.
6.2 Manner of Performance. Manager has sufficient staff and other
resources to carry out its duties under this Agreement in a prompt, efficient
and diligent manner. The Responsible Manager is designated as Manager's
Authorized Representative to act for and on behalf of Manager, and Owner and
Owner's Representative are entitled to rely upon the statements and information
received from Manager's Authorized Representative without further inquiry.
Manager has the right to designate a different individual to serve as its
Authorized Representative by giving notice to Owner and Owner's Representative.
6.3 Authorization. The execution, delivery and performance of this
Agreement has been duly authorized by all necessary action on the part of
Manager.
6.4 Validity. This Agreement constitutes a legal, valid and binding
agreement of the Manager enforceable against Manager in accordance with its
terms except as limited by bankruptcy, insolvency, receivership and similar laws
of general application.
6.5 Licenses. During the entire term of this Agreement Manager shall
cause all persons performing licensable activities to have and to maintain in
full force and effect all licenses, including, without limitation any real
estate broker's license obtained by Manager, which are required by applicable
law, and all permits necessary to perform its obligations under this Agreement
and shall pay all taxes, fees or charges imposed on the business engaged in by
Manager hereunder.
6.6 Conflicts of Interest. Owner acknowledges that Manager manages
other properties which may compete with the Properties and which are owned by
Brandywine or affiliates of Brandywine. Attached as Exhibit H is a schedule of
the current competing properties. Manager may from time to time update Exhibit H
as it becomes the manager of other competing Brandywine properties or as it
ceases to be the manager of properties scheduled on Exhibit H,
6.7 Independent Contractor. Manager's status under this Agreement is
that of an independent contractor and not as an agent or employee of Owner.
6.8 Year 2000.
A. Compliance: Manager has reviewed and has provided Owner with copies
of internal reports and analyses as to whether all of the Systems operating in,
on or about the Properties or relating to the Properties (which includes without
limitation corporate and other on-site or off-site offices of Manager) are Year
2000 Compliant.. For purposes of this Agreement, the following definitions shall
apply:
-25-
<PAGE>
"System" means any system relating to the management of tenant
relationships or the operation of one or more aspects of the
Properties, including without limitation computer hardware or
software systems that process billing, notification and
maintenance functions, HVAC controls, boilers, chillers,
flowmeters, filters, thermostats, leak detectors, underground
storage tank monitors (if any), lights, generators, elevators,
alarms, smoke detectors, sprinklers (both landscape and fire),
phones, building access systems, parking access systems and
security systems.
"Date Data" means any data, formula, algorithm, process, input or
output that includes, calculates or represents a date, a reference
to a date or a representation of a date.
"Year 2000 Compliant" means:
the functions, calculations and other computing processes of each
of the Systems (collectively, the "Processes") perform and will
perform in a consistent manner regardless of the date and time at
which the Processes are scheduled to be or are actually performed
and regardless of the Date Data input to any of the Systems,
whether before, on, during or after January 1, 2000 and whether or
not the Date Data is affected by leap years; each of the Systems
functions and will function without interruption or abnormality
caused by the date and time at which the functions of such System
are scheduled to perform or are actually performed or by the Date
Data input to such System, whether before, on, during or after
January 1, 2000 and taking into account any leap years;
each of the Systems accepts and responds to any two-digit
year-date input in a manner that resolves any ambiguities as to
the century in a defined, predetermined and appropriate manner;
each of the Systems stores and displays Date Data in a manner that
is unambiguous (a) as to the determination of the century and
between the years 1900 A.D. and 2000 A.D and (b) as to leap years;
and
no Date Data causes any of the Systems to perform an
abnormally-ending routine or function within the Processes or
generate incorrect values or invalid or abnormal results.
-26-
<PAGE>
B. Testing: Based on the reports referenced above, Manager believes
that no further testing is necessary for assuring that each system is Year 2000
Compliant. Upon Owner's written request, Manager agrees to participate in
additional tests of the Systems, which shall be reasonable in all material
respects, (at no additional charge by Manager) to determine that each of the
Systems is Year 2000 Compliant; provided, the costs and expense of such tests
shall be an operating expense of the Project. Manager shall notify Owner
promptly of the results of any test or any claim or other information that
indicates any of the Systems is not Year 2000 Compliant.
C. Repair Obligation: To the extent that it is determined by Manager or
Owner, in its reasonable discretion, that any System is not Year 2000 Compliant,
Manager agrees to promptly formulate and implement a written plan of action (the
"Year 2000 Plan") to modify such System such that it is Year 2000 Complaint and
the cost and expense of implementing such plan shall be included in an amendment
to the Operating Budget. A copy of such plan of action shall be delivered to
Owner within ten (10) business days after completion of the preparation of such
Year 2000 Plan. Manager shall cause the implementation of the Year 2000 Plan in
accordance with the Budget to correct any nonperformance, error or defect in a
timely manner that is commensurate with the nature of harm caused or potentially
caused by the nonperformance, error or defect, and shall deliver written
evidence of the completion of the correction to Owner not later than sixty (60)
days after Manager determines that there is such a problem or Owner has apprised
Manager that there is such a problem, but not later than September 1, 1999.
D. Contingency Plan: Manager shall provide Owner with a written
contingency plan to cover the failure of any one or more Systems,
notwithstanding any protections Manager may have implemented.
6.9 Unrelated Business Taxable Income. In its review process, Owner
shall be responsible for making its own determination of whether an action will
result in the allocation of unrelated business taxable income under Internal
Revenue Code Section 512, as amended from time to time, to Owner or to any
direct or indirect partner of Owner. Manager shall not be responsible for making
any such determination on Owner's behalf. Manager acknowledges that Owner has
informed Manager of certain restrictions and prohibitions on leasing
arrangements that could cause Owner to recognize unrelated business taxable
income. Manager will endeavor not to bring forward to Owner any transaction
which contains such prohibited terms.
-27-
<PAGE>
ARTICLE 7
MISCELLANEOUS
7.1 Owner's Rights. Nothing in this Agreement shall be deemed to limit
Owner's right to do anything regarding the Properties which an Owner of the
Properties would otherwise be entitled to do, including but not limited to the
right to enter upon the Properties, to inspect the Properties, to perform any
repair or maintenance thereof, and to do anything required of Manager hereunder
if Manager fails to do so in a timely manner.
7.2 Owner's Representative. Owner may designate one (1) representative
to serve as Owner's Representative in all dealings with Manager hereunder.
Whenever the approval or consent or other action of Owner is called for
hereunder, such approval, consent or action shall be processed through the
Owner's Representative unless Owner notifies Manager otherwise in writing. The
exclusive Owner's Representative shall be Alan Green at Invesco Realty Advisors,
Inc. Such representative may be changed at the discretion of Owner, at any time,
by a writing delivered to Manager. Notwithstanding the above, Owner's
Representative is acting as Owner's investment advisor and not as Owner's agent.
7.3 No Personal Liability.
MANAGER, ITS DIRECTORS, SHAREHOLDERS, OFFICERS, EMPLOYEES, AGENTS AND
REPRESENTATIVES WILL LOOK SOLELY TO OWNER'S INTEREST IN THE PROPERTIES FOR
RECOVERY OF ANY JUDGMENT AGAINST OWNER OR OWNER'S REPRESENTATIVES ARISING OUT OF
THIS AGREEMENT.
IN NO EVENT SHALL EITHER PARTY HERETO, OR ANY DIRECT OR INDIRECT
PARTNER, MEMBER, SHAREHOLDER, BENEFICIARY, OWNER OR AFFILIATE THEREOF, OR ANY
OFFICER, DIRECTOR, EMPLOYEE, TRUSTEE, OR AGENT OF ANY OF THE FOREGOING OR ANY
AFFILIATE OR CONTROLLING PERSON THEREOF, BE LIABLE TO ANY INDEMNIFIED PARTY IN
CONTRACT, TORT OR OTHERWISE WITH RESPECT TO ANY INDIRECT, CONSEQUENTIAL, OR
EXEMPLARY DAMAGES ARISING FROM OR RELATING TO THIS AGREEMENT OR ANY CLOSING
DOCUMENT.
7.4 Nature of Relationship. Manager shall be responsible for all of its
employees, the supervision of all persons performing services regarding the
Properties, and for determining the manner of performance of all services for
which Manager is responsible hereunder. Manager is an independent contractor and
not an agent or employee of Owner. Nothing in this Agreement, nor any acts of
the parties hereto, shall be deemed or construed by the parties hereto, or
either of them, or any third party, to create the relationship of principal and
agent, employer and employee, or a partnership or joint venture, between Owner
and Manager.
7.5 No Third Party Beneficiaries. Neither this Agreement nor any part
thereof nor any service, relationship, or other matter alluded to herein shall
inure to the benefit of any third party, to any trustee in bankruptcy, to any
assignee for the benefit of creditors, to any receiver by reason of insolvency,
to any other fiduciary or officer representing a bankruptcy or insolvent estate
of either party, or to the creditors or claimants of such an estate. Without
limiting the generality of the foregoing sentence, it is specifically understood
-28-
<PAGE>
and agreed that insolvency or bankruptcy of either Owner or Manager shall at the
option of the other void all rights of such insolvent or bankrupt party
hereunder (or so many of such rights as the other party shall elect to void).
7.6 Notices. Except as provided in Paragraph 4.2D as to emergencies,
all notices and communications required or permitted hereunder shall be in
writing and shall be: (i) personally delivered; (ii) delivered by overnight
courier; (iii) delivered by facsimile (provided to be effective such notice must
also be given by another method set forth herein); (iv) or sent by registered or
certified mail, return receipt requested, addressed as follows:
If mailed or personally Brandywine Industrial Partnership, L.P.
delivered to Owner: c/o INVESCO Realty Advisors
One Lincoln Centre, Suite 700
5400 LBJ Freeway, LB-2
Dallas, TX 75240
Attn: Alan Green
Asset Manager
Fax Number: 972/715-5816
with a duplicate original
mailed or personally delivered Same As Above
to Owner's Representative:
If mailed or personally
delivered to Manager: Brandywine Realty Services Corporation
14 Campus Drive, Suite 100
Newtown Square, PA 19073
John M. Adderly, Jr.
Fax Number: 610-325-5622
With a copy delivered to: Brandywine Realty Services Corporation
14 Campus Drive, Suite 100
Newtown Square, PA 19073
Attn: General Counsel
or to such address as either party may from time to time specify by notice to
the other. Notices shall be deemed to be received and, therefore, effective on
the date of receipt if personally delivered, delivered by overnight courier, or
delivered by facsimile or, if sent by registered or certified mail, on the third
(3rd) day after the date the notice is mailed.
-29-
<PAGE>
7.7 Amendments. This Agreement may not be amended except by further
agreement in writing executed by each party to be bound thereby.
7.8 Exhibits. All exhibits or addenda to this Agreement are intended to
be attached to this Agreement and, whether or not so attached, are incorporated
herein by reference as if set forth in full.
7.9 Laws. The term "laws" as used in this Agreement means all
applicable constitutional provisions, statutes, ordinances, codes, and rules and
regulations of any governmental body having jurisdiction over any of the
Properties, the parties, or this Agreement.
7.10 No Implied Waivers. No failure or delay by either party in
exercising any right or remedy under this Agreement and no course of dealing
between Owner and Manager shall operate as a waiver of any such right or remedy
nor shall any single or partial exercise of any right or remedy by either party
under this Agreement preclude any other or further exercise of such right or
remedy. The rights and remedies available to each party are cumulative and not
exclusive of any other rights and remedies provided by law or equity.
7.11 Severability. Whenever possible each provision of this Agreement
shall be interpreted in such manner as to be effective and valid under all
applicable laws. However, if any provision of this Agreement is invalid under
any applicable law, such provision shall be ineffective only to the extent of
such invalidity without invalidating the remaining provisions of this Agreement
and, to the fullest extent possible, this instrument shall be interpreted so as
to give effect to the stated written intent of the parties.
7.12 Governing Law. This Agreement shall be governed by and construed
in accordance with the laws of the State where the Properties are located and
the laws of the United States applicable to transactions in such State.
7.13 Confidentiality. All information and knowledge of the Properties
and Owner's systems and databases obtained by Manager from Owner or in the
course of Manager's engagement by Owner (the "Information") shall be kept
confidential by Manager and shall not be used by Manager for any purpose
(including, without limitation, the marketing, sale, or release thereof) other
than as expressly permitted under this Agreement. Manager will not disclose the
Information (or the fact of its existence) to any person other than employees of
Manager who have a need to know such information in connection with the
Properties and who are familiar with these confidentiality restrictions.
7.14 Benefit and Assignment. This Agreement shall be binding upon Owner
and Manager and their respective successors and assigns and shall inure to the
benefit of Owner, its successors and assigns. Manager may not assign or transfer
any of its rights or obligations under this Agreement without the prior written
consent of Owner, which may be withheld without cause in Owner's sole discretion
-30-
<PAGE>
and any such assignment without Owner's prior consent shall be void and of no
effect. A corporate merger or acquisition of Manager shall not constitute an
assignment provided that the resulting entity is still an affiliate of the
Brandywine affiliates which own an interest in Owner.
7.15 Headings. The captions and headings in this Agreement are for
convenience only and shall not affect the construction of any provision of this
Agreement.
7.16 Counterparts. This Agreement may be executed in any number of
counterparts and each shall be considered an original and together they shall
constitute one Agreement.
7.17 Entire Agreement. This Agreement sets forth the entire Agreement
and understanding between the parties regarding the subject matter of this
Agreement and supersedes all prior agreements and understandings.
7.18 Policy Respecting Business Ethics. Owner is committed to the
highest standard of ethics in its business activities and has a policy
respecting the actions of all of its employees in connection therewith. Owner
requires that such policy apply, to the extent appropriate, to consultants
performing work on its behalf. A statement of such policy is contained in
Exhibit F attached hereto ("the Policy"). Manager agrees to comply with terms of
the Policy and further agrees that any breach of such terms shall constitute a
breach of this Agreement.
7.19 Prevailing Party. In the event of any dispute between the parties
which results in litigation, the prevailing party in such litigation shall be
entitled to attorney's fees from the other party.
EXECUTED to be effective as of the date first entered above.
OWNER: MANAGER:
BRANDYWINE INDUSTRIAL. BRANDYWINE REALTY SERVICES
PARTNERSHIP, L.P. CORPORATION
By: By: /s/ Gerard H. Sweeney
---------------------------------- ----------------------------------
Name: Name: Gerard H. Sweeney
-------------------------------- --------------------------------
Title: Title: President and CEO
------------------------------- -------------------------------
-31-
<PAGE>
EXHIBIT A
SCHEDULE OF THE PROPERTIES
2250 Cabot Boulevard
650 Clark Avenue
201/221 Kings Manor
741 Third Avenue
820 Third Avenue
780 Third Avenue
7055 Ambassador Drive
6670 Grant Way
6690 Grant Way
6755 Snowdrift Road
6845 Snowdrift Road
7020 Snowdrift Road
6810 Tilghman Street
Highlands Business Park
International Harvester Building
4612 Navistar Drive
1510 Gehman Road
A-1
<PAGE>
EXHIBIT B
---------
GUIDELINES FOR SHORT-TERM INVESTMENT
OF OWNER'S FUNDS
------------------------------------
To assist the Manager in carrying out its duty of maximizing all potential
revenue to Owner and minimizing expenses and losses to Owner according to
Articles 2.1 and 2.6 of the Management Agreement, the following guidelines will
be followed for short-term investment of Owner's funds.
1. The investment objective of short-term investments is to produce a return
that equates to prevailing short-term rates commensurate with the duration
and quality of the investment specified below.
2. All idle funds of the Properties shall be invested in short-term investment
vehicles as provided below.
3. Acceptable Money market investments shall include:
a. Money Market Rate Checking/Savings Depository Accounts, Certificates of
deposit, banker's acceptances, and time deposits of banks with a minimum
of $1.5 billion capitalization and that have a quality rated A or better
by Moody's or Standard and Poor's,
b. Commercial paper provided it, or the guarantor, is rated A1 or P1,
c. Money market mutual finds that are SEC registered 2(a)-7 and AAA rated by
Moody's and Standard and Poor's and are collateralized with U.S.
Treasuries or agency securities or are secured by repurchase agreements
and whose investments guidelines are substantially equivalent to and are
consistent with the Owner's overall short-term investment criteria.
d. The short-term investment of Owner's funds by any Manager shall be
suitably diversified as to assets and accounts so that an adversity
affecting a particular sector will not impact a substantial share of the
total funds invested.
B-1
<PAGE>
EXHIBIT C
REQUIRED REPORTS AND SUPPORTING DOCUMENTATION
(1) A profit and loss statement showing the results of operations of
the Properties for the preceding reporting period and for the fiscal/calendar
year to date;
(2) a balance sheet of the Properties as of the end of the preceding
reporting period;
(3) a variance report describing the reason for each account line item
variance that meets or exceeds ten percent (10%) and $1,000, unless otherwise
designated by Owner, whether such variance is negative or positive;
(4) a calculation of the management fee;
(5) an owner's statement in a format to be supplied by Owner showing
collections, uncollectible items and charges;
(6) a general ledger;
(7) a cash receipts and disbursement journal;
(8) copies of adjusting entries;
(9) copies of all invoices indicating date paid, amount paid, and check
number, (as requested);
(10) all original bank statements and bank reconciliations;
(11) an aged schedule of delinquent accounts receivable by tenant and
type of charge;
(12) a list of unpaid bills and accrued expenses;
(13) time sheets for roving maintenance personnel and the payroll list
showing the occupation of and wages paid to applicable roving maintenance
personnel, if any, and to all on-site employees hired by Manager for the purpose
of performing its duties under this Agreement, (as requested);
(14) an explanation of tenant credits;
C-1
<PAGE>
(15) a list of security deposits with an indication of any changes
thereto since last month's report and a security deposit account reconciliation
if such deposits are retained in a separate bank account;
(16) a construction report, if applicable;
(17) the current rent roll and tenant summary;
(18) a marketing and leasing report including among other things a
vacancy report and lease expiration report and a calculation of leasing fees and
a summary of each new lease that includes the lease term, rental rate, expense
reimbursement information, rental incentives, options, CPI increases, security
deposit, and any other pertinent information; and
(19) any other statements for the Properties reasonably requested by
Owner.
C-2
<PAGE>
EXHIBIT D
---------
TABLE OF CONTENTS TO OWNER'S REQUIRED BUDGET FORMAT
---------------------------------------------------
D-1
<PAGE>
EXHIBIT E
---------
SCHEDULE OF BASE MANAGEMENT FEE PERCENTAGES
-------------------------------------------
Existing Leases:
Single Tenant Properties - 1%
Multi-Tenant Properties - 3%
New Leases:
Single Tenant Properties - 1%, except that if the tenant is responsible
for a higher management fee on a pass-through basis, then such higher amount
Multi-Tenant Properties - 3%
E-1
<PAGE>
EXHIBIT F
---------
ETHICS POLICY RESPECTING CONSULTANTS
------------------------------------
Owner has always had a commitment to the highest ethical and moral standards.
Its business is based on trust and a reputation for fair and honest dealing.
Owner has a formal ethics policy which governs the activities of its directors,
officers and employees. As Owner expands and diversifies, its interests are
frequently served by consultants who perform a variety of tasks for or on
Owner's behalf. It is felt that these consultants (including but not limited to
Manager) should adhere to the same ethical standards as Owner's officers,
directors, and employees. While it is not possible to cover every conceivable
circumstance which may give rise to ethical questions, nor to mandate high
standards of morality and business behavior, certain basic tenets of Owner's
policy can be set forth for guidance in an effort to mutually nurture the
business climate Owner expects. These are as follows:
- No payments, loans, employment or promises of employment, investment
opportunities, vacation trips, gifts or entertainment (other than entertainment
conforming to generally accepted business practices or gifts of nominal value
not reasonably calculated to influence a decision, in an amount not to exceed
$100) may be offered to or accepted by any director, officer, or employee of
Owner, Owner's Representative, or Manager, or a relative of such a person as a
condition of the initial or continued employment of a consultant working for
Owner.
- No payments, loans, employment or promises of employment, investment
opportunities, vacation trips, gifts or entertainment (other than entertainment
conforming to generally accepted business practices or gifts of nominal value
not reasonably calculated to influence a decision, in an amount not to exceed
$100) may be offered to or accepted by any government official or a relative of
such official with whom a consultant must deal in connection with any activity
being performed by Owner.
- No consultant may employ or recommend any party for work in
connection with a project or development of Owner where the party's compensation
is to be paid by Owner or reimbursed directly by Owner, on the basis of any
kickback payment or fee sharing arrangement, nor may a consultant employ or
recommend any such party, if that consultant has any ownership interest in or
has a relationship as a debtor or creditor with that party without Owner's
written consent.
- No consultant may make any loan, donation, contribution, or payment
to a political party, candidate, or political action committee or for any
activity which is sponsored by or for a political party, candidate or political
action committee, for or on behalf of Owner or any project or development in
which it is engaged nor shall a consultant reimburse any individual who does.
(Nothing contained in this tenet shall prohibit a consultant from taking any of
the above actions in his, her or its name, provided that the action is
exclusively for the consultant's benefit and is not an indirect means of
accomplishing one of the prohibited actions).
F-1
<PAGE>
- No consultant shall use or appropriate materials, property,
equipment, systems and procedures (if proprietary in nature) owned or to be
acquired by Owner for their own personal financial gain except to the extent
necessary for the performance of their duties for Owner.
- No consultant shall use or appropriate information about Owner's
clients, tenants, customers, borrowers, or employees for any purpose whatsoever
without Owner's prior written consent.
- No consultant shall engage in any activity or conduct in connection
with an Owner project or development which improperly reduces or eliminates
competition, nor shall any sales, purchases or rental of materials, services, or
property for, on, or with respect to an Owner project or development be made on
the basis of tying such sale, purchase, or rental to any service or product to
Owner or the consultant, or on the basis of a reciprocal arrangement with Owner
or the consultant.
- No consultant is expected to engage in any conduct which is unlawful
or improper by conventional standards, whether or not requested to do so by
anyone employed by or working for Owner in some other capacity, in any work done
for Owner on any project or development.
- No consultant shall use information which is not publicly known and
is gained as a result of consultant's work for Owner, for its own personal
financial gain or that of others with whom the consultant has any relationship,
and shall comply with respect to all federal and state statutes respecting
trading in the securities of entities having a relation to an Owner development
or project as a result of confidential information gained while working for
Owner.
F-2
<PAGE>
EXHIBIT G
---------
SIGNATURE BLOCK FOR CONTRACTS
-----------------------------
BRANDYWINE REALTY SERVICES
CORPORATION
By:
-------------------------------------------
As property manager of [insert name of
Property]
G-1
<PAGE>
Commercial Leasing Agreement
By and Between
BRANDYWINE INDUSTRIAL PARTNERSHIP, L.P.
("Owner")
and
BRANDYWINE REALTY SERVICES CORPORATION
("Manager")
for
PROPERTIES SCHEDULED ON EXHIBIT A
("Properties")
COMMERCIAL LEASING AGREEMENT
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
0.2 Owner................................................................................................1
0.3 Broker...............................................................................................2
0.4 Property.............................................................................................2
0.5 Commission...........................................................................................2
0.6 Term ................................................................................................2
0.8 Key Agents...........................................................................................2
2. EXCLUSIVE BROKER; TERM...................................................................................2
2.1 Engagement...........................................................................................2
2.2 Leasing Only.........................................................................................2
3. COMMISSION.....................................................................................................2
3.1 During Term.........................................................................................2
3.2 After Expiration of Term or Earlier Termination of Agreement........................................2
3.3 No Commission.......................................................................................3
3.4 No Additional Payments..............................................................................3
4. DUTIES AND AUTHORITY OF BROKER...........................................................................4
4.1 Leasing.............................................................................................4
4.2 Key Agents..........................................................................................4
4.3 Deposits............................................................................................4
4.4 Advertising.........................................................................................4
4.5 Monthly Report......................................................................................4
4.6 Marketing Plan......................................................................................5
4.7 Limitation on Authority.............................................................................5
4.8 No Representations..................................................................................5
4.9 Professional Consultants............................................................................5
4.10 Insurance..........................................................................................5
5. INDEMNITY................................................................................................6
6. DEFAULT; TERMINATION.....................................................................................6
6.1 For Cause...........................................................................................6
6.2 Without Cause.......................................................................................6
6.3 Other Agreement.....................................................................................7
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
7. REPRESENTATIONS AND WARRANTIES OF BROKER.................................................................7
7.1 Organization........................................................................................7
7.2 Manner of Performance...............................................................................7
7.3 Authorization.......................................................................................7
7.4 Validity............................................................................................7
7.5 Licenses............................................................................................7
7.6 Conflicts of Interest...............................................................................7
7.7 Independent Contractor..............................................................................8
7.8 Year 2000 Compliance................................................................................8
7.9 Cooperation.........................................................................................8
7.10 Unrelated Business Taxable Income...................................................................8
8. MISCELLANEOUS............................................................................................9
8.1 Owner's Representative..............................................................................9
8.2 Discrimination......................................................................................9
8.3 Entire Agreement....................................................................................9
8.4 Successors; Assignment..............................................................................9
8.5 Attorneys' Fees.....................................................................................9
8.6 Governing Law......................................................................................10
8.7 Headings...........................................................................................10
8.8 Notices............................................................................................10
8.9 Construction.......................................................................................10
8.10 Number; Gender.....................................................................................10
8.11 Time is of the Essence.............................................................................10
8.12 Exhibits...........................................................................................10
8.13 Other Brokers......................................................................................10
8.14 Confidentiality....................................................................................11
8.15 No Personal Liability..............................................................................11
8.16 Inquiries and Offers to Purchase Property..........................................................11
</TABLE>
Exhibit A Schedule of Properties
Exhibit B Compensation
Exhibit C Schedule of Key Agents
Exhibit D Lease Form
Exhibit E Form of Monthly Report
<PAGE>
COMMERCIAL LEASING AGREEMENT
THIS COMMERCIAL LEASING AGREEMENT (the "Agreement") is made as of June
17, 1999, between BRANDYWINE INDUSTRIAL PARTNERSHIP, L.P., a Delaware limited
partnership ("Owner"), and BRANDYWINE REALTY SERVICES CORPORATION, a
Pennsylvania corporation ("Broker").
RECITALS
A. Owner owns those certain parcels of land scheduled on Exhibit
A to this Agreement, the improvements and fixtures thereon, and all
appurtenances thereto (said land, improvements, fixtures and appurtenances and
any personal property of Owner on said land or in such improvements being herein
called individually a "Property" and collectively the "Properties").
B. Broker has experience in leasing space in buildings similar to
that comprising the Properties and its personnel possess the skills and
experience necessary for the efficient leasing of space in the buildings
comprising the Properties.
C. Owner desires to engage Broker to manage the leasing
operations of the Properties consistent with Owner's objective of maximizing the
Properties' economic value. Broker desires to accept such engagement.
D. Broker is an affiliate of Brandywine Operating Partnership,
L.P. and Brandywine Realty Trust (collectively known as "Brandywine").
Brandywine or other affiliates of Brandywine have an ownership interest in
Owner. The rights of Broker hereunder, and under that certain Commercial
Property Management Agreement of even date herewith (the "Management Agreement")
between Owner and Manager, are coupled with an interest and are intended to
continue for the duration of Brandywine's interest in Owner.
NOW, THEREFORE, in consideration of the foregoing and of the full and
faithful performance by Broker of all the terms, conditions, and obligations
imposed upon Broker hereunder, Owner and Broker agree as follows:
1. BASIC TERMS. This Paragraph 1 contains the basic terms of this
Commercial Leasing Agreement (the "Agreement") between the Owner and the Broker
named below. All other Paragraphs of this Agreement are to be read in
conjunction with the basic terms contained in this Paragraph 1.
0.1 Date: June __, 1999
1.2 Owner: Brandywine Industrial Partnership, L.P.
c/o INVESCO Realty Advisors, Inc.
One Lincoln Centre, Suite 700
5400 LBJ Freeway, LB 2
Dallas, Texas 75240
Attn: Alan Green
Asset Manager
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1.3 Broker: Brandywine Realty Services Corporation
14 Campus Boulevard, Suite 100
Newtown Square, PA 19073
Attn: John M. Adderly, Jr.
With a notice copy to General Counsel
1.4 Properties: The real property scheduled on Exhibit A
with all improvements located thereon.
1.5 Commission: See Exhibit B attached hereto and Paragraphs
3 and 6 hereafter.
1.6 Term: See Section 2.3
1.7 Key Agents: See Exhibit C attached hereto
2. EXCLUSIVE BROKER; TERM.
2.1 Engagement. Owner hereby engages Broker as Owner's exclusive
real estate broker in connection with the leasing of the Properties for the term
set forth in Section 2.3, unless sooner terminated pursuant to the provisions
hereof. Broker accepts such engagement and agrees to use its best efforts to
lease the Properties and every part thereof during the Term of this Agreement.
Owner agrees to cooperate with Broker in leasing the Properties and to refer to
Broker all inquiries of anyone interested in the Properties.
2.2 Leasing Only. This Agreement relates to leasing only and
Broker shall have no right to recover any commission or other fee hereunder
relating to any sale of the Properties or any portion thereof.
2.3 Term. This Agreement shall commence on the date of this Agreement
and, unless sooner terminated as set forth below, shall continue for so long as
Owner owns any of the Properties and Brandywine or an affiliate of Brandywine
holds its ownership interest in Owner, unless earlier terminated in accordance
with Section 6.1 hereof.
3. COMMISSION.
3.1 During Term. Owner shall pay Broker the commission set forth
in Paragraph 1.5, if, during the term: (i) a third party tenant satisfactory to
Owner is procured by Broker, Owner, or any third party; (ii) such tenant and
Owner enter into a written lease, upon terms and conditions satisfactory to
Owner in its sole discretion, covering all or part of any of the Properties; and
(iii) such lease is fully executed by Owner and such tenant (together with any
lease guaranties required by Owner).
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3.2 After Expiration of Term or Earlier Termination of Agreement.
Owner shall also pay Broker a commission if, within ninety (90) days after the
expiration of the Term or earlier termination of this Agreement, any Property is
leased to (or Owner enters into a contract to lease the Property thereafter
resulting in a lease of the Property with) any person or entity (i) with whom
Broker is involved in pending and active negotiations for a lease of space in
the Property at the time of termination or expiration of the Term of this
Agreement, provided further that Broker continues to have through the closing an
active role in the negotiation and closing of the lease (Owner agrees not to
exclude Broker or prohibit Broker from continuing in an active role), or (ii)
whom Broker has introduced to the Properties. Broker shall as a condition
precedent to its rights and Owner's obligations hereunder, submit a written list
of such persons or entities with whom Broker claims to have pending and active
negotiations or to have introduced to the Properties (containing full and
complete names, addresses, telephone numbers and primary contact persons,
together with copies of any written proposals to and from such parties) to Owner
no later than five (5) days following the expiration of the Term or earlier
termination of this Agreement. If Broker fails to submit that list within such
time period, Broker shall not be entitled to any commission under this Paragraph
3.2 or otherwise. Notwithstanding anything to the contrary contained herein, if
another licensed real estate broker claims a commission with respect to any
lease under this Paragraph 3.2, Owner's sole obligation regarding the payment of
such commission shall be to pay such commission at the joint direction of Broker
and such other broker or in accordance with the final decision of a court of
competent jurisdiction.
3.3 No Commission. Notwithstanding Paragraphs 3.1, 3.2 or any
other provisions hereof, Broker shall not be entitled to any commission: (i) in
the event of a default by Broker under this Agreement which is material and
adverse and which has not been cured within thirty (30) days after notice or
(ii) in the event of a lease, at any time, of all or any part of the Property to
a venture, partnership or other entity in which Owner is a principal or
beneficiary or has an ownership interest, or to any affiliate of Owner, or to
any of their successors or assigns.
3.4 No Additional Payments. The compensation to Broker provided
herein includes all costs, taxes, fees and charges, and no additional payments
shall be made by Owner to Broker in connection with any lease, except that Owner
shall be liable for the costs of any professional consultants engaged pursuant
to Section 4.9.
3.5 Earnout Provisions. With respect to each of the Properties
known as 6755 Snowdrift Road, 6690 Grant Way and 7055 Ambassador Drive, Owner
will pay Broker a one-time additional earnout fee of $200,000 for each of these
three Properties which meets or exceeds the Property's NOI Target on or before
the second anniversary date of this Agreement. The NOI Target for each Property
is set forth below, and shall be calculated as the annualized net operating
income from the Property based on leases with tenants in occupancy, and computed
in a manner consistent with the budget and reporting provisions of the
Management Agreement between Owner and Broker. The NOI Targets are as follows:
6755 Snowdrift Road $500,000
6690 Grant Way $350,000
7055 Ambassador Drive $615,000
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4. DUTIES AND AUTHORITY OF BROKER. Owner shall from time to time
prescribe for use by Broker in connection with its duties hereunder lease rates,
terms, concessions, allowances, and forms to apply regarding the leasing of
space in a Property. Attached hereto as Exhibit D is the lease form currently
required to be used at the Properties by Owner. Broker shall use all of such
information and materials then prescribed for use in connection with its efforts
hereunder. Broker shall endeavor to keep the Properties fully leased and shall
perform the following duties:
4.1 Leasing. Broker shall, except with respect to Manager Leasing
Rights set forth above, negotiate all leases and all renewals, extensions, and
amendments of leases covering space in the Properties. Broker shall endeavor to
obtain and provide to Owner a current financial statement relating to each
prospective tenant, and shall complete Owner's lease analysis form, which shall
be submitted to Owner with Broker's recommendation regarding Owner's execution
of a lease with such prospective tenant. Owner reserves the right to determine
all terms, conditions, and provisions of any lease and to reject any lease in
its discretion. Broker shall perform other reasonable standard leasing
activities upon Owner's request.
4.2 Key Agents. If there are any Key Agents designated in
Paragraph 1.8, then Broker shall assign those Key Agents to be primarily
responsible for performing the duties of Broker hereunder during the entire Term
hereof.
4.3 Deposits. Broker is authorized to conditionally accept a
deposit from any prospective tenant in connection with the presentation of a
proposed written offer to Owner, but Owner shall not thereby incur any liability
or obligation to such proposed tenant, Broker, or any other third party.
4.4 Advertising. Broker is authorized to advertise, at its sole
expense, the Properties and to place "For Lease" signs on the Properties,
subject to Owner's reasonable control over the type and location of such signs.
Owner and Broker agree to cooperate so as to keep each other informed prior to
the publication or distribution of any publicity releases relating to the
Properties. All advertisements and all such releases prepared by Broker shall be
subject to prior written approval by Owner. Broker shall not publish, display or
distribute any such advertisement or release without Owner's prior written
consent. Advertising and promotional materials shall be prepared in full
compliance with federal, state, and municipal laws, ordinances, and regulations
pertaining to fair housing or otherwise affecting the leasing and/or advertising
of the Properties.
4.5 Monthly Report. Broker shall prepare and furnish to Owner and
Owner's property manager, as soon as possible after the end of each month during
the Term and in no event later than the twenty-fifth (25th) day of the month, a
monthly report, in reasonable detail, summarizing Broker's activities hereunder
and the results obtained therefrom for the previous month. The report shall be
in the form attached hereto as Exhibit E or such other form as may be reasonably
acceptable to Owner and broker and shall include such information regarding
advertising, people contacted, expenses incurred, property showings and related
matters as Owner reasonably requests. The foregoing information shall be
submitted both in a consolidated format as to include all of the Properties
covered hereby as well as in a separate or individual format with respect to
each Property.
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4.6 Marketing Plan. Within thirty (30) days of the date of this
Agreement, Broker in cooperation with the property manager for the Properties
shall prepare and provide to Owner a marketing plan for the leasing of space
within the Properties. Said marketing plan shall be in a form reasonably
acceptable to Owner. Broker shall update such marketing plan at least annually
and shall submit such updated plan to Owner and the property manager of the
Properties no later than thirty (30) days after the property manager's request.
Broker shall make whatever changes may be requested by Owner in any marketing
plan submitted by Broker. In its leasing of space within the Properties, Broker
shall perform substantially pursuant to the marketing plan then in effect.
4.7 Limitation on Authority. Notwithstanding any provision to the
contrary contained herein, Broker expressly acknowledges, confirms and agrees
that it is acting as an independent contractor and not as Owner's agent.
Therefore, Broker shall be solely responsible for complying with all applicable
laws and regulations with respect to its employees, including but not limited
to, worker's compensation, hours of work, wages, social security, vacation time,
sick leave, unemployment insurance, the Immigration Reform and Control Act of
1986, working conditions and any other employer-employee related issues. Broker
has no authority to enter into, execute, make or acknowledge any contract,
covenant, agreement, lease or representation pertaining to the Properties
without the express prior written approval of Owner. Broker agrees in all oral
and written communications with prospective tenants to advise prospective
tenants that any and all lease proposals are proposals only and are contingent
upon the negotiation and final execution by Owner and by the prospective tenant
of a mutually acceptable and definitive lease embodying the full terms of the
agreement. Furthermore, Broker acknowledges that all oral and written lease
offers received by Broker shall be promptly reduced to writing and delivered to
Owner and shall not be binding or obligatory on Owner or create any liability on
Owner until Owner accepts such offer and evidences such acceptance by the
execution of a written contract containing all the material terms relevant
thereto.
4.8 No Representations. Broker shall make no representations or
warranties of any kind, express or implied, concerning the Properties or any
other matter without the prior written consent of Owner.
4.9 Professional Consultants. In regard to the marketing and
leasing of the Properties, Broker will utilize the services of such attorneys,
accountants and financial professionals as Owner may from time to time
designate.
4.10 Insurance Broker agrees to carry Comprehensive General
Liability Insurance (including Contractual Liability) with a minimum limit of
$2,000,000 Comprehensive Crime Insurance with a minimum limit of $500,000,
Employer's Liability Insurance with a minimum limit of $300,000 (combined single
limit) and statutory worker's compensation insurance for the protection of the
interest of Owner and Broker. In each such policy of insurance, Broker agrees to
designate Owner and Owner's Representative (as defined in Section 8.1) as
additional insured's along with Broker. Each such policy of insurance shall be
in a form acceptable to Owner. A certificate of each policy issued by the
carrier shall be delivered promptly to Owner by Broker. Each policy shall
require the carrier to give Owner at least thirty (30) calendar days prior
written notice of cancellation. It is understood and agreed, with respect to any
insurance provided hereunder and covering Owner's interests, that Broker shall
be solely responsible for the payment of all premiums thereon and the same shall
not be a reimbursable expense paid by Owner.
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5. INDEMNITY. Owner shall indemnify, hold harmless and defend Broker
from all losses, damages, costs, claims and liabilities (including without
limitation court costs and reasonable attorneys' fees relating thereto) caused
solely by any materially incorrect information supplied by Owner concerning the
Properties. Broker shall indemnify, hold harmless and defend Owner from all
losses, damages, costs, claims and liabilities (including without limitation
court costs and reasonable attorneys' fees relating thereto) arising out of or
related to (a) any intentional misrepresentation of material information , or
any failure to disclose material information known to Broker, regarding the
Properties to a prospective tenant by Broker or any agent or representative of
Broker; (b) any material adverse fact known by Broker relating to any tenant or
proposed transaction which Broker fails to disclose to Owner; (c) any material
and adverse breach of or default under this Agreement by Broker; and/or (d) any
act by Broker inconsistent with or outside the scope of this Agreement and the
limited authority conferred hereby. Broker shall pay any and all costs, taxes,
fees, and charges that may be imposed by others on the solicitation, listing,
brokerage, advertising and negotiating of the transactions contemplated by this
Agreement.
6. DEFAULT; TERMINATION.
6.1 For Cause. If either party fails to fully and timely perform
any covenant set forth herein or fails to satisfy any condition specified
herein, the consequences of which are material and adverse, or if any
representation or warranty by such party is determined to be false, misleading,
or erroneous in any material respect (a "Default"), then the party not in
default shall have the right to terminate this Agreement if the default is not
cured within thirty (30) days after written notice thereof to the defaulting
party (unless the default is non-curable, in which case no cure period shall
exist). The dissolution, termination, merger, consolidation, reorganization,
bankruptcy, insolvency, or assignment for the benefit or the creditors of
Broker, or termination or suspension of Broker's real estate broker's license,
or cessation on Broker's part to continue to do business shall effect an
immediate termination of this Agreement without notice. In the event of a
termination for a Default, Owner shall not be liable to Broker for any
commission or other fee or expense hereunder; otherwise, Owner shall not be
liable to Broker for any commission or other fee hereunder except to the extent
set forth in Paragraph 3.2.
6.2 Termination Upon Sale. This Agreement shall automatically
terminate upon payment in full of all obligations to Broker hereunder and: (i)
the termination of the Investment Management Agreement between the Owner's
Representative and an affiliate of Owner; or (ii) the consummation of any sale
or other disposition of the Properties by Owner, and as to any Property, the
consummation of a sale or other disposition of that Property. In the event of a
termination of this Agreement as to one or more of the properties, Owner shall
not be liable to Broker for any commission or other fee hereunder with respect
to the Property or properties in question, except to the extent set forth in
Paragraph 3.2. Notwithstanding the foregoing, Owner may relieve itself of the
obligation to pay any further commission to Broker under this Agreement if Owner
shall cause the new owner of the Properties or its management agent to assume in
writing the outstanding obligations of Owner under this Agreement. No new owner
shall have any obligation or liability hereunder unless it has assumed the same
in writing.
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6.3 Other Agreement. If Owner has engaged Broker to act in a
separate capacity as Owner's independent contractor or agent with respect to the
Properties (for example, as sales broker or property manager) pursuant to a
separate or additional agreement, then any default by Broker under any such
separate or additional agreement shall be a default hereunder; and in such event
of default, termination shall be concurrent with the effective termination date
under such agreement, notwithstanding anything to the contrary herein.
7. REPRESENTATIONS AND WARRANTIES OF BROKER. To induce Owner to enter
into this Agreement, Broker makes the following representations and warranties,
which shall survive the execution and expiration or earlier termination of this
Agreement:
7.1 Organization. Broker is duly organized, validly existing and
in good standing under the laws of and is qualified to do business in the state
where the Properties are located. Broker has all power and authority required to
execute, deliver and perform this Agreement.
7.2 Manner of Performance. Broker is experienced in the business
of leasing space in real property similar to the Properties in the states in
which the Properties are located.
7.3 Authorization. The execution, delivery and performance of this
Agreement has been duly authorized by all necessary action on the part of
Broker.
7.4 Validity. This Agreement constitutes a legal, valid and
binding agreement of the Broker enforceable against Broker in accordance with
its terms except as limited by bankruptcy, insolvency, receivership and similar
laws of general application.
7.5 Licenses. During the entire term of this Agreement Broker
shall cause all persons performing licensable activities to have and to maintain
in full force and effect all licenses which are required by applicable law, and
all permits necessary to perform its obligations under this Agreement, and shall
pay all taxes, fees, or charges imposed on the business engaged in by Broker
hereunder.
7.6 Conflicts of Interest. Owner acknowledges that Broker is the
leasing agent for other properties which may compete with the Properties and
which are owned by Brandywine or affiliates of Brandywine. Attached hereto as
Exhibit F is a current list of such other competing properties. Broker will
provide Owner with an updated Exhibit F from time to time as Broker either
becomes the broker for other competing Brandywine properties or ceases to be the
broker for properties on Exhibit F. Broker acknowledges that an affiliate of
Broker intends to enter into a joint venture with an affiliate of Owner and that
the joint venture has a first priority right to development and acquisition of
industrial properties by Broker's affiliate in the states of Pennsylvania, New
Jersey and Maryland.
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If requested by Owner, Broker will provide to Owner nonproprietary
market information concerning the competing properties on the most current
Exhibit F; provided, however, that this shall not require Broker to disclose to
Owner confidential information about such properties.
7.7 Independent Contractor. Broker's status under this Agreement
is that of an independent contractor and not as an agent or employee of Owner.
7.8 Year 2000 Compliance. Broker shall use commercially reasonable
efforts to assure that all computer systems and programs which Broker will use
to create the monthly reports under this Agreement shall properly and accurately
account for the transition from the twentieth century to the twenty-first
century, and no data, calculation, process, or application will be rendered
lost, inaccessible, or inaccurate as a result of such transition. Broker shall
make no representations or warranties regarding the compliance of the Properties
with Year 2000 issues, without Owner's consent.
7.9 Cooperation. Broker shall cooperate with Owner and Owner's
property manager in connection with space planning to accommodate tenants,
installation of tenant finish, and tenant move-in arrangements. Broker shall
also cooperate with Owner's property manager in the preparation of annual
budgets, including budgeting of lease-up of the Properties, tenant improvement,
and leasing costs.
7.10 Unrelated Business Taxable Income. In its review process,
Owner shall be responsible for making its own determination of whether an action
will result in the allocation of unrelated business taxable income under
Internal Revenue Code Section 512, as amended from time to time, to Owner or to
any direct or indirect partner of Owner. Broker shall not be responsible for
making any such determination on Owner's behalf. Broker acknowledges that Owner
has informed Broker of certain restrictions and prohibitions on leasing
arrangements that could cause Owner to recognize unrelated business taxable
income. Broker will endeavor not to bring forward to Owner any transaction which
contains or involves any of the following:
(1) the determination of the amount of rent is
expressed in whole or in part as a percentage of the income or
profits derived by the tenant from the space leased (other
than an amount based on a fixed percentage or percentages of
gross receipts or gross sales);
(2) more than ten percent (10%) of the rent is
attributable to personal property, determined at the time the
personal property is placed in service and by reference to
relative adjusted bases of the personal and other property
leased to the tenant (and not by reference to any allocation
contained in the lease documents);
(3) services are rendered to the tenant or occupant
primarily for the tenant's convenience and which are other
than those usually or customarily rendered in connection with
the rental of space for occupancy only; or
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(4) the tenant leases only personal property; or:
(5) the Properties become stock in trade or other
property of a kind that would properly be includable in
inventory if on hand at the close of the taxable year; or
(6) the Properties become property held primarily
for sale to customers in the ordinary course of a trade or
business.
8. MISCELLANEOUS.
8.1 Owner's Representative. Owner may designate one (1)
representative to serve as Owner's Representative in all dealings with Broker
hereunder. Whenever the approval or consent or other action of Owner is called
for hereunder, such approval, consent, or action shall be processed through the
Owner's Representative unless Owner notifies Broker otherwise in writing. The
exclusive Owner's Representative shall be Alan Green Invesco Realty Advisors,
Inc. Such representative may be changed at the discretion of Owner, at any time,
by a writing delivered to Broker. Notwithstanding the above, Owner's
Representative is acting as Owner's investment advisor and not as Owner's agent.
8.2 Discrimination. Owner and Broker shall not refuse to display
or lease the Properties to any person because of race, color, religion, national
origin, sex, marital status or physical disability.
8.3 Entire Agreement. This Agreement constitutes the entire
agreement between Owner and Broker with respect to the matters set forth herein
and supersedes all prior discussions, negotiations and agreements, whether oral
or written. No amendment of this Agreement shall be valid or binding unless made
in writing and signed by both Owner and Broker.
8.4 Successors; Assignment. This Agreement shall be binding upon
and inure to the benefit of the parties hereto and their permitted successors
and assigns. This Agreement may not be assigned by either party hereto without
the other party's prior written consent, which may be withheld in such party's
sole discretion. Notwithstanding the foregoing, Owner has the right to assign
this Agreement without Broker's consent (i) to an affiliate provided that Owner
remains financially liable for the performance of its affiliate hereunder or
(ii) to any entity for which Invesco Realty Advisors acts as investment advisor
and which is of comparable financial capability as Bailard, Biehl & Kaiser
Properties II, Inc., in which latter event Owner shall thereafter have no
further obligation or liability hereunder. A corporate merger or acquisition of
Broker shall not constitute an assignment provided that the resulting entity is
still an affiliate of the Brandywine affiliates which own an interest in Owner.
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8.5 Attorneys' Fees. If either party hereto shall institute any
action or proceeding against the other party hereto relating to this Agreement,
the successful party in such action or proceeding shall be entitled to recover
from the unsuccessful party all fees and expenses incurred in connection
therewith, including, without limitation, court costs, reasonable attorneys'
fees, and related expenses.
8.6 Governing Law. This Agreement shall be governed by, and
construed in accordance with, the laws of the Commonwealth of Pennsylvania.
8.7 Headings. The paragraph headings in this Agreement are
inserted for convenience only and are not intended to be used in construing the
substance of any of the provisions of this Agreement.
8.8 Notices. All notices, demands requests, approvals and other
communications required or permitted by this Agreement shall be in writing and
shall be deemed to have been given on the earlier of the date when presented
personally or otherwise delivered (whether by commercial delivery service, mail,
or otherwise) or on the third (3rd) day after the date when deposited in a
regularly maintained mail receptacle of the United States Postal Service,
postage prepaid, registered or certified, return receipt requested, addressed to
Owner or Broker, as the case may be, at its respective address set forth in
Paragraph 1 of this Agreement, or at such other address as Owner or Broker may
from time to time designate by written notice to the other party as herein
required. A copy of any notice sent to Owner shall be sent to Owner's
Representative.
8.9 Construction. If any of the provisions of this Agreement shall
for any reason be held to be invalid, illegal or unenforceable, such invalidity,
illegality, or unenforceability shall not affect any other provisions hereof,
and this Agreement shall be construed as if such invalid, illegal, or
unenforceable provision had never been contained herein.
8.10 Number; Gender. Whenever used herein, the singular number
shall include the plural, and the plural shall include the singular, and the use
of any gender shall be applicable to all genders.
8.11 Time is of the Essence. Time is of the essence in each
provision of this Agreement.
8.12 Exhibits. All exhibits referred to in this Agreement are
incorporated herein by this reference.
8.13 Other Brokers. Broker is not authorized and empowered to
engage any other realtor, broker, or agent under or in connection with this
Agreement without the prior specific approval of Owner; provided, however,
Broker agrees to cooperate with other realtors, brokers, or agents in
endeavoring to lease the Properties, and the amount of the commission provided
to be paid hereunder by Owner shall constitute the entire amount which, in the
absence of an express written agreement of Owner to the contrary, Owner shall be
obligated to pay, jointly to Broker and such cooperating realtor, broker or
agent, with the division of such amount between Broker and such cooperating
realtor, broker or agent to be upon such basis specified in Exhibit B or, if no
division is so specified, then as they may agree. In the absence of the express
written agreement of Owner as specified in the proviso clause of the preceding
sentence, Broker agrees to protect and save Owner harmless from any liability to
any realtor, broker, or agent cooperating with or claiming under Broker.
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8.14 Confidentiality. All information and knowledge of the
Properties obtained by Broker from Owner or in the course of Broker's engagement
by Owner (the "Information") shall be kept confidential by Broker and shall not
be used by Broker for any purpose (including, without limitation, the marketing,
sale, or release thereof) other than as expressly permitted under this
Agreement. Owner acknowledges that the negotiation and enforcement of leases
(such as the calculation of CAM charges) will necessitate the disclosure by the
broker of certain elements of operating information respecting the Properties.
Otherwise, except as may be required by law, Broker will not disclose the
Information (or the fact of its existence) to any person other than employees of
Broker who have a need to know such information in connection with the
Properties and who are familiar with these confidentiality restrictions.
8.15 No Personal Liability.
BROKER, ITS DIRECTORS, SHAREHOLDERS, OFFICERS, EMPLOYEES, AGENTS AND
REPRESENTATIVES WILL LOOK SOLELY TO OWNER'S INTEREST IN THE PROPERTIES FOR
RECOVERY OF ANY JUDGMENT AGAINST OWNER OR OWNER'S REPRESENTATIVES ARISING OUT OF
THIS AGREEMENT.
IN NO EVENT SHALL EITHER PARTY HERETO, OR ANY DIRECT OR INDIRECT
PARTNER, MEMBER, SHAREHOLDER, BENEFICIARY, OWNER OR AFFILIATE THEREOF, OR ANY
OFFICER, DIRECTOR, EMPLOYEE, TRUSTEE, OR AGENT OF ANY OF THE FOREGOING OR ANY
AFFILIATE OR CONTROLLING PERSON THEREOF, BE LIABLE TO ANY INDEMNIFIED PARTY IN
CONTRACT, TORT OR OTHERWISE WITH RESPECT TO ANY INDIRECT, CONSEQUENTIAL, OR
EXEMPLARY DAMAGES ARISING FROM OR RELATING TO THIS AGREEMENT.
8.16 Inquiries and Offers to Purchase Property. This is not an
exclusive listing agreement. Broker shall promptly refer to Owner all inquiries
and offers to purchase the Properties. Broker shall not disclose information
regarding the terms of any pending or existing lease transaction or any other
Property information without the prior written approval of Owner. Broker will
not be entitled to and shall not accept any portion of a commission, override,
or referral fee associated with the sale of the Properties (regardless of
whether or not Broker is the procuring cause) from any person without the proper
written agreement of the Owner.
OWNER: BROKER:
BRANDYWINE INDUSTRIAL. BRANDYWINE REALTY SERVICES
PARTNERSHIP, L.P. CORPORATION
By: By: /s/ Gerard H. Sweeney
------------------ ------------------------------
Name: Name: Gerard H. Sweeney
----------------- ------------------------------
Title: Title: President and CEO
----------------- ------------------------------
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EXHIBIT A
TO COMMERCIAL LEASING AGREEMENT
SCHEDULE OF PROPERTIES
2250 Cabot Boulevard
650 Clark Avenue
201/221 Kings Manor
741 Third Avenue
820 Third Avenue
780 Third Avenue
7055 Ambassador Drive
6670 Grant Way
6690 Grant Way
6755 Snowdrift Road
6845 Snowdrift Road
7020 Snowdrift Road
6810 Tilghman Street
Highlands Business Park
International Harvester Building
4612 Navistar Drive
1510 Gehman Road
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EXHIBIT B
TO COMMERCIAL LEASING AGREEMENT
COMPENSATION
A. NEW LEASES:
Subject to the terms and conditions in Section B hereafter, commissions
shall be payable in accordance with the following payment schedule and
rates:
1. Payment Schedule of Commissions:
(a) One-half (1/2) upon execution of a lease by Owner
and the tenant.
(b) One-half (1/2) upon the actual occupancy and
commencement of rent by such tenant of the leased
premises.
2. Rates:
(a) Except as provided below, in all new leases not
involving third-party brokers, the commission rate
for Broker will be:
6% of the Commissionable Gross Rental Receipts for
the first year of the lease, 5% for the second year,
4% for the third and 3% for each year thereafter.
less the exclusions described in Paragraph B.1 below.
(b) Except as provided below, in all new leases involving
third-party brokers, the commission rate will be:
To Broker:
3% of the Commissionable Gross Rental Receipts for
the first year of the lease, 2.5% for the second
year, 2% for the third and 1.5% for each year
thereafter.
less the exclusions described in Paragraph B.1 below
and
To third-party brokers:
6% of the Commissionable Gross Rental Receipts for
the first year of the lease, 5% for the second year,
4% for the third and 3% for each year thereafter.
less the exclusions described in Paragraph B.1 below.
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It is agreed and understood that Owner shall have the
right, upon written notice to Broker, to separately
negotiate any commission paid to third-party brokers.
(c) The above payment schedule and rates are subject to
the following terms and conditions:
(i) Term of More than 10 Years: If a lease term
(including any and all renewal periods, whether by
virtue of a renewal option in the lease and/or a
renewal agreement or otherwise) is in excess of ten
(10) years, then no commission shall be paid for that
tenant's continued occupancy during any period
following the tenth (10th) anniversary of that
tenant's initial lease commencement date.
(ii) Renewals: If a lease for which a commission is
payable hereunder contains an option(s) to renew or
extend, and a lease term is renewed or extended
pursuant to such option, or if a current tenant
otherwise signs a renewal agreement and extends its
occupancy beyond the current expiration date of the
original lease, and the tenant commences payment of
regularly scheduled monthly base rental following the
expiration of all rental abatement, then subject to
Paragraph 2(c) hereof, Owner shall pay a leasing
commission with respect to the term of the extension
equal to three percent of the Commissionable Gross
Rental Receipts, and no other sums shall be owed with
respect to such lease. However, if a lease is
renegotiated or renewed to commence prior to the
expiration date of the original lease, the leasing
fee to Broker or third-party broker is a commission
equal to three percent calculated on the difference
between the income (Commissionable Gross Rental
Receipts) Owner would have received if the lease had
run its full term under its original terms and
conditions and the income (Commissionable Gross
Rental Receipts) Owner will receive for the duration
of the new lease under its new terms and conditions,
subject to Paragraph 2(c) hereof.
Expansions: If a tenant occupies additional space
pursuant to an option to expand contained in its
lease or otherwise and commences payment of regularly
scheduled monthly base rental following the
expiration of all rental abatement, then, subject to
Paragraph 2(c) hereof, Owner shall pay a leasing
commission with respect to the additional space equal
to what would otherwise be payable hereunder.
B-2
<PAGE>
B. TERMS AND CONDITIONS:
1. Commissionable Gross Rental Receipts: Commissionable Gross Rental
Receipts shall mean all fixed rents, common area maintenance reimbursements and
tax and insurance reimbursements actually collected in cash by Owner or its
property manager from tenants of the Properties. The following shall be excluded
from Commissionable Gross Rental Receipts under any lease:
(a) Escalations in excess of the original base rent for
each year, as stated in the lease, including, without
limitation, escalations resulting from increases in
ad valorem/real estate taxes, in operating expense
pass-throughs, and/or in the Consumer Price Index or
similar index resulting in a corresponding increase
to the base rental (if applicable).
(b) Rentals credited to any tenant by reason of lease
takeover of lease pick-ups and/or Owner take-back or
subleasing.
(c) Additional rentals for special tenant services above
and over Owner's customary tenant services.
(d) Any cost and/or amortization of above building
standard cost and/or special leasehold improvements,
which have been paid by Owner and which have been
added to the rental rate per lease agreement.
(e) Late payment charges.
(f) Payments for parking.
(g) Rentals payable upon continuation of a tenancy on a
month-to-month or statutory basis or any other
tenancy following the expiration or termination of
the lease.
(h) Percentage rental in the case of retail leases.
(i) Relocation allowances, cash credits, payments, tenant
inducements, deferments, or abatements of rent or
other concession items.
(j) Sums designated as or in the nature of "additional
rent" under the lease (including but not limited to
payments from tenant to landlord for utility cost
reimbursements), except as otherwise provided herein.
(k) Security deposits (including any amount necessary to
restore any security deposit after application of
same).
(l) Rent for services of facilities available to tenant
at locations other than the demised premises covered
by the lease.
B-3
<PAGE>
2. Cancellations: The leasing commission on the cancelable portion of a
lease term shall be deemed to be only contingently earned and payable.
Initially, a commission shall be payable only on the noncancelable portion of
the lease term, and such term shall apply for the purposes of calculating the
commission earned and payable. In the event the lease is not canceled, then the
contingent portion of the leasing commission shall be due and payable for the
remaining lease term. Additionally, if the lease is cancelled by the tenant and
the tenant pays Owner an amount equivalent to the unamortized tenant
improvements and leasing commissions as part of any termination fee, the
contingent portion of the leasing commission shall be due and payable to Broker.
3. Return of Commission: If and to the extent that the tenant or an
approved subtenant does not take occupancy under the terms of the lease, Broker
agrees to pay to Owner Broker's portion of the commission paid to Broker (which
is the amount of commission paid to Broker less any amounts paid to outside or
cooperating brokers). If the tenant or an approved subtenant takes occupancy of
less than all of the leased premises described in the lease, Broker agrees to
return to Owner a portion of commissions which may have been previously paid to
Broker, which portion shall be the fractional amount of the commission paid
relating to the fractional portion of the leased premises that are not occupied
by tenant (less any amounts paid to outside or cooperating brokers for such
fractional portion). In either event, if Broker has not yet made a payment to an
outside or cooperating broker and if Owner requests Broker to cooperate with
Owner in attempting to obtain a release from such outside or cooperating broker
without full payment of the agreed fee, Broker agrees that it will cooperate
with Owner's efforts.
B-4
<PAGE>
EXHIBIT C
TO COMMERCIAL LEASING AGREEMENT
SCHEDULE OF KEY AGENTS
New Jersey Properties: George Sowa and George Hasencz
Philadelphia Western Suburbs: Tony Nichols, Jr., David Niles and Ina Sargen
Philadelphia Northern Suburbs: Jeff DeVuono and Keith Oldt
Maryland Properties: N/A
Allentown Properties: Phil Schenkel
C-1
<PAGE>
DEVELOPMENT AGREEMENT
THIS DEVELOPMENT AGREEMENT (the "Agreement") is entered into this 17th
day of June, 1999 between INVESCO REALTY ADVISORS, INC. (the "Investor"), and
BRANDYWINE OPERATING PARTNERSHIP, L.P., a Delaware limited partnership
("Developer").
W I T N E S S E T H:
WHEREAS, pursuant to a Contribution Agreement dated June 8, 1999 (the
"Contribution Agreement") Developer, Nichols Lansdale Limited Partnership, III,
a Pennsylvania limited partnership, and Investor have formed Brandywine
Industrial Partnership ("BIP"), a Delaware limited partnership, to own and
operate several existing industrial and warehouse properties (collectively, the
"BIP Properties") in Pennsylvania, Maryland, Delaware and the counties of
Burlington, Camden and Gloucester in New Jersey (the "Applicable Area"); and
WHEREAS, Investor and Developer desire to acquire, develop, own and
operate additional industrial and warehouse properties in the Applicable Area in
conjunction with the BIP Properties; and
WHEREAS, Developer directly owns or controls the ownership of several
vacant land parcels which are described on Exhibit A attached hereto (the
"Option Land").
NOW, THEREFORE, for and in consideration of the various covenants and
agreements contained herein and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties agree as
follows:
1. Identification of Opportunities. During the Term (as defined in
Paragraph 14) of this Agreement, each party may identify projects in the
Applicable Area which would be appropriate for acquisition and development (an
"Opportunity") by a joint venture that would be formed by the parties or their
affiliates (a "Development Joint Venture"). A project shall constitute an
Opportunity and be subject to the provisions of this Agreement only if the
project meets each of the following criteria:
a. the project involves the acquisition and/or development of
industrial and/or warehouse building(s) that contain or, upon completion of
development would contain, an aggregate of not less than 50,000 net rentable
square feet;
b. the project is located exclusively within the Applicable
Area;
c. the project is not an Excluded Opportunity (as defined in
Paragraph 14).
<PAGE>
When a party has identified an Opportunity, and assembled such
information as it believes would form the basis for a meaningful discussion
between the parties as to whether to pursue such Opportunity, such party shall
inform the other party (an "Opportunity Notice") and provide the other party
with such information. Subject to the 15-day period referenced in Paragraph 3
below, the parties will then negotiate in good faith to determine whether to
pursue the Opportunity through a Development Joint Venture. Such negotiations
will also cover terms of the project comprising the Opportunity, including the
type and size of the building(s) and the required amounts of debt and equity
financing. The parties contemplate that the Development Joint Venture will
employ approximately 55%-60% leverage. If the parties agree to pursue the
identified Opportunity, they, or their affiliates, will execute a partnership
agreement to reflect their agreement.
The following terms will be part of every Development Joint Venture:
a. net operating cash flow will be distributed to the partners
on a pro-rata basis in accordance with their respective
outstanding equity contributions;
b. net proceeds from a sale or refinancing will be distributed
first to the partners on a pro-rata basis in accordance
with their respective outstanding equity contributions
until each has received the return of its equity
contribution;
c. net proceeds from a sale or refinancing will next be
distributed to the partners on a pro-rata basis in
accordance with their respective equity contributions until
each has received a 12.0% leveraged IRR on its equity
contribution;
d. net proceeds from a sale or refinancing will
next be distributed as follows: 60% to the partners on a
pro-rata basis in accordance with their respective equity
contributions and 40% to Developer until Investor has
received a 18.0% leveraged IRR on its equity contribution;
e. any remaining net proceeds from a sale or refinancing will
be distributed as follows: 40% to the partners on a
pro-rata basis in accordance with their respective equity
contributions and 60% to Developer.
In addition, each Development Joint Venture will include a mutually
acceptable buy-sell provision and a right of first offer in favor of Developer
covering the properties owned by the Development Joint Venture. The Development
Joint Venture will also include a mechanism to compensate Developer and its
affiliates for third party costs (e.g., architectural, engineering, zoning, site
assessment, legal, structural, environmental, etc.) associated with the pursuit
of Opportunities approved by the Development Joint Venture or Investor,
including approved Opportunities that are not ultimately acquired or purchased
by the Development Joint Venture.
-2-
<PAGE>
2. Development Option. If the parties have agreed to pursue an
Opportunity: (i) Developer will have the option either to contribute equity
(which may be in the form of the land to be used for the project and if such
land is Option Land, it shall be valued as provided in Paragraph 4 below) in an
amount up to Investor's contribution or not to contribute any equity and (ii)
Investor will have the option either (a) to contribute its equity at the
commencement of the project or (b) if acceptable to a third party lender, to
contribute its equity throughout the construction process or at the completion
of the construction, in which case Investor shall execute a tri-party agreement
with the construction lender. The parties shall execute a mutually agreeable
contribution agreement at the outset of construction setting forth each party's
funding obligations and the other conditions which must be met before the
project is acquired by the Development Joint Venture.
3. Development Exclusive. During the Term of this Agreement, neither
Developer nor Brandywine Realty Trust nor any controlled affiliate of such party
shall acquire or develop any industrial property or warehouse in the Applicable
Area which it does not own or control, directly or indirectly through one or
more subsidiaries, as of the date hereof if the acquisition or development meets
the Opportunity criteria set forth in Paragraph 1; provided, however, that, in
the event that one party presents to the other party an Opportunity, as provided
for in Paragraph 1, and the parties fail to agree on whether to pursue the
Opportunity and the terms of the related Development Joint Venture within 15
days of delivery of an Opportunity Notice from one party to the other, then a
party may thereafter pursue such Opportunity for its own account without any
obligation to permit the other party or any affiliate of the other party to
participate in such Opportunity.
4. Option to Purchase. Developer grants to Investor, for the benefit of
the Development Joint Venture, an option, exercisable only during the Term, to
purchase the Option Land for a price of $6.00 multiplied by the number of
Buildable Square Feet (as hereinafter defined) in the Option Land. "Buildable
Square Feet" shall mean the maximum amount of actual square footage approved
pursuant to the Opportunity which the applicable governmental statutes, laws,
and regulations and any applicable private restrictions permit to be built on
the Option Land. The option may only be exercised as to portions of the Option
Land which Developer and Investor have agreed to include in the Development
Joint Venture as an Opportunity under Paragraph 1 above, and any remaining
portion of the Option Land shall remain subject to the option during the balance
of the Term.
-3-
<PAGE>
The option shall be exercised by written notice from Investor to
Developer, and Developer shall transfer good and marketable title, free and
clear of all liens, claims and encumbrances, to the designated portion of the
Option Land to the Development Joint, subject, however, to liens, claims and
encumbrances currently existing or arising during the Term in the ordinary
course of business, such as liens for unpaid taxes not yet due and payable. Upon
receipt of such written notice, Developer and Investor shall enter into a
purchase contract, for the benefit of the Development Joint Venture, which will
incorporate the relevant terms of this Agreement and contain such other
provisions as are commercially reasonable under the circumstances, taking into
account comparable provisions of the Contribution Agreement. Such purchase
contract will have as an exhibit the partnership agreement creating the
Development Joint Venture, which will be executed by the parties or their
affiliates at closing.
In the event that Developer receives an offer from an unaffiliated
third party during the Term to purchase all or a portion of the Option Land then
Developer will provide Investor with prompt written notice of Developer's
receipt of such offer, and Investor will have 15 days from receipt of such
notice to elect to exercise the option to purchase the Option Land. If Investor
does not elect to exercise the option prior to expiration of such 15-day period,
then the option shall expire with respect to such Option Land upon expiration of
such 15-day period.
5. Survey. Within thirty (30) days after the exercise of an option
under Paragraph 4 of this Agreement, Developer shall, at Development Joint
Venture's cost and expense, obtain a current survey of the Option Land subject
to the option exercise meeting the standards for surveys contained in the
Contribution Agreement, to the extent applicable, and otherwise reasonably
acceptable to Investor. The survey shall certify the number of Buildable Square
Feet for the Option Land subject to the option exercise.
6. Title. Developer shall obtain and deliver to Investor, at
Development Joint Venture's expenses, within twenty (20) days following the date
an option is exercised pursuant to Paragraph 4, a commitment for an owner's
title insurance policy (the "Title Commitment") covering title to the Option
Land subject to the option exercise and meeting the requirements of the
Contribution Agreement, to the extent applicable. Investor shall, within ten
(10) days following the receipt of the Title Commitment, notify Developer of
permitted title exceptions for the purpose of the purchase contract.
7. Further Encumbrances. Developer agrees that, during the Term and so
long as Investor is not in default under this Agreement, it will not, without
the prior written consent of Investor, which consent shall not be unreasonably
withheld or delayed, encumber the Option Land or enter into any leases,
agreements or contracts affecting the Option Land. Notwithstanding the
foregoing, Developer and Investor acknowledge that a portion of the Option Land,
as legally described on the attached Exhibit B, is subject to an option right
for the benefit of BIP, and that the option granted herein shall be subject to
and subordinate to that option.
8. Representations and Warranties. Developer represents and warrants
that: (a) Developer presently owns the Option Land in fee simple absolute; (b)
that the Option Land is not subject to any claims, liens or encumbrances [except
as set forth on the attached Exhibit C]; and (c) Developer has full limited
partnership power, right and authority to enter into this Agreement and perform
the covenants set forth herein. Investor represents and warrants that: (a)
Investor has full power, right and authority to enter into this Agreement and
perform the covenants set forth herein.
-4-
<PAGE>
9. Taxes and Maintenance of Option Land. Developer agrees that it shall
promptly pay when due all real estate taxes on the Option Land and, further,
that it shall use commercially reasonable efforts to maintain the Option Land in
substantially its current condition. If Developer fails to pay said real estate
taxes when and as due, and is not challenging its obligation to pay said taxes
in good faith and in a commercially reasonable manner then, within ten (10)
business days following receipt of written notice from Investor of said failure,
Investor may pay such taxes and Developer shall promptly reimburse Investor for
such amount, together with interest thereon at a rate of twelve percent (12%)
per annum.
10. Additional Developer Services. Developer or an affiliate shall
provide the following services to the Development Joint Venture:
a. property management for all properties owned by the
Development Joint Venture for a fee of 1.0% of collected revenue for
single-tenant properties and 3.0% for all other properties, based on the form of
agreement executed by BIP and Brandywine Real Estate Services Corporation in
conjunction with the consummation of the transactions covered by the
Contribution Agreement;
b. leasing brokerage for all available premises owned by the
Development Joint Venture for then prevailing market fees, based on the form of
agreement executed by BIP and Brandywine Real Estate Services Corporation in
conjunction with the consummation of the transactions covered by the
Contribution Agreement;
c. construction/development management for all construction
projects undertaken by the Development Joint Venture, at then prevailing market
fees.
11. Notices. Any notice, request, demand, instruction or other
communication to be given by a party to the other party hereunder, except those
required to be delivered at the Closing, shall be in writing, and shall be
deemed to be delivered (a) upon receipt, if delivered by facsimile, (b) upon
receipt if hand delivered, (c) on the first business day after having been
delivered to a national overnight air courier service, or (d) three business
days after deposit by registered or certified mail, return receipt requested,
addressed as follows:
If to Investor: Invesco Realty Advisors
One Lincoln Centre, Suite 700
5400 LBJ Freeway, LB-2
Dallas, Texas 75240
Attention: Scott Dennis, Alan Green and
Jason Haas
Fax: 972/715-5811
-5-
<PAGE>
with an additional copy to: D'Ancona & Pflaum LLC
111 E. Wacker Drive, Suite 2800
Chicago, Illinois 60601-4205
Attention: J. Kelly Bufton, Esq.
Fax: (312) 602-3078
If to Developer: Brandywine Operating Partnership, L.P.
14 Campus Boulevard
Newtown Square, Pennsylvania 19073
Attention: Gerard H. Sweeney, President
and Chief Executive Officer and
Brad A. Molotsky, General Counsel
Fax:(610) 325-5622
12. Recording. Developer and Investor shall execute and record a
memorandum of this Agreement evidencing the existence of this Agreement.
13. Term of this Agreement. This Agreement shall be valid and
enforceable for a period commencing on the date hereof and continuing through
but not after the Term.
14. Definitions. As used herein, the following terms have meanings
assigned to them below:
a. "Excluded Opportunity" shall mean a project or transaction
that involves any of: (i) a passive investment by or on behalf of Developer or
Investor (i.e., an investment that does not involve active management by
Developer or Investor or an affiliate); (ii) an investment that involves
securities or instruments convertible into securities of Developer or its
affiliates and not just cash; (iii) an investment in industrial or warehouse
properties as part of a mixed portfolio transaction (i.e., a transaction
involving multiple commercial facilities that either are not exclusively within
the Applicable Area or include non-industrial or non-warehouse properties); (iv)
a contractual commitment by Developer or an affiliate, in effect on the date
hereof, to pursue a transaction which would, if consummated, be inconsistent
with or breach the exclusivity arrangement provided for in Paragraph 1 hereof;
(v) the sale or contribution by Developer or an affiliate of any industrial or
warehouse property or properties that Developer or an affiliate owns or controls
on the date hereof.
b. "Restrictive Business Combination" means a transaction in
which Brandywine Realty Trust or Developer either merges or consolidates
(whether directly or in a triangular transaction) with a third party in an
arm's-length transaction if, immediately prior to such merger or consolidation,
such third party or its parent has entered into commitments that would be
inconsistent with or breached by the exclusivity arrangement provided for in
Paragraph 1 hereof.
-6-
<PAGE>
c. "Term" means the period commencing on the date hereof and
ending on the earliest to occur of: (i) the third anniversary of the date
hereof; (ii) the consummation of a Restrictive Business Combination; (iii) the
failure of Investor and Developer to agree to pursue four consecutive
Opportunities; (iv) a breach by Investor of its obligation to commit equity to
the Development Joint Venture; (v) the filing by or against Investor or
Developer of a bankruptcy petition or petition for relief from creditors; and
(vi) the date on which Investor has contributed or unconditionally committed to
contribute an aggregate of at least $25 million to the Development Joint
Venture.
INVESCO REALTY ADVISORS, INC.
By: /s/ Ron Ragsdale
-------------------------------------
Title: Vice President
-------------------------------------
BRANDYWINE OPERATING PARTNERSHIP,
L.P. by Brandywine Realty Trust, general partner
By: /s/ Gerard H. Sweeney
-------------------------------------
Title: President and Chief Executive Officer
-------------------------------------
-7-
<PAGE>
Exhibit A
Option Land
Iron Run - Parcels B and C as depicted on the marketing brochure attached hereto
Highlands Business Park - Lots 8.01, 7.05 and 7.06
-8-
