<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): December 4, 1998
AMERICAN REAL ESTATE INVESTMENT CORPORATION
(Exact Name of Registrant as Specified in its Charter)
- --------------------------------------------------------------------------------
Maryland 1-12514 84-1246585
(State or Other (Commission (IRS Employer
Jurisdiction of File Number) Identification No.)
Incorporation)
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620 W. Germantown Pike, Suite 200
Plymouth Meeting, Pennsylvania 19462
(Address of Principal Executive Offices)(Zip Code)
- --------------------------------------------------------------------------------
Registrant's telephone number, including area code:
(610) 834-7950
- --------------------------------------------------------------------------------
<PAGE>
ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS
On December 7, 1998, American Real Estate Investment Corporation (the
"Company"), announced in a press release attached hereto as Exhibit 99.1 and
incorporated by reference herein, the signing on December 4, 1998 of a joint
venture agreement with Browning Investments, Inc. to develop 491 acres
located in Indianapolis, Indiana in Airtech Park. In addition, the Company
acquired through American Real Estate Investment, L.P. (the "Operating
Partnership") , a limited partnership of which the Company is the sole general
partner and in which the Company owns on the date of this Current Report on Form
8-K, an interest of approximately 51%, a portfolio consisting of three
warehouse/office buildings located in Indianapolis, Indiana (the "Browning
Portfolio") totaling 861,760 square feet and has agreed to acquire two
additional warehouse/office buildings totaling 534,992 square feet, which are
currently under construction, upon the completion of their construction. The
aggregate purchase price of the joint venture interest and 1.4 million square
foot portfolio is approximately $73.2 million and the aggregate developable
square footage of Airtech Park is in excess of 7.5 million square feet. The
purchase price of the Browning Portfolio, of approximately $34.4 million, was
funded by the issuance of 524,954 units in the Operating Partnership, the
assumption of approximately $21.7 million debt and the Company's revolving
credit facility.
Other information on the properties included in the Browning Portfolio is as
follows:
<TABLE>
<CAPTION>
Leaseable November 30, 1998 Year
Property Square Feet Occupancy Constructed
- -------- ----------- ----------------- -----------
<S> <C> <C> <C>
8677 Logo Court 599,152 100% 1991
4400 West 96th Street 100,000 100% 1998
6402 Corporate Drive 162,608 100% 1996
-------
TOTAL 861,760
-------
</TABLE>
The sellers of the Browning Portfolio (MPSN, L.L.C., Corporate Drive Associates,
LLC, Post 70 Building 7 Partners and COB Associates, LLC) are parties
unaffiliated with the Company and the Operating Partnership. The Company based
its determination of the purchase price of these properties on the expected cash
flow, physical condition, location, competitive advantages, existing tenancies,
and opportunities to retain and attract additional tenants. The purchase price
was determined through an arm's length negotiation between the Company and the
sellers.
<PAGE>
The following table set forth below shows certain information regarding rental
rates and lease expirations for the Browning Portfolio (assuming that no tenants
exercise renewal or cancellation options and that there are no tenant
bankruptcies or other tenant defaults):
<TABLE>
<CAPTION>
Annualized Annualized Rent
Percentage of Rent of Per Leased Square
Year of Lease Number of Square Footage of Total Leased Expiring Foot of
Expiration Expiring Leases Expiring Leases Square Feet Leases (1) Expiring Leases
- ------------- --------------- ----------------- ------------- ----------- -----------------
<S> <C> <C> <C> <C> <C>
1998 --- --- --- --- ---
1999 2 162,608 18.87% $ 894,456 $ 5.50
2000 --- --- --- --- ---
2001 --- --- --- --- ---
2002 --- --- --- --- ---
2003 --- --- --- --- ---
2004 --- --- --- --- ---
2005 --- --- --- --- ---
2006 --- --- --- --- ---
2007 1 599,152 69.53% 1,827,414 3.05
Thereafter 1 100,000 11.60% 1,010,000 10.10
- ------- ----- --------- -----
Total/Average 4 861,760 100.00% $ 3,731,870 $ 4.33
- ------- ------ ----------- ---------
- ------- ------ ----------- ---------
</TABLE>
(1) Annualized Rent of Expiring Leases, as used above, represents the monthly
contractual rental rate in the month the lease expires multiplied by twelve.
<PAGE>
ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS.
(b) PRO FORMA FINANCIAL INFORMATION.
It is impracticable to file with this current report on Form
8-K the financial statements and pro forma financial
information required by this Item 7 with regard to the
acquisition described in Item 2 above. Those financial
statements and pro forma financial information will be filed
by amendment to this current report on Form 8-K as soon as
practicable and, in any event, within 60 days after the
required filing date for this current report on Form 8-K.
(c) EXHIBITS
10.1 Contribution Agreement between American Real Estate
Investment, L.P., acquiror and MPSN, L.L.C., Corporate
Drive Associates, LLC, Post 70 Building 7 Partners, and
COB Associates, LLC.
99.1 Press Release dated December 7, 1998
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this Report to be signed on its behalf by the
undersigned, thereunto duly authorized.
AMERICAN REAL ESTATE INVESTMENT
CORPORATION
Date: December 18, 1998 By: /s/ Jeffrey E. Kelter
---------------------
Jeffrey E. Kelter
President
Date: December 18, 1998 By: /s/ Timothy A. Peterson
-----------------------
Timothy A. Peterson
Chief Financial Officer
Date: December 18, 1998 By: /s/ Timothy E. McKenna
----------------------
Timothy E. McKenna
Treasurer
(Principal Accounting Officer)
<PAGE>
Exhibit 10-1
CONTRIBUTION AGREEMENT
THIS CONTRIBUTION AGREEMENT (this "Agreement") is made and entered into as
of the 4th day of December, 1998, between AMERICAN REAL ESTATE INVESTMENT, L.P.,
a Delaware limited partnership ("Acquiror"), and the parties reflected on the
signature pages hereto as "Contributor" (such entities are sometimes referred to
in this Agreement, individually and collectively, as the context requires, as
"Contributor") and "OP Unit Recipients."
RECITALS
A. Contributor is the owner of fee title and other interests in 3 office
and industrial buildings located at 8677 Logo 7 Court, Indianapolis, IN ("Logo 7
Court"); 4400 West 96th Street, Indianapolis, IN ("4400 West 96th"); and 6402
Corporate Drive, Indianapolis, IN ("6402 Corporate Drive"; and collectively with
Logo 7 Court, and 4400 West 96th, the "Properties"); and 1 office and industrial
building located at 351 West 10th Street, Indianapolis, IN ("351 West 10th" or
the "Additional Property");.
B. Contributor desires to contribute and convey to Acquiror all of its
interests relating to the Properties and the Additional Property to Acquiror,
and Acquiror desires to acquire and accept same from Contributor, each upon and
subject to the terms and conditions of this Agreement.
THEREFORE, in consideration of and in reliance upon the terms, covenants,
conditions and representations contained in this Agreement, and other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, Contributor and Acquiror agree as follows:
1. CONTRIBUTION
Subject to and upon the terms and conditions contained in this Agreement,
Contributor agrees to contribute and convey to Acquiror and Acquiror agrees to
accept and to assume, all of Contributor's right, title and interest (whether
now or hereafter existing) in and to the Properties and the Additional Property,
consisting of:
A. those certain parcels of real estate comprising approximately
Forty-Six (46) acres and more particularly described in Exhibit A attached to
this Agreement (collectively, the "Land"); together with all and singular the
easements, covenants, agreements, rights, tenements, hereditaments and
appurtenances thereunto now or hereafter belonging or appertaining;
B. any land lying in the bed of any street, alley, road or avenue (either
open, closed or proposed) within, in front of, behind or otherwise adjoining the
Land; and any award made or to be made as a result of or in lieu of condemnation
affecting the Properties or the Additional Property or any part thereof, and any
award for damage to the Properties, the Additional Property or any part thereof
by reason of casualty;
<PAGE>
C. all of the buildings, structures, fixtures, facilities,
installations and other improvements of every kind and description now or
hereafter in, on, over and under the Land, including, without limitation, the 4
office and industrial buildings at Logo 7 Court, 4400 West 96th, 351 West 10th
and 6402 Corporate Drive, together with any and all structures and facilities,
plumbing, air conditioning, heating, ventilating, air conditioning, mechanical,
electrical and other utility systems, water and sewage facilities (including
wells and septic systems), parking lots, landscaping, sidewalks, signs and light
fixtures, which are not owned by tenants under the Leases (as defined below) or
leased by such tenants from third parties (collectively, the "Improvements");
D. all furniture, furnishings, fixtures, equipment, machinery,
supplies, tools, parts, and other tangible personalty of every kind and
description situated in, on, over or under the Land or any part thereof or used
in connection with the Properties or the Additional Property that are owned by
Contributor, together with all replacements and substitutions therefor
(collectively, the "Personal Property"), all of which are more particularly
described in Exhibit B attached to this Agreement;
E. all existing surveys, blueprints, drawings, plans and
specifications (including, without limitation, structural, HVAC, mechanical and
plumbing, water and sewer plans and specifications) and other documentation for
or with respect to the Properties, the Additional Property or any part thereof,
all available tenant lists and data, correspondence with past, present and
prospective tenants, vendors, suppliers, utility companies and other third
parties, booklets, manuals and promotional and advertising materials concerning
the Properties, the Additional Property or any part thereof; and such other
existing books, records and documents (including, without limitation, those
relating to ad valorem taxes) used in connection with the operation of the
Properties, the Additional Property or any part thereof;
F. to the extent assignable, all intangible personal property now or
hereafter owned by Contributor and used in connection with or arising from the
business now or hereafter conducted on or from the Properties, the Additional
Property or any part thereof, including, without limitation, claims, choses in
action, lease and other contract rights, names and telephone exchange numbers. A
list of all employment, union, purchase, service and maintenance agreements,
equipment leases and any other agreements, contracts, licenses and permits,
including, without limitation, cable television and satellite master antenna
television system agreements, affecting or pertaining in any way to the
Properties, the Additional Property or any part thereof (collectively, the
"Service Contracts") is attached to this Agreement as Exhibit C; and
G. Seller's interest, as fee owner and landlord, in all leases for
portions of the Properties or the Additional Property, as the case may be. A
summary of all current leases affecting the Properties, the Additional Property
or any part thereof (collectively, the "Leases," with such summary being
referred to in this Agreement as the "Rent Roll"), including each tenant's name,
a description of the space leased, the amount of rent due and the amount of
security deposit paid, the term of each Lease, and a description of any right to
renew or extend, is attached to this Agreement as Exhibit D.
2. EARNEST MONEY
Within three (3) business days after the expiration of the Inspection
Period (as defined herein), Acquiror shall deliver to First American Title
Insurance Company ("Escrowee") a check payable to Escrowee or wire transferred
federal funds in the amount of Two Hundred Thousand
<PAGE>
Dollars ($200,000) (the "Earnest Money"). The Earnest Money, together with any
and all interest earned thereon (net of any investment costs), shall hereinafter
be referred to as the "Earnest Money." The Earnest Money shall be invested and
applied in accordance with the terms and conditions of the Escrow Agreement
attached hereto as Exhibit E. The Escrow Agreement shall be executed and
delivered by Contributor, Acquiror and Escrowee contemporaneously with the
execution and delivery of this Agreement. Upon the Closing, the Earnest Money
shall be returned to Acquiror.
3. CONTRIBUTION CONSIDERATION; OP UNITS; OTHER AGREEMENTS
A. General. Acquiror's sole general partner is American Real Estate
Investment Corporation, a Maryland corporation (the "REIT"). The REIT is a real
estate investment trust whose common stock is listed on the American Stock
Exchange (the "AMEX").
B. Contribution Consideration.
(i) The aggregate consideration to be paid to Contributor by
Acquiror at the Closing for the Properties (the "Contribution
Consideration") shall consist of the following:
(1) that number of OP Units (as defined below)
equal to (a) 691,651; plus or minus (b) the amount of OP
Units equal to the net amount of prorations described in
Section 6C credited to Acquiror or Contributor, as the case
may be, divided by $17.50; minus (c) the aggregate amount of
Additional Cash Consideration elected to be received by
Contributor as provided in Section 3B(i)(3) below, divided
by $17.50; plus
(2) that number of OP Units equal to the excess,
if any, of (a) Twenty Two Million Eighty-Nine Thousand Three
Hundred One Dollars ($22,089,301) over (b) the total amount
of principal outstanding under the Permitted Existing
Indebtedness (as hereinafter defined) with respect to the
Properties at the Closing, divided by $17.50; plus
(3) at Contributor's election, exercisable by
written notice to Acquiror given at any time not later than
twenty (20) days from the date of this Agreement, up to an
additional Three Million Dollars ($3,000,000) in cash (the
"Additional Cash Consideration"), which shall be paid to
Post 70 Building 7 Partners.
(ii) The aggregate consideration to be paid to Contributor
by Acquiror at the Additional Closing for the Additional Property (the
"Additional Consideration") shall consist of the following:
(1) that number of OP Units equal to (a) 44,507;
plus or minus (b) the amount of OP Units equal to the net
amount of prorations described in Section 6C credited to
Acquiror or Contributor, as the case may be, divided by
$17.50; plus
(2) that number of OP Units equal to the excess,
if any, of (a) Two Million Eight Hundred Fifteen Thousand
Dollars ($2,815,000) over (b) the total amount of principal
outstanding under the Permitted Existing Indebtedness with
<PAGE>
respect to the Additional Property at the Additional
Closing, divided by $17.50; provided, however, that, to the
extent that Contributor has not elected to take the entire
$3 million of Additional Cash Consideration, Contributor
shall be entitled to elect to receive cash exercisable by
written notice to Acquiror given at any time not later than
twenty (20) days from the date of this Agreement in lieu of
such OP Units in this Section 3B(ii)(2); provided, however,
that the Additional Cash Consideration together with the
cash received pursuant to this Section 3B(ii)(2) shall not
exceed $3 million.
If the calculation of the number of OP Units to be included in the Contribution
Consideration or Additional Consideration as provided herein would result in a
fraction of an OP Unit being delivered to Contributor, then the fraction shall
be rounded to the nearest whole number and a corresponding adjustment shall be
made to the amount of cash to be paid to the Contributor as provided in Section
3B(i)(2) or Section 3B(ii)(2).
(iii) The Contribution Consideration and the Additional
Consideration (as calculated based on an agreed upon value of $17.50
per OP Unit) shall be allocated in proportion to the following
relative values of the Properties and Additional Property, subject to
the effect of prorations with respect to each of the Properties and
the Additional Property, as the case may be:
<TABLE>
<S> <C>
Logo 7 Court $16,808,320
4400 West 96th 9,134,172
351 West 10th 3,593,877
6402 Corporate Drive 8,250,695
-----------
$37,787,064
</TABLE>
The number of OP Units included in the Contribution Consideration and the
Additional Consideration, and the amount of the Earnest Money deposited by
Acquiror hereunder, shall be allocated to each of the Properties pro rata based
on the amount of the Contribution Consideration allocable to each as set forth
above.
C. Issuance of OP Units. Units of limited partnership interest in
Acquiror (the "OP Units") shall be issued and delivered in the names of and for
distribution to those recipients set forth in Exhibit F attached hereto (the "OP
Unit Recipients"). The OP Units shall be designated as OP Units pursuant to
Section 4.1 of Acquiror's Amended and Restated Agreement of Limited Partnership
dated as of December 12, 1997, as amended from time to time (the "Partnership
Agreement"). After the first anniversary of the Closing and the Additional
Closing, as the case may be, the OP Units delivered at such closing shall be
convertible at any time or from time to time for shares ("Conversion Shares") of
the common stock, par value $.001 per share, of the REIT ("Stock") on a
one-for-one basis, or for cash as provided in and subject to the conditions and
restrictions contained in the Partnership Agreement; provided, however, that on
or prior to the Closing, the REIT, as the general partner of Acquiro shall
agree, pursuant to Section 4.2(c) of the Partnership Agreement, that upon the
issuance and delivery of the OP Units pursuant to this Agreement, and subject to
the terms and provisions of this Agreement and the OP Unit Recipient Agreement
(as defined below), the OP Unit Recipients will acquire an interest in, and may
exercise or otherwise participate in, any Conversion Rights (as defined in the
Partnership Agreement) with respect to the OP Units pursuant to Article XII of
the Partnership Agreement. Distributions payable by Acquiror for the first
distribution of Net Operating Cash Flow (as defined in and pursuant to the
Partnership Agreement) after the Closing or the Additional Closing, as the case
may be, with respect to the
<PAGE>
OP Units issued pursuant to this Agreement shall be made to the OP Unit
Recipients on a pro rata basis based upon the number of days that the OP Unit
Recipients held such OP Units during the calendar quarter in which the Closing
or the Additional Closing, as the case may be, occurs.
D. Permitted Existing Indebtedness. As provided in Section
3B(i)(2)(b), Contributor may convey the Properties and the Additional Property
subject to, existing mortgage indebtedness encumbering the Properties and the
Additional Property (the "Permitted Existing Indebtedness"), provided, that (i)
the principal amount of Permitted Existing Indebtedness (A) with respect to the
Properties shall not exceed $22,089,301 and (B) with respect to the Additional
Property shall not exceed $2,815,000, (ii) all interest payable through the last
payment date shall have been paid in full and current accrued but unpaid
interest shall be prorated, (iii) no event of default shall exist under the
mortgages securing the Permitted Existing Indebtedness (the "Existing
Mortgages") and no condition shall exist which, with the giving of notice or the
passage of time would constitute an event of default under such Existing
Mortgages in each case as evidenced by an estoppel certificate from the current
holder of each such Existing Mortgage in form and substance satisfactory to
Acquiror, and (iv) at or prior to Closing, the terms of the Permitted Existing
Indebtedness shall have been restructured to reflect the terms set forth on
Schedule 3D attached to this Agreement or such other terms as are acceptable to
Acquiror.
E. Transfer Restrictions. Each OP Unit Recipient, by his execution and
delivery of this Agreement, agrees that he may only sell, transfer, assign,
pledge or encumber, or otherwise convey, any or all of the OP Units issued and
delivered to him in connection with this transaction and, if applicable, any
Conversion Shares (any of the foregoing, a "Transfer") in strict compliance with
this Agreement, the Partnership Agreement, the charter documents of the REIT,
the registration and other provisions of the Securities Act of 1933 as amended
and the rules and regulations promulgated thereunder (the "Securities Act"), any
state securities laws, and the rules of the AMEX or any other exchange or
quotation system on which the REIT's securities are listed for trading, in each
case as may be applicable (collectively, the "Transfer Requirements"). Each OP
Unit Recipient shall have the registration rights with respect to the Conversion
Shares issuable in respect of its OP Units set forth in the OP Unit Recipient
Agreement.
F. Lock-Up Period. Each OP Unit Recipient agrees that for a period of
twelve (12) months following the Closing (with respect to the OP Units delivered
at the Closing) and the Additional Closing (with respect to the OP Units
delivered at the Additional Closing) (the "Lock-Up Period") he shall not, nor
shall he seek to, in any way or to any extent, directly or indirectly exchange
or convert (pursuant to the Partnership Agreement or otherwise), offer, sell,
offer or contract to sell, transfer, assign, grant any option for the sale of,
pledge or encumber, or otherwise transfer, convey, or dispose of, any or all of
the OP Units delivered to the OP Unit Recipient at the Closing or the Additional
Closing, as the case may be, or the Conversion Shares in respect thereof;
provided that the foregoing transfer restrictions shall not apply to (i) pledges
of, or encumbrances on, OP Units in favor of institutional lenders and other
financial institutions with assets in excess of Five Billion Dollars, provided
that such OP Unit Recipient promptly notifies Acquiror of such pledge of, or
encumbrance on, such OP Units, stating the details thereof, or (ii) transfers
made, subject to the restrictions hereof and under the Partnership Agreement, to
Permitted Transferees (as defined below) who shall remain subject to the
restrictions hereunder. In addition, Michael G. Browning and each OP Unit
Recipient receiving its OP Units from or on behalf of Michael G. Browning
further agree that following the expiration of the Lock-Up Period, not more than
twenty-five percent (25%) of the OP Units
<PAGE>
delivered to or on behalf of Michael G. Browning at the Closing or the
Additional Closing, as the case may be, or Conversion Shares in respect thereof
may be sold in the three-month period following the initial Lock-Up Period, and
an additional twenty-five percent (25%) of such OP Units and Conversion Shares
may be sold in each three-month period thereafter (so that all such OP Units
delivered at such closing and Conversion Shares thereof may be sold at any time
after the ninth (9th) month following the end of such Lock-Up Period). The term
"Permitted Transferee" with respect to any OP Unit Recipient shall mean such
recipient's spouse; a parent or lineal descendant (including an adopted child)
of a parent, or the parent or spouse of a lineal descendant; a trustee, guardian
or custodian for, or an executor, administrator or other legal representative of
the estate of, such recipient, or a trustee, guardian or custodian for a
Permitted Transferee of such recipient; the trustee of a trust (including a
voting trust) for the benefit of such recipient; and a corporation, partnership
or other entity of which such recipient and Permitted Transferees of such
recipient are the beneficial owners of a majority in voting power of the equity;
any direct or indirect equity owners of an OP Unit Recipient; or any other OP
Unit Recipients or Permitted Transferees thereof, and any public charity, or
private foundation as define in Section 501(c)(3) of the Internal Revenue Code
of 1986, as amended (the "Code"), but only in each case, who (a) is an
Accredited Investor (as defined in Rule 501 under the Securities Act); and (b)
agrees in writing in an instrument reasonably acceptable to Acquiror to be bound
by the restrictions on transfer of the OP Units and Conversion Shares contained
in this Agreement and by the obligations contained in the indemnification
provisions contained in Section 14 of this Agreement. Each OP Unit Recipient
shall execute and deliver to Acquiror at Closing or the Additional Closing, as
the case may be, a letter to the effect of the foregoing, in form and substance
reasonably satisfactory to Acquiror.
G. Right of First Refusal/First Offer on Sale of OP Units. Each OP
Unit Recipient agrees that Acquiror shall have a right of first refusal and a
right of first offer with respect to OP Units that such OP Unit Recipient seeks
to sell other than to a Permitted Transferee, as provided in an agreement to be
delivered by each OP Unit Recipient at Closing or the Additional Closing, as the
case may be, substantially in the form of Exhibit G attached hereto (the "OP
Unit Recipient Agreement").
H. Right of First Refusal/First Offer on Sale of Mayflower and Dow
Buildings.
(i) Except as provided in Section 3H(ii) and 3H(iii), from
and after the Closing Date and continuing up to and including December
31, 2003 (the "Option Period"), Acquiror shall have a continuing right
of first refusal to purchase the land owned by Mayflower Park
Associates, L.L.C., an Indiana limited liability company, and located
in Southeast Hamilton County, Indiana and Southwest Boone County,
Indiana, and the land and buildings owned by Mayflower Office
Building, L.L.C., an Indiana limited liability company (collectively,
"Owner") and located in Southeast Boone County, Indiana (the
"Mayflower and Dow Properties") as follows: If owner receives a bona
fide third party offer to purchase (whether by transfer of fee simple
interest, a ground lease, installment sale or otherwise), the
Mayflower and/or Dow Properties or any interest therein or in Owner,
and Owner desires to accept such offer, Owner shall provide written
notice to Acquiror within five (5) business days after Owner's receipt
of such offer, including a copy of the offer and specifying the
purchase price, terms of payment, identity of the other material terms
and conditions of such third party offer. Acquiror or its nominee
shall be entitled for a period of fifteen (15) days after the date of
receipt of such notice of a third party offer to exercise its right to
purchase such Mayflower and Dow Properties in accordance with the
terms and conditions specified in the offer as set
<PAGE>
forth in Owner's written notice to Acquiror. Acquiror shall not have
the right of first refusal for less than both the Mayflower and Dow
Properties identified in a third party offer for both of the Mayflower
and Dow Properties unless such third party offeror shall have
alternative rights to purchase less than both of the Mayflower and Dow
Properties at prices and pursuant to terms set forth in the offer, in
which case Acquiror's right of first refusal shall correspond to the
third party offeror's alternative rights. Any elimination of either of
the Mayflower and Dow Properties from the original offer or addition
of the other Mayflower and Dow Property to the original offer shall
constitute a new offer for purposes of this paragraph, for which
Acquiror shall have the corresponding right of first refusal, provided
that the terms for such elimination or addition were not part of the
original offer submitted to Acquiror for right of first refusal
consideration. If Acquiror exercises its right to purchase the
interest offered for sale, Owner and Acquiror shall consummate the
purchase and sale within a period of ninety (90) days after the date
Acquiror provides written notice to Owner exercising its right to
purchase, unless such closing is delayed for reasons beyond the
reasonable control of the parties. If Acquiror fails to exercise its
right of first refusal as set forth in this paragraph, Owner shall be
free to sell the applicable Mayflower and/or Dow Property(ies) to such
third party offeror pursuant to the terms and conditions of the offer;
provided, however, that if a binding contract of sale for such
property(ies) is not executed between Owner and such third party
offeror within 180 days after the expiration of Acquiror's fifteen-day
right of first refusal period, or the material terms and conditions of
such third party offer set forth in Owner's notice to Acquiror of such
third party offer are modified in any respect which would have been
more favorable to Acquiror, then Acquiror shall again have its right
of first refusal to acquire such Mayflower and Dow Property(ies) as
set forth in this paragraph, and Owner and Acquiror shall again comply
with the requirements hereof. For purposes of this paragraph, a bona
fide third party offer shall include, without limitation, an executed
letter of intent so long as such letter of intent specifies the
purchase price, terms of payment, identity of the Mayflower and/or Dow
Property(ies) to be sold and other material terms and conditions. The
right of first refusal set forth in this Section 3H(i) shall not apply
with respect to land that is subject to those proposals or agreements
of sale set forth on Schedule 3H attached to this Agreement; provided,
however, that the right of first refusal shall apply to the extent
such land is not sold pursuant to such agreements or pursuant to the
terms and conditions of such proposals.
(ii) Except as provided in Section 3H(iii), during the
Option Period, Acquiror shall have a continuing right of first offer
to purchase the Mayflower and/or Dow Properties, as follows: If Owner
desires to sell or seek to sell (whether by transfer of fee simple
interest, a ground lease, sale of an interest in Owner, an installment
sale, or otherwise) one or both of the Mayflower and/or Dow
Properties, Owner shall provide fifteen (15) days prior written notice
to Acquiror (th "Sale Notice") briefly describing the proposed
transaction (the "Proposed Transaction"), provided, that the parties
acknowledge that the terms and conditions of the Proposed Transaction
cannot be specified in advance of a definitive agreement. Acquiror and
Owner shall negotiate in good faith to determine whether they can
agree upon terms upon which Acquiror will undertake the Proposed
Transaction. If Acquiror and Owner are unable to agree upon the terms
of such a sale or other participation of Acquiror in the Proposed
Transaction within fifteen (15) days thereafter (the "Negotiation
Period"), Contributor may enter into the Proposed Transaction with
another person upon terms and conditions which would have been no more
favorable to Acquiror than those offered by Owner to Acquiror during
the negotiations, provided that a binding agreement is entered into
within one hundred twenty (120) days after the expiration of the
Negotiation Period. If a binding agreement
<PAGE>
for such Proposed Transaction is not executed between Owner and such
third party within 120 days after the expiration of the Negotiation
Period, or the terms and conditions of such third party offer are
modified in any respect which would have been more favorable to
Acquiror, then Acquiror shall again have its right of first offer to
acquire such Mayflower and/or Dow Property(ies) as set forth in this
Paragraph, and Owner and Acquiror shall again comply with the
requirements hereof. If a binding agreement for suc Proposed
Transaction is executed by Contributor and such other person within
120 days after the expiration of the Negotiation Period, Acquiror
shall not have a right of first refusal under Section 3H(i) with
respect to the property sold pursuant to the Proposed
Transaction;provided, however, that, notwithstanding the existence of
a binding agreement, if the Proposed Transaction is not consummated
with such other person, Acquiror shall again have the rights under
Section 3H with respect to such property.
(iii) The foregoing right of first refusal shall not apply
to the sale of land to a third party who represents in the agreement
of sale or other conveyance documents that such land is being acquired
solely for occupancy by such third party, or by its affiliate or an
entity controlled by such third party.
(iv) Owner agrees that it will not enter into any agreement
of sale if Owner believes that the buyer's representations regarding
intended occupancy of the Mayflower and/or Dow Property is not true
and correct.
(v) At Closing, Owner and Acquiror shall execute, and record
against the Mayflower and Dow Properties, a memorandum of Acquiror's
right of first refusal and first offer set forth in the foregoing
paragraph. Such memorandum shall expire on the date that is sixty (60)
days after the expiration of the Option Period. Acquiror agrees that
in the event it declines to exercise its rights of first refusal or
right of first offer or such right of first refusal is not applicable
by reason of Section 3H(iii) and Owner consummates a sale of the
Mayflower and/or Dow Properties to a third party, the right of first
refusal and right of first offer shall terminate with respect to the
property which is sold and Acquiror shall execute and record at the
closing of such sale an acknowledgement of such termination in form
and substance reasonably satisfactory to Owner and the third-party
purchaser.
I. Option Agreement. Acquiror and Six Points Associates, LLC ("Six
Points") shall concurrently with, and subject to, the Closing, enter into the
Option Agreement in the form attached hereto as Exhibit H (the "Option
Agreement").
J. Tax Matters.
(i) No Property Disposition. During the period expiring on
the (i) seventh (7th) anniversary of the Closing Date with respect to
Logo 7 Court, (ii) first (1st) anniversary of the Closing Date with
respect to the remaining Properties and (iii) first (1st) anniversary
of the Additional Closing Date with respect to the Additional
Property, Acquiror shall not sell or make any other voluntary
disposition, including, without limitation, by way of deed in lieu of
foreclosure, a foreclosure action, or transfer in anticipation of an
eminent domain taking, of any of the Properties or Additional
Property, as the case may be, in a transaction that causes any OP Unit
Recipient to recognize taxable income in excess of "book" income under
Section 704(c) of the Code with respect to such sale or other
disposition without the consent of the affected OP Unit Recipient.
Thereafter, during the period expiring on the earlier of (i) the tenth
(10th)
<PAGE>
anniversary of the Closing Date (with respect to the Properties) or
the Additional Closing Date (with respect to the Additional Property),
or (ii) the sale or conversion by the OP Unit Recipients of OP Units
representing in the aggregate 70% of all OP Units delivered to them at
the Closing (with respect to the Properties) or the Additional Closing
(with respect to the Additional Property), Acquiror shall use
commercially reasonable efforts in connection with the sale of any or
all of the Properties or the Additional Property, a the case may be,
to enter into a transaction that will qualify for non-recognition of
gain under the Code, whether by means of an exchange contemplated
under Code Sections 351, 354, 355, 368, 721, 1031, 1033 or otherwise,
provided, that if such sale were not so structured such Contributor
would recognize taxable income in excess of "book" income in respect
of such disposition. Notwithstanding the foregoing, in the event of
catastrophic damage to any or all of the Properties or the Additional
Property by an act of God (e.g., hurricane or tornado), Acquiror shall
have the right to sell any or all of the Properties or the Additional
Property affected thereby without regard to the foregoing. Pursuant to
Section 5.4 of the Partnership Agreement, Acquiror shall elect to use
the "traditional method" without curative allocations set forth in
Regulation Section 1.704-3(b) with respect to the Properties and the
Additional Property.
(ii) Debt Maintenance and Guaranty Requirements. During the
period expiring on the seventh (7th) anniversary of the Closing Date,
Acquiror will permit Michael G. Browning at Michael G. Browning's
option to guarantee up to $250,000 of available indebtedness of
Acquiror or indemnify the REIT, Acquiror or any of their subsidiaries
for liabilities in respect thereof.
K. Allocation of Contribution Consideration. Prior to the Closing and
the Additional Closing, as the case may be, and if requested by Acquiror,
Acquiror and Contributor shall use commercially reasonable efforts to agree in
writing upon the allocation of the Contribution Consideration and the Additional
Consideration allocable to each of the Properties and the Additional Property,
as the case may be, among the Land, the Improvements and the tangible Personal
Property comprising eac of the Properties and the Additional Property, as the
case may be.
L. Further Assurances. Each party hereto will execute such further
documents and instruments and take such further actions as may be reasonably
requested by one or more of the others to consummate the transactions
contemplated hereby, to vest Acquiror with full right, title and interest in and
to the Properties and the Additional Property or to effect the other purposes of
this Agreement.
M. Notification if Representations and Warranties Untrue. During the
Inspection Period, Acquiror shall notify Contributor upon discovery that any
representation or warranty of Contributor contained in this Agreement is untrue
or incorrect, and Contributor shall notify Acquiror upon discovery that any
representation or warranty of Acquiror contained in this Agreement is untrue or
incorrect.
4. OPERATION OF PROPERTIES THROUGH CLOSING
Through the Closing Date (with respect to the Properties) and the
Additional Closing Date (with respect to the Additional Property), Contributor
shall:
<PAGE>
A. Except as otherwise provided for in this Agreement, manage and
operate the Properties and the Additional Property, as the case may be, only in
and shall not take any actions except in accordance with Contributor's usual and
ordinary course of business consistent with past practices and keep the Land,
the Improvements and the tangible Personal Property in their current condition
and repair, ordinary wear and tear excepted.
B. Not extend or otherwise renew any Lease or Service Contract without
the prior written consent of Acquiror, which consent shall not be unreasonably
withheld.
C. Not cancel, modify or amend any Lease or Service Contract or
institute any rent increases without the prior written consent of Acquiror,
which consent shall not be unreasonably withheld. Acquiror acknowledges that the
Lease between Corporate Drive Associates, LLC and Brightpoint, Inc. f/k/a
Wholesale Cellular U.S.A., Inc. is subject to the Agreement for Payment of Rent
dated September 18, 1998 by and between Corporate Drive Associates, LLC,
Brightpoint, Inc. f/k/a Wholesale Cellular U.S.A., Inc. and Michael G. Browning
(the "Rent Agreement").
D. Not enter into any new Lease or new Service Contract without the
prior written consent of Acquiror, which consent shall not be unreasonably
withheld.
E. Neither take any action nor omit to take any action that would
render or allow title to the Properties or the Additional Property to be
nonconforming to the requirements of this Agreement.
F. Provide Acquiror, upon reasonable advance notice, with such access
to the Properties and the Additional Property as is reasonably necessary for it
to inspect same to assure that Contributor is complying with the requirements of
this Section 4.
G. Promptly deliver to Acquiror copies of any operating statements for
the Properties and the Additional Property that come into the possession or
control of Contributor for any period(s) including the period between the date
of this Agreement and the Closing Date or the Additional Closing Date, as the
case may be.
H. Not sell, lease, grant any security interest in, pledge, encumber,
dispose of, finance or refinance any indebtedness in respect of, any of the
Properties or the Additional Property without the prior written consent of
Acquiror.
5. STATUS OF TITLE TO PROPERTIES
A. State of Title. Contributor shall convey the Land and Improvements
to Acquiror or Acquiror's designee by special limited warranty deeds in
recordable form (the "Deeds"), and title to the Land and Improvements shall be
free and clear of all liens and encumbrances and shall be subject only to: (i)
those covenants, conditions and restrictions of record which are reflected in
the Title Commitment (as defined below) which is obtained by Contributor, (ii)
rights of tenants under the Leases, as tenants only, (iii) general real estate
taxes, not yet delinquent, (iv) subject to Section 3D, Existing Mortgages
securing payment of Permitted Existing Indebtedness, (v) applicable zoning,
building, land use and other governmental restrictions, laws, ordinances, rules
and regulations and (vi) all matters that are disclosed by the Survey (as
defined below) which is obtained by Contributor for Acquiror (the
<PAGE>
above enumerated exceptions being hereinafter collectively referred to as the
"Permitted Exceptions").
B. Preliminary Evidence of Title. As specified below, Contributor
shall furnish Acquiror with, or Acquiror shall obtain, the following documents
to evidence the condition of Contributor's title to the Land and Improvements:
(i) Contributor shall obtain for each of the Land and
Improvements, at Contributor's expense, a commitment (the "Title
Commitment") for an ALTA 1992 Owner's Title Insurance Policy proposing
to insure Acquiror or Acquiror's designee and committing to insure
title to the Land and Improvements in such amounts as Acquiror
reasonably deems appropriate, issued through a title insurer to be
selected by Contributor and approved by Acquiror, which approval shall
not be unreasonably withheld (the "Title Insurer"), and irrevocable
for at least six (6) months. At the Closing, Contributor shall obtain
for Acquiror, at Contributor's expense, an Owner's Title Insurance
Policy corresponding to the Title Commitment which shall contain an
extended coverage endorsement over the so-called general or standard
exceptions that are a part of the printed form of the policy, an ALTA
Form 103.7 access endorsement, a non-imputation endorsement and such
other endorsements as Acquiror shall reasonably deem appropriate.
(ii) Within fifteen (15) days after the date of this
Agreement, Contributor shall furnish to Acquiror, at Contributor's
expense, written results of searches (the "UCC Searches") conducted by
a private service reasonably acceptable to Acquiror of the records of
the County Recorder of the County and Secretary of State of the State
in which the Land and Improvements are located for Uniform Commercial
Code Financing Statements, tax liens and the like in the name of
Contributor, the OP Unit Recipients, the Properties, the Additional
Property and any other name or location reasonably requested by
Acquiror.
(iii) Contributor shall obtain for Acquiror, at
Contributor's expense, a current "as-built" plat of survey (the
"Survey") for each of the Land and Improvements dated after the date
of this Agreement, certified to Acquiror, the REIT and the Title
Insurer (and such other persons or entities as Acquiror may designate)
by a surveyor registered in the State in which the Land and
Improvements are located as having been prepared (i) in accordance
with the "Minimum Standard Detail Requirements for ALTA/ACSM Land
Title Surveys," jointly established and adopted by the American Land
Title Association ("ALTA") and the American Congress on Surveying and
Mapping ("ACSM") in 1992, and including items 1 through 4 (excluding
for Table A5 any information with respect to elevations), 6-11 and 13
of Table A thereof, and (ii) pursuant to the Accuracy Standards (as
adopted by ALTA and ACSM and in effect on the date of such
certification) of an "Urban" Survey (as defined therein). Each Survey
shall also contain the surveyor's certification that, among other
things, the Land and Improvements are not located in any area
designated by any governmental agency or authority as being a
flood-prone or flood-risk area (whether pursuant to the Flood Disaster
Act of 1973, as amended, or otherwise), and that the requirements of
the National Flood Insurance Program are not applicable to the Land
and Improvements.
C. Title Defects. If the Title Commitment, the UCC Searches or any
Survey (or any revision or update of any of them) discloses exceptions to title
which are not acceptable to Acquiror or any other title or survey matter which
does not conform to the requirements of this
<PAGE>
Agreement, Acquiror shall so notify Contributor and Contributor shall have
fifteen (15) days after the date of Contributor's receipt of such notice to have
each such unpermitted exception to title removed or to correct each such other
matter, in each case to the reasonable satisfaction of Acquiror. If within the
time specified Contributor fails to have each such unpermitted exception removed
or to correct each such other matter as aforesaid, Acquiror may, at its option,
which option must be selected by Acquiror within ten (10) days after the
expiration of Contributor's fifteen (15) day cure period described above, either
(i) terminate this Agreement upon written notice to Contributor and immediately
receive fro Escrowee the Earnest Money, in which event this Agreement, without
further action of the partes, shall become null and void and neither party shall
have any further rights or obligations under this Agreement, except with respect
to the indemnities contained in Sections 12 and 15B (the "Surviving
Indemnities") (ii) terminate this Agreement with respect to the affected
Property or Additional Property only upon written notice to Contributor, and
immediately receive from Escrowee the portion of the Earnest Money allocable to
such Property or Additional Property, in which event this Agreement, without
further action of the parties, shall become null and void as to such Property or
Additional Property (but shall remain in full force and effect with respect to
the other Properties and Additional Property, as the case may be) and neither
party shall have any further rights or obligations under this Agreement with
respect to such Property or Additional Property, except with respect to the
Surviving Indemnities, or (iii) elect to accept title to the Land and
Improvements as it then is and waive any unpermitted exceptions that do not
constitute liens or encumbrances that can be discharged by payment of a definite
or ascertainable amount; provided, however, that termination with respect to
more than one Property or termination with respect to Logo 7 Court shall result
in a termination of this Agreement pursuant to option (i) above. If Acquiror
fails to make any such election, and elects not to pursue its other rights and
remedies as aforesaid, Acquiror shall be deemed to have elected option (i)
above.
6. CLOSING
A. Closing Date. The closing contemplated by this Agreement with
respect to the Properties (the "Closing") shall occur at the offices of Wolf,
Block, Schorr and Solis-Cohen LLP, Twelfth Floor Packard Building, 111 South
15th Street, Philadelphia, PA 19102, on the basis of a "New York Style" closing
at 10:00 a.m. on (i) the later to occur of the fifteenth (15th) day after the
expiration of the Inspection Period and the fifth (5th) business day after all
conditions precedent to the respective obligations of the parties have been
satisfied or waived, (ii) such earlier date as the Acquiror may elect, provided
that reasonable prior notice is given to Contributor, or (iii) such other time
and at such other place as Contributor and Acquiror shall agree upon in writing.
The "Closing Date" shall be the date of the Closing.
B. Additional Closing Date. The closing contemplated by this Agreement
with respect to the Additional Property (the "Additional Closing") shall occur
at the offices of Wolf, Block, Schorr and Solis-Cohen LLP, Twelfth Floor Packard
Building, 111 South 15th Street, Philadelphia, PA 19102, on the basis of a "New
York Style" closing at 10:00 a.m. on (i) the fifth (5th) business day after all
conditions precedent to the respective obligations of the parties with regard to
the Additiona Property have been satisfied or waived or (ii) such other time and
at such other place as Contributor and Acquiror shall agree upon in writing. The
"Additional Closing Date" shall be the date of the Additional Closing.
C. Closing Documents.
<PAGE>
(i) Contributor. Not less than five (5) business days prior
to the Closing Date or the Additional Closing Date, as the case may
be, Contributor shall deliver to Acquiror a copy of each of the
following items (the original of each to be executed if necessary and
delivered to Acquiror at the Closing or the Additional Closing, as the
case may be) with respect to the Properties or the Additional
Property, as the case may be:
(a) the Deeds, in form and substance reasonably
satisfactory to Acquiror, subject only to the Permitted
Exceptions and such other exceptions that have been waived
in writing by Acquiror sufficient to transfer and convey to
Acquiror or Acquiror's designee fee simple title to the Land
and Improvements as required by this Agreement;
(b) a general warranty bill of sale, in form and
substance reasonably satisfactory to Acquiror, sufficient to
transfer to Acquiror or Acquiror's designee title to the
tangible Personal Property and containing appropriate
warranties of title and condition as required by this
Agreement;
(c) a letter advising tenants under the Leases of
the change in ownership of the Properties or the Additional
Property, as the case may be, and directing them to pay rent
to Acquiror or as Acquiror may direct, in form and substance
reasonably satisfactory to Contributor;
(d) any and all affidavits, certificates or other
documents required by the Title Insurer in order to cause it
to issue at the Closing or the Additional Closing, as the
case may be, an Owner's Title Insurance Policy for each of
the Properties or the Additional Property, as the case may
be (or marked-up commitment therefor) in the form and
condition required by this Agreement (it being understood
that Contributor will provide any certificates or
undertakings required in orde to induce the Title Insurer to
insure over any "gap" period resulting from any delay in
recording of documents or later-dating the title insurance
file);
(e) an assignment and assumption, in form and
substance reasonably satisfactory to Acquiror, of the Leases
(the "Assignment of Leases") (including an updated Rent Roll
certified by Contributor as of the Closing Date or the
Additional Closing Date, as the case may be, as being true,
accurate and complete and all security deposits thereunder),
and an assignment and assumption, in form and substance
reasonably satisfactory to Acquiror, of those Service
Contracts that Acquiror elects to assume to the extent the
same are assignable by Contributor (the "Assignment of
Service Contracts");
(f) all of the original Leases, all written
Service Contracts assigned to Acquiror, and any and all
building plans, surveys, site plans, engineering plans and
studies, utility plans, landscaping plans, development
plans, blueprints, specifications, drawings and other
documentation concerning the Properties or the Additional
Property, as the case may be, and in the possession or
control of Contributor;
(g) an assignment, in form and substance
reasonably satisfactory to Acquiror, pursuant to which
Contributor transfers all items of intangible personal
<PAGE>
property referred to in Section 1F above to the extent the
same are assignable by Contributor;
(h) any existing bonds, warranties or guaranties
which are in any way applicable to the Properties, the
Additional Property or any part thereof, as the case may be;
(i) estoppel certificates from the holders of each
Existing Mortgage, in form and content consistent with the
provisions of Section 3D;
(j) to the extent not previously delivered to
Acquiror, copies of the most currently available tax bills
for the Properties and the Additional Property, as the case
may be;
(k) an affidavit stating, under penalty of
perjury, Contributor's United States taxpayer identification
number and that Contributor is not a "foreign person" as
defined in Section 1445(f)(3) of the Code, and otherwise in
the form prescribed by the Internal Revenue Service;
(l) a certificate, dated the Closing Date or the
Additional Closing Date, as the case may be, and signed by
the President, authorized officer, manager or authorized
member of Contributor, certifying to Acquiror that the
representations and warranties of Contributor contained in
this Agreement are true and correct as of the Closing Date
or the Additional Closing Date, as the case may be, except
as disclosed in a schedule to such certificate;
(m) an OP Unit Recipient Agreement in
substantially the form of Exhibit G attached to this
Agreement, such OP Unit Recipient Agreement to be duly
executed by each OP Unit Recipient receiving OP Units at the
Closing or the Additional Closing, as the case may be;
(n) at the Closing, the Option Agreement, duly
executed by Six Points, Browning Investments, Inc. and
Michael G. Browning;
(o) notices to parties to Service Contracts that
are being assigned pursuant to the Assignment of Service
Contracts (the "Service Contracts Notices");
(p) the Amended and Restated Operating Agreement
of First Point Associates, LLC, substantially in the form of
Exhibit K attached hereto, duly executed and delivered by
Airtech Parkway Associates, LLC;
(q) the Contribution and Sale Agreement,
substantially in the form of Exhibit L attached hereto, duly
executed and delivered by Airtech Parkway Associates, LLC;
(r) the Supplemental Agreement by and between
Acquiror, Six Points and Browning Investments, Inc.,
substantially in the form of Exhibit M attached hereto;
<PAGE>
(s) an assignment, in form and substance
reasonably satisfactory to Acquiror, pursuant to which
Contributor assigns to Acquiror Contributor's entire
interest in the Lease Agreement and Grant of Option dated
June 18, 1998, by and between Mayflower Park Associates,
L.L.C., as Landlord, and MPSN, L.L.C., as Tenant;
(t) an agreement, in form and substance reasonably
satisfactory to Acquiror and Contributor, (the "Brightpoint
Rent Agreement") pursuant to which Corporate Drive
Associates, LLC assigns all of its rights and obligations
under the Rent Agreement and Michael G. Browning is released
from all of his obligations under the Rent Agreement; and
(u) all other necessary or appropriate documents
reasonably required by Acquiror in order to consummate the
transaction contemplated hereby (including, without
limitation, the currently effective certificate(s) of
occupancy for the Properties or Additional Property, as the
case may be (if certificates of occupancy are issued in the
applicable jurisdictions), and such other governmental or
regulatory approvals issued to Contributor with respect to
the Properties or the Additional Property, as the case may
be).
(ii) Acquiror. Not less than five (5) business days prior to
the Closing Date or the Additional Closing Date, as the case may be,
Acquiror shall deliver to Contributor a copy of each of the following
items (the original of each to be executed if necessary and delivered
to Contributor at the Closing or the Additional Closing, as the case
may be) with respect to the Properties or the Additional Property, as
the case may be:
(a) the Assignment of Leases and the Assignment of
Service Contracts;
(b) the OP Unit Recipient Agreement and such other
documents as may be required under the Partnership Agreement
in connection with the admission of each OP Unit Recipient
as an additional limited partner of the Acquiror;
(c) at the Closing, the Option Agreement, duly
executed by Acquiror;
(d) the Service Contracts Notices;
(e) the Brightpoint Rent Agreement; and
(f) all other necessary or appropriate documents
reasonably required by Contributor in order to consummate
the transaction contemplated hereby.
(iii) Form. Except to the extent attached to this
Agreement, all documents and instruments required hereby
shall be in form and substance reasonably acceptable to
Contributor and Acquiror.
D. Closing Prorations and Adjustments.
(i) A statement of prorations and adjustments shall be
prepared by Acquiror in conformity with the provisions of this
Agreement and submitted to Contributor
<PAGE>
for review not less than three (3) business days prior to the Closing
Date (with respect to the Properties) or the Additional Closing Date
(with respect to the Additional Property). For purposes of prorations,
Acquiror shall be deemed the owner of the Properties on the Closing
Date and the Additional Property on the Additional Closing Date. In
addition to prorations and adjustments that may otherwise be provided
for in this Agreement, the following items are to be prorated or
adjusted (as the case requires) as of the Closing Date or the
Additional Closing Date, as the case may be:
(a) the full amount of the security and other deposits paid
under the Leases, together with interest thereon if required by law or
under the Leases, shall be credited to Acquiror;
(b) To the extent such charges are not billed directly to
Tenants, water, electricity, sewer, gas, telephone and other utility
charges shall be prorated based, to the extent practicable, on final
meter readings and final invoices, or, if final readings and invoices
are not available, based on the most currently available billing
information, and reprorated upon issuance of final utility bills;
(c) Amounts paid or payable under any Service Contracts
being assigned to Acquiror shall be prorated based, to the extent
practicable, on final invoices or, in the event final invoices are not
available, based on the most currently available billing information,
and reprorated upon issuance of final invoices;
(d) All assessments, general or special, shall be prorated
as of the Closing Date on a "lien" basis such that the Contributor
shall be responsible for the portion of such assessments which first
become a lien and relate to the period prior to the Closing Date and
are not paid by the tenants under the Leases, and Acquiror shall be
responsible for the portion of such assessments which relate to the
period on or after the Closing Date;
(e) Except as otherwise provided in Section 6C(g),
commissions of leasing and rental agents for any Lease entered into as
of or prior to the Closing Date that are due and payable at or prior
to the Closing Date, whether with respect to base lease term, future
expansions, renewals, or otherwise, shall be paid in full at or prior
to Closing by the Contributor, without contribution or proration from
Acquiror;
(f) All Base Rents (as defined below) and other charges
actually received, including, without limitation, all Additional Rent
(as defined below), shall be prorated at Closing. At the time(s) of
final calculation and collection from tenants of Additional Rent for
1998, there shall be a re-proration between Acquiror and the
Contributor as to Additional Rent adjustments, which re-proration
shall be paid upon Acquiror's presentation of its final accounting to
the Contributor, certified as to accuracy by Acquiror. The party's
respective obligations to reprorate Additional Rent shall survive the
Closing and shall not merge into any instrument of conveyance
delivered at Closing. At the Closing, no "Delinquent Rents" (rents or
other charges which are due and owing as of the Closing) shall be
prorated in favor of the Contributor. Notwithstanding the foregoing,
Acquiror shall use reasonable efforts after the Closing Date to
collect
<PAGE>
any Delinquent Rents due to th Contributor from tenants. Further,
after the Closing Date, the Contributor shall continue to have the
right, enforceable at its sole expense, to pursue legal action against
any tenant (and any guarantors) who have defaulted, prior to the
Closing Date, under a Lease; provided, however, that the Contributor
gives Acquiror advance written notice of its intent to pursue such
action and further provided that the Contributor shall have no right
to terminate any Lease (or any right to dispossess any tenant
thereunder). All rents and other charges received from any tenant
after the Closing by and for the benefit of Acquiror shall be applied,
first, against current and past due rental obligations owed to, or for
the benefit of, Acquiror with respect to those rental obligations
accruing subsequent to the Closing Date (including, but not limited
to, obligations to replenish any security deposit withdrawal by the
Contributor or Acquiror), or any obligations accruing prior to the
Closing Date that the Contributor does not pay or for which Acquiror
does not receive a credit at Closing, and second, any excess shall be
delivered to the Contributor, but only to the extent of Delinquent
Rents owed to, and for the benefit of, the Contributor for the period
prior to the Closing Date (in no event, however, shall any sums be
paid to the Contributor to the extent it has been previously
reimbursed for such default out of any security deposit);
(g) The Contributor and Acquiror acknowledge that various of
the Properties and the Additional Property may contain certain
vacancies as of the date of this Agreement and all such current
vacancies are reflected on the Rent Roll (the "Vacancies"). If a new
lease for any such Vacancy ("Vacancy Lease") is executed prior to
Closing or the Additional Closing and the terms of such Vacancy Lease
have been approved by Acquiror, then the applicable Contributor and
Acquiror shall each bear a pro rata share, of the tenant improvement
costs and brokerage commission attributable to the Vacancy Lease (the
"Vacancy Lease Costs"). The Contributor's proportionate share of the
Vacancy Lease Costs shall be based on that portion of the Vacancy
Lease's term commencing on and after the date the tenant commences
paying rent that elapses prior to Closing or the Additional Closing, a
the case may be, and Acquiror's proportionate share shall be based on
that portion of the Vacancy Lease's term commencing on and after the
date the tenant commences paying rent that remains unexpired as of the
Closing Date or the Additional Closing Date, as the case may be. The
Contributor shall pay all Vacancy Lease Costs and Acquiror shall
reimburse the Contributor for its proportionate share of such Vacancy
Lease Costs by way of an Adjustment in the Contribution Consideration
or Additional Consideration, as the case may be. If this Agreement is
terminated prior to Closin (with respect to one or more Properties) or
prior to the Additional Closing (with respect to the Additional
Property), then Acquiror shall have no liability or obligation with
respect to any Vacancy Lease or any Vacancy Lease Costs with respect
to such Properties or Additional Property.
(h) All interest and other amounts payable on the Permitted
Existing Indebtedness to the extent the same is to be assigned to, and
assumed by, Acquiror.
(i) Such other items that are customarily prorated in
transactions of this nature shall be ratably prorated, provided there
shall be no proration of real estate taxes, personal property and ad
valorem taxes applicable to the Properties
<PAGE>
or Additional Property because such Taxes are paid by the tenants when
due pursuant to the Leases.
(ii) For purposes of calculating prorations, Acquiror shall
be deemed to be in title to the Properties or the Additional Property,
as the case may be, and therefore entitled to the income therefrom and
responsible for the expenses thereof, for the entire Closing Date or
Additional Closing Date, as the case may be. All such prorations shall
be made on the basis of the actual number of days of the year and
month that shall have elapsed as of the Closing Date or Additional
Closing Date, as the case may be. Except with respect to general real
estate and personal property taxes that are to be reprorated as
aforesaid, any proration which must be estimated at the Closing or the
Additional Closing shall be reprorated and finally adjusted within
ninety (90) days after the Closing Date or Additional Closing Date, as
the case may be; otherwise all prorations shall be final.
E. Closing Costs. All transfer taxes, documentary stamps, intangible
taxes and similar taxes or charges, and all recording charges, shall be paid by
the party as is customary in Indiana. All title insurance premiums, search fees
and survey costs shall be paid by Contributor. Contributor and Acquiror shall
each pay for one-half (1/2) of the escrow fees charged by the Escrowee, if any.
Each party shall pay its own attorney's fees and all of its other expenses,
except as otherwise expressly set forth herein.
F. Possession. Upon consummation of the Closing and the Additional
Closing, Contributor shall deliver to Acquiror full and complete possession of
the Properties and the Additional Property, as the case may be, subject only to
the Permitted Exceptions.
7. CASUALTY, LOSS AND CONDEMNATION
A. If, prior to the Closing, any Property or any part thereof shall be
condemned, destroyed or damaged in any material respect by fire or other
casualty (that is, damage or destruction in excess of One Hundred Thousand and
00/100 Dollars $100,000.00), Contributor shall immediately so notify Acquiror
and Acquiror shall have the option either to (i) terminate this Agreement upon
written notice to Contributor, (ii) except in the case of the condemnation or
destruction of or damage to Logo 7 Court, terminate this Agreement upon written
notice to Contributor with respect to the damaged or condemned Property only, or
(iii) consummate the transaction contemplated by this Agreement notwithstanding
such condemnation, destruction or material damage. If Acquiror elects to
consummate the transaction contemplated by this Agreement, (a) Acquiror shall be
entitled to receive the condemnation proceeds or settle the loss under all
policies of insurance applicable to the destruction or damage and receive the
proceeds of insurance applicable thereto, (b) Contributor shall, at the Closing
and thereafter as necessary, execute and deliver to Acquiror all required proofs
of loss, assignments of claims and other similar items and (c) the Contribution
Consideration shall be reduced by the difference between the actual loss and the
amount of such proceeds received by Acquiror. If Acquiror elects to terminate
this Agreement, or, except in the case of Logo 7 Court, to terminate the
Agreement with respect t the condemned or damaged Property only, the Earnest
Money (or allocable portion thereof) shall be returned to Acquiror by Escrowee,
in which event this Agreement shall, without further action of the parties,
become null and void, or null and void with respect to the condemned or damaged
Property only, as the case may be, and neither party shall have any rights or
obligations under this
<PAGE>
Agreement, or under this Agreement with respect to the condemned or damaged
Property only, as the case may be. If there is any other damage or destruction
(that is, damage or destruction of One Hundred Thousand and 00/100 Dollars
$100,000.00 or less) to the Properties or any part thereof, the parties shall
close hereunder and (x) Contributor shall, assign all insurance claims
pertaining to such damage or destruction to Acquiror by executing and delivering
to Acquiror at the Closing and thereafter as necessary all required proofs of
loss, assignments of claims and other similar items, and (y) the Contribution
Consideration shall be reduced by the difference between the actual loss and the
amount of such proceeds received by Acquiror. If Acquiror elects to take an
assignment of all insurance claims as aforesaid, Acquiror shall receive at the
Closing a credit against the Contribution Consideration in an amount equal to
any deductible(s) applicable thereto.
B. If, prior to the Additional Closing, the Additional Property or any
part thereof shall be condemned, destroyed or damaged in any material respect by
fire or other casualty (that is, damage or destruction in excess of One Hundred
Thousand and 00/100 Dollars $100,000.00), Contributor shall immediately so
notify Acquiror and Acquiror shall have the option either to (i) terminate this
Agreement upon written notice to Contributor, (ii) terminate this Agreement upon
written notice to Contributor with respect to the Additional Property only, or
(iii) consummate the transaction contemplated by this Agreement notwithstanding
such condemnation, destruction or material damage. If Acquiror elects to
consummate the transaction contemplated by this Agreement, (a) Acquiror shall be
entitled to receive the condemnation proceeds or settle the loss under all
policies of insurance applicable to the destruction or damage and receive the
proceeds of insurance applicable thereto, (b) Contributor shall, at the
Additional Closing and thereafter as necessary, execute and deliver to Acquiror
all required proofs of loss, assignments of claims and other similar items and
(c) the Additional Consideration shall be reduced by the difference between the
actual loss and the amount of such proceeds received by Acquiror. If Acquiror
elects to terminate this Agreement, or to terminate the Agreement with respect
to the Additional Property only, prior to the Closing Date, the Earnest Money
(or allocable portion thereof) shall be returned to Acquiror by Escrowee, in
which event this Agreement shall, without further action of the parties, become
null and void, or null and void with respect to the Additional Property only, as
the case may be, and neither party shall have any rights or obligations under
this Agreement, or under this Agreement with respect to the Additional Property
only, as the case may be. If there is any other damage or destruction (that is,
damage or destruction of One Hundred Thousand and 00/10 Dollars $100,000.00 or
less) to the Additional Property or any part thereof, the parties shall close
hereunder and (x) Contributor shall, assign all insurance claims pertaining to
such damage or destruction to Acquiror by executing and delivering to Acquiror
at the Additional Closing and thereafter as necessary all required proofs of
loss, assignments of claims and other similar items, and (y) the Additional
Consideration shall be reduced by the difference between the actual loss and the
amount of such proceeds received by Acquiror. If Acquiror elects to take an
assignment of all insurance claims as aforesaid, Acquiror shall receive at the
Additional Closing a credit against the Additional Consideration in an amount
equal to any deductible(s) applicable thereto.
8. REPRESENTATIONS AND WARRANTIES
A. Contributor represents and warrants to Acquiror that the following
are true, complete and correct as of the date of this Agreement:
(i) Contributor is a limited liability company or
partnership duly organized and validly existing under the laws of the
State of its formation and has all
<PAGE>
requisite limited liability company or partnership power and authority
to own, lease and operate its properties and assets as they are now
owned, leased and operated and to carry on its business as now
conducted and presently proposed to be conducted. Contributor is duly
qualified, licensed or admitted to do business and is in good standing
in those other jurisdictions in which the ownership, use, or leasing
of its assets and properties, or the conduct or nature of its business
makes such qualification, licensing or admission necessary, except for
failures to be so qualified, licensed or admitted and in good standing
that individually or in the aggregate would not materially adversely
affect the Properties, the Additional Property, assets, business,
operations or condition (financial or otherwise) of Contributor or the
ability of Contributor to perform its obligations under this Agreement
(a "Contributor Material Adverse Effect").
(ii) Contributor has full limited liability company or
partnership power and authority and each OP Unit Recipient has full
legal right, capacity and power to enter into, execute and deliver
this Agreement and to perform fully its obligations hereunder. The
execution, delivery and performance by Contributor of this Agreement
and the other documents to be delivered by Contributor at Closing, and
the consummation by Contributor of the transactions contemplated
hereby and thereby have been duly and validly authorized by all
necessary limited liability company or partnership action on the part
of Contributor and no other limited liability company or partnership
proceedings on the part of Contributor, including of its members or
partners, are necessary to authorize the execution, delivery and
performance by Contributor of this Agreement and the other documents
to be delivered by Contributor at Closing and the consummation by
Contributor of the transactions contemplated hereby and thereby. This
Agreement has been duly executed and delivered by Contributor and each
OP Unit Recipient and is a valid and binding obligation of Contributor
and each OP Unit Recipient, enforceable against Contributor and each
OP Unit Recipient in accordance with its terms.
(iii) Neither the execution and delivery of this Agreement
by Contributor nor the performance by Contributor or the OP Unit
Recipients of the transactions contemplated hereby will: (a) violate
or conflict with any of the provisions of the operating agreement,
certificate of formation or partnership agreement of Contributor; (b)
except as would not have a Contributor Material Adverse Effect,
violate, result in a breach of, conflict with, result in the
acceleration of, or entitle any party to accelerate the maturity or
the cancellation of the performance of any obligation under, or result
in the creation or imposition of any Lien (as defined below) in or
upon any of the Properties, the Additional Property or the assets of
Contributor or constitute a default (or an event which might, with the
passage of time or the giving of notice, or both, constitute a
default) under any mortgage, indenture, deed of trust, lease, contract
(including any Service Contract), loan or credit agreement, license or
other instrument to which Contributor is a party or by which it or any
of its assets may be bound or affected; or (c) except as would not
have a Contributor Material Adverse Effect, violate or conflict with
any provision of any statute, law, rule, regulation, code or ordinance
or any judgment, decree, order, writ, permit or license (collectively,
"Laws or Orders") applicable to Contributor, the Properties, the
Additional Property or the assets of Contributor. Other than those
which have been obtained or made prior to the date hereof, or as set
forth in Schedule 8A(iii) attached to this Agreement, no consent or
approval or action of, filing with or notice to any Governmental or
Regulatory Authority (as defined below), any creditor, investor,
member, partner, shareholder, or tenant-in-common of Contributor, or
other party is necessary or required for the execution, delivery and
performance by
<PAGE>
Contributor of this Agreement, or the consummation of the transactions
contemplated hereby, other than such consents, approvals, actions,
filings and notices which the failure to obtain or make, individually
or in the aggregate, would not reasonably be expected to have a
Contributor Material Adverse Effect.
(iv) To the best of Contributor's knowledge, it is not (a)
in violation of its operating agreement, certificate of formation
or partnership agreement, (b) in default, and no event has occurred
which, with notice or lapse of time or both, would constitute such
a default, in the due performance or observance of any obligation,
agreement, covenant or condition contained in any indenture,
mortgage, deed of trust, loan or credit agreement, lease, contract
(including any Service Contract) or other material agreement or
instrument to which it is a party or by which it is bound or to
which any of its properties or assets is subject or by which it, or
any of them, may be materially affected, or (c) in violation or in
conflict with any provision of any Laws or Orders applicable to
Contributor, the Properties, the Additional Property or the assets
of Contributor, except in the case of clauses (b) and (c) for such
defaults, violations or conflicts that individually or in the
aggregate would not reasonably be expected to have a Contributor
Material Adverse Effect. To the best of Contributor's knowledge,
(x) it is not in default under any of the documents, recorded or
unrecorded, referred to in the Title Commitments for the Properties
or the Additional Property, and (y) neither Contributor nor any of
the Properties or the Additional Property is in default under any
certificates of occupancy, licenses, permits, authorizations and
approvals required by law or by any Governmental or Regulatory
Authority having jurisdiction thereof in respect of Contributor or
its assets, the Properties, the Additional Property, occupancy of
the Properties or the Additional Property, or any present use
thereof, except in the case of clauses (x) and (y), for such
defaults that individually or in the aggregate would not reasonably
be expected to have a Contributor Material Adverse Effect.
(v) Contributor is the sole owner of, and has good and
marketable title to, the Properties and the Additional Property free
and clear of all liens, encumbrances, pledges, claims, security
interests, demands, easements, covenants, conditions, restrictions and
encroachments of any kind or nature (collectively, "Liens") other than
Permitted Exceptions and liens that will be discharged or otherwise
provided for at or prior to the Closing. The Contributor has not
received any notice alleging that it is in default in compliance with
the terms and provisions of any of the covenants, conditions,
restrictions, rights-of-way or easements constituting one or more of
the Permitted Exceptions. There are no development or other rights
associated with any Property or the Additional Property which are not
being transferred to Acquiror under this Agreement or the documents
contemplated by this Agreement.
(vi) All Improvements constructed by or on behalf of
Contributor and, to the best of Contributor's knowledge, all other
Improvements, were constructed in a good, workmanlike and substantial
manner, and in conformity with all rules, regulations, laws and
ordinances applicable at the time of construction. Contributor has
obtained and paid for all permits and certificates (including, without
limitation, permits and certificates for water, plumbing, sewers and
sewage treatment, electric, heating, ventilating, air conditioning,
drainage and occupancy) required under any Federal, state or local
law, ordinance, rule or regulation or by any governmental or
quasi-governmental agency having jurisdiction over the Properties or
the Additional Property, and all of the same are in good standing.
Except as set forth in Schedule 8A(vi) attached to this Agreement, all
Improvements constructed by or on behalf of Contributor and, to the
best
<PAGE>
of Contributor's knowledge, all other Improvements and the tangible
Personal Property are free from material defects; and the Properties,
the Additional Property and each part thereof have adequate drainage
and contain not less than the minimum number of parking spaces
required under applicable law. Each of the Properties and the
Additional Property abuts a public right-of-way, and the rights of
ingress and egress with respect thereto as they currently exist are
not restricted or limited in any manner.
(vii) The schedule of insurance policies to be furnished to
Acquiror pursuant to Section 10(iii) below will be true, complete and
correct, all such policies are in full force and effect and
Contributor is not in default with respect to any material provisions
contained in any such policy. Neither Contributor, nor to the best of
Contributor's knowledge, any agent of Contributor, has received from
any insurer any notice with respect to any defects or inadequacies
affecting all or any part of the Properties or the Additional
Property, any notice of cancellation or non-renewal of any such
policy, or any notice that any insurance premiums will be materially
increased in the future or that any insurance coverage under such
policies will not be available in the future on substantially the same
terms as now in effect.
(viii) Except as set forth in Schedule 8A(viii) attached to
this Agreement, there is no judicial, municipal or administrative
action, suit, arbitration, proceeding or investigation pending or, to
the best of Contributor's knowledge, threatened against, relating to
or affecting Contributor, its assets, the Properties, the Additional
Property or any part thereof before any court or governmental
department, commission, board, agency or instrumentality, of the
United States or any state, county, city or other political
subdivision (a "Governmental or Regulatory Authority"), including,
without limitation, proceedings for or involving collections (other
than collections in the ordinary course of business), condemnation,
eminent domain, alleged building code or environmental or zoning
violations, or personal injuries or property damage alleged to have
occurred at any of the Properties or the Additional Property, or by
reason of the condition, use of, or operations on, such Property or
Additional Property. No attachments, execution proceedings,
assignments for the benefit of creditors, insolvency, bankruptcy or
other similar proceedings are pending or, to the best of Contributor's
knowledge, threatened against Contributor or any of the OP Unit
Recipients.
(ix) Except as set forth in Schedule 8A(ix) attached to this
Agreement, Contributor has not received from any Governmental
Authority any written notice of zoning, building, fire, health code,
environmental or other violations of applicable laws, rules,
ordinances codes and regulations with respect to the Properties, the
Additional Property, or any part thereof.
(x) The Service Contracts comprise every contract,
agreement, relationship and commitment, oral or written, other than
the Leases and the Existing Mortgages that affect the Properties or
the Additional Property or to which Contributor is a party or by which
it is bound, including, without limitation, all agreements relating to
the management, construction, operation, maintenance or repair of any
Property or the Additional Property, the purchase of materials,
supplies, equipment, machinery parts, products and services, and the
lease of any property, real or personal. The Service Contracts are in
full force and effect and have not been modified, amended or altered,
in writing or otherwise. Neither Contributor nor, to the best of
Contributor's knowledge, any other party is in default under the terms
of any Service Contract. Except as otherwise
<PAGE>
noted on Exhibit C, each Service Contract is cancelable by Contributor
(or its assignees or successors) without paymen of any penalty upon
not more than thirty (30) days prior notice.
(ix) Contributor has no patents, trademarks, servicemarks or
trade names used in connection with the Properties or the Additional
Property. There is no claim pending or, to the best of Contributor's
knowledge, threatened against Contributor with respect to alleged
infringement of any patent, trademark, servicemark or trade name
related to the Properties or the Additional Property.
(xii) Without limiting any other warranty or representation
of Contributor:
(a) there is no proceeding, plan, study or effort
by any governmental authority or agency pending, or to the
best of Contributor's knowledge, threatened, which in any
way affects or would affect the present use, improvements
on, size or zoning of any of the Properties or the
Additional Property (and Contributor has received no notice
from any governmental authority of any such plan, study or
effort), and there is no existing, or to the best of
Contributor's knowledge, proposed or contemplated plan to
widen, modify or realign any street or highway or any
existing, or to the best of Contributor's knowledge,
proposed or contemplated eminent domain proceedings that
would affect any of the Properties or the Additional
Property in any way whatsoever (and Contributor has received
no notice from any governmental authority of any such
existing, proposed or contemplated plan or proceedings);
(b) all laws, ordinances, codes, rules and
regulations of any Governmental and Regulatory Authority,
bearing on the construction, maintenance, repair or
operation of each of the Properties and the Additional
Property have been complied with by Contributor at its sole
cost, except the non-compliance with which would not
reasonably be expected to have a Contributor Material
Adverse Effect; and
(c) none of the Properties or the Additional
Property is located in any area designated by any
governmental authority or agency as being a flood prone or
flood risk area (whether pursuant to the Flood Disaster Act
of 1973, as amended, or otherwise) and the requirements of
the National Flood Insurance Program are not applicable to
the Properties, the Additional Property or any part thereof.
(xiii) Except as set forth in Schedule 8A(xiii) attached to
this Agreement, Contributor is not in default in respect of any of its
obligations or liabilities pertaining to the Properties or the
Additional Property (including, without limitation, Contributor's
obligations under any of the Leases), and there is no state of facts
or circumstances or condition or event which, after notice or lapse of
time, or both, would constitute or result in any such default.
(xiv) With respect to the Leases:
(a) Except as set forth on the Rent Roll and the
Rent Agreement, each of the Leases is in full force and
effect, and has not been modified,
<PAGE>
amended, or altered, in writing or otherwise. Contributor
has not received any notice of any material claim of any
sort that has been asserted by anyone adverse to the rights
of Contributor under any of the Leases, or affecting or
questioning the rights of Contributor or the continued
possession of the leased or subleased premises under any
such Lease. Except as set forth on the Rent Roll, each
tenant is legally required to pay all sums and perform all
of its obligations set forth in the Lease, without
concessions, abatements, offsets or other bases for relief
or adjustment;
(b) Except as set forth on the Rent Roll, all
obligations of the lessor under the Leases that accrue to
the Closing Date have been performed, including, but not
limited to, all required tenant improvements, cash or other
inducements, rent abatements or moratoria, installations and
construction (for which payment in full has been made or
will be made prior to Closing, or subject to proration
hereunder in all cases), and, to the best of Contributor's
knowledge, each tenant has unconditionally accepted lessor's
performance of such obligations. Except as set forth on the
Rent Roll, no tenant has asserted any offsets, defenses or
claims available against rent payable by it or other
performance or obligations otherwise due from it under any
Lease, which assertion remains outstanding;
(c) Except as set forth on the Rent Roll, no
tenant is currently in default under or is in arrears (for
more than 30 days) in the payment of any sums or in the
performance of any monetary obligations required of it under
its Lease, and Contributor has no knowledge of any other
default under any such Lease;
(d) Except as set forth in the Rent Roll, during
the 12-month period immediately preceding the date hereof:
(i) no tenant has, at any time, been more than 30 days
delinquent in its respective payment of any and all sums due
under the terms of its respective Lease; (ii) no tenant has
requested that Contributor provide that tenant with any
reduction in the tenant's monetary obligations under its
Lease; (iii) no tenant has requested that Contributor, in
its capacity as landlord, permit the tenant to sublease its
leased premises, or assign its Lease, or terminate its Lease
on an accelerated basis; (iv) Contributor has not "written
off" any delinquent sums owed by any tenant to satisfy its
obligation to contribute to the payment of real estate
taxes, common area maintenance charges, and insurance
premiums; and (v) Contributor has not had (nor is it
currently engaged in) any dispute (whether of a formal or an
informal nature) with any tenant concerning that tenant's
obligations to make payments under the terms of its Lease
toward real estate taxes, insurance premiums and common area
maintenance charges or other charges imposed under its
Lease;
(e) Except as set forth on the Rent Roll,
Contributor has not received any written notice from any
tenant stating that a petition in bankruptcy has been filed
or is threatened to be filed by or against it;
(f) Except with respect to security deposits,
neither base rent ("Base Rent"), nor regularly payable
estimated tenant contributions for operating expenses,
insurance premiums, real estate taxes, common area charges,
and similar or other "pass through" or non-base rent items
including, without limitation, cost-of-living or so-called
"C.P.I." or other such adjustments
<PAGE>
(collectively, "Additional Rent"), nor any other material
item payable by any tenant under any Lease has been
heretofore prepaid for more than one month;
(g) To the best of Contributor's knowledge, no
guarantor(s) of any Lease has been released or discharged,
partially or fully, voluntarily or involuntarily, or by
operation of law, from any obligation under or in connection
with any Lease or any transaction related thereto;
(h) Except as set forth on the Rent Roll, there
are no brokers' commissions, finders' fees, or other charges
payable or to become payable to any third party on behalf of
Contributor in connection with any Lease, including, but not
limited to, any exercised option(s) to expand or renew;
(i) Each security deposit set forth on the Rent
Roll shall be assigned to Acquiror at the Closing (or
Acquiror shall receive a credit therefor). Except as set
forth on the Rent Roll, (i) no tenant or any other party has
asserted any claim (other than for customary refund at the
expiration of a Lease) to all or any part of any security
deposit and (ii) Contributor has not applied any portion of
any security deposit to the payment of any sums due from any
tenant under a Lease;
(j) Contributor shall pay (or Acquiror shall
receive a credit therefor), and retains sole and exclusive
responsibility for, all expenses due on or before the
Closing Date connected with or arising out of the
negotiation, execution and delivery of the Leases,
including, without limitation, brokers' commissions
(including those applicable, if any, to future expansions or
renewals by a tenant), leasing fees and recording fees (as
well as the cost of all tenant improvements not required to
be paid for by tenants);
(k) No tenant has, by virtue of its Lease or any
other agreement or understanding, any purchase option with
respect to any of the Properties, the Additional Property,
or any portion thereof, or any right of first refusal to
purchase any of the Properties, the Additional Property, or
a portion thereof, whether triggered by the transactions
contemplated by this Agreement or by a subsequent sale of
any of the Properties or a portion thereof. Except as set
forth on the Rent Roll or the Rent Agreement, no tenant has,
by virtue of its Lease or any other agreement or
understanding any of the following (i) the option to
terminate its Lease prior to the stated expiration date and
(ii) the option to reduce the rentable space at any of the
Properties or the Additional Property that such tenant is
currently occupying; and
(l) Except as set forth on the Rent Roll: (i) to
the best of Contributor's knowledge, no tenant has sublet
its leased premises; and (ii) there are no outstanding
requests from any tenant to Contributor, requesting any
consent to an assignment of the tenant's Lease or to a
sublease of all or some portion of a tenant's leased
premises.
(xv) Except as set forth in Schedule 8A(xv) attached to this
Agreement, there are no general or special assessments applicable to
the Properties, the Additional Property or any part thereof. The bill
or bills issued for the years 1995, 1996, 1997 and 1998, for all real
estate taxes and personal property taxes and copies of any and all
notices pertaining to real estate taxes or assessments applicable to
the
<PAGE>
Properties and the Additional Property (the "Tax Bills") (and to
Contributor's knowledge, the only real estate tax bills applicable to
the Properties and the Additional Property) have been delivered to
Acquiror. Except as set forth in Schedule 8A(xv) attached to this
Agreement, Contributor has not received any notice of any proposed or
actual increase in the assessed valuation of or rate of taxation of
any or all of the Properties or the Additional Property from that
reflected in the most recent Tax Bills. Except as set forth in
Schedule 8A(xv) attached to this Agreement, there is not now pending,
and Contributor agrees that it will not, without the prior written
consent of Acquiror (which consent shall not be unreasonably withheld
or delayed), institute prior to the Closing Date (with respect to the
Properties) or the Additional Closing Date (with respect to the
Additional Property), any proceeding or application for a reduction in
the real estate tax assessment of any of the Properties or the
Additional Property or any other relief for any tax year. Other than
the amounts disclosed by the Tax Bills or as reflected in the Rent
Agreement, no other real estate taxes have been, or to Contributor's
knowledge, will be, assessed against the Properties, the Additional
Property, or any portion thereof, in respect of the year 1998 or any
prior year, and no special assessments of any kind (special, bond or
otherwise) are or have been levied against the Properties, the
Additional Property, or any portion thereof, that are outstanding or
unpaid, and, to Contributor's knowledge, none will be levied prior to
Closing (with respect to the Properties) or the Additional Closing
(with respect to the Additional Property). Contributor has not entered
into any agreements with attorneys, or consultants or other parties,
with respect to real estate taxes applicable to any of the Properties
or the Additional Property that will be binding on Acquiror after the
Closing or Additional Closing, as the case may be. All real estate
taxes which are due and payable have been paid.
(xvi) Contributor has prepared and timely filed all tax
returns required to be filed on or before the date hereof with respect
to the Properties and the Additional Property, which tax returns are
true, correct and complete in all material respects. Contributor has
paid or made provision for the payment of all taxes with respect to
the Properties and the Additional Property that are due or claimed to
be due from it on or before the date hereof by any governmental taxing
authority. No federal, state, local or foreign taxing authority has
asserted any tax deficiency, lien, interest or penalty or other
assessment against the Properties, the Additional Property or
Contributor which has not been paid and there is no pending audit or
inquiry from any federal, state, local or foreign tax authority
relating to the Properties, the Additional Property or Contributor
that may be expected to result in a tax deficiency, lien interest or
other assessment against the Properties or the Additional Property.
(xvii) The Personal Property is all of the personal property
owned by Contributor and used by Contributor in the operation of the
Properties and the Additional Property. Except as set forth in
Schedule 8A(xvii) attached to this Agreement, Contributor has good
title to the Personal Property, free and clear of any Liens. All such
Personal Property is in good working condition, free of material
defects, normal wear and tear excepted.
(xviii) This Agreement and all other documents and
agreements executed by Contributor in connection with the transaction
that is the subject of this Agreement (collectively, the
"Contributor's Documents") are binding on Contributor and enforceable
against Contributor in accordance with their respective terms, subject
to
<PAGE>
bankruptcy and similar laws affecting the remedies or recourse of
creditors generally and general principles of equity.
(xix) All financial information regarding the Properties and
the Additional Property furnished by Contributor to Acquiror is true,
complete and correct; has been compiled on a tax accounting basis and
accurately set forth in all material respects the results of the
operations of the Properties and the Additional Property for the
periods covered.
(xx) All management contracts pertaining to the Properties
will be terminated as of the Closing and all management contracts
pertaining to the Additional Property will be terminated as of the
Additional Closing.
(xxi) All utilities (including, without limitation, gas,
electricity, telephone, water and sanitary and storm sewers) have been
completed to the lot lines of the Land, are connected to the
Improvements as necessary, and all connection, hook-up, tap fees and
the like have been paid.
(xxii) The Existing Mortgages constitute all of the
mortgages or deeds of trust presently encumbering the Properties, the
Additional Property or any portion thereof. Contributor has complied
with (and, prior to Closing with respect to the Properties and the
Additional Closing with respect to the Additional Property, shall
continue to comply with) in all material respects the terms of, and
all notices or correspondence received from the holder of, the
promissory notes evidencing the loans secured by the Existing
Mortgages (the "Existing Notes"). Contributor has paid (and, at all
times prior to Closing with respect to the Properties and the
Additional Closing with respect to the Additional Property, shall
pay), when and as due, all sums due under the Existing Mortgages, the
Existing Notes and all other loan documents securing the Existing
Notes (the "Other Loan Documents"). The Existing Notes, the Existing
Mortgages and the Other Loan Documents are in full force and effect,
and Contributor has not received any notice of a default thereunder
that remains outstanding. Contributor has delivered to Acquiror true,
complete and accurate copies of the Existing Notes, the Existing
Mortgages and the Other Loan Documents. Except as set forth in
Schedule 8A(xxii) attached to this Agreement, the indebtedness
evidenced by the Existing Notes may be prepaid, in full, on the
Closing Date with respect to the Properties and the Additional Closing
Date with respect to the Additional Property, without imposition of
any penalty or premium.
(xxiii) No representation or warranty made by Contributor in
this Agreement, no exhibit attached hereto with respect to the
Properties or the Additional Property, and no schedule contained in
this Agreement contains any untrue statement of a material fact, or
omits to state a material fact necessary in order to make the
statements contained therein not misleading. All items delivered by or
on behalf of Contributor pursuant to this Agreement are true,
accurate, correct and complete in all material respects, and fairly
present the information set forth in a manner that is not misleading.
The copies of all documents and other agreements delivered or
furnished and made available by or on behalf of Contributor to
Acquiror pursuant to this Agreement constitute all of and the only
Leases and other agreements to which Contributor is presently a party
relating to or affecting the ownership, leasing, management and
operation of the Properties and the Additional Property, there being
no
<PAGE>
"side" or other agreements, written or oral, in force or effect, to
which Contributor is a party or to which any Property is subject.
(xxiv) Except as set forth in Schedule 8A(xxiv) attached to
this Agreement:
(a) The Properties and the Additional Property are
owned and operated by Contributor in compliance with all
Environmental Laws, except for instances of non-compliance as
would not individually or in the aggregate reasonably expected
to have a Contributor Material Adverse Effect.
(b) There have been no past and there are no pending
or, to the knowledge of Contributor, threatened (in writing)
claims, complaints, notices, correspondence or requests for
information received by Contributor with respect to any
violation or alleged violation of any Environmental Law or
Environmental Permit or with respect to any corrective or
remedial action for or cleanup of the Properties, the
Additional Property or any portion thereof.
(c) There have been no Releases of a Hazardous
Material at, on, under, in or about any of the Properties, the
Additional Property or any portion thereof during any period
that Contributor owned or leased such Property, or to the best
of Contributor's knowledge, prior thereto. None of the
Properties or the Additional Property is listed, or to the
best of Contributor's knowledge, proposed for listing, on the
National Priorities List promulgated pursuant to CERCLA (the
"NPL") or on any similar state or other list of sites that
require or may require corrective or remedial action.
(d) To the best of Contributor's knowledge, no
conditions exist at, on, under, in or about the Properties,
the Additional Property or any portion thereof that, with the
passage of time or the giving of notice or both, would give
rise to any claim, liability or obligation under any
Environmental Law or Environmental Permit.
(e) Contributor has been issued all Environmental
Permits required for the operation of the Properties and the
Additional Property. All such Environmental Permits are in
full force and effect and Contributor is in compliance in all
material respects with the terms and conditions of such
Environmental Permits.
(f) Contributor has not transported, disposed of or
treated, or arranged for the transportation, disposal or
treatment of, any Hazardous Material from the Properties, the
Additional Property or any portion thereof to any location
that is: (i) listed, or to the best of Contributor's
knowledge, proposed or nominated for listing, on the NPL or on
any other similar list or (ii) the subject of any pending, or
to the best of Contributor's knowledge, threatened, Federal,
state or local enforcement action or other investigation under
any Environmental Law.
(g) There are no underground storage tanks at, on or
under the Properties, the Additional Property or any portion
thereof. Contributor has not removed, closed or abandoned any
underground storage tanks at any of the Properties or the
Additional Property, and Contributor has no knowledge of the
<PAGE>
existence, abandonment, closure or removal of underground
storage tanks at any of the Properties or the Additional
Property.
(h) There have been no environmental investigations,
studies, audits, tests, reviews or other analyses conducted
by, or which are in the possession of, Contributor in relation
to any Property or the Additional Property which have not been
delivered to Acquiror prior to the execution of this
Agreement.
For purposes of this item (xxiv), the following terms shall have the
meanings ascribed to them below.
(1) "Environmental Law" or "Environmental Laws" shall mean all
applicable Federal, state and local statutes, regulations, directives,
ordinances, rules, guidelines, court orders, judicial or administrative
decrees, arbitration awards and the common law, which pertain to the
environment, soil, water, air, flora and fauna, or health and safety
matters, as such have been amended, modified or supplemented from time
to time (including all amendments thereto and reauthorizations
thereof). Environmental Laws include, without limitation, those
relating to: (i) the manufacture, processing, use, distribution,
treatment, storage, disposal, generation or transportation of Hazardous
Materials; (ii) air, soil, surface, subsurface, groundwater or noise
pollution; (iii) Releases; (iv) protection of endangered species,
wetlands or natural resources; (v) the operation and closure of
underground storage tanks; (vi) health and safety of employees and
other persons; and (vii) notification and reporting requirements
relating to the foregoing. Without limiting the above, Environmental
Law also includes the following: (i) the Comprehensive Environmental
Response, Compensation and Liability Act (42 U.S.C. Sections 9601 et
seq.), as amended ("CERCLA"); (ii) the Solid Waste Disposal Act, as
amended by the Resource Conservation and Recovery Act (42 U.S.C.
Sections 6901 et seq.), as amended ("RCRA"); (iii) the Emergency
Planning and Community Right to Know Act of 1986 (42 U.S.C.
Sections 11001 et seq.), as amended; (iv) the Clean Air Act (42 U.S.C.
Sections 7401 et seq.), as amended; (v) the Clean Water Act (33 U.S.C.
Sections 1251 et seq.), as amended; (vi) the Occupational Safety and
Health Act (29 U.S.C. Sections 651 et seq.), as amended; (vii) any
state, county, municipal or local statutes, laws or ordinances similar
or analogous to (including counterparts of) any of the statutes listed
above; and (viii) any rules, regulations, guidelines, directives,
orders or the like adopted pursuant to or implementing any of the
above.
(2) "Environmental Permit" or "Environmental Permits" shall
mean licenses, certificates, permits, directives, requirements,
registrations, government approvals, agreements, authorizations, and
consents which are required under or are issued pursuant to an
Environmental Law.
(3) "Hazardous Material" or "Hazardous Materials" shall mean
any chemical, pollutant, contaminant, pesticide, petroleum or petroleum
product or by product, radioactive substance, hazardous or extremely
hazardous solid waste, special, dangerous or toxic waste, substance,
chemical or material regulated, listed, limited or prohibited under any
Environmental Law, including without limitation: (i) friable or damaged
asbestos, asbestos-containing material, polychlorinated biphenyls,
solvents and waste oil; (ii) any "hazardous substance" as defined under
CERCLA; and (iii) any "hazardous waste" as defined under RCRA or
comparable state or local law.
<PAGE>
(4) "Release" means any spill, discharge, leak, migration,
emission, escape, injection, dumping or other release or threatened
release of any Hazardous Material into the environment, whether or not
notification or reporting to any governmental authority was or is
required. Release includes, without limitation, the meaning of Release
as defined under CERCLA.
B. Contributor represents and warrants to Acquiror that, as of
the Closing or the Additional Closing, as the case may be, each of the
representations and warranties set forth in Section 8A above shall be true,
complete and correct except for changes in the operation of the Properties
occurring prior to the Closing, or in the operation of the Additional Property
occurring prior to the Additional Closing, that are specifically permitted by or
pursuant to this Agreement and except for inaccuracies in such representations
and warranties as to which Contributor had no actual knowledge at the date of
this Agreement that are disclosed in the schedule to the certificate delivered
by Contributor to Acquiror pursuant to Section 6C(i)(l).
C. Acquiror represents and warrants to Contributor that the
following are true, complete and correct as of the date of this Agreement:
(i) Acquiror is a limited partnership duly formed,
validly existing and in good standing under the laws of the State of
Delaware and has all requisite partnership power and authority to own,
lease and operate its properties and assets as they are now owned,
leased and operated and to carry on its business as now conducted and
presently proposed to be conducted. Acquiror is duly qualified,
licensed or admitted to do business and is in good standing in those
jurisdictions in which the ownership, use, or leasing of its assets and
properties, or the conduct or nature of its business makes such
qualification, licensing or admission necessary, except for failures to
be so qualified, licensed or admitted and in good standing that
individually or in the aggregate would not materially adversely affect
the assets, business, operations or condition (financial or otherwise)
of Acquiror or the ability of Acquiror to perform its obligations under
this Agreement (an "Acquiror Material Adverse Effect").
(ii) Acquiror has all partnership power and authority to
enter into, execute and deliver this Agreement and to perform fully its
obligations hereunder. The execution, delivery and performance by
Acquiror of this Agreement and the other documents to be delivered by
Acquiror at Closing and the Additional Closing, and the consummation by
Acquiror of the transactions contemplated hereby and thereby are
permitted under the Partnership Agreement, and at Closing and the
Additional Closing will have been duly and validly authorized by all
necessary partnership action on the part of Acquiror. This Agreement
has been duly executed and delivered by Acquiror and is a valid and
binding obligation of Acquiror, enforceable against Acquiror in
accordance with its terms.
(iii) To the best of Acquiror's knowledge, it is not (a)
in violation of the Partnership Agreement, (b) in default, and no event
has occurred which, with notice or lapse of time or both, would
constitute such a default, in the due performance or observance of any
obligation, agreement, covenant or condition contained in any material
indenture, mortgage, deed of trust, loan or credit agreement, lease,
contract or other material agreement or instrument to which it is a
party or by which it is bound or to which any of its properties or
assets is subject or by which it, or any of them, may be materially
affected, or (c) in violation or in conflict with any provision of any
Laws or Orders applicable to Acquiror or its assets, except in the case
of clauses (b) and (c) for
<PAGE>
such defaults, violations or conflicts that individually or in the
aggregate would not reasonably be expected to have an Acquiror
Material Adverse Effect.
(iv) The Partnership Agreement is in full force and
effect and has not been further amended or modified (other than any
amendment which solely amends Schedule A thereto).
(v) The OP Units to be issued to the OP Unit
Recipients, when issued, sold and paid for pursuant to this Agreement
and the Partnership Agreement, will be duly authorized, validly issued,
and fully-paid. At or prior to the Closing, the general partner of
Acquiror shall have given such consents and taken such actions as
necessary to vest each OP Unit Recipient with Conversion Rights (as
defined in the Partnership Agreement) pursuant to Article XII of the
Partnership Agreement; provided, however, that such Conversion Rights
will be subject to the terms and provisions of Section 3F and the OP
Unit Recipient Agreement.
(vi) There is no existing or, to Acquiror's knowledge,
threatened, legal action or governmental proceedings of any kind
involving Acquiror, any of its assets or the operation of any of the
foregoing, which, if determined adversely to Acquiror or its assets,
would have an Acquiror Material Adverse Effect.
(vii) The REIT is a corporation duly organized, validly
existing and in good standing under the laws of the State of Maryland
and has all requisite corporate power and authority to own, lease and
operate its properties and assets as they are now owned, leased and
operated and to carry on its business as now conducted and presently
proposed to be conducted. The REIT is duly qualified, licensed or
admitted to do business and is in good standing in those jurisdictions
in which the ownership, use, or leasing of its assets and properties,
or the conduct or nature of its business makes such qualification,
licensing or admission necessary, except for failures to be so
qualified, licensed or admitted and in good standing that individually
or in the aggregate would not materially adversely affect the assets,
business, operations or condition (financial or otherwise) of the REIT
(a "REIT Material Adverse Effect"). The REIT is the sole general
partner of the Acquiror.
(viii) The REIT has all requisite corporate power and
authority to enter into, execute and deliver this Agreement in its
capacity as general partner of Acquiror and to perform fully its
obligations hereunder in its capacity as general partner of Acquiror.
The execution, delivery and performance by the REIT of this Agreement
and the other documents to be delivered by the REIT at Closing and the
Additional Closing in its capacity as general partner of Acquiror, and
the consummation by the REIT of the transactions contemplated hereby
and thereby at Closing and Additional Closing will have been duly and
validly authorized by all necessary corporate action on the part of the
REIT. This Agreement has been duly executed and delivered by the REIT
and is a valid and binding obligation of the REIT, enforceable against
the REIT in accordance with its terms.
(ix) To the best of the REIT's knowledge, it is not (a)
in violation of its Certificate of Incorporation or by-laws, (b) in
default, and no event has occurred which, with notice or lapse of time
or both, would constitute such a default, in the due performance or
observance of any obligation, agreement, covenant or condition
contained in any material indenture, mortgage, deed of trust, loan or
credit agreement,
<PAGE>
lease, contract or other material agreement or instrument to which it
is a party or by which it is bound or to which any of its properties
or assets is subject or by which it, or any of them, may be materially
affected, or (c) in violation or in conflict with any provision of any
Laws or Orders applicable to the REIT or its assets, except in the
case of clauses (b) and (c) for such defaults, violations or conflicts
that individually or in the aggregate would not reasonably be expected
to have a REIT Material Adverse Effect.
(x) The Conversion Shares will be duly authorized and
reserved for issuance and, to the extent delivered upon exchange of the
OP Units, when issued, sold and paid for pursuant to this Agreement and
the Partnership Agreement, will be validly issued, fully-paid and
nonassessable by the REIT.
(xi) The REIT is organized and operates in conformity
with the requirements of a "real estate investment trust" under
Sections 856 through 860 of the Code. The REIT has elected to be taxed
as a "real estate investment trust" under the Code.
(xii) There is no existing, or, to the REIT's knowledge,
threatened legal action or governmental proceedings of any kind
involving the REIT, any of its assets or the operation of any of the
foregoing, which, if determined adversely to the REIT or its assets,
would have a material adverse effect on the financial condition,
business or operations of the REIT or its assets and which would
interfere with the Company's ability to perform its obligations
hereunder.
(xiii) The REIT has prepared or caused to be prepared and
timely filed all tax returns required to be filed on or before the date
hereof with respect to Acquiror and the REIT, the failure of which to
file would have an Acquiror Material Adverse Effect or a REIT Material
Adverse Effect, which tax returns are true, correct and complete in all
material respects. The REIT has paid or made provision for the payment
of all taxes that are due or claimed to be due from it on or before the
date hereof by any governmental taxing authority, the failure of which
to pay would have an Acquiror Material Adverse Effect or a REIT
Material Adverse Effect. No federal, state, local or foreign taxing
authority has asserted any tax deficiency, lien, interest or penalty or
other assessment against the REIT or Acquiror which has not been paid
and there is no pending audit or inquiry from any federal, state, local
or foreign tax authority relating to the REIT or Acquiror that may be
expected to result in a tax deficiency, lien interest or other
assessment against the REIT or Acquiror's assets, which in the
aggregate would have an Acquiror Material Adverse Effect or a REIT
Material Adverse Effect.
(xiv) The REIT has filed all forms, reports, schedules,
proxy materials, registration statements and related prospectuses and
supplements and other documents required to be filed by the REIT with
the Securities and Exchange Commission (the "SEC") pursuant to the
Securities Act or the Securities Exchange Act of 1934, as amended, for
the year ended December 31, 1997 and from December 31, 1997 up to the
date hereof (collectively, the "SEC Documents") and will cause to be
delivered to Contributor copies of such additional documents as may be
filed with the SEC by the REIT between the date hereof and the
Additional Closing Date. The SEC Documents were, and those additional
documents filed between the date hereof and the Additional Closing
will be, prepared and filed in all material respects in compliance
with the rules and regulations promulgated by the SEC, and do not
contain any untrue statement of a material fact or omit to state any
material fact required to be stated therein in order to
<PAGE>
make the statements contained therein, in light of the circumstances
under which they were made, not misleading.
D. Acquiror represents and warrants to Contributor that, as of
the Closing (with respect to the Properties) and the Additional Closing (with
respect to the Additional Closing), each of the representations and warranties
set forth in Section 8C above shall be true, complete and correct.
E. For the period continuing through the first anniversary of
the Closing Date (with respect to the Properties) and the Additional Closing
Date (with respect to the Additional Property), and without limitation of
document production otherwise required of Contributor hereunder, Contributor
shall, from time to time, upon reasonable advance written notice from Acquiror,
provide to Acquiror and its representatives access to all financial and other
information pertaining to the period of Contributor's ownership and operation of
the Properties and the Additional Property, as the case may be, which
information is relevant and reasonably necessary, in the opinion of the
Acquiror's outside, third party accountants (the "Accountants") to enable
Acquiror and the Accountants to prepare financial statements in compliance with
any and all of (a) Rule 3-05 or Rule 3-14 of Regulation S-X of the SEC, as
applicable to the Acquiror; (b) any other rule issued by the SEC and applicable
to the Acquiror; and (c) any registration statement, report or disclosure
statement filed with the SEC by, or on behalf of the Acquiror; and (ii) a
representation letter, in form specified by, or otherwise satisfactory to, the
Accountants, signed by the individuals responsible for Contributor's financial
reporting, as prescribed by generally accepted auditing standards promulgated by
the Auditing Standards Division of the American Institute of Certified Public
Accountants, which representation letter may be required by the Accountants in
order to render an opinion concerning the Contributor's financial statements.
Contributor shall indemnify and hold Acquiror harmless from and against any
losses, costs, expenses (including, without limitation, reasonable attorneys'
fees and expenses) and liabilities arising from Contributor's failure to comply
with its obligation to provide such access and representation letter.
9. ACQUIROR'S DUE DILIGENCE AND INSPECTION OF THE PROPERTIES
A. Subject to the provisions of Section 15B, during the period
extending to and including the date which is fifteen (15) days from the date of
this Agreement (the "Inspection Period"), Acquiror will complete its due
diligence investigation of the Properties. During the Inspection Period,
Acquiror and Acquiror's agents, engineers, surveyors, consultants, appraisers,
auditors and other representatives (collectively, "Representatives") will, upon
reasonable advance notice, be given the right to enter upon the Properties and
perform nondestructive physical tests and to conduct any and all necessary
engineering, environmental and other surveys, tests and inspections at the
Properties and to examine and evaluate any books and records, agreements and
documents within the possession of Contributor or subject to its control
(whether or not located at the Properties), as Acquiror or Acquiror's agents may
reasonably request. Contributor shall cooperate fully with the inspections
hereunder by Acquiror and its Representatives, and shall furnish to Acquiror and
its Representatives all such books, records, information (financial or
otherwise), data and agreements that Acquiror or Acquiror's Representatives may
reasonably request in connection with the investigations hereunder, including
but not limited to, copies of all leases, Services Contracts, insurance
policies, environmental reports, working drawings, plans and specifications,
surveys, appraisals, engineering and architect reports, real estate tax bills
and receipts, operating statements and related documents. Acquiror shall have
the right to perform a Phase One environmental
<PAGE>
assessment of each of the Properties. Upon Acquiror's receipt of any such Phase
One assessment, it shall provide a copy thereof to Contributor (at no cost to
Contributor). If such Phase One assessment should recommend further inspections
and testing at the Properties, Acquiror shall have the option, to be exercised
by written notice given to Contributor prior to the expiration of the Inspection
Period, to extend the Inspection Period for one (1) additional period of thirty
(30) days. Except as otherwise provided herein, Acquiror's obligations under
this Agreement shall be contingent, only during the Inspection Period, upon
Acquiror being satisfied in its sole discretion with the results of its
investigation and evaluation of the Properties (the "Inspection Condition"). If
the Inspection Condition is not so satisfied, Acquiror shall notify Contributor
in writing (the "Termination Notice") prior to the expiration of the Inspection
Period that it is terminating this Agreement, in which case this Agreement shall
terminate; provided, that if the failure of the Inspection Condition results
from the failure of any one Property, other than Logo 7 Court, to meet
Acquiror's due diligence standards based on reasons related to title or
environmental condition, Acquiror may, in its sole discretion, elect instead to
terminate this Agreement only as it relates to such Property. If Acquiror shall
give the Termination Notice to Contributor prior to the expiration of the
Inspection Period, the Earnest Money (or the portion of the Earnest Money
allocable to the Property that is the subject of the Termination Notice, as the
case may be) shall be promptly returned to Acquiror and all parties hereto shall
be released from all further obligations and liabilities hereunder, or with
respect to such terminated Property, as the case may be, except with respect to
the Surviving Indemnities. If Acquiror does not give the Termination Notice to
Contributor prior to the expiration of the Inspection Period, Acquiror shall be
deemed to have waived the Inspection Condition and Acquiror's right to terminate
this Agreement pursuant to this Section 9 shall be deemed deleted from this
Agreement.
B. Without limiting the generality of the foregoing, Acquiror
may review applicable zoning rules and regulations to determine Acquiror's
reasonable ability to undertake any planned building renovations or new
construction within applicable zoning requirements. Contributor shall cooperate
with Acquiror in such zoning analysis and shall provide Acquiror access to all
relevant materials, including certificate of occupancy, licenses and special
permits, and "as-built" floor plans and specifications relevant thereto.
C. Without limiting the generality of the foregoing,
Contributor shall provide Acquiror with copies of all communications, letters,
inquiries or notices received from any regulatory body dealing with
environmental matters, water quality, air quality, life safety or OSHA, and all
reports in its possession which may have been prepared addressing the presence
of PCB, asbestos, or other Hazardous Materials or Releases at the Properties.
10. SCHEDULES
Within three (3) business days after the date of this
Agreement, to the extent not previously delivered, Contributor shall furnish to
Acquiror:
(i) a true, correct and complete copy of each written
Service Contract and a true, correct and complete summary of each oral
Service Contract;
(ii) true, correct and complete copies of all of
the Leases;
(iii) a schedule of all insurance policies owned by or on
behalf of Contributor with respect to the Properties and the Additional
Property and the coverage amounts thereunder;
<PAGE>
(iv) copies of all operating statements for the
Properties and the Additional Property that are in the possession or
control of Contributor for any time during the period commencing with
the first day of the second full calendar year preceding the date of
this Agreement and ending on the date of this Agreement; and
(v) copies of the most recent survey of and title
policy or commitment for each of the Properties and the Additional
Property in the possession or control of Contributor.
11. CONDITIONS PRECEDENT
A. Acquiror's obligation to acquire the Properties at the
Closing and the Additional Property at the Additional Closing, as the case may
be, shall be subject to and contingent upon the following conditions precedent
with respect to the Properties or the Additional Property, as the case may be,
any or all of which Acquiror may waive only by a notice delivered in accordance
with Section 15G:
(i) Acquiror shall have received an Owner's Title
Insurance Policy (or marked-up commitment therefor) insuring fee simple
title to each of the Properties or the Additional Property, as the case
may be, in Acquiror (or Acquiror's designee, if applicable) in amounts
reasonably satisfactory to Acquiror and subject only to Permitted
Exceptions, and otherwise in the form and condition required by this
Agreement.
(ii) Contributor shall have obtained and delivered to
Acquiror original executed tenant estoppel certificates (the "Tenant
Estoppel Certificates") in substantially the form of Exhibit I attached
hereto, dated not more than thirty (30) days before Closing or the
Additional Closing, as the case may be, and executed by tenants under
Leases leasing space producing not less than ninety-five percent (95%)
of the total aggregate gross rental income for all of the Properties or
the Additional Property, as the case may be, including, without
limitation, those particular tenants listed in Exhibit J attached
hereto ("Required Estoppel Tenants"). Contributor shall use its
reasonable, good faith and diligent efforts to obtain the Tenant
Estoppel Certificates. To the extent that the Tenant Estoppel
Certificate obtained from a tenant contains less than all of the
Exhibit I information, or to the extent that, after satisfying the
above condition, Contributor is unable to obtain Tenant Estoppel
Certificates from all of the remaining tenants, then, at Closing or the
Additional Closing, as the case may be, Contributor shall execute a
Tenant Estoppel Certificate with respect to those Leases for which no
or an insufficient Tenant Estoppel Certificate has been obtained
(provided that in the case of an insufficient Tenant Estoppel
Certificate the certification from Contributor shall be limited to the
insufficient matters). With respect to tenants who have signed Leases
but not yet taken occupancy, the Tenant Estoppel Certificate shall
appropriately identify the full and complete Lease but will omit
certifications that are inappropriate.
(iii) The termination, on or before the Closing Date or
Additional Closing Date, as the case may be, of all of the Service
Contracts that Acquiror has reasonably determined are unacceptable to
it and that Acquiror has elected to terminate by written notice given
to Contributor prior to the expiration of the Inspection Period.
<PAGE>
(iv) The representations and warranties made by
Contributor in this Agreement shall be true and correct in all material
respects on the Closing Date or the Additional Closing Date, as the
case may be, as if made on such date.
(v) The delivery by Contributor of all documents
(executed by parties other than Acquiror, where required) required
under Section 6B(i).
(vi) Other than the Permitted Existing Indebtedness and
Existing Mortgages, all liens or encumbrances of a definite or
ascertainable amount on or related to the Properties or the Additional
Property shall be paid off by Contributor and removed from such
Property or Additional Property.
(vii) The terms of the Permitted Existing Indebtedness
shall have been restructured to reflect the terms set forth on Schedule
3D attached to this Agreement.
(viii) The delivery of all necessary consents and
approvals of lenders under the Permitted Existing Indebtedness to be
assumed by Acquiror, and the consents and approvals set forth on
Schedule 11A(viii) to this Agreement.
(ix) For the Additional Property only, the issuance of
Certificate of completion from the Agency (as defined below) as
required by Section 5(e) of the Project Agreement, dated December 12,
1997, between the city Indianapolis, Department of Metropolitan
Development (the "Agency") and COB Associates, LLC.
(x) Contributor not being otherwise in default of its
obligations under this Agreement.
B. If the condition precedent set forth in Section 11A(i) is
not satisfied or waived on or prior to the Closing Date or the Additional
Closing Date, as the case may be, Acquiror shall have the rights and remedies
set forth in Section 5C. If any of the conditions precedent set forth in Section
11A(ii) is not satisfied or waived on or prior to the Closing Date or the
Additional Closing Date, as the case may be, Acquiror shall have the right to
terminate this Agreement upon written notice to Contributor, or to terminate
this Agreement upon written notice to Contributor as it relates to any Property
or the Additional Property for which such condition is unsatisfied, and in which
event Escrowee shall immediately return the Earnest Money (allocable portion
thereof) to Acquiror and this Agreement, or this Agreement as it relates to such
Property or the Additional Property, as the case may be, without further action
of the parties, shall become null and void and neither party shall have any
further rights or obligations under this Agreement, or under this Agreement as
it relates to such Property or the Additional Property, as the case may be,
except with respect to the Surviving Indemnities. If any of the conditions
precedent set forth in Sections 11A(iii), (iv), (v), (vi), (vii), (viii) (ix)
and (x), is not satisfied or waived on or prior to the Closing Date or the
Additional Closing Date, as the case may be, then Acquiror shall have the rights
and remedies provided in Section 13B.
C. Contributor's obligation to contribute and convey the
Properties at the Closing and the Additional Property at the Additional Closing
shall be subject to and contingent upon the following conditions precedent with
respect to the Properties or the Additional Property, as the case may be, any or
all of which Contributor may waive by a notice delivered in accordance with
Section 15G:
<PAGE>
(i) The representations and warranties made by Acquiror
in this Agreement shall be true and correct in all material respects on
the Closing Date or Additional Closing Date, as the case may be, as if
made on such date.
(ii) The delivery by Acquiror of all documents (executed
by Acquiror, where required) required under Section 6B(ii).
(iii) Acquiror not being otherwise in default of its
obligations under this Agreement.
(iv) Acquiror agrees to take the Properties and
Additional Property subject to the Permitted Existing Indebtedness.
If any of the conditions precedent set forth in Sections
11C(i), (ii) and (iii) is not satisfied or waived on or prior to the Closing
Date or the Additional Closing Date, as the case may be, then Contributor shall
have the rights and remedies provided in Section 13A. If any of the conditions
precedent set forth in Section 11C(iv) is not satisfied or waived on or prior to
the Closing Date or the Additional Closing Date, as the case may be, Contributor
shall have the right to terminate this Agreement upon written notice to Acquiror
and in which event Escrowee shall immediately return the Earnest Money to
Acquiror and this Agreement, without further action of the parties, shall become
null and void and neither party shall have any further rights or obligations
under this Agreement, except with respect to the Surviving Indemnities.
12. BROKERAGE
Contributor and Acquiror represent and warrant to each other
that neither they nor their affiliates have dealt with any broker, finder or the
like in connection with the transaction contemplated by this Agreement, other
than Oxford Realty Services, Inc. ("Oxford"). Acquiror shall pay Oxford its
brokerage commission for the transactions contemplated herein pursuant to a
separate agreement between Acquiror and Oxford. Acquiror and Contributor each
agrees to indemnify, defend and hold the other harmless from and against all
loss, expense (including reasonable attorneys' fees and court costs), damage and
liability resulting from the claims of any other broker or finder (or anyone
claiming to be a broker or finder) on account of any services claimed to have
been rendered to the indemnifying party in connection with the transaction
contemplated by this Agreement, except that Acquiror shall indemnify Contributor
and hold Contributors harmless as provided above from any claims made by NatCity
Investments.
13. DEFAULT AND REMEDIES
A. If the Closing does not occur due to Acquiror's default
hereunder, or breach of its representations, warranties, covenants or other
terms of this Agreement, and such default or breach is not cured or remedied
within ten (10) business days after receipt of written notice thereof given by
Contributor to Acquiror, or otherwise waived by Contributor, Contributor may
terminate this Agreement and, as its sole remedy, receive the Earnest Money from
the Escrowee, as liquidated damages, in which event this Agreement shall be
deemed null and void and the parties shall be released from all further
obligations and liabilities under this Agreement, except with respect to the
indemnity set forth in Section 15B. It is recognized by Contributor and Acquiror
that the damages Contributor will sustain by reason of Acquiror's default,
breach
<PAGE>
or failure will be substantial, but difficult, if not impossible, to ascertain.
The Earnest Money has been determined by the parties as a reasonable sum for
damages and is intended not as a penalty, but as full liquidated damages.
B. If, prior to the Closing, Contributor is in default with
respect to, or breaches, or fails to perform one or more of its representations,
covenants, warranties or other terms of this Agreement, and such default, breach
or failure is not cured or remedied within ten (10) business days after receipt
of written notice thereof given by Acquiror to Contributor, or otherwise waived
by Acquiror, Acquiror as its sole remedy may (a) terminate this Agreement, or
terminate this Agreement with respect to any one Property (other than Logo 7
Court) or the Additional Property to which such default relates, in which event
the Earnest Money, or allocable portion thereof, shall be returned by the
Escrowee to Acquiror and, upon such return, the parties shall be released from
all further obligations and liabilities under this Agreement, or under this
Agreement as it relates to such Property or the Additional Property, as the case
may be, except with respect to the Surviving Indemnities, (b) sue for Specific
Performance (as defined below) or (c) proceed with the Closing and pursue its
remedies pursuant to Section 14A. For purposes of this Agreement, "Specific
Performance" shall mean delivery of the Deeds free and clear of all Liens of a
definite or ascertainable amount other than the Permitted Indebtedness and the
performance of all other obligations of Contributor other than obligations
arising out of, or pertaining to, a breach or inaccuracy of any representation
or warranty contained in Section 8A, other than subsection (xiv) of Section 8A,
which was disclosed on the certificate delivered by Contributor to Acquiror
pursuant to Section 6C(i)(l), provided that (a) Contributor had no actual
knowledge of such breach or inaccuracy on the date of this Agreement and (b)
such inaccuracy or breach was not the result of an intentional act or omission
of Contributor.
C. If, after the Closing has occurred, but prior to the
Additional Closing, Acquiror is in default with respect to, or breaches, or
fails to perform one or more of the representations, warranties, covenants or
other terms of this Agreement related to the Additional Property, and such
default, breach or failure is not cured or remedied within five (5) business
days prior to the Additional Closing Date or otherwise waived by Contributor,
Contributor may terminate this Agreement with respect to the Additional Property
and, as its sole remedy, receive $100,000 from Acquiror, as liquidated damages,
and, upon such payment, the parties shall be released from all further
obligations and liabilities under this Agreement with respect to the Additional
Property, except with respect to the Surviving Indemnities. It is recognized by
Contributor and Acquiror that the damages Contributor will sustain by reason of
Acquiror's default, breach or failure will be substantial, but difficult, if not
impossible, to ascertain. The payment stated above has been determined by the
parties as a reasonable sum for damages and is intended not as a penalty, but as
full liquidated damages.
D. If, after the Closing has occurred, but prior to the
Additional Closing, Contributor is in default with respect to, or breaches, or
fails to perform one or more of the representations, covenants, warranties or
other terms of this Agreement related to the Additional Property, and such
default, breach or failure is not cured or remedied within five (5) business
days prior to the Additional Closing Date or otherwise waived by Acquiror,
Acquiror as its sole remedy may (a) terminate this Agreement with respect to the
Additional Property, in which event the parties shall be released from all
further obligations and liabilities under this Agreement with respect to the
Additional Property, except with respect to the Surviving Indemnities, (b) sue
for Specific Performance or (c) proceed with the Additional Closing and pursue
its remedies pursuant to Section 14A.
<PAGE>
14. INDEMNIFICATION
A. Indemnification by Contributor. Contributor agrees to
indemnify Acquiror and its respective shareholders, directors, employees,
agents, partners and affiliates in respect of, and hold each of them harmless
from and against, any and all losses, liabilities (including punitive or
exemplary damages, fines or penalties and interest thereon), expenses (including
fees and disbursements of counsel and expenses of investigation and defense),
claims or other obligations of any value whatsoever (collectively, "Losses")
suffered, incurred or sustained by any of them or to which any of them becomes
subject, resulting from, arising out of or relating to (i) any breach of or
inaccuracy in any representation or warranty, or nonfulfillment of or failure to
perform or breach of any covenant or agreement on the part of Contributor
contained in this Agreement, or (ii) any default or dispute set forth in
Schedule 8A(xiii) attached to this Agreement. If Acquiror does not elect to
terminate this Agreement at the Closing with respect to the Properties or at the
Additional Closing with respect to the Additional Property, as the case may be,
Acquiror shall be deemed to have waived the breach or inaccuracy of any
representation or warranty contained in Section 8A, other than subsection (xiv)
of Section 8A (unless such breach of subsection (xiv) of Section 8A arose out of
an event which occurred subsequent to the date of this Agreement and was beyond
the control of Contributor), which was disclosed on the certificate delivered by
Contributor to Acquiror pursuant to Section 6C(i)(l), provided that (a)
Contributor had no actual knowledge of such breach or inaccuracy on the date of
this Agreement and (b) such inaccuracy or breach was not the result of an
intentional act or omission of Contributor.
B. Indemnification by Acquiror. Acquiror agrees to indemnify
the Contributor and its members, officers, directors, employees, agents and
affiliates in respect of, and hold each of them harmless from and against, any
and all Losses suffered, incurred or sustained by any of them or to which any of
them becomes subject, resulting from, arising out of or relating to any breach
of or inaccuracy in any representation or warranty, or nonfulfillment of or
failure to perform or breach of any covenant or agreement on the part of
Acquiror contained in this Agreement.
C. Method of Asserting Claims. All claims for indemnification
by any Indemnified Party under this Section 14 will be asserted and resolved as
follows:
(i) If any claim or demand in respect of which an
Indemnified Party might seek indemnity under this Section 14 is
asserted against or sought to be collected from such Indemnified Party
by a person or entity other than Contributor, Acquiror or any Affiliate
of the Contributor or Acquiror (a "Third Party Claim"), the Indemnified
Party shall deliver a Claim Notice (as defined below) with reasonable
promptness to the Indemnifying Party. If the Indemnified Party fails to
provide the Claim Notice with reasonable promptness after the
Indemnified Party receives notice of such Third Party Claim, the
Indemnifying Party will not be obligated to indemnify the Indemnified
Party with respect to such Third Party Claim to the extent that the
Indemnifying Party's ability to defend has been irreparably prejudiced
by such failure of the Indemnified Party. The Indemnifying Party will
notify the Indemnified Party as soon as practicable within the Dispute
Period (as defined below) whether the Indemnifying Party disputes its
liability to the Indemnified Party under this Section 14 and whether
the Indemnifying Party desires, at its sole cost and expense, to defend
the Indemnified Party against such Third Party Claim.
<PAGE>
(a) If the Indemnifying Party notifies the Indemnified Party
within the Dispute Period that the Indemnifying Party desires to defend
the Indemnified Party with respect to the Third Party Claim pursuant to
this Section 14C(i), then the Indemnifying Party will have the right to
defend, with counsel reasonably satisfactory to the Indemnified Party,
at the sole cost and expense of the Indemnifying Party, such Third
Party Claim by all appropriate proceedings, which proceedings will be
vigorously and diligently prosecuted by the Indemnifying Party to a
final conclusion or will be settled at the discretion of the
Indemnifying Party (but only with the consent of the Indemnified Party
in the case of any settlement that provides for any relief other than
the payment of monetary damages or that provides for the payment of
monetary damages as to which the Indemnified Party will not be
indemnified in full pursuant to this Section 14). The Indemnifying
Party will have full control of such defense and proceedings,
including any compromise or settlement thereof; provided, however,
that the Indemnified Party, at the sole cost and expense of the
Indemnified Party, at any time prior to the Indemnifying Party's
delivery of the notice referred to in the first sentence of this
clause (a), may file any motion, answer or other pleadings or take any
other action that the Indemnified Party reasonably believes to be
necessary or appropriate to protect its interests; and provided
further, that if requested by the Indemnifying Party, the Indemnified
Party, at the sole cost and expense of the Indemnifying Party, will
provide reasonable cooperation to the Indemnifying Party in contesting
any Third Party Claim that the Indemnifying Party elects to contest.
The Indemnified Party may participate in, but not control, any defense
or settlement of any Third Party Claim controlled by the Indemnifying
Party pursuant to this clause (a), and except as provided in the
preceding sentence, the Indemnified Party will bear its own costs and
expenses with respect to such participation. Notwithstanding the
foregoing, the Indemnified Party may take over the control of the
defense or settlement of a Third Party Claim at any time if it
irrevocably waives its right to indemnity under this Section 14 with
respect to such Third Party Claim.
(b) If the Indemnifying Party fails to notify the Indemnified
Party within the Dispute Period that the Indemnifying Party desires to
defend the Third Party Claim pursuant to Section 14C(i), or if the
Indemnifying Party gives such notice but fails to prosecute vigorously
and diligently or settle the Third Party Claim, or if the Indemnifying
Party fails to give any notice whatsoever within the Dispute Period,
then the Indemnified Party will have the right to defend, at the sole
cost and expense of the Indemnifying Party, the Third Party Claim by
all appropriate proceedings, which proceedings will be prosecuted by
the Indemnified Party in a reasonable manner and in good faith or will
be settled at the discretion of the Indemnified Party (with the consent
of the Indemnifying Party, which consent will not be unreasonably
withheld). The Indemnified Party will have full control of such defense
and proceedings, including any compromise or settlement thereof;
provided, however, that if requested by the Indemnified Party, the
Indemnifying Party will, at the sole cost and expense of the
Indemnifying Party, provide reasonable cooperation to the Indemnified
Party and its counsel in contesting any Third Party Claim which the
Indemnified Party is contesting. Notwithstanding the foregoing
provisions of this clause (b), if the Indemnifying Party has notified
the Indemnified Party within the Dispute Period that the Indemnifying
Party disputes its liability hereunder to the Indemnified Party with
respect to such Third Party Claim and if such dispute is resolved in
favor of the Indemnifying Party in the manner provided in clause (c)
below, the Indemnifying Party will not be required to bear the costs
and expenses of the Indemnified Party's defense pursuant to this clause
(b) or of the Indemnifying Party's participation therein at the
Indemnified Party's request, and the Indemnified Party will reimburse
the Indemnifying Party in full for all reasonable costs and expenses
incurred
<PAGE>
by the Indemnifying Party in connection with such litigation. The
Indemnifying Party may participate in, but not control, any defense or
settlement controlled by the Indemnified Party pursuant to this clause
(b), and the Indemnifying Party will bear its own costs and expenses
with respect to such participation.
(c) If the Indemnifying Party notifies the Indemnified Party
that it does not dispute its liability to the Indemnified Party with
respect to the Third Party Claim under this Section 14 or fails to
notify the Indemnified Party within the Dispute Period whether the
Indemnifying Party disputes its liability to the Indemnified Party with
respect to such Third Party Claim, the Loss in the amount specified in
the Claim Notice will be conclusively deemed a liability of the
Indemnifying Party under this Section 14 and the Indemnifying Party
shall pay the amount of such Loss to the Indemnified Party on demand.
If the Indemnifying Party has timely disputed its liability with
respect to such claim, the Indemnifying Party and the Indemnified
Party will proceed in good faith to negotiate a resolution of such
dispute, and if not resolved through negotiations within the
Resolution Period, such dispute shall be resolved by arbitration in
accordance with paragraph (iii) of this Section 14C.
(ii) If any Indemnified Party should have a claim under
this Section 14C against any Indemnifying Party that does not involve a
Third Party Claim, the Indemnified Party shall deliver an Indemnity
Notice (as defined below) with reasonable promptness to the
Indemnifying Party. The failure by any Indemnified Party to give the
Indemnity Notice shall not impair such party's rights hereunder except
to the extent that an Indemnifying Party demonstrates that it has been
irreparably prejudiced thereby. If the Indemnifying Party notifies the
Indemnified Party that it does not dispute the claim described in such
Indemnity Notice or fails to notify the Indemnified Party within the
Dispute Period whether the Indemnifying Party disputes the claim
described in such Indemnity Notice, the Loss in the amount specified in
the Indemnity Notice will be conclusively deemed a liability of the
Indemnifying Party under this Section 14 and the Indemnifying Party
shall pay the amount of such Loss to the Indemnified Party on demand.
If the Indemnifying Party has timely disputed its liability with
respect to such claim, the Indemnifying Party and the Indemnified Party
will proceed in good faith to negotiate a resolution of such dispute,
and if not resolved through negotiations within the Resolution Period,
such dispute shall be resolved by arbitration in accordance with
paragraph (iii) of this Section 14C.
(iii) Any dispute submitted to arbitration pursuant to
this Section 14C shall be finally and conclusively determined by the
decision of a board of arbitration consisting of three (3) members
(hereinafter sometimes called the "Board of Arbitration") selected as
hereinafter provided. Each of the Indemnified Party and the
Indemnifying Party shall select one (1) member and the third member
shall be selected by mutual agreement of the other members, or if the
other members fail to reach agreement on a third member within twenty
(20) days after their selection, such third member shall thereafter be
selected by the American Arbitration Association upon application made
to it for such purpose by the Indemnified Party. The Board of
Arbitration shall meet in New York City, New York or such other place
as a majority of the members of the Board of Arbitration determines
more appropriate, and shall reach and render a decision in writing
(concurred in by a majority of the members of the Board of Arbitration)
with respect to the amount, if any, which the Indemnifying Party is
required to pay to the Indemnified Party in respect of a claim filed by
the Indemnified Party. In connection with rendering its decisions, the
Board of Arbitration shall adopt and follow such rules and procedures
<PAGE>
as a majority of the members of the Board of Arbitration deems
necessary or appropriate. To the extent practical, decisions of the
Board of Arbitration shall be rendered no more than thirty (30)
calendar days following commencement of proceedings with respect
thereto. The Board of Arbitration shall cause its written decision to
be delivered to the Indemnified Party and the Indemnifying Party. Any
decision made by the Board of Arbitration (either prior to or after the
expiration of such thirty (30) calendar day period) shall be final,
binding and conclusive on the Indemnified Party and the Indemnifying
Party and entitled to be enforced to the fullest extent permitted by
law and entered in any court of competent jurisdiction. Each party to
any arbitration shall bear its own expense in relation thereto,
including but not limited to such party's attorneys' fees, if any, and
the expenses and fees of the member of the Board of Arbitration
appointed by such party, provided, however, that the expenses and fees
of the third member of the Board of Arbitration and any other expenses
of the Board of Arbitration not capable of being attributed to any one
member shall be borne in equal parts by the Indemnifying Party and the
Indemnified Party.
For purposes of this Section 14, the following terms shall have the
meanings ascribed to them below:
(1) "Claim Notice" shall mean written notification of a Third
Party Claim, pursuant to Section 14C(i), as to which indemnity under Section 14
is sought by an Indemnified Party, enclosing a copy of all papers served, if
any; and specifying the nature of and basis for such Third Party Claim and for
the Indemnified Party's claim against the Indemnifying Party under Section 14,
together with the amount or, if not then reasonably ascertainable, the estimated
amount, determined in good faith, of such Third Party Claim.
(2) "Dispute Period" shall mean the period ending thirty (30)
calendar days following receipt by an Indemnifying Party of either a Claim
Notice or Indemnity Notice.
(3) "Indemnified Party" shall mean any person or entity
claiming indemnification under any provision of Section 14.
(4) "Indemnifying Party" shall mean any person or entity
providing indemnification under any provision of Section 14.
(5) "Indemnity Notice" shall mean written notification
pursuant to Section 14C(ii) of a claim for indemnity under Section 14 by an
Indemnified Party, specifying the nature of and basis for such claim, together
with the amount or, if not then reasonably ascertainable, the estimated amount,
determined in good faith, of such claim.
D. Limitations on Indemnification. Notwithstanding any
provision in this Agreement to the contrary, Acquiror and Contributor agree as
follows:
(i) the obligation of either party under this Section
14 to indemnify the other party for a breach of a representation or
warranty set forth in Section 8 of this Agreement shall only become
operative after the total amount of such claims for indemnification by
the other party exceed Three Hundred Seventy Thousand Dollars
($370,000) (net of insurance proceeds actually received by the
Indemnified Party within three months after determination of liability;
provided, however, that the Indemnified Party shall not be required
seek enforcement of any insurance liability in a court of law), and
when the amount of such claims exceed Three Hundred Seventy Thousand
Dollars
<PAGE>
($370,000), reimbursement will be limited to those claims in excess of
Three Hundred Seventy Thousand Dollars ($370,000);
(ii) the aggregate liability of either party for
indemnification pursuant to this Section 14 shall not exceed the
aggregate amount of the Contribution Consideration and the Additional
Consideration (with the OP Units delivered at the Closing and the
Additional Closing valued at $17.50 per OP Unit) (the "Cap"); provided,
however, that no OP Unit Recipient shall be liable pursuant to this
Section 14 for more than that portion of the Cap equal to the product
of (a) the Cap, multiplied by (b) the total number of OP Units received
by such OP Unit Recipient, divided by the total number of OP Units
delivered by Acquiror pursuant to this Agreement; and
(iii) Except as hereinafter provided, all
representations and warranties made in Section 8 by Contributor and/or
the OP Unit Recipients and by Acquiror shall survive (a) the Closing
until the second (2nd) anniversary of the Closing Date and (b) the
Additional Closing until the second (2nd) anniversary of the Additional
Closing Date, and shall not merge into any instrument of conveyance
delivered at the Closing or the Additional Closing; provided, however,
that the foregoing limitation shall not apply to the extent any claim
for indemnification is made under this Agreement with respect to any
representation, warranty, covenant or agreement that would otherwise
terminate pursuant to this Section 14D and a notice for
indemnification shall have been timely given under Section 14 on or
prior to such termination date, in which case such survival period
will be extended as it relates to such related claims until the
related claim for indemnification has been satisfied or otherwise
resolved as provided in Section 14. This Section shall not limit in
any way the survival and enforceability of any covenant or agreement
of the parties hereto which by its terms contemplates performance
after the Closing Date, which shall survive for the respective periods
set forth herein. Notwithstanding the foregoing, the representations
and warranties contained in Section 8A(xv), (xvi) and (xxiv) shall
survive until the expiration of the statute of limitations applicable
thereto.
15. MISCELLANEOUS
A. Except as expressly set forth in this Agreement, this
Agreement shall not be cancelled or merged upon consummation of the Closing or
the Additional Closing. Each and every representation and warranty of
Contributor contained in this Agreement shall be deemed to have been relied upon
by Acquiror notwithstanding any investigation Acquiror or its agents may have
made with respect thereto or any information developed by or made available to
Acquiror prior to the Closing or the Additional Closing, as the case may be.
B. Between the date of this Agreement and the Closing Date,
Acquiror and its agents or representatives shall have the right to enter upon
the Properties and the Additional Property for the purpose of examining,
inspecting and testing the Properties and the Additional Property. Acquiror
shall hold Contributor harmless for damages resulting therefrom and which would
not have been incurred but for the negligent acts of Acquiror or its agents or
representatives, provided that if any claim relating thereto is asserted against
Contributor, Contributor shall promptly give written notice thereof to Acquiror
and allow Acquiror a reasonable opportunity to defend same.
<PAGE>
C. Neither this Agreement nor any interest hereunder shall be
assigned or transferred by Contributor or Acquiror. Notwithstanding the
foregoing, Acquiror may direct Contributor to convey the Properties or any part
thereof to any party designated by Acquiror, provided notice of such designation
is given to Contributor in writing at least ten (10) business days prior to
Closing and such designee is a directly or indirectly wholly-owned subsidiary of
Acquiror that is ignored for federal income tax purposes. Subject to the
foregoing, this Agreement shall inure to the benefit of and shall be binding
upon Contributor and Acquiror and their respective successors and assigns.
D. This Agreement constitutes the entire agreement between
Contributor and Acquiror with respect to the Properties and the Additional
Property and shall not be modified or amended except in a written document
signed by Contributor and Acquiror. Any prior agreement or understanding between
Contributor and Acquiror concerning the Properties or the Additional Property is
hereby rendered null and void.
E. In the computation of any period of time provided for in
this Agreement or by law, the day of the act or event from which the period of
time runs shall be excluded, and the last day of such period shall be included,
unless it is a Saturday, Sunday or legal holiday, in which case the period shall
be deemed to run until the end of the next day which is not a Saturday, Sunday
or legal holiday.
F. This Agreement shall be governed and interpreted in
accordance with the laws of the State of New York, without giving effect to the
conflicts of laws principles thereof.
G. All notices, requests, demands or other communications
required or permitted under this Agreement shall be in writing and delivered
personally (including delivery by overnight courier such as Federal Express) or
by certified mail, return receipt requested, postage prepaid or by facsimile
transmission to the fax number shown below and simultaneously mailed by
first-class mail of the United States Postal Service, addressed as follows:
1. If to Contributor:
Browning Investments, Inc.
Capitol Center - Suite 200
251 North Illinois Street
Indianapolis, IN 46204
Telephone: (317) 237-2800
Facsimile: (317) 237-2826
Attention: Mr. Michael G. Browning
With a copy to:
Baker & Daniels
300 North Meridian Street
Suite 2700
Indianapolis, IN 46204
Telephone: (317) 237-1124
Facsimile: (317) 237-1000
Attention: Donald P. Bennet, Esq.
<PAGE>
2. If to Acquiror:
American Real Estate Investment Corporation
Plymouth Meeting Executive Campus
620 West Germantown Pike, Suite 200
Plymouth Meeting, Pennsylvania 19462
Telephone: (610) 834-7950
Facsimile: (610) 834-9560
Attention: Stephen J. Butte
With a copy to:
Rogers & Wells LLP
200 Park Avenue
New York, New York 10166
Telephone: (212) 878-8285
Facsimile: (212) 878-8375
Attention: Stephen E. Poltrack, Esq.
Unless otherwise specified, notices shall be deemed given when received, but if
delivery is not accepted, on the earlier of the date delivery is refused or the
third day after the same is deposited with the United States Postal Service.
Either party hereto may change its address for receiving notices, requests,
demands or other communications by notice sent in accordance with the terms of
this Section 15G.
H. Contributor acknowledges that (i) the computation of
taxable income of Acquiror is crucial in the determination of the taxable income
of REIT, (ii) REIT needs to be able to prepare accurate estimates of its taxable
income in order to monitor compliance with the requirement that it distribute
95% of its taxable income to its shareholders, and (iii) the depreciation of the
Properties and the Additional Property and the required depreciation allocations
under Section 704(c) of the Code will materially impact the computation of
Acquiror's and REIT's taxable income. Accordingly, Contributor agrees that (i)
prior to the expiration of the Inspection Period, Contributor shall provide
Acquiror with tax basis computations and historical tax depreciation schedules
updated through the Closing Date for each Property and the Additional Closing
Date for the Additional Property; and (ii) prior to the expiration of the
Inspection Period, Contributor shall provide Acquiror with all data required to
perform depreciation allocations (as contemplated by Section 704(c) of the Code)
with respect to each Property, the Additional Property and each OP Unit
Recipient. Such data shall include the tax basis allocable to each OP Unit
Recipient for each Property and the Additional Property. In addition,
Contributor acknowledges that, if repayment of any Permitted Existing
Indebtedness triggers discharge of indebtedness income under the Code (and
particularly Section 61(a)(12) thereof), the Acquiror's Partnership Agreement
shall be amended to specially allocate all such income to Contributor.
I. Except as otherwise required by law or the rules of any
applicable securities exchange or national market system, so long as this
Agreement is in effect, Contributor will not, and will not permit any of its
Representatives to, issue or cause the publication of any press release or make
any other public announcement with respect to the transactions contemplated by
this Agreement without the consent of Acquiror, which consent
<PAGE>
shall not be unreasonably withheld. Acquiror and Contributor will cooperate with
each other in the development and distribution of all press releases and other
public announcements with respect to this Agreement and the transactions
contemplated hereby, and will furnish the other with drafts of any such releases
and announcements as far in advance as practicable.
J. This Agreement may be executed in any number of identical
counterparts, any or all of which may contain the signatures of fewer than all
of the parties but all of which shall be taken together as a single instrument.
Execution copies of this Agreement may also be exchanged by facsimile, and
facsimile signatures shall be treated as originals.
K. When the context so requires, the singular number shall
include the plural and the plural the singular, and the use of any gender shall
include all genders.
L. This Agreement may not be modified, discharged or changed
in any respect whatsoever, except by a further agreement in writing duly
executed by Contributor and Acquiror. However, any consent, waiver, approval or
authorization shall be effective if signed by the party granting or making such
consent, waiver, approval or authorization.
M. The invalidation or unenforceability in any particular
circumstance of any of the provisions of this Agreement shall in no way affect
any of the other provisions hereof, which shall remain in full force and effect.
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement
as of the respective dates set forth below:
ACQUIROR:
AMERICAN REAL ESTATE INVESTMENT, L.P.,
a Delaware limited partnership
BY: American Real Estate Investment
Corporation, a Maryland corporation, its
sole general partner
By: /s/Stephen J. Butte
------------------------
Name: Stephen J. Butte
Title: Vice President
Date: December 4, 1998
CONTRIBUTOR:
MPSN, L.L.C.
By: /s/ Michael G. Browning
-------------------------
Michael G. Browning
President
Date: December 4, 1998
----------------
Corporate Drive Associates, LLC
By: /s/ Michael G. Browning
-------------------------
Michael G. Browning
Member
Date: December 4, 1998
------------------
Post 70 Building 7 Partners
By: /s/Michael G. Browning
-------------------------
Michael G. Browning
Member
Date: December 4,1 998
----------------
<PAGE>
COB Associates, LLC
By: /s/ Michael G. Browning
-------------------------
Michael G. Browning
President
Date: December 4, 1998
----------------
OP UNIT RECIPIENTS:
The undersigned hereby (i) agree to
be bound by all obligations of the
OP Unit Recipients arising under
this Contribution Agreement and (ii)
confirm the accuracy of all
representations and warranties made
by Contributor with respect to the
OP Unit Recipients:
----------------------------------------------
----------------------------------------------
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Date: December 4, 1998
<PAGE>
Exhibit 99-1
AMERICAN REAL ESTATE INVESTMENT CORPORATION
PLYMOUTH MEETING EXECUTIVE CAMPUS
620 WEST GERMANTOWN PIKE, SUITE 200
PLYMOUTH MEETING, PA 19462
TEL. (610) 834-7950 FAX (610) 834-9560
http://www.areic.com
FOR IMMEDIATE RELEASE
American Real Estate Investment Corporation Enters Indianapolis Market with 1.4
Million SF Portfolio Purchase Together with 491 Acre Airtech Park Joint Venture
PLYMOUTH MEETING, PA, December 7, 1998. American Real Estate Investment
Corporation (AMEX: REA - news) (the "Company") today announced that it has
formed a strategic alliance with Michael Browning and Browning Investments Inc.
("Browning") including the joint venture development of the 491 acre Airtech
Park, the purchase of 3 warehouse/office buildings totaling 861,760 sf, and the
commitment to purchase 2 additional warehouse/office buildings totaling 534,992
sf, which are currently under construction. The aggregate purchase price of the
1.4 million square foot portfolio and the joint venture interest is
approximately $73.2 million, and the aggregate developable square footage of
Airtech Park is in excess of 7.5 million square feet.
Airtech Park is a 491 acre parcel of ground immediately abutting the
Indianapolis International Airport and Interstate 70. The Airport, currently
under expansion, is home to the new $2.0 billion United Airlines maintenance
facility and the newly completed Federal Express international airfreight hub,
their largest domestic operation. As part of this closing, the Company has
agreed to purchase the first development project of the Airtech Park joint
venture, a 495,740 square foot, warehouse/office facility currently under
construction on 34 acres, and scheduled for delivery January 1, 2000. The
state-of-the-art facility, consisting of a 395,420 square foot high bay
warehouse, with 100,500 square feet of appurtenant Class A office space, is
being completed under a twenty year build-to-suit lease for Brightpoint, Inc.,
the world's second largest distributor of cellular phones. The warehouse portion
of the Building will be expandable by up to 140,000 square feet.
The three initial buildings the Company has acquired are triple-net leased to
single users under lease terms averaging approximately eight years. The Company
has also agreed to purchase an additional warehouse/office building (net leased
for ten years), comprising 39,252 square feet which is currently under
construction scheduled for completion in January 1999. Tenants of the portfolio
include Logo Athletics, Brightpoint, Support Net and Office Works.
Browning Investments, Inc., an Indianapolis based real estate company, has
developed over 7,000,000 square feet of office and warehouse space, including
Vacation Plaza, Northwest Technology Park, Mayflower Park, Capital Center, 300
North Meridian, Gateway Plaza, Pan Am Plaza, Fidelity Plaza, Thomson Consumer
Electronics Headquarters, Meridian Mark Plaza, Penn Mark Plaza and the Meridian
Technology Center, among others. Michael G. Browning, the Chairman of the Board
and President of Browning Investments, Inc., also serves on the Board of
Directors of CINergy, Corp., Indianapolis Indians, Inc., Indiana Sports
Corporation and the Indianapolis Economic Development Commission. He has
previously served on the Boards of Emmis Broadcasting, NBD Indiana Inc, the
Indiana National Bank, Conseco, Inc., and is involved in many other business,
civic and political interests. He also served as the Chairman of the Board and
President of the Fidelity Bank of Indiana. As part of this transaction, Browning
agreed to accept approximately 1,175,000 shares of the Company's operating
partnership units.
<PAGE>
AMERICAN REAL ESTATE INVESTMENT CORPORATION
December 7, 1998
Page 2 of 2
"This is a very compelling transaction for the Company for many reasons. First,
we are very excited to enter a new vibrant market through the addition of these
extremely high quality, high yielding buildings. However, we would not have
entered this competitive market without our alliance with Michael Browning and
Browning Investments. Michael's organization is widely regarded as one of the
finest private developers and operators in the area, having developed over 7
million square feet of Class A space in the market, and we are delighted to
include him as a substantial shareholder and partner. Our joint venture on one
of the best parcels of developable ground in the market, together with our
strategic alliance will provide the Company access to dramatically higher
yields, as we continue to pursue transactions such as the new Brightpoint
facility." stated Jeff Kelter, President of American Real Estate.
"We believe this partnership will help us be very competitive, particularly in
the Airport market, and will provide additional access to capital which is so
critical in the industry today. Most importantly, this alliance allows us the
opportunity to team up with American Real Estate and, through Jeff Kelter and
his organization, create a dynamic enterprise to develop high quality projects."
stated Michael G. Browning, President and Chairman of Browning Investment, Inc.
American Real Estate Investment Corporation, with headquarters in Plymouth
Meeting, Pennsylvania, and regional offices in Franklin Lakes, New Jersey,
Albany and Syracuse, New York, and Allentown, Pennsylvania, is a
fully-integrated, self-administered and self-managed real estate investment
trust (REIT) focusing on office and industrial properties located in the
Mid-Atlantic and Northeast states. The Company currently owns 73 office and
industrial properties containing an aggregate of 9.5 million square feet. For
more information, contact Timothy A. Peterson at 610-834-3469, send email to
[email protected] or visit the Company's web site at www.areic.com.
This press release may contain statements which constitute forward looking
statements within the meaning of the Private Securities Litigation Reform Act of
1995, including statements regarding the intent, belief or current expectations
of the Company, its directors, or its officers with respect to the future
operating performance of the Company and the result and the effect of legal
proceedings. Investors are cautioned that any such forward looking statements
are not guarantees of future performance and involve risks and uncertainties,
and that actual results may differ materially from those in the forward looking
statements as a result of various factors. Important factors that could cause
such differences are described in the Company's periodic filings with the
Securities and Exchange Commission, including the Company's Form 10-KSB and
quarterly reports on Form 10-QSB and 10-Q.
SOURCE American Real Estate Investment Corporation
Web Site: http://www.areic.com
CONTACT: Timothy A. Peterson of American Real Estate Investment Corporation,
610-834-3469
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