<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K/A
(Amendment No. 1)
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): April 30, 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)
- -------------------------------------------------------------------------------
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>
The purpose of this filing is to file the Item 7 information for the
acquisition of the Galesi Properties, which was consummated on April 30,
1998, and was originally reported in a Current Report on Form 8-K filed on
May 14, 1998, and the acquisition of the Fed One Industrial Portfolio, which
was consummated on June 29, 1998, and was originally reported in a Current
Report on Form 8-K filed on July 7, 1998. In addition, the Company is
reporting the Item 7 information related to the sale of Quadrangles Village
Apartments which was consummated on June 24, 1998 and was originally reported
in a Current Report on Form 8-K filed on July 7, 1998.
ITEM 5. OTHER EVENTS
On July 8, 1998, the Company announced, in a press released attached hereto
as Exhibit 99.1 and incorporated herein by reference, agreements to sell in a
private placement 1,092,051 shares of its Common Stock for an aggregate
purchase price of $18,018,841 (the "Private Placement") to several institutional
purchasers including certain accounts managed by CRA Real Estate Securities,
L.P. and Morgan Stanley Asset Management, Inc. The shares will not be
registered under the Securities Act of 1933, as amended, and may not be
offered or sold in the United States absent registration or an applicable
exemption from registration.
The subscription agreements (which are filed as exhibits 10.7 and 10.8
hereto) (the "Agreements") for the Private Placement include provisions for a
purchase price adjustment on the earlier of the first business day after the
first anniversary of the closing or the first business day after a
Liquidating Event, as defined in the Agreement, has occurred and the average
price of the Company's Common Stock for a 30-day period preceding such date
is greater than $19.50 or less than $15.50 per share of Common Stock. In the
event the average price is less than $15.50, the Company is required to
deliver to the purchasers cash in an amount equal to (i) the difference
between $15.50 and the average price, multiplied by (ii) the number of shares
of Common Stock purchased. In the event the average price is greater than
$19.50, the purchasers are required to deliver to the Company the number of
shares of Common Stock equal to (i) the difference between the average price
and $19.50, divided by (ii) the average price, multiplied by (iii) the number
of shares of Common Stock purchased in the Private Placement. The Company has
granted certain registration rights to the purchasers pursuant to the
Registration Rights Agreements attached hereto as Exhibits 10.5 and 10.6. The
Company encourages its stockholders to see the Agreements and the
Registration Rights Agreements for other details regarding the Private
Placement.
ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS.
(a) FINANCIAL STATEMENTS OF BUSINESSES ACQUIRED
The audited statements of revenue and certain operating expenses of
the Galesi Properties and the Fed One Industrial Portfolio for the
year ended December 31, 1997 and the three month period ended
March 31, 1998 (unaudited) are included on pages F-19 to F-27.
(b) PRO FORMA FINANCIAL INFORMATION.
Unaudited pro forma financial information which reflects the Company's
acquisitions of the Galesi Properties and the Fed One Industrial
Portfolio and the disposition of the Quadrangles Village Apartments
and the effect of the Private Placement as of and for the year ended
December 31, 1997 and the three month period ended March 31, 1998 are
included on pages F-1 to F-18.
(c) EXHIBITS
<TABLE>
<S> <C>
10.1 Contribution Agreement between American Real Estate
Investment, L.P., and Northeastern Industrial Park, Inc. and
Guilderland Ventures, Inc.
10.2 Contribution Agreement between American Real Estate
Investment, L.P., and Columbia Executive I Assoc., Columbia
Executive II Assoc., Columbia Executive III Assoc., Columbia
Executive V Assoc., Columbia Executive VI Assoc., Columbia
Executive VII Assoc., and Columbia Executive VIII Assoc.
10.3 Agreement of Sale and Purchase - Fed One Industrial Portfolio
10.4 Revolving Credit Facility between American Real Estate
Investment, L.P., American Real Estate Investment Corporation
and BankBoston, N.A., and DLJ Capital Funding, Inc.
</TABLE>
1
<PAGE>
<TABLE>
<S> <C>
10.5 Registration Rights Agreement between American Real Estate
Investment Corporation and CRA Real Estate Securities, L.P.
(as attorney-in-fact for the purchasers named therein)
10.6 Registration Rights Agreement between American Real Estate
Investment Corporation and Morgan Stanley Asset Management,
Inc. (as attorney-in-fact for the purchasers named therein)
10.7 Subscription Agreement between American Real Estate
Investment Corporation and CRA Real Estate Securities, L.P.
(as attorney-in-fact for the purchasers named therein)
10.8 Subscription Agreement between American Real Estate
Investment Corporation and Morgan Stanley Asset Management,
Inc. (as attorney-in-fact for the purchasers named therein)
99.1 Press release dated July 8, 1998
</TABLE>
2
<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: July 14, 1998 By /s/ Jeffrey E. Kelter
---------------------
Jeffrey E. Kelter
President
Date: July 14, 1998 By: /s/ Timothy E. McKenna
----------------------
Timothy E. McKenna
Treasurer
(Principal Financial and Accounting
Officer)
3
<PAGE>
AMERICAN REAL ESTATE INVESTMENT CORPORATION
INDEX
<TABLE>
<S> <C>
I. UNAUDITED PRO FORMA CONDENSED CONSOLIDATING
FINANCIAL INFORMATION
- Pro Forma Condensed Consolidating Balance Sheet as of March 31, 1998 . . . . . . . . .F-3
- Pro Forma Condensed Consolidating Statement of Operations for the
three month period ended March 31, 1998. . . . . . . . . . . . . . . . . . . . . . . .F-4
- Pro Forma Condensed Consolidating Statement of Operations for the
year ended December 31, 1997 . . . . . . . . . . . . . . . . . . . . . . . . . . . . .F-5
- Notes to Management's Assumptions to Unaudited Pro Forma
Condensed Consolidating Financial Information. . . . . . . . . . . . . . . . . . . . .F-6
II. THE GALESI PROPERTIES
- Report of Independent Public Accountants.. . . . . . . . . . . . . . . . . . . . . . F-19
- Statement of Revenue and Certain Expenses for the three month period
ended March 31, 1998 (unaudited) and year ended
December 31, 1997. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-20
- Notes to Statement of Revenue and Certain Expenses . . . . . . . . . . . . . . . . . F-21
III. FED ONE INDUSTRIAL PORTFOLIO
- Report of Independent Public Accountants.. . . . . . . . . . . . . . . . . . . . . . F-24
- Statement of Revenue and Certain Expenses for the three month period
ended March 31, 1998 (unaudited) and year ended
December 31, 1997. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-25
- Notes to Statement of Revenue and Certain Expenses . . . . . . . . . . . . . . . . . F-26
</TABLE>
<PAGE>
AMERICAN REAL ESTATE INVESTMENT CORPORATION
UNAUDITED PRO FORMA CONDENSED CONSOLIDATING FINANCIAL INFORMATION
The following sets forth the unaudited pro forma condensed consolidating
balance sheet at March 31, 1998 and the unaudited pro forma condensed
consolidating statements of operations for American Real Estate Investment
Corporation (the "Company") for the three months ended March 31, 1998 and the
year ended December 31, 1997.
The pro forma condensed consolidating financial information should be read in
conjunction with the historical financial statements of the Company and those
acquistions deemed significant pursuant to the rules and regulations of the
Securities and Exchange Commission.
The unaudited pro forma consolidating financial information is presented as
if the following events occurred on March 31, 1998 for balance sheet purposes
and on January 1, 1997 for purposes of the statements of operations:
- - The Company acquired the properties described in Note 1 to these pro forma
financial statements
- - THE QUADRANGLES VILLAGE APARTMENTS. On June 24, 1998, the Company sold
Quadrangles Village Apartments, a 510-unit apartment building located in
Tempe, Arizona for approximately $26,500,000.
- - AMERICANA LAKEWOOD APARTMENTS AND OTHER PROPERTY DISPOSITIONS. On January
9, 1998, the Company consummated the sale of a 300 unit multi-family
residential property known as Americana Lakewood Apartments located in
the metropolitan Denver area for a gross sales price of $15,066,000.
In addition, during 1997, the Company sold three other directly owned
and one indirectly owned multi-family residential properties (Timberleaf,
Sedona, International and Emerald Point).
- - THE GALESI PROPERTIES ACQUISITION. On April 30, 1998, the Company
acquired, from entities affiliated with the Galesi Group, approximately
790,000 square feet located in Albany, New York for approximately
$59,000,000. These properties consist of seven Class A office buildings
and three state-of-the-art, partially refrigerated industrial buildings.
- - THE FED ONE INDUSTRIAL PORTFOLIO ACQUISITION. On June 29, 1998, the
Company acquired three industrial buildings located in Ohio. A brief
description of the properties is as follows:
- 3530 East Pike, Zanesville, Ohio - a 300,000 square foot industrial
facility which is 100% leased to Owens Brockway. This property was
purchased for approximately $5,000,000.
- 1030 Edgewood Drive, Urbana, Ohio - a 200,000 square foot industrial
facility which is 100% leased to SC Johnson Wax. This property was
purchased for approximately $3,900,000.
F-1
<PAGE>
AMERICAN REAL ESTATE INVESTMENT CORPORATION
UNAUDITED PRO FORMA CONDENSED CONSOLIDATING FINANCIAL INFORMATION
- 16725 Square Drive, Marysville, Ohio - a 133,500 square foot
industrial facility which is 100% leased to Midwest Express. This
property was purchased for approximately $2,800,000.
- - On July 9, 1998, the Company issued 1,092,051 shares of Common Stock at
$16.50 per share to various institutional investors in a Private Placement
(the "Private Placement"). The net proceeds from the Private Placement
were contributed to American Real Estate Investment, L.P. (the "Operating
Partnership") in exchange for 1,092,051 units of limited partnership
interest ("OP Units").
All of the above acquisition transactions were accounted for using the purchase
method of accounting.
This unaudited pro forma condensed consolidating financial information should be
read in conjunction with the historical financial statements of the Company for
the year ended December 31, 1997 and the Company's Quarterly Report on Form 10-Q
for the three months ended March 31, 1998 which are incorporated by reference.
The pro forma condensed consolidating financial information is unaudited and is
not necessarily indicative of what the actual financial position or results of
operations of the Company would have been had the transactions discussed above
been consummated as of the dates indicated, nor does it purport to represent the
future financial position and the results of operations of the Company. In
management's opinion, all adjustments consisting of normal recurring adjustments
necessary to reflect the effects of the transactions have been made.
F-2
<PAGE>
AMERICAN REAL ESTATE INVESTMENT CORPORATION
PRO FORMA CONDENSED CONSOLIDATING BALANCE SHEET--AS OF MARCH 31, 1998
(Unaudited--in thousands, except share and per share data)
<TABLE>
<CAPTION>
The The Fed One The
Company Property Company The Galesi Industrial Private Pro Forma Company
Historical Disposition(A) As Adjusted Properties(B) Portfolio(C) Placement(D) Adjustment Pro Forma
---------- -------------- ----------- ------------- ------------ ----------- ---------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
ASSETS
Investments in Real Estate, net $206,921 $(21,207) $185,714 $59,035 $11,738 $ $ $256,487
Investment in direct financing
lease 1,867 1,867 1,867
Investment in management
company 4,728 4,728 4,728
Cash and cash equivalents 2,994 10,251 13,245 13,245
Restricted cash 1,217 1,217 1,217
Accounts receivable 580 580 580
Other assets, net 2,436 2,436 2,436
-------- -------- -------- ------- ------- ------- -------- --------
Total assets $220,743 $(10,956) $209,787 $59,035 $11,738 $ $ $280,560
-------- -------- -------- ------- ------- ------- -------- --------
-------- -------- -------- ------- ------- ------- -------- --------
LIABILITIES AND SHAREHOLDERS'
EQUITY
Liabilities:
Mortgage notes payable 118,343 (16,199) 102,144 36,547 11,738 (17,440) 132,989
Accrued expenses and
other liabilities 3,776 3,776 3,776
Minority interest 41,225 2,203 43,428 22,488 (2,646)(E) 63,270
Shareholders' equity:
Common stock 5 5 2 7
Warrants 685 685 685
Additional paid-in capital 53,506 53,506 17,438 2,646 (E) 73,590
Cumulative net income 8,011 3,040 11,051 11,051
Cumulative dividends (4,808) (4,808) (4,808)
-------- -------- -------- ------- ------- ------- -------- --------
Total shareholders' equity 57,399 3,040 60,439 17,440 80,525
-------- -------- -------- ------- ------- ------- -------- --------
Total liabilities and
shareholders' equity $220,743 $(10,956) $209,787 $59,035 $11,738 $ $ $280,560
-------- -------- -------- ------- ------- ------- -------- --------
-------- -------- -------- ------- ------- ------- -------- --------
</TABLE>
The accompanying notes and management's assumptions are an
integral part of these statements.
F-3
<PAGE>
AMERICAN REAL ESTATE INVESTMENT CORPORATION
PRO FORMA CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS
FOR THE THREE MONTH PERIOD ENDED MARCH 31, 1998
(Unaudited--in thousands, except Share and Per Share Data)
<TABLE>
<CAPTION>
The
Company 1998 The Company, 1998
Historical Dispositions(a) As Adjusted Acquisitions(b)
----------- --------------- ------------ ---------------
<S> <C> <C> <C> <C>
REVENUE:
Minimum rent $ 5,263 $ (965) $ 4,298 $ 2,696
Tenant reimbursements and other
income 478 (34) 444 509
--------- ------- -------- --------
Total revenue 5,741 (999) 4,742 3,205
OPERATING EXPENSES:
Repairs and maintenance 121 (63) 58 316
Property taxes 290 (45) 245 209
Property management fees 168 (33) 135
Utilities 191 (71) 120 96
Payroll 118 (59) 59
Other property operations 54 (11) 43
General and administrative 160 (16) 144
Interest 932 (298) 634 1,292
Depreciation and amortization 1,915 (5) 1,910 573
--------- ------- -------- --------
Total operating expenses 3,949 (601) 3,348 2,486
EQUITY IN EARNINGS
(LOSSES) FROM INVESTMENT IN
MANAGEMENT COMPANY (162) (162)
MINORITY INTEREST (3,617) (3,617)
GAINS ON SALE OF PROPERTY 6,880 (6,880)
--------- ------- -------- --------
NET INCOME (LOSS) $ 4,893 $ (7,278) $ (2,385) $ 719
--------- ------- -------- --------
--------- ------- -------- --------
BASIC EARNINGS PER SHARE $ .90
---------
---------
DILUTED EARNINGS PER SHARE $ .87
---------
---------
WEIGHTED AVERAGE SHARES OUTSTANDING - BASIC 5,446,278
---------
---------
WEIGHTED AVERAGE SHARES OUTSTANDING - DILUTED 9,802,235
---------
---------
<CAPTION>
Private Pro Forma The Company
Placement(c) Adjustments Pro Forma
------------ -------------- -----------
<S> <C> <C> <C>
REVENUE:
Minimum rent $ $ $ 6,994
Tenant reimbursements and other
income 953
------------ -------------- -----------
Total revenue 7,947
OPERATING EXPENSES:
Repairs and maintenance 374
Property taxes 454
Property management fees 135
Utilities 216
Payroll 59
Other property operations 43
General and administrative 144
Interest (316) 1,610
Depreciation and amortization 2,483
------------ -------------- -----------
Total operating expenses (316) 5,518
EQUITY IN EARNINGS
(LOSSES) FROM INVESTMENT IN
MANAGEMENT COMPANY (162)
MINORITY INTEREST 2,620(d) (997)
GAINS ON SALE OF PROPERTY
------------ -------------- -----------
NET INCOME (LOSS) $ 316 $ 2,620 $ 1,270
------------ -------------- -----------
------------ -------------- -----------
BASIC EARNINGS PER SHARE $ .19
-----------
-----------
DILUTED EARNINGS PER SHARE $ .19
-----------
-----------
WEIGHTED AVERAGE SHARES OUTSTANDING - BASIC 6,538,329
-----------
-----------
WEIGHTED AVERAGE SHARES OUTSTANDING - DILUTED 12,257,226
-----------
-----------
</TABLE>
The accompanying notes and management's assumptions are an
integral part of this statement.
F-4
<PAGE>
AMERICAN REAL ESTATE INVESTMENT CORPORATION
PRO FORMA CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS
FOR YEAR ENDED DECEMBER 31, 1997
(Unaudited--in thousands, except Share and Per Share Data)
<TABLE>
<CAPTION>
The
Company 1997 1997 1998
Historical Dispositions(a) Acquisition(b) Subtotal Dispositions(c)
----------- --------------- -------------- -------- ---------------
<S> <C> <C> <C> <C> <C>
REVENUE:
Minimum rent $ 7,732 $ (1,457) $ 12,499 $ 18,774 $ (5,738)
Tenant reimbursements and other
income 465 1,498 1,963 (96)
--------- --------- --------- --------- ---------
Total revenue 8,197 (1,457) 13,997 20,737 (5,834)
OPERATING EXPENSES:
Repairs and maintenance 427 (116) 895 1,206 (297)
Property taxes 376 (57) 830 1,149 (287)
Property management fees 252 (47) 205 (205)
Utilities 637 (279) 507 865 (342)
Payroll 551 (153) 398 (398)
Other property operations 869 (243) 148 774 (543)
General and administrative 732 732
Buyout of employment agreements,
warrants and options expense 3,203 3,203
Interest 3,134 (845) 4,582 6,871 (2,011)
Depreciation and amortization 909 (158) 2,619 3,370 (819)
--------- --------- --------- --------- ---------
Total Operating expenses 11,090 (1,898) 9,581 18,773 (4,902)
EQUITY IN EARNINGS FROM INVESTMENT
IN MANAGEMENT COMPANY 404 (436) (392) (424)
MINORITY INTEREST (876) (876)
GAINS ON SALES OF PROPERTY 4,608 (4,608)
--------- --------- --------- --------- ---------
NET INCOME (LOSS) $ 1,243 $ (4,603) $ 4,024 $ 664 $ (932)
--------- --------- --------- --------- ---------
BASIC EARNINGS PER SHARE $ 0.92
---------
---------
DILUTED EARNINGS PER SHARE $ 0.88
---------
---------
WEIGHTED AVERAGE SHARES
OUTSTANDING - BASIC 1,347,297
---------
---------
WEIGHTED AVERAGE SHARES
OUTSTANDING - DILUTED 2,404,004
---------
---------
<CAPTION>
Other
1998 Private Pro Form The Company
Acquisitions(d) Placement(e) Adjustments Pro Forma
--------------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
REVENUE:
Minimum rent $ 14,177 $ $ $ 27,213
Tenant reimbursements and other
income 2,059 3,926
------- -------- ------- ---------
Total revenue 16,236 31,139
OPERATING EXPENSES:
Repairs and maintenance 977 1,886
Property taxes 908 1,770
Property management fees
Utilities 408 931
Payroll
Other property operations 231
General and administrative 732
Buyout of employment agreements,
warrants and options expense (3,203) (f)
Interest 6,799 (1,264) 10,395
Depreciation and amortization 3,100 5,651
------- -------- ------- ---------
Total Operating expenses 12,192 (1,264) (3,203) 21,596
EQUITY IN EARNINGS FROM INVESTMENT
IN MANAGEMENT COMPANY (424)
MINORITY INTEREST (3,136) (g) (4,012)
GAINS ON SALES OF PROPERTY
------- -------- ------- ---------
NET INCOME (LOSS) 4,044 $ 1,264 $ 67 $ 5,107
------- -------- ------- ---------
------- -------- ------- ---------
BASIC EARNINGS PER SHARE $ .79
---------
---------
DILUTED EARNINGS PER SHARE $ .77
---------
---------
WEIGHTED AVERAGE SHARES
OUTSTANDING - BASIC 6,455,332
---------
---------
WEIGHTED AVERAGE SHARES
OUTSTANDING - DILUTED 11,916,417
----------
----------
</TABLE>
The accompanying notes and management's assumptions are an
integral part of this statement.
F-5
<PAGE>
AMERICAN REAL ESTATE INVESTMENT CORPORATION
NOTES AND MANAGEMENT'S ASSUMPTIONS TO UNAUDITED PRO FORMA
CONDENSED CONSOLIDATING FINANCIAL INFORMATION
1. BASIS OF PRESENTATION
American Real Estate Investment Corporation (the "Company") is a
self-administered and self-managed equity real estate investment trust
which was organized in the state of Maryland. As of July 10, 1998, the
Company owned 49 properties. All but five of the properties are owned
directly or indirectly by American Real Estate Investment, L.P. (the
"Operating Partnership"). The Company is the sole general partner of
the Operating Partnership and as of March 31, 1998 and July 10, 1998,
owned approximately 58% and 56% of the Operating Partnership,
respectively.
These pro forma financial statements should be read in conjunction with the
historical financial statements and notes thereto of the Company, the
McBride Portfolio, Penn Square Properties, Inc., the Moran Acquisition
Properties, the Northfield Acquisition Properties, the Loew Acquisition
Properties, 101 Commerce Drive, the GATX Properties, the Double M
Development Properties, the Galesi Properties and the Fed One Industrial
Portfolio. In management's opinion, all adjustments necessary to reflect
the acquisitions of the McBride Portfolio, Penn Square Properties, Inc.,
the Moran Acquisition Properties, the Northfield Acquisition Properties,
the Loew Acquisition Properties, 101 Commerce Drive, the GATX Properties
and the Double M Development Properties, the Galesi Properties, the Fed One
Industrial Portfolio and the 1998 Private Placement by the Company have
been made. The operating results reflected herein include the historical
results and related pro forma adjustments to reflect the period
January 1, 1997, through the earlier of the respective acquisition date or
March 31, 1998 or December 31, 1997. Operating results from those dates
forward are included in the historical results of the Company.
2. ADJUSTMENTS TO PRO FORMA CONSOLIDATING BALANCE SHEET
(A) Reflects the Company's sale on June 24, 1998 of the Quadrangles Village
Apartments, a 510-unit apartment building located in Tempe, Arizona for
approximately $26,500,000. The sale resulted in a gain of approximately
$5,500,000 and net proceeds to the Company of approximately $10,251,000.
(B) Reflects the Company's acquisition of the Galesi Properties for
approximately $59,000,000 which was funded through the assumption of
$18,036,000 in debt, $18,511,000 from the Company's $150,000,000 revolving
credit facility (the "Credit Facility") and the issuance of 1,362,940 OP
Units in the Operating Partnership.
(C) Reflects the Company's acquisition of the Fed One Industrial Portfolio on
July 1, 1998 for $11,738,000 including closing costs. The purchase price
was funded by the Credit Facility.
(D) Reflects the Company's Private Placement on July 9, 1998 for $18,018,841
and the use of net proceeds of $17,440,000 to repay indebtedness under
the Credit Facility. The Company issued 1,092,051 shares at a price of
$16.50. This price may be subject to future adjustment under the terms
of the Subscription Agreements based upon the Company's Common Stock on
the earlier of the first business day after the first anniversary of the
Closing or the first business day after a Liquidating Event, as defined
in the Agreement.
(E) Adjustment to reflect the Company's 56% ownership of the Operating
Partnership after Consummation of the Galesi transaction and Private
Placement.
F-6
<PAGE>
AMERICAN REAL ESTATE INVESTMENT CORPORATION
NOTES AND MANAGEMENT'S ASSUMPTIONS TO UNAUDITED PRO FORMA
CONDENSED CONSOLIDATING FINANCIAL INFORMATION
3. ADJUSTMENTS TO PROFORMA CONDENSED CONSOLIDATING STATEMENTS OF OPERATIONS
FOR THE THREE MONTH PERIOD ENDED MARCH 31, 1998
(a) 1998 DISPOSITIONS
Since January 1, 1998, the Company has sold two multi-family properties.
This adjustment affects the elimination of the impact on the March 31, 1998
statement of operations for these property dispositions.
SALE OF AMERICANA LAKEWOOD
On January 9, 1998, the Company sold a 300-unit multi-family residential
property known as Americana Lakewood Apartments, located in the
metropolitan Denver area, for a gross sales price of $15,066,000.
SALE OF THE QUADRANGLES VILLAGE APARTMENTS
On June 24, 1998, the Company sold the Quadrangles Village Apartments for
approximately $26,500,000.
<TABLE>
<CAPTION>
Americana Quadrangles
Lakewood Village
Apartments Apartments Total
---------- ----------- ------
<S> <C> <C> <C>
REVENUE:
Minimum rent $48 $917 $965
Tenant reimbursements and other income 34 34
---------- ----------- -------
Total revenue 48 951 999
OPERATING EXPENSES:
Repairs and maintenance 1 62 63
Property taxes 3 42 45
Property management fees 2 31 33
Utilities 2 69 71
Payroll 5 54 59
Other property operations 6 5 11
General and administrative 16 16
Interest 20 278 298
Depreciation and amortization 5 5
---------- ----------- -------
Total operating expenses 44 557 601
---------- ----------- -------
$4 $394 $398
---------- ----------- -------
---------- ----------- -------
</TABLE>
F-7
<PAGE>
AMERICAN REAL ESTATE INVESTMENT CORPORATION
NOTES AND MANAGEMENT'S ASSUMPTIONS TO UNAUDITED PRO FORMA
CONDENSED CONSOLIDATING FINANCIAL INFORMATION
(b) 1998 ACQUISITIONS
This adjustment reflects the pro forma effects of the following
acquisitions consummated since January 1, 1998:
FOR THE THREE MONTHS ENDED MARCH 31, 1998
<TABLE>
<CAPTION>
101 One Double M
Commerce Philips Development GATX Galesi
Drive Drive Properties Properties Properties
------ ------ ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
REVENUE:
Minimum rent $ 61 $ 26 $ 350 $ 423 $ 1,410
Tenant reimbursements and other income 3 78 424
------ ------ ---------- --------- --------
Total revenue 61 29 428 423 1,834
OPERATING EXPENSES:
Repairs and maintenance 37 270
Property taxes 3 47 147
Utilities 25 71
Depreciation and amortization
Interest expense
------ ------ ---------- --------- --------
Total operating expenses 3 109 488
------ ------ ---------- --------- --------
Net income $ 61 $ 26 $ 319 $ 423 $ 1,346
------ ------ ---------- --------- --------
------ ------ ---------- --------- --------
<CAPTION>
Fed One 1998
Industrial Pro Forma Acquisitions
Portfolio Adjustments Pro Forma
---------- ----------- ------------
<S> <C> <C> <C>
REVENUE:
Minimum rent $ 426 $ $ 2,696
Tenant reimbursements and other income 4 509
-------- ---------- --------
Total revenue 430 3,205
OPERATING EXPENSES:
Repairs and maintenance 9 316
Property taxes 12 209
Utilities 96
Depreciation and amortization 573 (1) 573
Interest expense 1,292 (2) 1,292
-------- ---------- --------
Total operating expenses 21 1,865 2,486
-------- ---------- --------
Net income $ 409 $(1,865) $ 719
-------- ---------- --------
-------- ---------- --------
</TABLE>
Footnote explanations appear on the following page.
F-8
<PAGE>
AMERICAN REAL ESTATE INVESTMENT CORPORATION
NOTES AND MANAGEMENT'S ASSUMPTIONS TO UNAUDITED PRO FORMA
CONDENSED CONSOLIDATING FINANCIAL INFORMATION
Footnotes to 1998 Acquisitions:
(1) To record depreciation on assets acquired and transaction costs
capitalized over a useful life of 35 years.
(2) To record interest expense on mortgage indebtedness as follows:
<TABLE>
<CAPTION>
Mortgage Amount Interest Rate (%)
--------------- -----------------
<S> <C> <C>
One Philips Drive $ 7,500 7.03%
101 Commerce Drive 17,000 7.03%
Double M Development Properties 9,357 7.71%
GATX Properties 8,433 7.71%
Galesi Properties 18,036 8.33% to 8.68%
Galesi Properties 18,511 7.25%
Fed One Industrial Properties 11,738 7.25%
</TABLE>
F-9
<PAGE>
AMERICAN REAL ESTATE INVESTMENT CORPORATION
NOTES AND MANAGEMENT'S ASSUMPTIONS TO UNAUDITED PRO FORMA
CONDENSED CONSOLIDATING FINANCIAL INFORMATION
(c) Represents interest expense savings from repayment of the Credit Facility
upon the application of the net proceeds from Private Placement.
(d) To adjust the minority interest's share of income in the Operating
Partnership. The Company owns approximately 56% of the Operating
Partnership after the consummation of the Galesi transactions and the
Private Placement. The adjustment to record the income effect of
the minority interest share for the three months ended March 31, 1998 in
the pro forma statement of operations was computed as follows:
<TABLE>
<S> <C>
Pro forma Revenue $ 7,947
Pro forma Operating Expenses 5,518
Pro forma Equity in Loss from equity investment (162)
----------
Pro forma Income before Minority Interest $ 2,267
----------
----------
Minority Interest (44%) 997
Minority Interest at March 31, 1998 3,617
----------
Adjustment Required $ (2,620)
----------
----------
</TABLE>
F-10
<PAGE>
AMERICAN REAL ESTATE INVESTMENT CORPORATION
NOTES AND MANAGEMENT'S ASSUMPTIONS TO UNAUDITED PRO FORMA
CONDENSED CONSOLIDATING FINANCIAL INFORMATION
4. ADJUSTMENTS TO PRO FORMA CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1997
(a) To reflect the elimination of the statement of operations impact for
the year ended December 31, 1997 for the multi-family residential
properties which were sold during 1997. The combined results for
these properties are shown as follows:
FOR THE YEAR ENDED DECEMBER 31, 1997:
<TABLE>
<CAPTION>
Timberleaf Sedona Emerald Pointe Total
---------- ------ -------------- -----
<S> <C> <C> <C> <C>
Revenue $364 $1,093 $ $1,457
Operating Expenses:
Repairs and maintenance 29 87 116
Property taxes 9 48 57
Property management fees 12 35 47
Utilities 98 181 279
Payroll 33 120 153
Other property operations 93 150 243
Interest 91 307 447 845
Depreciation 45 162 (49) 158
------ ------ ------ -------
Total operating expenses 410 1,090 398 1,898
Equity in earnings from
investment in partnership 436 436
Gains on sales of property 403 3,453 752 4,608
------ ------ ------ -------
Net income $357 $3,456 $790 $4,603
------ ------ ------ -------
------ ------ ------ -------
</TABLE>
F-11
<PAGE>
AMERICAN REAL ESTATE INVESTMENT CORPORATION
NOTES AND MANAGEMENT'S ASSUMPTIONS TO UNAUDITED PRO FORMA
CONDENSED CONSOLIDATING FINANCIAL INFORMATION
On February 28, 1997, the Company sold the 450-unit apartment complex known
as the Timberleaf Apartments, which was constructed in 1972 and is located in
Aurora, Colorado. The gross selling price for this property was
approximately $9.1 million. On August 29, 1997, the Company sold the Sedona
Apartments, a 276-unit apartment complex constructed in 1971 and located in
Denver, Colorado. The property had been acquired by the Company upon its
organization as a REIT in 1993. The selling price for the property was $9.2
million.
On September 26, 1997, the Company sold its 50% general partner interest in
Emerald Vista Associates, L.P., which owns the 456-unit apartment complex
known as the Emerald Pointe Apartments located in San Diego County,
California. The selling price for the general partnership interest was $2
million.
The pro forma effects of these property sales are shown above for the year
ended December 31, 1997.
F-12
<PAGE>
AMERICAN REAL ESTATE INVESTMENT CORPORATION
NOTES AND MANAGEMENT'S ASSUMPTIONS TO UNAUDITED
PRO FORMA CONDENSED CONSOLIDATING FINANCIAL INFORMATION
(b) 1997 ACQUISITIONS
To reflect the acquisitions of the following properties which occurred
during 1997:
FOR THE TWELVE MONTHS ENDED DECEMBER 31, 1997
<TABLE>
<CAPTION>
McBride Penn Square
Portfolio Properties Dana Loew
--------- ----------- ------ ------
<S> <C> <C> <C> <C>
Revenues
Minimum rents $9,310 $ $ 365 $1,704
Tenant reimbursements and other
income 1,098 7 245
--------- ----------- ------ ------
Total Revenues 10,408 372 1,949
Operating Expenses:
Maintenance, administration and other 2,419 75
Real estate taxes 516 1 187
Insurance 6 16
Depreciation and amortization
Mortgage and bank loan interest
--------- ----------- ------ ------
Total operating expenses 2,935 7 278
Equity in earnings from investment in
management company (392)
--------- ----------- ------ ------
Net income (loss) $7,473 $ (392) $ 365 $1,671
--------- ----------- ------ ------
--------- ----------- ------ ------
<CAPTION>
1997
Pro Forma Acquisitions
Northfield Adjustments Pro Forma
---------- ----------- ------------
<S> <C> <C> <C>
Revenues
Minimum rents $1,120 $ $12,499
Tenant reimbursements and other
income 148 1,498
---------- ----------- -----------
Total Revenues 1,268 13,997
Operating Expenses:
Maintenance, administration and other 173 (1,199) (1) 1,468
Real estate taxes 126 830
Insurance 60 82
Depreciation and amortization 2,619 (2) 2,619
Mortgage and bank loan interest 4,582 (3) 4,582
---------- ----------- -----------
Total operating expenses 359 6,002 9,581
Equity in earnings from investment in
management company (392)
---------- ----------- -----------
Net income (loss) $ 909 $(6,002) $4,024
---------- ----------- -----------
---------- ----------- -----------
</TABLE>
Footnote explanations appear on the following page.
F-13
<PAGE>
AMERICAN REAL ESTATE INVESTMENT CORPORATION
NOTES AND MANAGEMENT'S ASSUMPTIONS TO UNAUDITED
PRO FORMA CONDENSED CONSOLIDATING FINANCIAL INFORMATION
Footnotes to 1997 Events:
(1) To eliminate non-recurring McBride general and administrative costs which
will not be incurred as a result of the future operations of the McBride
Portfolio by the Company
<TABLE>
<S> <C>
- Property management fees $ 136,000
- General and administrative expenses 1,063,000
-------------
$ 1,199,000
-------------
-------------
</TABLE>
(2) To record depreciation on assets acquired and transaction costs
capitalized over a useful life of 35 years.
(3) To record the following adjustments to interest expense:
<TABLE>
<S> <C>
- To record interest expense on the $45,000,000 of assumed McBride
Portfolio debt at 7.71% $ 3,300,000
- To record amortization of $500,000 of deferred financing costs
over a 10 year period $ 48,000
</TABLE>
- To record interest expense on other indebtedness:
<TABLE>
<CAPTION>
Principal Interest Rate
--------- (%)
---
<S> <C> <C>
Dana Building $ 1,155,000 7.38%
Loew Properties 2,875,000 8.25%
Loew Properties 4,385,000 8.50%
Loew Properties 3,358,000 8.50%
Northfield Properties 3,500,000 7.25%
</TABLE>
F-14
<PAGE>
AMERICAN REAL ESTATE INVESTMENT CORPORATION
NOTES AND MANAGEMENT'S ASSUMPTIONS TO UNAUDITED
PRO FORMA CONDENSED CONSOLIDATING FINANCIAL INFORMATION
(c) 1998 DISPOSITIONS
To reflect the sale in 1998 of the following multi-family assets:
FOR THE TWELVE MONTHS ENDED DECEMBER 31, 1997
<TABLE>
<CAPTION>
Americana Quadrangles
Lakewood Village
Apartments Apartments Total
---------- ---------- -----
<S> <C> <C> <C>
Revenues $ 2,200 $3,538 $5,738
Tenant reimbursements and other income 96 96
---------- ------- ------
2,200 3,634 5,834
Operating expenses:
Repairs and maintenance 56 241 297
Property taxes 118 169 287
Property management fees 87 118 205
Utilities 107 235 342
Payroll 180 218 398
Other property operations 341 202 543
Interest 891 1,120 2,011
Depreciation and amortization 233 586 819
---------- ------- ------
Total operating expenses 2,013 2,889 4,902
---------- ------- ------
Net Income $ 187 $ 745 $ 932
---------- ------- ------
---------- ------- ------
</TABLE>
F-15
<PAGE>
AMERICAN REAL ESTATE INVESTMENT CORPORATION
NOTES TO MANAGEMENT'S ASSUMPTIONS TO UNAUDITED
PRO FORMA CONDENSED CONSOLIDATING INCOME STATEMENT
(d) 1998 ACQUISITIONS
To reflect the following acquisitions which have occurred since
January 1, 1998:
FOR THE TWELVE MONTHS ENDED DECEMBER 31, 1997
<TABLE>
<CAPTION>
One 101 Double M Fed One 1998
Philips Commerce Development GATX Galesi Industrial Pro Forma Acquisitions
Drive Drive Properties Properties Properties Portfolio Adjustments Pro Forma
------- -------- ----------- ---------- ---------- ---------- ----------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Revenues $1,188 $2,788 $1,605 $1,770 $5,193 $1,633 $ $14,177
Tenant reimbursement and other
income 145 4 330 1,558 22 2,059
------- -------- ----------- ---------- ---------- ---------- ----------- ---------
1,333 2,792 1,935 1,770 6,751 1,655 16,236
Operating expenses
Repairs and maintenance 59 882 36 977
Property taxes 145 196 521 46 908
Utilities 104 304 408
Interest 6,799(1) 6,799
Depreciation and amortization 3,100(2) 3,100
------- -------- ----------- ---------- ---------- ---------- ----------- ---------
Total operating expenses 145 -- 359 -- 1,707 82 9,899 12,192
------- -------- ----------- ---------- ---------- ---------- ----------- ---------
Net income (loss) $1,188 $2,792 $1,576 $1,770 $5,044 $1,573 $(9,899) $4,044
------- -------- ----------- ---------- ---------- ---------- ----------- ---------
------- -------- ----------- ---------- ---------- ---------- ----------- ---------
</TABLE>
Footnote explanations appear on the following page.
F-16
<PAGE>
AMERICAN REAL ESTATE INVESTMENT CORPORATION
NOTES TO MANAGEMENT'S ASSUMPTIONS TO UNAUDITED
PRO FORMA CONDENSED CONSOLIDATING INCOME STATEMENT
Footnotes to 1998 Acquisitions:
(1) To record interest expense on mortgage indebtedness as follows:
<TABLE>
<CAPTION>
Mortgage
Amount Interest Rate (%)
------ -----------------
<S> <C> <C>
One Philips Drive $7,500,000 7.03%
101 Commerce Drive 17,000,000 7.03%
Double M Development Properties 9,357,000 7.71%
GATX Properties 8,433,000 7.71%
Galesi Properties 18,036,000 8.33 % to 8.68%
Galesi Properties 18,511,000 7.25%
Fed One Industrial Portfolio 11,738,000 7.25%
</TABLE>
(2) To record depreciation on assets acquired and transaction costs capitalized
over a useful life of 35 years.
- -------------------------------------------------------------------------------
(e) Represents interest expense savings from repayment of the Credit Facility
upon the application of net proceeds from Private Placement.
(f) To eliminate the pro forma effect of the non-recurring costs associated
with the buyout of certain executives employment agreements and outstanding
options and warrants in conjunction with the transactions which occurred on
December 12, 1997, related to the Company's reorganization into an office
and industrial real estate investment trust.
F-17
<PAGE>
AMERICAN REAL ESTATE INVESTMENT CORPORATION
NOTES TO MANAGEMENT'S ASSUMPTIONS TO UNAUDITED
PRO FORMA CONDENSED CONSOLIDATING INCOME STATEMENT
(g) To adjust the minority interest's share of income in the Operating
Partnership. The Company owns approximately 56% of the Operating
Partnership after the consummation of the Galesi transactions and the
Private Placement. The adjustment to record the income effect of the
minority interest share for the year ended December 31, 1997 in the pro
forma statement of operations was computed as follows:
<TABLE>
<S> <C>
Proforma Revenue $ 31,139
Proforma Operating Expenses 21,596
Proforma Equity in Loss from Equity Investment (424)
-----------
Proforma Income before Minority Interest $ 9,119
-----------
-----------
Minority Interest (44%) $ 4,012
Minority Interest at March 31, 1998 876
-----------
Adjustment Required $ (3,136)
-----------
-----------
</TABLE>
F-18
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To American Real Estate Investment Corporation:
We have audited the combined statement of revenue and certain expenses of The
Galesi Properties, for the year ended December 31, 1997. This financial
statement is the responsibility of the Properties' management. Our
responsibility is to express an opinion on this financial statement based on
our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statement is free of
material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statement.
An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as, evaluating the overall
financial statement presentation. We believe that our audit provides a
reasonable basis for our opinion.
The combined statement of revenue and certain expenses was prepared for the
purpose of complying with the rules and regulations of the Securities and
Exchange Commission for inclusion in a Current Report on Form 8-K/A of
American Real Estate Investment Corporation, as described in Note 1, and is
not intended to be a complete presentation of the Properties' revenue and
expenses.
In our opinion, the financial statement referred to above presents fairly, in
all material respects, the combined revenue and certain expenses of The
Galesi Properties for the year ended December 31, 1997, in conformity with
generally accepted accounting principles.
Philadelphia, Pa.,
April 1, 1998
F-19
<PAGE>
THE GALESI PROPERTIES
COMBINED STATEMENT OF REVENUE AND CERTAIN EXPENSES (NOTE 1)
<TABLE>
<CAPTION>
For the year
For the three ended
months ended December 31,
March 31, 1998 1997
-------------- ------------
REVENUE: (unaudited)
<S> <C> <C>
Minimum rent (Notes 2 and 3) $1,410,000 $5,193,000
Tenant reimbursements 424,000 1,554,000
Other income 4,000
-------------- ------------
Total revenue 1,834,000 6,751,000
-------------- ------------
CERTAIN EXPENSES:
Maintenance and other operating expenses 270,000 882,000
Utilities 71,000 304,000
Real estate taxes 147,000 521,000
-------------- ------------
Total certain expenses 488,000 1,707,000
-------------- ------------
REVENUE IN EXCESS OF CERTAIN EXPENSES $1,346,000 $5,044,000
-------------- ------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-20
<PAGE>
THE GALESI PROPERTIES
NOTES TO THE COMBINED STATEMENT OF REVENUE AND CERTAIN EXPENSES
FOR THE YEAR ENDED DECEMBER 31, 1997
1. BASIS OF PRESENTATION:
The combined statement of revenue and certain expenses reflects the combined
operations of the Columbia properties and the Northeastern Industrial Park
properties (collectively the "Properties"). The Properties consist of the
Columbia properties (7 buildings) located in Albany, NY, and three industrial
buildings located in the Northeastern Industrial Park, which is located in
Guilderland, NY. The Properties have an aggregate net rentable area of
approximately 780,357 square feet and are 94% leased as of December 31, 1997.
The Properties will be acquired by American Real Estate Investment Corporation
(the "Company") under agreements with Columbia Executive Assoc. I, II, III, V,
VI, VII, VIII, Northeastern Industrial Park, Inc., and Guilderland Ventures,
Inc. (all affiliates of the Galesi Group). This combined statement of
revenue and certain expenses is to be included in the Company's current
report on Form 8-K/A, as the above described transaction has been deemed
significant pursuant to the rules and regulations of the Securities and
Exchange Commission.
The accounting records of the Properties are maintained on an accrual basis.
Adjusting entries have been made to present the accompanying financial
statement in accordance with generally accepted accounting principles. The
accompanying financial statement excludes certain expenses such as interest,
depreciation and amortization, and other costs not directly related to the
future operations of the Properties in conformity with Rule 3-14 of the
Securities and Exchange Commission.
The preparation of the financial statement in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of revenue and expenses during
the reporting period. The ultimate results could differ from those estimates.
The statement of revenue and certain expenses for the three months ended
March 31, 1998 is unaudited; however, in the opinion of management, all
adjustments (consisting solely of normal recurring adjustments) necessary for
the fair presentation of the statement of revenue and certain expenses for
the interim period have been included. The results of the interim periods
are not necessarily indicative of the results for the full year.
2. OPERATING LEASES:
Minimum rent presented for the year ended December 31, 1997, includes
straight-line adjustments for rental revenue increases in accordance with
generally accepted accounting principles. The aggregate rental revenue
increase resulting from the straight-line adjustment for the year ended
December 31, 1997 was $64,000.
F-21
<PAGE>
THE GALESI PROPERTIES
NOTES TO THE COMBINED STATEMENT OF REVENUE AND CERTAIN EXPENSES
FOR THE YEAR ENDED DECEMBER 31, 1997
The following tenants had minimum rental payments greater than 10% of the
total minimum rent in 1997:
<TABLE>
<CAPTION>
Property Tenant Minimum Rent
------------------ ------------------------------------------- -------------
<S> <C> <C>
3 Columbia Circle Delmar Publishers, Inc. $758,000
15 Columbia Circle The Prudential Insurance Company of America 929,000
8 Airline Drive Allstate Insurance Company 691,000
Building 22 AmeriServe Food Distribution, Inc. 530,000
Buildings 8 & 21 Distribution Unlimited, Inc. 964,000
</TABLE>
The Properties are leased to tenants under operating leases with expiration
dates extending to the year 2006. Future minimum rentals under noncancelable
operating leases, excluding tenant reimbursements of operating expenses as of
December 31, 1997, are as follows:
<TABLE>
<S> <C>
1998 $ 5,854,000
1999 5,742,000
2000 5,299,000
2001 5,206,000
2002 4,872,000
Thereafter 7,028,000
</TABLE>
Certain leases also include provisions requiring tenants to reimburse the
Properties for management costs and other operating expenses up to stipulated
amounts.
3. RELATED PARTY TRANSACTIONS:
The Galesi Management Company, a related party, leases 1,016 square feet at
13 Columbia Circle and occupies 660 square feet of storage space at 3
Columbia Circle. No rent was charged to this related party in 1997.
Distribution Unlimited, Inc., a related party, leases 286,400 square feet of
net rentable space in two of the buildings in the Northeastern Industrial
Park as of December 31, 1997 with a minimum base rent of $964,000.
4. COMMITMENTS:
Guilderland Ventures, Inc. is obligated under a ground lease agreement for
Building 21 with Northeastern Industrial Park, Inc. requiring minimum annual
payments of $1,000 in addition to 2% of the gross rental income received from
the tenants occupying the property.
F-22
<PAGE>
THE GALESI PROPERTIES
NOTES TO THE COMBINED STATEMENT OF REVENUE AND CERTAIN EXPENSES
FOR THE YEAR ENDED DECEMBER 31, 1997
Total ground lease expense paid in 1997 was approximately $19,000 and is
included in maintenance and other operating expenses, in the accompanying
statements of revenue and certain expenses.
5. SUBSEQUENT EVENT:
The Company entered into agreements in March 1998 in which certain
entities affiliated with The Galesi Group agreed to contribute all their
interests in seven office and three industrial properties to American Real
Estate Investment, L.P. (the "Company's Operating Partnership"). As
consideration for this contribution, the Operating Partnership will issue
1,362,940 units of limited partnership interest in the Operating Partnership,
will assume approximately $18,500,000 in debt and will pay $18,000,000 in cash,
funded by the Company's revolving credit facility, for an aggregate purchase
price of approximately $59,000,000, including closing costs.
F-23
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To American Real Estate Investment Corporation:
We have audited the statement of revenue and certain expenses of the Fed One
Industrial Portfolio, for the year ended December 31, 1997. This financial
statement is the responsibility of the Portfolio's management. Our
responsibility is to express an opinion on this financial statement based on
our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statement is free of
material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statement.
An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audit provides a
reasonable basis for our opinion.
The statement of revenue and certain expenses was prepared for the purpose of
complying with the rules and regulations of the Securities and Exchange
Commission for inclusion in a Current Report on Form 8-K/A of American Real
Estate Investment Corporation, as described in Note 1, and is not intended to
be a complete presentation of the Portfolio's revenue and expenses.
In our opinion, the financial statement referred to above presents fairly, in
all material respects, the revenue and certain expenses of the Fed One
Industrial Portfolio for the year ended December 31, 1997, in conformity with
generally accepted accounting principles.
Philadelphia, Pa.,
June 15, 1998
F-24
<PAGE>
FED ONE INDUSTRIAL PORTFOLIO
STATEMENT OF REVENUE AND CERTAIN EXPENSES (NOTE 1)
<TABLE>
<CAPTION>
For the Three For the Year
Months Ended Ended
March 31, December 31,
1998 1997
---- ----
(unaudited)
<S> <C> <C>
REVENUE:
Minimum rent (Note 2) $ 426,393 $ 1,632,900
Tenant reimbursements 3,416 21,796
--------------- --------------
Total revenue 429,809 1,654,696
--------------- --------------
CERTAIN EXPENSES:
Maintenance and other operating expenses 9,406 36,047
Real estate taxes 11,413 45,674
--------------- --------------
Total certain expenses 20,819 81,721
--------------- --------------
REVENUE IN EXCESS OF CERTAIN EXPENSES $ 408,990 $ 1,572,975
--------------- --------------
--------------- --------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-25
<PAGE>
FED ONE INDUSTRIAL PORTFOLIO
NOTES TO STATEMENT OF REVENUE AND CERTAIN EXPENSES
DECEMBER 31, 1997
1. BASIS OF PRESENTATION:
The statement of revenue and certain expenses reflect the operations of the
following properties in the Fed One Industrial Portfolio (the "Portfolio"):
<TABLE>
Property Location
-------- --------
<S> <C>
16725 Square Drive Marysville, Ohio
1030/1037 S. Edgwood Drive Urbana, Ohio
3530 East Pike Zanesville, Ohio
</TABLE>
The Portfolio is expected to be acquired by American Real Estate Investment
Corporation (the "Company") from Fed One of Dayton in June 1998. The
Portfolio has an aggregate net rentable area of approximately 633,500 square
feet (100% leased as of December 31, 1997). This statement of revenue and
certain expenses is to be included in the Company's current report on Form
8-K/A, as the above described transaction has been deemed significant
pursuant to the rules and regulations of the Securities and Exchange
Commission.
The accounting records of the Portfolio are maintained on a modified cash
basis. Adjusting entries have been made to present the accompanying financial
statements in accordance with generally accepted accounting principles. The
accompanying financial statements exclude certain expenses such as interest,
depreciation and amortization, professional fees, and other costs not
directly related to the future operations of the Portfolio.
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions
that affect the reported amounts revenue and expenses during the reporting
period. The ultimate results could differ from those estimates.
The statement of revenue and certain expenses for the three months ended
March 31, 1998 is unaudited; however, in the opinion of management, all
adjustments (consisting solely of normal recurring adjustments) necessary for
the fair presentation of the statement of revenue and certain expenses for
the interim period have been included. The results of the interim periods
are not necessarily indicative of the results for the full year.
F-26
<PAGE>
FED ONE INDUSTRIAL PORTFOLIO
NOTES TO STATEMENT OF REVENUE AND CERTAIN EXPENSES
DECEMBER 31, 1997
2. OPERATING LEASES:
Minimum rent presented for the year ended December 31, 1997, is recorded in
accordance with generally accepted accounting principles.
The following tenants account for greater than 10% of minimum rent:
<TABLE>
<CAPTION>
Property Tenant Minimum Rent
-------- ------ ------------
<S> <C> <C>
Marysville Midwest $388,900
Urbana SC Johnson & Son $384,000
Zanesville Owens-Brockway $860,000
</TABLE>
The Portfolio is leased to tenants under operating leases with expiration
dates extending to the year 2002. Future minimum rentals under noncancelable
operating leases, excluding tenant reimbursements of operating expenses as of
December 31, 1997, are as follows:
<TABLE>
<S> <C>
1998 $ 1,673,572
1999 1,321,572
2000 1,281,441
2001 840,000
2002 140,000
</TABLE>
Certain leases also include provisions requiring tenants to reimburse the
Portfolio for management costs and other operating expenses up to stipulated
amounts.
3. RELATED PARTY TRANSACTIONS:
In 1997 the Company engaged a related party to perform certain repairs and
maintenance. Amounts totaling $17,088 were expensed and have been included
in the statement of revenue and certain expenses.
4. SUBSEQUENT EVENT
The Portfolio is under of letter of intent to be purchased by the Company for
approximately $11,700,000. The Purchase price will be funded by the Company's
revolving credit facility.
F-27
<PAGE>
Exhibit 10-1
EXECUTION COPY
Northeastern Industrial Park
CONTRIBUTION AGREEMENT
between
AMERICAN REAL ESTATE INVESTMENT, L.P., ACQUIROR
and
THE OTHER PARTIES LISTED ON
THE SIGNATURE PAGES OF THIS AGREEMENT, CONTRIBUTOR
Dated as of February 4, 1998
THE PARTIES TO THIS AGREEMENT OTHER THAN ACQUIROR WILL BE DEEMED TO BE MAKING A
DECISION TO INVEST IN UNITS OF LIMITED PARTNERSHIP INTEREST IN ACQUIROR AND IN
THE SECURITIES FOR WHICH THOSE UNITS ARE EXCHANGEABLE. IN MAKING THAT INVESTMENT
DECISION, THOSE PERSONS MUST RELY ON THEIR OWN EXAMINATION OF THE ISSUERS OF
THOSE SECURITIES AND THE TERMS OF THE INVESTMENT, INCLUDING THE MERITS OF THE
INVESTMENT AND THE RISKS INVOLVED. THESE SECURITIES HAVE NOT BEEN RECOMMENDED BY
ANY FEDERAL OR STATE SECURITIES COMMISSION OR REGULATORY AUTHORITY. FURTHERMORE,
THE FOREGOING AUTHORITIES HAVE NOT CONFIRMED THE ACCURACY OR ADEQUACY OF THIS
DOCUMENT. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
THESE SECURITIES ARE SUBJECT TO RESTRICTIONS ON TRANSFERABILITY AND RESALE AND
MAY NOT BE TRANSFERRED OR RESOLD EXCEPT AS PERMITTED UNDER THE SECURITIES ACT OF
1933, AS AMENDED, AND THE APPLICABLE STATE SECURITIES LAWS, PURSUANT TO
REGISTRATION OR EXEMPTION THEREFROM. INVESTORS SHOULD BE AWARE THAT THEY MAY BE
REQUIRED TO BEAR THE FINANCIAL RISK OF THIS INVESTMENT FOR AN INDEFINITE PERIOD
OF TIME.
<PAGE>
CONTRIBUTION AGREEMENT
THIS CONTRIBUTION AGREEMENT (this "Agreement") is made and entered into
as of the 4th day of February, 1998, between AMERICAN REAL ESTATE INVESTMENT,
L.P., a Delaware limited partnership ("Acquiror"), and the parties reflected on
the signature pages hereto as "Contributor and other OP Unit Recipients" (such
entities are sometimes referred to in this Agreement, individually and
collectively, as the context requires, as "Contributor").
RECITALS
A. Contributor is the owner of certain fee and other interests in three
(3) industrial buildings known as 8, 21 and 22 Northeastern Industrial Park,
Albany, New York (collectively, the "Properties").
B. Contributor desires to contribute and convey to Acquiror all of its
interests relating to the Properties to Acquiror, and Acquiror desires to
acquire and accept same from Contributor, each upon and subject to the terms and
conditions of this Agreement.
C. Acquiror has entered into that certain Contribution Agreement, dated
the date hereof, with the other parties listed on the signature pages thereto,
with respect to six buildings known as 1, 3, 9, 13, 15 and 17 Columbia Circle
and one building known as 8 Airline Drive (the "Columbia Contribution
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 assume, all of Contributor's right, title and interest
(whether now or hereafter existing) in and to all of the following described
properties (all of which is herein collectively referred to as the
"Properties"):
A. those certain parcels of real estate comprising
approximately Sixteen and 71/100 (16.71) acres, located in Albany County, New
York and more particularly described in Exhibit A attached to this Agreement;
together with all and singular the easements, covenants, agreements, rights,
tenements, hereditaments and appurtenances thereunto now or hereafter belonging
or appertaining (collectively, the "Land"):
<PAGE>
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 any part thereof, and any
award for damage to the Properties or any part thereof by reason of casualty
(all of the foregoing being included within the term "Land");
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
three (3) industrial buildings known as 8, 21 and 22 Northeastern Industrial
Park, 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) (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 Properties or any part thereof or
used in connection therewith that are not owned by tenants under the Leases,
together with all replacements and substitutions therefor (collectively, the
"Personal Property"), including, without limitation, those items 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 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 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 or any part thereof;
F. 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 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 material 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 or any part thereof
(collectively, the "Service Contracts") is attached to this Agreement as Exhibit
C; and
G. Seller's interest, as fee and landlord, in all leases for
portions of the Properties. A summary of all current leases affecting the
Properties 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.
<PAGE>
2. EARNEST MONEY
Within three (3) business days after the execution of this
Agreement by Contributor and Acquiror, Acquiror shall deliver to TitleServNY
located in New York, New York ("Escrowee") a check payable to Escrowee or wire
transferred federal funds in the amount of One Hundred Thousand and 00/100
Dollars ($100,000.00) (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 traded on the American
Stock Exchange (the "AMEX").
B. Contribution Consideration. The aggregate consideration to
be paid to Contributor by Acquiror for the Properties (the "Contribution
Consideration") shall consist of that number (the "Total OP Unit Amount") of OP
Units (as defined below) equal to: (i) 565,048 OP Units; minus (ii) the amount
of OP Units equal to (a) the aggregate amount of any prorations described in
Section 6C ("Prorations") and credited, as of the Closing Date, to Acquiror
divided by (b) $16.50; plus (iii) the amount of OP Units equal to (x) the
aggregate amount of any Prorations credited, as of the Closing Date, to
Contributor divided by (y) $16.50. If the calculation of the Contribution
Consideration in accordance with the foregoing provision would result in a
fraction of an OP Unit being delivered to Contributor, then such fraction shall
be rounded to the nearest whole number. The Properties are to be contributed to
Acquiror subject to those corresponding items of indebtedness of Contributor set
forth on Exhibit F attached hereto outstanding as of the Closing Date (as
defined below) (the "Existing Indebtedness"), in order to obtain a release from
the lien of such mortgage loans, which will either be assumed, refinanced or
paid off by Acquiror immediately following the Closing.
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 G attached hereto (the
"OP Unit Recipients"). After the first anniversary of the Closing the OP Units
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 Acquiror's Amended and Restated Agreement of
Limited Partnership dated as of December 12, 1997 (the "Partnership Agreement")
provided, however, that notwithstanding the foregoing, the OP Units (together
with the OP Units issued pursuant to the Columbia Contribution Agreement) may
not be converted into Conversion Shares that in the aggregate represent more
than 19.9% of the total number of shares of Stock that are issued and
outstanding on the date on which the OP Units are issued to the OP Unit
Recipients until and unless the requisite approval from the REIT's stockholders
is obtained prior to such conversion. Acquiror agrees that it will use its
commercially reasonable efforts to cause the REIT to seek such stockholder
approval, including presenting the issue, with management's endorsement, to the
REIT's stockholders at the next annual or special meeting of stockholders
following the Closing, and to present the issue at the next subsequent meeting
if the necessary stockholder approval is not obtained.
D. Transfer Restrictions. Each OP Unit Recipient, by his
execution and delivery of
<PAGE>
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, 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
(as defined below). The provisions of this paragraph shall survive the Closing.
E. Lock-Up Period. Each OP Unit Recipient agrees that for a
period of twelve (12) months following the 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 (without Acquiror's consent which will not be
unreasonably withheld, and except for pledges to those pledgees listed in
Schedule 3E) 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
Conversion Shares in respect thereof; provided that transfers may be 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, each OP Unit Recipient further agrees that
following the expiration of the Lock-Up Period, not more than twenty-five
percent (25%) of the OP Units delivered to such OP Unit Recipient at the Closing
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 OP Units and Conversion Shares may be sold after
the second (2nd) anniversary of the Closing Date). The term "Permitted
Transferee" with respect to any OP Unit Recipient shall mean any other OP Unit
Recipient or an individual who directly or indirectly, as a stockholder, member
or partner, owns such OP Unit Recipient and with respect to such individual,
such individual's spouse; a parent or lineal descendant (including an adopted
child) of a parent, or the spouse of a lineal descendant of a parent; a trustee,
guardian or custodian for, or an executor, administrator or other legal
representative of the estate of, any such recipient or individual, 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/or
Permitted Transferees of such recipient or individual are the beneficial owners
of a majority in voting power of the equity; but only in each of the foregoing
cases, 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. The provisions of this paragraph shall survive the Closing. Each OP
Unit Recipient shall execute and deliver to Acquiror at Closing a letter to the
effect of the foregoing, in form and substance reasonably satisfactory to
Acquiror.
F. 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, as provided in an agreement to be delivered by each OP Unit
Recipient at Closing substantially in the form of Exhibit H attached hereto (the
"OP Unit Recipient Agreement").
G. Right of First Refusal/First Offer on Sale of Buildings.
(i) From and after the Closing Date and continuing up to
and including the fifth (5th) anniversary thereof, Acquiror shall have
a continuing right of first refusal to (1) purchase any building(s)
owned by Contributor and/or any of the OP Unit Recipients
(collectively, "Owner")
<PAGE>
and located at the Northeastern Industrial Park, and (2) purchase or
develop as a joint venture partner the approximately 400 acres of land
adjoining the Properties, as follows: In the event Owner receives a
bona fide third party offer to (1) purchase (whether by transfer of
fee simple interest, a ground lease, sale of an interest in Owner, an
installment sale, or otherwise) one or more buildings and related land
and facilities located at the Northeastern Industrial Park (the "First
Refusal Buildings") or, subject to Section 3G(iii) below, (2) purchase
or develop as a partner with Owner or any affiliate of Owner all or
any portion of the approximately 400 acres of land adjoining the
Properties or any building to be built thereon (the "First Refusal
Land"), and Owner desires to accept such offer, Owner shall provide
written notice to Acquiror within ten (10) 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 First Refusal
Building(s) or First Refusal Land and 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 First Refusal Building(s) or to purchase or develop as a
partner with Owner or any affiliate of Owner, as the case may be, the
First Refusal Land in accordance with the terms and conditions
specified in the offer as set forth in Owner's written notice to
Acquiror. Acquiror shall not have the right of first refusal for less
than all of the First Refusal Building(s) identified in a third party
offer for two or more of the First Refusal Building(s) or for less
than all of the First Refusal Land identified in a third party offer
unless such third party offeror shall have alternative rights to
purchase less than all of the First Refusal Building(s) or to purchase
or develop as a partner with Owner, as the case may be, less than all
of the First Refusal Land identified in the offer 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 First Refusal Buildings or any
First Refusal Land from the original offer or addition of one or more
First Refusal Buildings or more First Refusal Land 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 or develop
with Owner or any affiliate of Owner, as the case may be, the interest
so offered, Owner and Acquiror shall consummate the purchase and sale
or joint venture, as the case may be, within a period of ninety (90)
days after the date Acquiror provides written notice to Owner
exercising its right to purchase or develop with Owner or any
affiliate of Owner, as the case may be, unless such closing is delayed
for reasons beyond the reasonable control of the parties. In the event
Acquiror fails to exercise its right of first refusal as set forth in
this paragraph, Owner shall be free to sell the First Refusal
Building(s) to, or to sell or develop, as the case may be, the First
Refusal Land to or with, such third party offeror pursuant to the
terms and conditions of the offer; provided, however, that in the
event a binding contract of sale for such First Refusal Building(s) or
a binding contract of sale or joint venture agreement, as the case may
be, for such First Refusal Land 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 aggregate purchase
price or consideration is reduced by 3% or more or the other terms and
conditions of such third party offer are modified in any other
material respect, then Acquiror shall again have its right of first
refusal to acquire such First Refusal Building(s) or First Refusal
Land 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
First Refusal Building(s) or First Refusal Land and other material
terms and conditions.
(ii) From and after the Closing Date and continuing up to
and including the fifth (5th) anniversary thereof, Acquiror shall have
a continuing right of first offer to (1) purchase any building(s) owned
by Owner and located at the Northeastern Industrial Park, and (2)
purchase
<PAGE>
or develop as a joint venture partner the approximately 400 acres of
land adjoining the Properties, as follows: In the event Owner desires
to (1) 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 more buildings and related land and
facilities located at the Northeastern Industrial Park (the "First
Offer Buildings") or, subject to Section 3G(iii) below, (2) sell or
seek to sell, or develop with a partner all or any portion of the
approximately 400 acres of land adjoining the Properties or any
building to be built thereon (the "First Offer Land"), Owner shall
provide written notice to Acquiror specifying the purchase price,
terms of payment, identity of the First Offer Building(s) or First
Offer Land and other material terms and conditions of the offer or
sale (the "Sale Notice"). Acquiror or its nominee shall have the
option (the "Purchase Option"), to be exercised by written notice
given to Owner within thirty (30) days after Acquiror's receipt of the
Sale Notice (the "Exercise Period"), to purchase the First Offer
Buildings from Owner, or to purchase or develop as a partner with
Owner, as the case may be, the First Offer Land on the terms specified
in the Sale Notice. If Acquiror exercises its Purchase Option, Owner
and Acquiror shall consummate the purchase and sale or joint venture,
as the case may be, within a period of ninety (90) days after the date
Acquiror provides written notice to Owner exercising its right to
purchase or develop with Owner or any affiliate of Owner, as the case
may be, unless such closing is delayed for reasons beyond the
reasonable control of the parties. In the event Acquiror fails to
exercise its Purchase Option as set forth in this paragraph, Owner
shall be free to sell the First Offer Building(s) to, or to sell or
develop, as the case may, the First Offer Land to or with, third
parties pursuant to the terms and conditions of the offer to Acquiror;
provided, however, that in the event a binding contract of sale for
such First Offer Building(s) or a binding contract of sale, loan
agreement or joint venture agreement, as the case may be, for such
First Offer Land is not executed between Owner and such third party
offeror within 180 days after the expiration of the Exercise Period,
or the aggregate purchase price or consideration is reduced by 3% or
more or the other terms and conditions of such third party offer are
modified in any other material respect, then Acquiror shall again have
its right of first offer to acquire such First Offer Building(s) or
First Offer Land as set forth in this paragraph, and Owner and
Acquiror shall again comply with the requirements hereof.
(iii) Notwithstanding the foregoing right of first refusal
and right of first offer, such rights shall not apply to First Refusal
Land or First Offer Land in instances where Owner either receives bona
fide offers from, or proposes to sell to, potential purchasers or
potential developers who would also be, or whose affiliate would be,
the tenant in the building(s) proposed to be built on such land.
(iv) At Closing, Contributor and Acquiror shall execute
and record against the other properties owned by Owner at the
Northeastern Industrial Park, 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 (the "Expiration Date") that is
sixty (60) days after the fifth (5) anniversary of the Closing Date.
Contemporaneous with the execution and delivery of such memorandum,
Acquiror shall execute and deliver into escrow with Steven K. Porter,
attorney for Contributor, an agreement in form and substance
satisfactory to Contributor and Acquiror terminating of record the
memorandum referred to above, which agreement Mr. Porter shall be
authorized to release from escrow and record thirty (30) days after the
Expiration Date. The terms and conditions of this paragraph shall
survive the Closing.
H. Tax Matters. During the period commencing on the Closing
Date and expiring on the earlier to occur of (i) the seventh (7th) anniversary
of the Closing Date 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, Acquiror shall not sell or make any other voluntary disposition
(other than through a deed in lieu of foreclosure, a foreclosure action, or an
act of eminent domain) of any of the Properties in a
<PAGE>
transaction that causes gain recognition under Sections 704(c) or 752 (or any
other section) of the Internal Revenue Code of 1986, as amended (the "Code") for
Contributor without the consent of Contributor. Thereafter, Acquiror shall use
all commercially reasonable efforts in disposing of any of the Properties during
the period expiring on the earlier to occur of (i) the tenth (10th) anniversary
of the Closing Date 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, to structure such disposition as 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, in which not more than 10% of the built-in gain associated with such
Property is required to be recognized by the OP Unit Recipients. Notwithstanding
the foregoing, in the event of catastrophic damage to any or all of the
Properties by an act of God (e.g., hurricane or tornado), Acquiror shall have
the right to sell any or all of the Properties affected thereby without regard
to the foregoing. Pursuant to Section 5.4 of the Partnership Agreement, Acquiror
shall elect to use the "traditional method" set forth in Regulation Section
1.704-3(b) with respect to the Properties.
I. Board Seat. Acquiror shall take all such actions necessary
to cause the nomination of Francesco Galesi for election to the Board of
Directors of the REIT, with an initial term of not less than two (2) years nor
more than three (3) years, at the REIT's next annual or special meeting of the
REIT's stockholders, such nominee to take office effective upon such election.
J. Allocation of Contribution Consideration. Prior to the
Closing and if requested by Acquiror, Acquiror and Contributor shall use
commercially reasonable efforts to agree in writing upon the allocation of the
Contribution Consideration among the Land, the Improvements and the tangible
Personal Property.
K. 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 or to effect the other purposes of this Agreement. In
addition, Contributor will use all commercially reasonable efforts to cause,
prior to the Closing, the recordation described in Section 6B(i)(n).
L. Notification if Representations and Warranties Untrue.
During the Inspection Period (as defined below), 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, Contributor shall:
A. Except as otherwise provided for in this Agreement, manage
and operate the Properties 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 Contact or
institute any rent increases without the prior written consent of Acquiror,
which consent shall not be unreasonably withheld.
<PAGE>
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 to be nonconforming to the
requirements of this Agreement.
F. Provide Acquiror, upon reasonable advance notice, with such
access to the Properties 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 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.
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 without the prior written consent of Acquiror, which consent
shall not be unreasonably withheld.
5. STATUS OF TITLE TO PROPERTIES
A. State of Title. Contributor shall convey the Properties to
Acquiror or Acquiror's designee subsidiary by bargain and sale deeds without
covenants against grantor's acts in recordable form (the "Deeds"), and title to
the Properties 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 reviewed and approved by Acquiror within the Inspection Period (as
defined below), (ii) rights of tenants under the Leases, as tenants only, (iii)
general real estate taxes for the year in which the Closing occurs and
subsequent years, not yet delinquent and (iv) those certain mortgages securing
payment of the Existing Indebtedness and more particularly described in Exhibit
I attached to this Agreement (the "Existing Mortgages") (the 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 at Acquiror's
expense the following documents to evidence the condition of Contributor's title
to the Properties:
(i) Acquiror shall obtain for each of the Properties, at
Acquiror'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 Properties in
such amounts as Acquiror deems appropriate, issued through a title
insurer to be selected by Acquiror (the "Title Insurer"), and
irrevocable for at least six (6) months. The Title Commitment shall
show fee simple title to the Properties vested in Contributor. The
Owner's Title Insurance Policy to be issued to Acquiror at the Closing
pursuant to the corresponding Title Commitment shall be at regular
rates and 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, coverage insuring
any easements for utilities servicing the Properties that do not
connect to the Properties from a public street, and such other
endorsements as counsel for Acquiror shall reasonably deem appropriate.
(ii) Within fifteen (15) days after the date of this
Agreement, Contributor shall furnish to Acquiror, at Acquiror'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 Properties are located for
<PAGE>
Uniform Commercial Code Financing Statements, tax liens and the like
in the name of Contributor, the OP Unit Recipients, the Properties and
any other name or location reasonably requested by Acquiror.
(iii) Acquiror shall obtain, at Acquiror's expense, a
current "as-built" plat of survey (the "Survey") for each of the
Properties 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 Properties 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 5
(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 Properties 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 Properties.
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 other than Permitted Exceptions or any other title or survey matter which
does not conform to the requirements of this 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 from
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")
or (ii) elect to accept title to the Properties as it then is with the right to
deduct from the Purchase Price a sum equal to the amount required to discharge
liens or encumbrances of a definite or ascertainable amount. If Acquiror fails
to make either 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
(the "Closing") shall occur at the offices of Rogers & Wells, 200 Park Avenue,
New York, New York 10166, on the basis of a "New York Style" closing at 10:00
a.m. on (i) the earlier 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,
and, in any event, will occur on the same day as the closing specified in the
Columbia Contribution Agreement. The "Closing Date" shall be the date of the
Closing.
<PAGE>
B. Closing Documents.
(i) Contributor. Not less than five (5) business days
prior to the Closing Date, 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):
(a) the Deeds, in form and substance reasonably
satisfactory to Acquiror, subject only to the Permitted
Exceptions, sufficient to transfer and convey to Acquiror or
Acquiror's designee fee simple title to the Properties 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 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 an Owner's Title Insurance Policy for
each of the Properties (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 order 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 as being true,
accurate and complete and all security deposits thereunder),
and an assignment, in form and substance reasonably
satisfactory to Acquiror, of those Service Contracts that
Acquiror elects to assume (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 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 property referred
to in Section 1F above;
(h) any existing bonds, warranties or guaranties
which are in any way applicable to the Properties or any part
thereof;
(i) a pay-off letter (the "Pay-Off Letter") issued by
the holder of each Existing Note (as defined below), setting
forth the amount of principal and interest outstanding on the
Closing Date, and the amount of any prepayment fees and other
related charges;
<PAGE>
(j) to the extent not previously delivered to
Acquiror, copies of the most currently available tax bills for
the Properties;
(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) 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 Acquiror, such OP Unit
Recipient Agreement and other documents to be duly executed by
each of the OP Unit Recipients;
(m) a certificate, dated the Closing Date and signed
by the President or any executive vice president 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;
(n) evidence of the recordation in the appropriate
land records of a separate subdivision plat complying with all
applicable laws, regulations, codes and ordinances, pursuant
to which that each of those certain properties commonly known
as 8, 21 and 22 Northeastern Industrial Park (including all
parking areas, driveways, buildings and other improvements and
lawful means of access and utility service and capacity to
permit the present use and operation thereof) is each
established as a separate and distinct parcel for all
necessary purposes;
(o) notices to parties to Service Contracts that are
being assigned pursuant to the Assignment of Service Contracts
(the "Service Contracts Notices");
(p) a reciprocal easement and operating agreement
between Acquiror and Contributor, in form and substance
reasonably satisfactory to Acquiror and Contributor, to be
duly executed by Contributor;
(q) a fully executed lease with Distribution
Unlimited Inc. in the form attached as Exhibit J to this
Agreement; and
(r) 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, and such other governmental or
regulatory approvals issued to Contributor with respect to the
Properties).
(ii) Acquiror. Not less than five (5) business days prior
to the Closing Date, 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):
(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
<PAGE>
Unit Recipient as an additional limited partner of the
Acquiror;
(c) the Service Contracts Notices;
(d) a reciprocal easement and operating agreement
between Acquiror and Contributor, in form and substance
reasonably satisfactory to Acquiror and Contributor, to be
duly executed by Acquiror; and
(e) 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.
C. 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 for review not less than three
(3) business days prior to the Closing Date. For purposes of
prorations, Acquiror shall be deemed the owner of the Properties on the
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:
(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, in the event 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 real estate, personal property and ad valorem
taxes applicable to the Properties and levied with respect to
calendar year 1998 shall be prorated on an accrual basis, as
of the Closing Date, utilizing the actual final Tax Bills for
the Properties for 1997 (or 1998 if available) adjusted for
any announced changes in rates of taxation. Prior to or at
Closing, Contributor shall pay or have paid all Tax Bills that
are due and payable prior to or on the Closing Date and shall
furnish evidence of such payment to Acquiror and the Title
Company. Each party's respective obligations to reprorate real
estate taxes shall survive the Closing and shall not merge
into any instrument of conveyance delivered at Closing. The
taxes to be prorated (i.e., county, school, city) for each
Property and the billing and accrual schedule for each such
tax are set forth in Exhibit K;
(e) All assessments, general or special, shall be
prorated as of the Closing
<PAGE>
Date on a "due date" basis such that the Contributor shall
be responsible for any installments of assessments which are
first due or payable prior to the Closing Date and Acquiror
shall be responsible for any installments of assessments
which are first due or payable on or after the Closing Date;
(f) 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;
(g) 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 any
Delinquent Rents due to the 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);
(h) The Contributor and Acquiror acknowledge that
various of the Properties 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 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 that elapses prior
to Closing and Acquiror's proportionate share shall be based
on that portion of the Vacancy Lease's term that remains
unexpired as of the Closing Date. 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
<PAGE>
of an Adjustment in the Contribution Consideration. In the
event that this Agreement is terminated prior to Closing,
then Acquiror shall have no liability or obligation with
respect to any Vacancy Lease or any Vacancy Lease Costs.
(i) Such other items that are customarily prorated in
transactions of this nature shall be ratably prorated.
(ii) For purposes of calculating prorations, Acquiror
shall be deemed to be in title to the Properties, and therefore
entitled to the income therefrom and responsible for the expenses
thereof, for the entire Closing Date. 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. 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 shall be reprorated and finally adjusted within ninety (90)
days after the Closing Date; otherwise all prorations shall be final.
The provisions of the foregoing sentence shall survive the Closing.
D. Closing Costs. All transfer taxes, documentary stamps,
intangible taxes and similar taxes or charges and cure expenses shall be paid by
Contributor. All title insurance premiums, search fees, survey costs and
recording charges shall be paid by Acquiror. Contributor and Acquiror shall each
pay for one-half (1/2) of the escrow fees charged by the Escrowee. Each party
shall pay its own attorney's fees and all of its other expenses, except as
otherwise expressly set forth herein.
E. Possession. Upon consummation of the Closing, Contributor
shall deliver to Acquiror full and complete possession of the Properties,
subject only to the Permitted Exceptions.
7. CASUALTY, LOSS AND CONDEMNATION
If, prior to the Closing, the Properties or any part thereof
shall be condemned, or destroyed or materially damaged 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 terminate this Agreement upon written
notice to Contributor or to 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,
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, and 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. If
Acquiror elects to terminate this Agreement, the Earnest Money shall be returned
to Acquiror by Escrowee, in which event this Agreement shall, without further
action of the parties, become null and void and neither party shall have any
rights or obligations under this Agreement. 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, Contributor
shall either repair such damage prior to the Closing or, at Acquiror's option,
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. 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.
<PAGE>
8. REPRESENTATIONS AND WARRANTIES
A. Each Contributor represents and warrants, jointly and
severally, to Acquiror that the following are true, complete and correct as of
the date of this Agreement:
(i) Contributor is a corporation duly organized, validly
existing and in good standing under the laws of the State of New York
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. Contributor 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
Properties, 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 corporate 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 corporate action on the part of Contributor
and no other corporate proceedings on the part of Contributor,
including of its shareholders, 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 Certificate of Incorporation
or By-Laws (or similar governing documents) 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 or 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 or 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, partner, shareholder, or
tenant-in-common of Contributor, or other party is necessary or
required for the execution, delivery and performance by Contributor of
this
<PAGE>
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 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 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 or 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, and (y) Contributor nor any of the Properties 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, occupancy of the Properties
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 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 which are not
being transferred to Acquiror under this Agreement or the documents
contemplated by this Agreement.
(vi) To the best of Contributor's knowledge, the
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, and
all of the same are in good standing. To the best of Contributor's
knowledge, except as set forth in Schedule 8A(vi) attached to this
Agreement, the Improvements and the tangible Personal Property are free
from material defects; and the Properties and each part thereof have
adequate drainage and contain not less than the minimum number of
parking spaces required under applicable law. Except as set forth in
Schedule 8A(vi) attached to this Agreement, each of the Properties
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) All of Contributor's insurance policies are in full
force and effect and Contributor is not in default with respect to any
material provisions contained in any such policy.
<PAGE>
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, 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 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 by reason of the condition,
use of, or operations on, such 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, 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 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, 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. Except as set
forth in Schedule 8A(x) attached to this Agreement, 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
noted on Exhibit C, each Service Contact is cancelable by Contributor
(or its assignees or successors) without payment of any penalty upon
not more than thirty (30) days prior notice.
(xi) Contributor has no patents, trademarks, servicemarks
or trade names used in connection with the Properties, except for the
name "Galesi Group." To the best of Contributor's knowledge, the use of
such names does not conflict with any rights of others with respect
thereto. 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.
(xii) Without limiting any other warranty or
representation of Contributor:
(a) there is no proceeding, plan, study or effort by
any governmenta 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 (and Contributor has received
no notice from any governmental authority of any
<PAGE>
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 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 have been complied with by
Contributor at its sole cost, except the non-compliance with
which would not reasonably be expected to have a Material
Adverse Effect; and
(c) none of the Properties 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 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 (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, each of the
Leases is in full force and effect, and has not been modified,
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 of 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
material obligations of the lessor under the Leases that
accrue to the date of Closing 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;
<PAGE>
(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 or 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 (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 in Schedule 8A(xiv)(h)
attached to this Agreement, 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);
<PAGE>
(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, or any portion thereof, or
any right of first refusal to purchase any of the Properties,
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 in
Schedule 8A(xiv)(k) attached to this 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 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) The Properties have been fully valued and assessed
for property tax purposes. Except as set forth in Schedule 8A(xv)
attached to this Agreement, there are no general or special assessments
applicable to the Properties or any part thereof. The bill or bills
issued for the years 1994, 1995, 1996 and 1997, 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
Properties (the "Tax Bills") (and to Contributor's knowledge, the only
real estate tax bills applicable to the Properties) 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 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, any proceeding or application for a reduction in the real
estate tax assessment of any of the Properties or any other relief for
any tax year. Other than the amounts disclosed by the Tax Bills, no
other real estate taxes have been, or to Contributor's knowledge, will
be, assessed against the Properties, or any portion thereof, in respect
of the year 1997 or any prior year, and no special assessments of any
kind (special, bond or otherwise) are or have been levied against the
Properties, or any portion thereof, that are outstanding or unpaid,
and, to Contributor's knowledge, none will be levied prior to Closing.
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 that will be binding on Acquiror
after the Closing.
(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, 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 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 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 or Contributor that may be expected to result in a tax
deficiency, lien interest or other assessment against the Properties.
(xvii) The Personal Property is all of the personal
property owned by Contributor and used in the operation of the
Properties. 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
<PAGE>
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
bankruptcy and similar laws affecting the remedies or recourse of
creditors generally and general principles of equity.
(xix) All financial information regarding the Properties
furnished by Contributor to Acquiror is true, complete and correct; has
been compiled in accordance with generally accepted accounting
principles and accurately set forth in all material respects the
results of the operations of the Properties for the periods covered.
(xx) All management contracts pertaining to the
Properties will be terminated as of the Closing.
(xxi) Except as set forth in Schedule 8A(xxi) attached to
this Agreement, 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 or any
portion thereof. Contributor has complied with (and, prior to Closing,
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, 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. Upon Contributor's
request, Contributor will deliver to Acquiror true, complete and
accurate copies of the Existing Notes, the Existing Mortgages and the
Other Loan Documents. At Closing, the Existing Indebtedness as
contemplated by Section 11A(vii) will be the only indebtedness
encumbering the Properties and will be prepayable, in full, on the
Closing Date 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, 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, there being no "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) The OP Units are being acquired by each of the OP
Unit Recipients with the present intention of holding the OP Units for
purposes of investment and not with a view towards sale or any other
distribution. Each of the OP Unit Recipients recognizes that he may be
<PAGE>
required to bear the economic risk of an investment in the OP Units for
an indefinite period of time. Each OP Unit Recipient is an Accredited
Investor. Each OP Unit Recipient has such knowledge and experience in
financial and business matters so as to be fully capable of evaluating
the merits and risks of an investment in the OP Units. Each OP Unit
Recipient has received and reviewed the following documents: (A) the
Form 10-K for the year ended December 31, 1996 for the REIT and
Acquiror; (B) the annual proxy statement of the REIT for the 1997
annual meeting and the proxy statement of the REIT for the special
meeting of stockholders which was held on December 12, 1997; (C) the
Form 10-Q for the REIT and Acquiror for the quarters ended March 31,
1997, June 30, 1997, and September 30, 1997, respectively; (D) the Form
8-Ks filed by the REIT and Acquiror since December 31, 1996 and (E) the
Partnership Agreement. Each OP Unit Recipient has been afforded the
opportunity to ask questions of those persons he considers appropriate
and to obtain any additional information he desires in respect of the
OP Units and the business, operations, conditions (financial and
otherwise) and current prospects of Acquiror and the REIT. Each OP Unit
Recipient has consulted his own financial, legal and tax advisors with
respect to the economic, legal and tax consequences of delivery of the
OP Units and has not relied on Acquiror, the REIT or any of their
officers, directors, affiliates or professional advisors for such
advice as to such consequences.
(xxv) Except as set forth in Schedule 8A(xxv) attached to
this Agreement:
(a) The Properties 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 or any
portion thereof.
(c) There have been no Releases of a Hazardous
Material at, on, under, in or about any of the Properties 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 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 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. 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) The Properties are not listed, or to the
knowledge of Contributor, proposed or nominated for listing on
the NPL or on any other similar state or other list of sites
that require or may require corrective or remedial action.
<PAGE>
(g) Contributor has not transported, disposed of or
treated, or arranged for the transportation, disposal or
treatment of, any Hazardous Material from the Properties 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.
(h) There are no underground storage tanks at, on or
under the Properties or any portion thereof. Contributor has
not removed, closed or abandoned any underground storage tanks
at any of the Properties, and Contributor has no knowledge of
the existence, abandonment, closure or removal of underground
storage tanks at any of the Properties.
(i) 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 which have not been delivered to Acquiror
prior to the execution of this Agreement.
For purposes of this item (xxv), 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. ss.ss. 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. ss.ss.
6901 et seq.), as amended ("RCRA"); (iii) the Emergency Planning and
Community Right to Know Act of 1986 (42 U.S.C. ss.ss. 11001 et seq.),
as amended; (iv) the Clean Air Act (42 U.S.C. ss.ss. 7401 et seq.), as
amended; (v) the Clean Water Act (33 U.S.C. ss.ss. 1251 et seq.), as
amended; (vi) the Occupational Safety and Health Act (29 U.S.C. ss.ss.
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
<PAGE>
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.
(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, 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 that are specifically permitted by
or pursuant to this Agreement.
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
Contributor of this Agreement and the other documents to be delivered
by Acquiror at Closing, and the consummation by Acquiror of the
transactions contemplated hereby and thereby are permitted under the
Partnership Agreement, and at 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 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
<PAGE>
further amended or modified.
(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.
(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
consummation by the REIT of the transactions contemplated hereby and
thereby at 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, 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.
(xi) The REIT is organized and operates as a "real estate
investment trust" under Sections 856 through 860 of the Code. The REIT
has elected to be taxed as a "real estate
<PAGE>
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 REIT's ability to perform its obligations under the
REIT Documents.
D. Acquiror represents and warrants to Contributor that, as of
the Closing, each of the representations and warranties set forth in Section 8C
above shall be true, complete and correct.
E. Except as hereinafter provided, all representations and
warranties made in this Section 8 by Contributor and/or the OP Unit Recipient
(collectively, the "Contributor Party") and by Acquiror shall survive the
Closing until the second (2nd) anniversary of the Closing Date and shall not
merge into any instrument of conveyance delivered at the 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 8E 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 (xxv) shall survive until the expiration of the statute of limitations
applicable thereto.
F. Contributor shall provide to Acquiror and its auditors (i)
during the Inspection Period and following the Closing, access at all reasonable
times to all financial and other information relating to the Properties
necessary for Acquiror and its auditors to prepare audited, and if necessary,
pro forma, financial statements in conformity with Regulations S-X of the
Securities and Exchange Commission ("SEC") or other materials required for any
registration statement, report or other disclosure to be filed with the SEC or
necessary to comply with any SEC rule or regulation, and (ii) at the Closing (or
prior thereto if required by Acquiror's auditors) an executed representations
letter, in form and substance reasonably satisfactory to Acquiror, as required
by Generally Accepted Auditing Standards as promulgated by the Auditing
Standards Division of the American Institute of Public Accountants, which
representation is required to enable an independent public accountant to render
an opinion on such financial statements; provided, however, that Acquiror shall
pay for any actual reasonable costs incurred by Contributor in connection with
its obligations under this Section 8F. The obligation of Contributor to provide
such access and representation letter shall survive the Closing and 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
these obligations. This indemnity shall survive the Closing for a period of two
(2) years.
<PAGE>
9. ACQUIROR'S INSPECTION OF THE PROPERTIES
Subject to the provisions of Section 15B, during the period
extending to and including the 45th day from the date of this Agreement (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, plan 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 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"). In
the event 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. If Acquiror shall give
the Termination Notice to Contributor prior to the expiration of the Inspection
Period, the Earnest Money shall be promptly returned to Acquiror and all parties
hereto shall be released from all further obligations and liabilities hereunder,
except with respect to the indemnity set forth in Section 15B. In the event that
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.
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) copies of all operating statements for the
Properties 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
(iv) copies of the most recent survey of and title policy
or commitment for each of the Properties in the possession or control
of Contributor.
<PAGE>
11. CONDITIONS PRECEDENT
A. Acquiror's obligation to acquire the Properties shall be
subject to and contingent upon the following conditions precedent, any or all of
which Acquiror may waive only by a notice delivered in accordance with Section
15H:
(i) The issuance to Acquiror at the Closing of the Title
Policies in accordance with Section 5B(i).
(ii) Contributor shall have obtained and delivered to
Acquiror original executed tenant estoppel certificates (the "Tenant
Estoppel Certificates") in substantially the form of Exhibit L attached
hereto, dated not more than thirty (30) days before Closing, and
executed by tenants under Leases leasing not less than ninety-five
percent (95%) of the total aggregate gross rental income for all of the
Properties, including, without limitation, those particular tenants
listed in Exhibit M 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 L 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, 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 representations and warranties made by
Contributor in this Agreement shall be true and correct in all material
respects on the Closing Date as if made on the Closing Date.
(iv) The delivery by Contributor of all documents
(executed by parties other than Acquiror, where required) required
under Section 6B(i) (except for the recordation required under Section
6B(i)(n)).
(v) The delivery of all necessary consents and approvals
of lenders under Existing Indebtedness to be assumed by Acquiror, and
the consents and approvals set forth on Schedule 11A(vi) to this
Agreement.
(vi) Contributor not being otherwise in default of its
obligations under this Agreement.
(vii) The Existing Indebtedness shall total no more than
$8,500,000 of principal, with no accrued and unpaid interest or
prepayment fees or related charges.
(viii) All conditions precedent set forth in Section 11A of
the Columbia Contribution Agreement shall have been satisfied or, if
permissible, waived.
If the condition precedent set forth in Section 11A(i) is not
satisfied or waived on or prior to the Closing Date, Acquiror shall have the
rights and remedies set forth in Section 5C. If any of the conditions precedent
set forth in Section 11A(ii) or Section 11A(viii) (to the extent a condition
under the Columbia Contribution Agreement is not satisfied or, if permissible,
waived which allows for a similar termination right without the right to receive
costs and expenses) is not satisfied or waived on or prior to the
<PAGE>
Closing Date, Acquiror shall have the right to terminate this Agreement upon
written notice to Contributor, 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. If any of the conditions precedent set forth in Sections
11A(iii), (iv), (v), (vi) or (vii) or Section (viii) (to the extent a condition
under the Columbia Contribution Agreement is not satisfied or, if permissible,
waived which allows for a similar termination right with the right to receive
costs and expenses) is not satisfied or waived on or prior to the Closing Date,
then Acquiror shall have the rights and remedies provided in Section 13B.
B. Contributor's obligation to contribute and convey the
Properties shall be subject to and contingent upon the following conditions
precedent, any or all of which Contributor may waive by a notice delivered in
accordance with Section 15H:
(i) The representations and warranties made by Acquiror
in this Agreement shall be true and correct in all material respects on
the Closing Date as if made on the Closing 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) All conditions precedent set forth in Section 11B of
the Columbia Contribution Agreement shall have been satisfied or, if
permissible, waived.
If any of the conditions precedent set forth in Section 11B is
not satisfied or waived on or prior to the Closing Date, then Contributor shall
have the rights and remedies provided in Section 13A.
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. 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. The provisions of this
Section shall survive the Closing or the sooner termination of this Agreement.
<PAGE>
13. DEFAULT AND REMEDIES
A. If the Closing does not occur due to Acquiror's default
hereunder, or the breach of the 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 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 the 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, or if the consent of Fleet National Bank to the consummation of the
transactions contemplated hereby is not obtained within 30 days from the date of
this Agreement, Acquiror as its sole remedy may either (a) terminate this
Agreement, in which event the Earnest Money shall be returned by the Escrowee to
Acquiror and Contributor shall reimburse Acquiror for its reasonable
out-of-pocket expenses incurred by Acquiror (not to exceed $50,000 in the
aggregate) pursuant to this Agreement and, upon such return and reimbursement,
the parties shall be released from all further obligations and liabilities under
this Agreement, except with respect to the Surviving Indemnities, or (b) sue for
specific performance (except in such case where such default, breach or failure
to perform is the result of the good faith failure despite best efforts by
Contributor to obtain the consent of Fleet National Bank or the subdivision
approval described in Section 6B(i)(n)). In the event Acquiror elects the remedy
set forth in (a) above, Contributor shall reimburse Acquiror for such expenses
within fifteen (15) days after Contributor's receipt of written notice from
Acquiror accompanied by copies of invoices detailing such expenses or such other
documentation that reasonably substantiates such expenses.
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.
B. Indemnification by Acquiror. Acquiror agrees to indemnify
the Contributor and its shareholders, 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
<PAGE>
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) In the event 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.
(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
<PAGE>
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 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) In the event 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
<PAGE>
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 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.
15. MISCELLANEOUS
A. This Agreement shall not be cancelled or merged upon
consummation of the 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.
B. Between the date of this Agreement and the Closing Date,
Acquiror and its agents
<PAGE>
or representatives shall have the right to enter upon the Properties for the
purpose of examining, inspecting and testing the Properties. 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.
C. Neither this Agreement nor any interest hereunder shall be
assigned or transferred by Contributor. Acquiror may direct Contributor to
convey the Properties or any part thereof to any party designated by Acquiror
which is wholly-owned by Acquiror. 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 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 is hereby rendered null and void.
E. This Agreement constitutes an offer by Acquiror which must
be accepted by Contributor within three (3) business days after the date
execution copies of this Agreement are submitted by Acquiror to Contributor for
execution. If this Agreement is not so accepted and returned to Acquiror within
said three (3) business day period, this offer shall be deemed revoked. The date
of this Agreement shall be the date on which Acquiror signs this Agreement as
indicated below the signature line for Acquiror.
F. 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.
G. 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.
H. 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:
Guilderland Ventures, Inc. and
Northeastern Industrial Park, Inc.
Rotterdam Industrial Park
Building 6
Schenectady, NY 12306
Telephone: (518) 356-4445
Facsimile: (518) 356-5334
Attention: David M. Buicko
With a copy to:
Steven K. Porter, Esq.
<PAGE>
Rotterdam Industrial Park
Building 6
Schenectady, NY 12306
Telephone: (518) 356-4445
Facsimile: (518) 356-5334
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: Jeffrey E. Kelter
With a copy to:
Rogers & Wells
200 Park Avenue
New York, New York 10166
Telephone: (212) 878-8209
Facsimile: (212) 878-8375
Attention: Robert E. King, Jr., 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 15H.
I. 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 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 (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 and the OP Unit Recipient. Such data shall include
the tax basis allocable to the OP Unit Recipient for each Property. In addition,
Contributor acknowledges that, in the event repayment of any Assumed
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.
J. 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 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
<PAGE>
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.
K. 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.
L. 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.
M. 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.
N. 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.
O. The Properties being acquired by Acquiror pursuant to this
Agreement shall be transferred and conveyed on an "AS-IS" and "WHERE-IS" basis,
and WITH ALL FAULTS, except as otherwise expressly set forth in this Agreement
or in any document delivered by Contributor at Closing. Except as expressly set
forth in this Agreement or in any document delivered by Contributor at Closing,
Contributor has not made any representation or warranty as to the present or
future physical condition, value, presence/absence of hazardous or toxic
materials, financing status, leasing, operations, use, tax status, income and
expense or any other matter pertaining to the Properties.
<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: Stepen J. Butte
Title: Vice President
Date: February 4, 1998
CONTRIBUTOR:
NORTHEASTERN INDUSTRIAL PARK, INC., a New York
corporation
By: /s/ David M. Buicko
Name: David M. Buicko
Title: Executive Vice President
GUILDERLAND VENTURES, INC., a New York corporation
By: /s/ David M. Buicko
Name: David M. Buicko
Title: Executive Vice President
Date: February 4, 1998
<PAGE>
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:
NORTHEASTERN INDUSTRIAL PARK
By: /s/ David M. Buicko
Name: David M. Buicko
Title: Executive Vice President
GUILDERLAND VENTURES, INC.
By: /s/ David M. Buicko
Name: David M. Buicko
Title: Executive Vice President
Date: February 4, 1998
<PAGE>
Exhibit 10-2
EXECUTION COPY
Columbia Circle and Airline Drive
CONTRIBUTION AGREEMENT
between
AMERICAN REAL ESTATE INVESTMENT, L.P., ACQUIROR
and
THE OTHER PARTIES LISTED ON
THE SIGNATURE PAGES OF THIS AGREEMENT, CONTRIBUTOR
Dated as of February 4, 1998
THE PARTIES TO THIS AGREEMENT OTHER THAN ACQUIROR WILL BE DEEMED TO BE MAKING A
DECISION TO INVEST IN UNITS OF LIMITED PARTNERSHIP INTEREST IN ACQUIROR AND IN
THE SECURITIES FOR WHICH THOSE UNITS ARE EXCHANGEABLE. IN MAKING THAT INVESTMENT
DECISION, THOSE PERSONS MUST RELY ON THEIR OWN EXAMINATION OF THE ISSUERS OF
THOSE SECURITIES AND THE TERMS OF THE INVESTMENT, INCLUDING THE MERITS OF THE
INVESTMENT AND THE RISKS INVOLVED. THESE SECURITIES HAVE NOT BEEN RECOMMENDED BY
ANY FEDERAL OR STATE SECURITIES COMMISSION OR REGULATORY AUTHORITY. FURTHERMORE,
THE FOREGOING AUTHORITIES HAVE NOT CONFIRMED THE ACCURACY OR ADEQUACY OF THIS
DOCUMENT. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
THESE SECURITIES ARE SUBJECT TO RESTRICTIONS ON TRANSFERABILITY AND RESALE AND
MAY NOT BE TRANSFERRED OR RESOLD EXCEPT AS PERMITTED UNDER THE SECURITIES ACT OF
1933, AS AMENDED, AND THE APPLICABLE STATE SECURITIES LAWS, PURSUANT TO
REGISTRATION OR EXEMPTION THEREFROM. INVESTORS SHOULD BE AWARE THAT THEY MAY BE
REQUIRED TO BEAR THE FINANCIAL RISK OF THIS INVESTMENT FOR AN INDEFINITE PERIOD
OF TIME.
<PAGE>
CONTRIBUTION AGREEMENT
THIS CONTRIBUTION AGREEMENT (this "Agreement") is made and entered into
as of the 4th day of February, 1998, between AMERICAN REAL ESTATE INVESTMENT,
L.P., a Delaware limited partnership ("Acquiror"), and the parties reflected on
the signature pages hereto as "Contributor and other OP Unit Recipients" (such
entities are sometimes referred to in this Agreement, individually and
collectively, as the context requires, as "Contributor").
RECITALS
A. Contributor is the owner of certain fee and other interests in six
(6) buildings known as 1, 3, 9, 13, 15 and 17 Columbia Circle, Albany, New York,
and one (1) building known as 8 Airline Drive, Albany, New York (collectively,
the "Properties").
B. Contributor desires to contribute and convey to Acquiror all of its
interests relating to the Properties to Acquiror, and Acquiror desires to
acquire and accept same from Contributor, each upon and subject to the terms and
conditions of this Agreement.
C. Acquiror has entered into that certain Contribution Agreement, dated
the date hereof, with the other parties listed on the signature pages thereto,
with respect to three buildings known as 8, 21 and 22 Northeastern Industrial
Park (the "Northeastern Contribution 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 assume, all of Contributor's right, title and interest
(whether now or hereafter existing) in and to all of the following described
properties (all of which is herein collectively referred to as the
"Properties"):
A. those certain parcels of real estate comprising
approximately __________________________________ (_____) acres, located in
[Albany] County, New York and more particularly described in Exhibit A attached
to this Agreement; together with all and singular the easements, covenants,
agreements, rights, tenements, hereditaments and appurtenances thereunto now or
hereafter belonging or appertaining (collectively, the "Land"):
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 any part thereof, and any
award for damage to the Properties or any part thereof by reason of casualty
(all of the foregoing being included within the term "Land");
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,
<PAGE>
without limitation, the six (6) buildings known as 1, 3, 9, 13, 15 and 17
Columbia Circle ("Columbia Properties") and one (1) building known as 8 Airline
Drive ("Airline Property"), 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)
(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 Properties or any part thereof or
used in connection therewith that are not owned by tenants under the Leases,
together with all replacements and substitutions therefor (collectively, the
"Personal Property"), including, without limitation, those items 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 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 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 or any part thereof;
F. 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 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 material 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 or any part thereof
(collectively, the "Service Contracts") is attached to this Agreement as Exhibit
C; and
G. Seller's interest, as fee and landlord, in all leases for
portions of the Properties. A summary of all current leases affecting the
Properties 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 execution of this
Agreement by Contributor and Acquiror, Acquiror shall deliver to TitleServNY
located in New York, New York ("Escrowee") a check payable to Escrowee or wire
transferred federal funds in the amount of One Hundred Thousand and 00/100
Dollars ($100,000.00) (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 (as defined below),
the Earnest Money shall be returned to Acquiror.
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<PAGE>
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 traded on the American
Stock Exchange (the "AMEX").
B. Contribution Consideration. The aggregate consideration to
be paid to Contributor by Acquiror for the Properties (the "Contribution
Consideration") shall consist of (a) that number (the "Total OP Unit Amount") of
OP Units (as defined below) having an aggregate value (based upon a market price
of $16.50 per share for the common stock of the REIT) of the sum of the amounts
described in clauses (i) and (ii) below (the "Total OP Unit Value"):
(i) For the Columbia Properties, (a) Thirty-Three
Million Six Hundred Fifty-Three Thousand One Hundred Ninety-Eight and
00/100 Dollars ($33,653,198.00); minus (b) the sum of all of the
indebtedness of Contributor relating to the Columbia Properties
(including unpaid principal and interest and any prepayment fees and
related charges), as of the Closing Date (as defined below), under
those certain mortgage loans more particularly described in Exhibit F
attached to this Agreement (the "Columbia Existing Indebtedness");
minus (c) any prorations described in Section 6C ("Prorations") and
credited, as of the Closing Date, to Acquiror; plus (d) any Prorations
credited, as of the Closing Date, to Contributor.
(ii) For the Airline Property, (a) Six Million Four
Hundred Ninety Thousand One Hundred Sixty One and 00/100 Dollars
($6,490,161.00), minus (b) the sum of all of the indebtedness of
Contributor relating to the Airline Property (including unpaid
principal and interest and any prepayment fees and related charges), as
of the Closing Date, under those certain mortgage loans more
particularly described in Exhibit F attached to this Agreement (the
"Airline Existing Indebtedness," and together with the Columbia
Existing Indebtedness, the "Existing Indebtedness"); minus (c) any
Prorations credited, as of the Closing Date, to Acquiror; plus (d) any
Prorations credited, as of the Closing Date, to Contributor.
(iii) Notwithstanding the foregoing clauses (i) and (ii),
the number of OP Units to be paid by Acquiror, without giving effect to
any adjustment for Prorations discussed in clauses (i)(c), (i)(d),
(ii)(c) and (ii)(d) above, shall not exceed 797,892 OP Units. If the
calculation of the Contribution Consideration in accordance with the
foregoing provisions would result in a fraction of an OP Unit being
delivered to Contributor, then such fraction shall be rounded to the
nearest whole number. The Properties are to be contributed to Acquiror
subject to the corresponding items of Existing Indebtedness, which will
either be assumed, refinanced or paid off by Acquiror immediately
following the Closing.
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 G attached hereto (the
"OP Unit Recipients"). After the first anniversary of the Closing the OP Units
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 Acquiror's Amended and Restated Agreement of
Limited Partnership dated as of December 12, 1997 (the "Partnership Agreement");
provided, however, that notwithstanding the foregoing, the OP Units (together
with the OP Units issued pursuant to the Northeastern Contribution Agreement)
may not be converted into Conversion Shares that in the aggregate represent more
than 19.9% of the total number of shares of Stock that are issued and
outstanding on the date on which the
3
<PAGE>
OP Units are issued to the OP Unit Recipients until and unless the requisite
approval from the REIT's stockholders is obtained prior to such conversion.
Acquiror agrees that it will use its commercially reasonable efforts to cause
the REIT to seek such stockholder approval, including presenting the issue, with
management's endorsement, to the REIT's, stockholders at the next annual or
special meeting of stockholders following the Closing, and to present the issue
at the next subsequent meeting if the necessary stockholder approval is not
obtained.
D. 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, 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 (as defined below). The provisions of this paragraph shall survive the
Closing.
E. Lock-Up Period. Each OP Unit Recipient agrees that for a
period of twelve (12) months following the 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 (without Acquiror's consent which will not be
unreasonably withheld, and except for pledges to those pledgees listed in
Schedule 3E) 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
Conversion Shares in respect thereof; provided that transfers may be 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, each OP Unit Recipient further agrees that
following the expiration of the Lock-Up Period, not more than twenty-five
percent (25%) of the OP Units delivered to such OP Unit Recipient at the Closing
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 OP Units and Conversion Shares may be sold after
the second (2nd) anniversary of the Closing Date). The term "Permitted
Transferee" with respect to any OP Unit Recipient shall mean any other OP Unit
Recipient or such recipient's spouse; a parent or lineal descendant (including
an adopted child) of a parent, or the spouse of a lineal descendant of a parent;
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; but only in each of the foregoing cases, 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. The provisions of this paragraph
shall survive the Closing. Each OP Unit Recipient shall execute and deliver to
Acquiror at Closing a letter to the effect of the foregoing, in form and
substance reasonably satisfactory to Acquiror.
F. 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
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<PAGE>
such OP Unit Recipient seeks to sell, as provided in an agreement to be
delivered by each OP Unit Recipient at Closing substantially in the form of
Exhibit H attached hereto (the "OP Unit Recipient Agreement").
G. Right of First Refusal/First Offer on Sale of Future
Development at Airline Drive.
(i) From and after the Closing Date and continuing up to
and including the fifth (5th) anniversary thereof, Acquiror shall have
a continuing right of first refusal to purchase any building(s)
developed or acquired by Contributor and/or any of the OP Unit
Recipients (collectively, "Owner") after the date hereof and located at
Airline Drive, subject to Section 3G(iii) below, as follows: In the
event Owner receives a bona fide third party offer to purchase (whether
by transfer of fee simple interest, a ground lease, sale of an interest
in Owner, an installment sale, or otherwise) one or more buildings and
related land and facilities located at Airline Drive (the "First
Refusal Buildings"), and Owner desires to accept such offer, Owner
shall provide written notice to Acquiror within ten (10) 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 First
Refusal Building(s) and 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 First
Refusal Building(s) in accordance with the terms and conditions
specified in the offer as set forth in Owner's written notice to
Acquiror. Acquiror shall not have the right of first refusal for less
than all of the First Refusal Building(s) identified in a third party
offer for two or more of the First Refusal Building(s) unless such
third party offeror shall have alternative rights to purchase less than
all of the First Refusal Building(s) identified in the offer 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 First Refusal Buildings from the
original offer or addition of one or more First Refusal Buildings 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. In the event Acquiror fails to
exercise its right of first refusal as set forth in this paragraph,
Owner shall be free to sell the First Refusal Building(s) to such third
party offer pursuant to the terms and conditions of the offer;
provided, however, that in the event a binding contract of sale for
such First Refusal Building(s) 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 purchase price is
reduced by 3% or more or the other terms and conditions of such third
party offer are modified in any other material respect, then Acquiror
shall again have its right of first refusal to acquire such First
Refusal Building(s) 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
First Refusal Building(s) and other material terms and conditions.
(ii) From and after the Closing Date and continuing up to
and including the fifth (5th) anniversary thereof, Acquiror shall have
a continuing right of first offer to purchase any building(s) developed
or acquired by Owner after the date hereof and located at Airline
Drive, subject to Section 3G(iii) below, as follows: In the event Owner
desires to sell or seeks to sell
5
<PAGE>
(whether by transfer of fee simple interest, a ground lease, sale of
an interest in Owner, an installment sale, or otherwise) one or more
buildings and related land and facilities located at Airline Drive
(the "First Offer Buildings"), Owner shall provide written notice to
Acquiror specifying the purchase price, terms of payment, identity of
the First Offer Building(s) and other material terms and conditions of
the offer or sale (the "Sale Notice"). Acquiror or its nominee shall
have the option (the "Purchase Option"), to be exercised by written
notice given to Owner within thirty (30) days after Acquiror's receipt
of the Sale Notice (the "Exercise Period"), to purchase the First
Offer Buildings from Owner on the terms specified in the Sale Notice.
If Acquiror exercises its Purchase Option, 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. In the event Acquiror
fails to exercise its Purchase Option as set forth in this paragraph,
Owner shall be free to sell the First Offer Building(s) to third
parties pursuant to the terms and conditions of the offer to Acquiror;
provided, however, that in the event a binding contract of sale for
such First Offer Building(s) is not executed between Owner and such
third party offeror within 180 days after the expiration of the
Exercise Period, or the purchase price is reduced by 3% or more or the
other terms and conditions of such third party offer are modified in
any other material respect, then Acquiror shall again have its right
of first offer to acquire such First Offer Building(s) 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 First Offer Building(s) and other
material terms and conditions.
(iii) Notwithstanding the foregoing right of first refusal
and right of first offer, such rights shall not apply to First Refusal
Buildings or First Offer Buildings in instances where Owner either
receives bona fide offers from, or proposes to sell to, potential
purchasers or potential developers who would also be, or whose
affiliate would be, the tenant in the building(s) proposed to be built
on such land.
H. Tax Matters. During the period commencing on the Closing
Date and expiring on the first (1st) anniversary of the Closing Date, Acquiror
shall not sell or make any other voluntary disposition (other than through a
deed in lieu of foreclosure, a foreclosure action, or an act of eminent domain)
of any of the Properties. Thereafter, during the period expiring on the earlier
of (i) the seventh (7th) anniversary of the Closing Date, 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: in connection with the
sale of any or all of the Properties, Acquiror shall use commercially reasonable
efforts to enter into a transaction that will qualify for non-recognition of
gain under the Internal Revenue Code of 1986, as amended (the "Code"), whether
by means of an exchange contemplated under Code Sections 351, 354, 355, 368,
721, 1031, 1033 or otherwise. Notwithstanding the foregoing, in the event of
catastrophic damage to any or all of the Properties by an act of God (e.g.,
hurricane or tornado), Acquiror shall have the right to sell any or all of the
Properties affected thereby without regard to the foregoing. Pursuant to Section
5.4 of the Partnership Agreement, Acquiror shall elect to use the "traditional
method" set forth in Regulation Section 1.704-3(b) with respect to the
Properties.
I. Board Seat. Acquiror shall take all such actions necessary
to cause the nomination of Francesco Galesi for election to the Board of
Directors of the REIT, with an initial term of not less than two (2) years nor
more than three (3) years, at the REIT's next annual or special meeting of the
REIT's stockholders, such nominee to take office effective upon such election.
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<PAGE>
J. Allocation of Contribution Consideration. Prior to the
Closing and if requested by Acquiror, Acquiror and Contributor shall use
commercially reasonable efforts to agree in writing upon the allocation of the
Contribution Consideration among the Land, the Improvements and the tangible
Personal Property.
K. 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 or to effect the other purposes of this Agreement.
L. Notification if Representations and Warranties Untrue.
During the Inspection Period (as defined below), 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, Contributor shall:
A. Except as otherwise provided for in this Agreement, manage
and operate the Properties 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 Contact or
institute any rent increases without the prior written consent of Acquiror,
which consent shall not be unreasonably withheld.
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 to be nonconforming to the
requirements of this Agreement.
F. Provide Acquiror, upon reasonable advance notice, with such
access to the Properties 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 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.
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<PAGE>
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 without the prior written consent of Acquiror, which consent
shall not be unreasonably withheld.
5. STATUS OF TITLE TO PROPERTIES
A. State of Title. Contributor shall convey the Properties to
Acquiror or Acquiror's designee subsidiary by bargain and sale deeds without
covenants against grantor's acts in recordable form (the "Deeds"), and title to
the Properties 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 reviewed and approved by Acquiror within the Inspection Period, (ii)
rights of tenants under the Leases, as tenants only, (iii) general real estate
taxes for the year in which the Closing occurs and subsequent years, not yet
delinquent and (iv) those certain mortgages securing payment of the Existing
Indebtedness and more particularly described in Exhibit I attached to this
Agreement (the "Existing Mortgages") (the 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 at Acquiror's
expense the following documents to evidence the condition of Contributor's title
to the Properties:
(i) Acquiror shall obtain for each of the Properties, at
Acquiror'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 Properties in
such amounts as Acquiror deems appropriate, issued through a title
insurer to be selected by Acquiror (the "Title Insurer"), and
irrevocable for at least six (6) months. The Title Commitment shall
show fee simple title to the Properties vested in Contributor. The
Owner's Title Insurance Policy to be issued to Acquiror at the Closing
pursuant to the corresponding Title Commitment shall be at regular
rates and 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, coverage insuring
any easements for utilities servicing the Properties that do not
connect to the Properties from a public street, and such other
endorsements as counsel for Acquiror shall reasonably deem appropriate.
(ii) Within fifteen (15) days after the date of this
Agreement, Contributor shall furnish to Acquiror, at Acquiror'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 Properties are located for Uniform Commercial Code
Financing Statements, tax liens and the like in the name of
Contributor, the Properties and any other name or location reasonably
requested by Acquiror.
(iii) Acquiror shall obtain, at Acquiror's expense, a
current "as-built" plat of survey (the "Survey") for each of the
Properties 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 Properties 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 5
(excluding for Table A5 any information with respect to elevations),
6-
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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 Properties 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 Properties.
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 other than Permitted Exceptions or any other title or survey matter which
does not conform to the requirements of this 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 from
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")
or (ii) elect to accept title to the Properties as it then is with the right to
deduct from the Purchase Price a sum equal to the amount required to discharge
liens or encumbrances of a definite or ascertainable amount. If Acquiror fails
to make either 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
(the "Closing") shall occur at the offices of Rogers & Wells, 200 Park Avenue,
New York, New York 10166, on the basis of a "New York Style" closing at 10:00
a.m. on (i) the earlier 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,
and, in any event, will occur on the same day as the closing specified in the
Northeastern Contribution Agreement. The "Closing Date" shall be the date of the
Closing.
B. Closing Documents.
(i) Contributor. Not less than five (5) business days
prior to the Closing Date, 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):
(a) the Deeds, in form and substance reasonably
satisfactory to Acquiror, subject only to the Permitted
Exceptions, sufficient to transfer and convey to Acquiror or
Acquiror's designee fee simple title to the Properties 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
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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 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 an Owner's Title Insurance Policy for
each of the Properties (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 order 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 as being true,
accurate and complete and all security deposits thereunder),
and an assignment, in form and substance reasonably
satisfactory to Acquiror, of those Service Contracts that
Acquiror elects to assume (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 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 property referred
to in Section 1F above;
(h) any existing bonds, warranties or guaranties
which are in any way applicable to the Properties or any part
thereof;
(i) a pay-off letter (the "Pay-Off Letter") issued by
the holder of each Existing Note (as defined below), setting
forth the amount of principal and interest outstanding on the
Closing Date, and the amount of any prepayment fees and other
related charges;
(j) to the extent not previously delivered to
Acquiror, copies of the most currently available tax bills for
the Properties;
(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) 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
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Unit Recipient as an additional limited partner of Acquiror,
such OP Unit Recipient Agreement and other documents to be
duly executed by each of the OP Unit Recipients;
(m) a certificate, dated the Closing Date and signed
by the general partner or managing member, as the case may be,
of each Contributor, certifying to Acquiror that the
representations and warranties of Contributor contained in
this Agreement are true and correct as of the Closing Date;
(n) notices to parties to Service Contracts that are
being assigned pursuant to the Assignment of Service Contracts
(the "Service Contracts Notices");
(o) a fully executed master lease for the Airline
Property in form and substance reasonably satisfactory to
Acquiror, if necessary; and
(p) 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, and such other governmental or
regulatory approvals issued to Contributor with respect to the
Properties).
(ii) Acquiror. Not less than five (5) business days prior
to the Closing Date, 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):
(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) the Service Contracts Notices; and
(d) 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.
C. 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 for review not less than three
(3) business days prior to the Closing Date. For purposes of
prorations, Acquiror shall be deemed the owner of the Properties on the
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:
(a) the full amount of the security and other
deposits paid under the Leases,
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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, in the event 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 real estate, personal property and ad valorem
taxes applicable to the Properties and levied with respect to
calendar year 1998 shall be prorated on an accrual basis, as
of the Closing Date, utilizing the actual final Tax Bills for
the Properties for 1997 (or 1998 if available) adjusted for
any announced changes in rates of taxation. Prior to or at
Closing, Contributor shall pay or have paid all Tax Bills that
are due and payable prior to or on the Closing Date and shall
furnish evidence of such payment to Acquiror and the Title
Company. Each party's respective obligations to reprorate real
estate taxes shall survive the Closing and shall not merge
into any instrument of conveyance delivered at Closing. The
taxes to be prorated (i.e., county, school, city) for each
Property and the billing and accrual schedule for each such
tax are set forth in Exhibit J;
(e) All assessments, general or special, shall be
prorated as of the Closing Date on a "due date" basis such
that the Contributor shall be responsible for any installments
of assessments which are first due or payable prior to the
Closing Date and Acquiror shall be responsible for any
installments of assessments which are first due or payable on
or after the Closing Date;
(f) 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;
(g) 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 any
Delinquent Rents due to the Contributor from tenants. Further,
after the Closing Date, the Contributor shall
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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);
(h) The Contributor and Acquiror acknowledge that
various of the Properties 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 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 that elapses prior
to Closing and Acquiror's proportionate share shall be based
on that portion of the Vacancy Lease's term that remains
unexpired as of the Closing Date. 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. In the event that this Agreement is terminated
prior to Closing, then Acquiror shall have no liability or
obligation with respect to any Vacancy Lease or any Vacancy
Lease Costs.
(i) Such other items that are customarily prorated in
transactions of this nature shall be ratably prorated.
(ii) For purposes of calculating prorations, Acquiror
shall be deemed to be in title to the Properties, and therefore
entitled to the income therefrom and responsible for the expenses
thereof, for the entire Closing Date. 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. 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 shall be reprorated and finally adjusted within ninety (90)
days after the Closing Date; otherwise all prorations shall be final.
The provisions of the foregoing sentence shall survive the Closing.
D. Closing Costs. All transfer taxes, documentary stamps,
intangible taxes and similar taxes or charges and cure expenses shall be paid by
Contributor. All title insurance premiums, search fees, survey costs and
recording charges shall be paid by Acquiror. Contributor and Acquiror shall each
pay for one-half (1/2) of the escrow fees charged by the Escrowee. Each party
shall pay its own attorney's fees and all of its other expenses, except as
otherwise expressly set forth herein.
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E. Possession. Upon consummation of the Closing, Contributor
shall deliver to Acquiror full and complete possession of the Properties,
subject only to the Permitted Exceptions.
7. CASUALTY, LOSS AND CONDEMNATION
If, prior to the Closing, the Properties or any part thereof
shall be condemned, or destroyed or materially damaged 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 terminate this Agreement upon written
notice to Contributor or to 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,
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, and 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. If
Acquiror elects to terminate this Agreement, the Earnest Money shall be returned
to Acquiror by Escrowee, in which event this Agreement shall, without further
action of the parties, become null and void and neither party shall have any
rights or obligations under this Agreement. 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, Contributor
shall either repair such damage prior to the Closing or, at Acquiror's option,
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. 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.
8. REPRESENTATIONS AND WARRANTIES
A. Each Contributor represents and warrants, jointly and
severally, to Acquiror that the following are true, complete and correct as of
the date of this Agreement:
(i) Each Contributor is a general partnership or limited
liability company duly organized, validly existing and in good standing
under the laws of the state of its formation and has all requisite
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. Each
Contributor 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 Properties, assets, business,
operations or condition (financial or otherwise) of such Contributor or
the ability of Contributor to perform its obligations under this
Agreement (a "Contributor Material Adverse Effect").
(ii) Contributor has full partnership or limited
liability company, as the case may be, 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
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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 partnership or
limited liability company, as the case may be, action on the part of
Contributor and no other proceedings on the part of Contributor,
including of its partners or members, as the case may be, 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 partnership agreement,
operating agreement or similar governing documents 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 or 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 or 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, partner, shareholder, or tenant-in-common of Contributor, or
other party is necessary or required for the execution, delivery and
performance by 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 partnership agreement or operating agreement,
as the case may be, (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 or 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, and (y) Contributor nor
any of the Properties 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
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its assets, the Properties, occupancy of the Properties 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 or at Closing will be the sole owner
of, and has or will have good and marketable title to, the Properties
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 which are not being transferred to
Acquiror under this Agreement or the documents contemplated by this
Agreement.
(vi) To the best of Contributor's knowledge, the
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, and
all of the same are in good standing. To the best of Contributor's
knowledge, except as set forth in Schedule 8A(vi) attached to this
Agreement, the Improvements and the tangible Personal Property are free
from material defects; and the Properties and each part thereof have
adequate drainage and contain not less than the minimum number of
parking spaces required under applicable law. Except as set forth in
Schedule 8A(vi) attached to this Agreement, each of the Properties
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) All of Contributor's insurance 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, 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 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 by reason of the condition,
use of, or operations on, such Property. No attachments, execution
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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, 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 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, 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 noted on Exhibit C, each Service Contact is cancelable by
Contributor (or its assignees or successors) without payment of any
penalty upon not more than thirty (30) days prior notice.
(xi) Contributor has no patents, trademarks, servicemarks
or trade names used in connection with the Properties, except for the
name "Columbia Circle". To the best of Contributor's knowledge, the use
of such names does not conflict with any rights of others with respect
thereto. 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.
(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 (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 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 have been complied with by
Contributor at its sole cost, except the non-compliance with
which would not reasonably be expected to have a Material
Adverse Effect; and
(c) none of the Properties is located in any area
designated by any governmental authority or agency as being a
flood prone or flood risk area (whether
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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 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 (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, each of the
Leases is in full force and effect, and has not been modified,
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 of 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
material obligations of the lessor under the Leases that
accrue to the date of Closing 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
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<PAGE>
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 or 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 (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) Except as set forth in the Rent Roll, 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) Except as set forth on the Rent Roll, no tenant
has, by virtue of its Lease or any other agreement or
understanding, any purchase option with respect to any of the
Properties, or any portion thereof, or any right of first
refusal to purchase any of the Properties, 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, 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 that such tenant is currently occupying; and
(l) Except as set forth on the Rent Roll: (i) to the
best of Contributor's
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<PAGE>
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, the Properties have been fully valued and assessed for
property tax purposes. Except as set forth in Schedule 8A(xv) attached
to this Agreement, there are no general or special assessments
applicable to the Properties or any part thereof. The bill or bills
issued for the years 1994, 1995, 1996 and 1997, 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
Properties (the "Tax Bills") (and to Contributor's knowledge, the only
real estate tax bills applicable to the Properties) 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 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, any proceeding or application for a reduction in the real
estate tax assessment of any of the Properties or any other relief for
any tax year. Other than the amounts disclosed by the Tax Bills, no
other real estate taxes have been, or to Contributor's knowledge, will
be, assessed against the Properties, or any portion thereof, in respect
of the year 1997 or any prior year, and no special assessments of any
kind (special, bond or otherwise) are or have been levied against the
Properties, or any portion thereof, that are outstanding or unpaid,
and, to Contributor's knowledge, none will be levied prior to Closing.
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 that will be binding on Acquiror
after the Closing.
(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, 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 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 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 or Contributor that may be expected to result in a tax
deficiency, lien interest or other assessment against the Properties.
(xvii) The Personal Property is all of the personal
property owned by Contributor and used in the operation of the
Properties. Except as set forth in Schedule 8A(xvii) attached to this
Agreement, Contributor has or at Closing will have 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
bankruptcy and similar laws affecting the remedies or recourse of
creditors generally and general principles of equity.
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<PAGE>
(xix) All financial information regarding the Properties
furnished by Contributor to Acquiror is true, complete and correct; has
been compiled in accordance with generally accepted accounting
principles and accurately set forth in all material respects the
results of the operations of the Properties for the periods covered.
(xx) Contributor has no employees. All management
contracts pertaining to the Properties will be terminated as of the
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 or any
portion thereof. Contributor has complied with (and, prior to Closing,
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, 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 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, 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, there being no "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) The OP Units are being acquired by each of the OP
Unit Recipients with the present intention of holding the OP Units for
purposes of investment and not with a view towards sale or any other
distribution. Each of the OP Unit Recipients recognizes that he may be
required to bear the economic risk of an investment in the OP Units for
an indefinite period of time. Each OP Unit Recipient is an Accredited
Investor. Each OP Unit Recipient has such knowledge and experience in
financial and business matters so as to be fully capable of evaluating
the merits and risks of an investment in the OP Units. Each OP Unit
Recipient has received and reviewed the following documents: (A) the
Form 10-K for the year ended December 31, 1996 for the REIT and
Acquiror; (B) the annual proxy statement of the REIT for the 1997
annual meeting and the proxy statement of the REIT for the special
meeting of stockholders which was held on December 12, 1997; (C) the
Form 10-Q for the REIT and Acquiror for the quarters ended March 31,
1997,
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<PAGE>
June 30, 1997, and September 30, 1997, respectively; (D) the Form 8-Ks
filed by the REIT and Acquiror since December 31, 1996 and (E) the
Partnership Agreement. Each OP Unit Recipient has been afforded the
opportunity to ask questions of those persons he considers appropriate
and to obtain any additional information he desires in respect of the
OP Units and the business, operations, conditions (financial and
otherwise) and current prospects of Acquiror and the REIT. Each OP
Unit Recipient has consulted his own financial, legal and tax advisors
with respect to the economic, legal and tax consequences of delivery
of the OP Units and has not relied on Acquiror, the REIT or any of
their officers, directors, affiliates or professional advisors for
such advice as to such consequences.
(xxv) Except as set forth in Schedule 8A(xxv) attached to
this Agreement:
(a) The Properties 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 or any
portion thereof.
(c) There have been no Releases of a Hazardous
Material at, on, under, in or about any of the Properties 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 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 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. 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) The Properties are not listed, or to the
knowledge of Contributor, proposed or nominated for listing on
the NPL or on any other similar state or other list of sites
that require or may require corrective or remedial action.
(g) Contributor has not transported, disposed of or
treated, or arranged for the transportation, disposal or
treatment of, any Hazardous Material from the Properties 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.
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<PAGE>
(h) There are no underground storage tanks at, on or
under the Properties or any portion thereof. Contributor has
not removed, closed or abandoned any underground storage tanks
at any of the Properties, and Contributor has no knowledge of
the existence, abandonment, closure or removal of underground
storage tanks at any of the Properties.
(i) 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 which have not been delivered to Acquiror
prior to the execution of this Agreement.
For purposes of this item (xxv), 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. section 6901 et
seq.), as amended ("RCRA"); (iii) the Emergency Planning and
Community Right to Know Act of 1986 (42 U.S.C. section 11001 et
seq.), as amended; (iv) the Clean Air Act (42 U.S.C. section 7401 et
seq.), as amended; (v) the Clean Water Act (33 U.S.C. section 1251 et
seq.), as amended; (vi) the Occupational Safety and Health Act (29
U.S.C. section 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.
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(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, 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 that are specifically permitted by
or pursuant to this Agreement.
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
Contributor of this Agreement and the other documents to be delivered
by Acquiror at Closing, and the consummation by Acquiror of the
transactions contemplated hereby and thereby are permitted under the
Partnership Agreement, and at 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 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.
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<PAGE>
(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.
(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
consummation by the REIT of the transactions contemplated hereby and
thereby at 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, 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.
(xi) The REIT is organized and operates as a "real estate
investment trust" under Sections 856 through 860 of the Code. The REIT
has elected to be taxed as a "real estate
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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 REIT's ability to perform its obligations under the
REIT Documents.
D. Acquiror represents and warrants to Contributor that, as of
the Closing, each of the representations and warranties set forth in Section 8C
above shall be true, complete and correct.
E. Except as hereinafter provided, all representations and
warranties made in this Section 8 by Contributor and/or the OP Unit Recipient
(collectively, the "Contributor Party") and by Acquiror shall survive the
Closing until the second (2nd) anniversary of the Closing Date and shall not
merge into any instrument of conveyance delivered at the 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 8E 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 (xxv) shall survive until the expiration of the statute of limitations
applicable thereto.
F. Contributor shall provide to Acquiror and its auditors (i)
during the Inspection Period and following the Closing, access at all reasonable
times to all financial and other information relating to the Properties
necessary for Acquiror and its auditors to prepare audited, and if necessary,
pro forma, financial statements in conformity with Regulations S-X of the
Securities and Exchange Commission ("SEC") or other materials required for any
registration statement, report or other disclosure to be filed with the SEC or
necessary to comply with any SEC rule or regulation, and (ii) at the Closing (or
prior thereto if required by Acquiror's auditors) an executed representations
letter, in form and substance reasonably satisfactory to Acquiror, as required
by Generally Accepted Auditing Standards as promulgated by the Auditing
Standards Division of the American Institute of Public Accountants, which
representation is required to enable an independent public accountant to render
an opinion on such financial statements; provided, however, that Acquiror shall
pay for any actual reasonable costs incurred by Contributor in connection with
its obligations under this Section 8F. The obligation of Contributor to provide
such access and representation letter shall survive the Closing and 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
these obligations. This indemnity shall survive the Closing for a period of two
(2) years.
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9. ACQUIROR'S INSPECTION OF THE PROPERTIES
Subject to the provisions of Section 15B, during the period
extending to and including the 45th day from the date of this Agreement (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, plan 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 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"). In
the event 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. If Acquiror shall give
the Termination Notice to Contributor prior to the expiration of the Inspection
Period, the Earnest Money shall be promptly returned to Acquiror and all parties
hereto shall be released from all further obligations and liabilities hereunder,
except with respect to the indemnity set forth in Section 15B. In the event that
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.
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) copies of all operating statements for the
Properties 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
(iv) copies of the most recent survey of and title policy
or commitment for each
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of the Properties in the possession or control of Contributor.
11. CONDITIONS PRECEDENT
A. Acquiror's obligation to acquire the Properties shall be
subject to and contingent upon the following conditions precedent, any or all of
which Acquiror may waive only by a notice delivered in accordance with Section
15H:
(i) The issuance to Acquiror at the Closing of the Title
Policies in accordance with Section 5B(i).
(ii) Contributor shall have obtained and delivered to
Acquiror original executed tenant estoppel certificates (the "Tenant
Estoppel Certificates") in substantially the form of Exhibit K attached
hereto, dated not more than thirty (30) days before Closing, and
executed by tenants under Leases leasing not less than ninety-five
percent (95%) of the total aggregate gross rental income for all of the
Properties, including, without limitation, those particular tenants
listed in Exhibit L 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 K 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, 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, of
all of the Service Contracts that Acquiror has elected to terminate by
written notice given to Contributor prior to the expiration of the
Inspection Period.
(iv) The representations and warranties made by
Contributor in this Agreement shall be true and correct in all material
respects on the Closing Date as if made on the Closing Date.
(v) The delivery by Contributor of all documents
(executed by parties other than Acquiror, where required) required
under Section 6B(i).
(vi) The delivery of all necessary consents and approvals
of lenders under Existing Indebtedness to be assumed by Acquiror, and
the consents and approvals set forth on Schedule 11A(vi) to this
Agreement.
(vii) Contributor not being otherwise in default of its
obligations under this Agreement.
(viii) All conditions precedent set forth in Section 11A of
the Northeastern Contribution Agreement shall have been satisfied or,
if permissible, waived.
If the condition precedent set forth in Section 11A(i) is not
satisfied or waived on or prior
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to the Closing Date, Acquiror shall have the rights and remedies set forth in
Section 5C. If any of the conditions precedent set forth in Section 11A(ii) or
Section 11A(viii) (to the extent a condition under the Northeastern Contribution
Agreement is not satisfied or, if permissible, waived which allows for a similar
termination right without the right to receive costs and expenses) is not
satisfied or waived on or prior to the Closing Date, Acquiror shall have the
right to terminate this Agreement upon written notice to Contributor, 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. If any of the
conditions precedent set forth in Sections 11A(iii), (iv), (v), (vi) or (vii) or
Section 11A(viii) (to the extent a condition under the Northeastern Contribution
Agreement is not satisfied or, if permissible, waived which allows for a similar
termination right with the right to receive costs and expenses) is not satisfied
or waived on or prior to the Closing Date, then Acquiror shall have the rights
and remedies provided in Section 13B.
B. Contributor's obligation to contribute and convey the
Properties shall be subject to and contingent upon the following conditions
precedent, any or all of which Contributor may waive by a notice delivered in
accordance with Section 15H:
(i) The representations and warranties made by Acquiror
in this Agreement shall be true and correct in all material respects on
the Closing Date as if made on the Closing 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) All conditions precedent set forth in Section 11B of
the Northeastern Contribution Agreement shall have been satisfied or,
if permissible, waived.
If any of the conditions precedent set forth in Section 11B is
not satisfied or waived on or prior to the Closing Date, then Contributor shall
have the rights and remedies provided in Section 13A.
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 John Blumberg (the "Broker"). At the Closing, Acquiror shall pay a
commission to the Broker pursuant to a separate agreement between Acquiror and
the Broker; provided, however, that no commission shall be deemed earned unless
and until the Closing shall have occurred as provided in this Agreement and
title to the Properties shall have been conveyed to Acquiror. 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. The provisions of this Section shall
survive the Closing or the sooner termination of this Agreement.
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13. DEFAULT AND REMEDIES
A. If the Closing does not occur due to Acquiror's default
hereunder, or the breach of the 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 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 the 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 either (a) terminate this
Agreement, in which event the Earnest Money shall be returned by the Escrowee to
Acquiror and Contributor shall reimburse Acquiror for its reasonable
out-of-pocket expenses incurred by Acquiror (not to exceed $50,000 in the
aggregate) pursuant to this Agreement and, upon such return and reimbursement,
the parties shall be released from all further obligations and liabilities under
this Agreement, except with respect to the Surviving Indemnities, or (b) sue for
specific performance (except in such case where such default, breach or failure
to perform is the result of the good faith failure despite best efforts by
Contributor to obtain the consent of Manufacturers, Traders & Trust Company and
Dorman & Wilson, Inc.). In the event Acquiror elects the remedy set forth in (a)
above, Contributor shall reimburse Acquiror for such expenses within fifteen
(15) days after Contributor's receipt of written notice from Acquiror
accompanied by copies of invoices detailing such expenses or such other
documentation that reasonably substantiates such expenses.
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(iii) attached to this Agreement.
B. Indemnification by Acquiror. Acquiror agrees to indemnify
the Contributor and its shareholders, officers, directors, employees, agents,
partners, members 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
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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) In the event 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.
(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
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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 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) In the event 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
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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 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.
15. MISCELLANEOUS
A. This Agreement shall not be cancelled or merged upon
consummation of the
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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.
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 for the purpose of examining, inspecting and testing the
Properties. 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.
C. Neither this Agreement nor any interest hereunder shall be
assigned or transferred by Contributor. Acquiror may direct Contributor to
convey the Properties or any part thereof to any party designated by Acquiror
which is wholly-owned by Acquiror. 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 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 is hereby rendered null and void.
E. This Agreement constitutes an offer by Acquiror which must
be accepted by Contributor within three (3) business days after the date
execution copies of this Agreement are submitted by Acquiror to Contributor for
execution. If this Agreement is not so accepted and returned to Acquiror within
said three (3) business day period, this offer shall be deemed revoked. The date
of this Agreement shall be the date on which Acquiror signs this Agreement as
indicated below the signature line for Acquiror.
F. 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.
G. 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.
H. 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:
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1. If to Contributor:
Rotterdam Industrial Park
Building 6
Schenectady, NY 12306
Telephone: (518) 356-4445
Facsimile: (518) 356-5334
Attention: David M. Buicko
With a copy to:
Steven K. Porter, Esq.
Rotterdam Industrial Park
Building 6
Schenectady, NY 12306
Telephone: (518) 356-4445
Facsimile: (518) 356-5334
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: Jeffrey E. Kelter
With a copy to:
Rogers & Wells
200 Park Avenue
New York, New York 10166
Telephone: (212) 878-8209
Facsimile: (212) 878-8375
Attention: Robert E. King, Jr., 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 15H.
I. 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 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
35
<PAGE>
depreciation schedules updated through the Closing Date for each 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 and
the OP Unit Recipient. Such data shall include the tax basis allocable to the OP
Unit Recipient for each Property. In addition, Contributor acknowledges that, in
the event repayment of any Assumed 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.
J. 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 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.
K. 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.
L. 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.
M. 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.
N. 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.
O. The Properties being acquired by Acquiror pursuant to this
Agreement shall be transferred and conveyed on an "AS-IS" and "WHERE-IS" basis,
and WITH ALL FAULTS, except as otherwise expressly set forth in this Agreement
or in any document delivered by Contributor at Closing. Except as expressly set
forth in this Agreement or in any document delivered by Contributor at Closing,
Contributor has not made any representation or warranty as to the present or
future physical condition, value, presence/absence of hazardous or toxic
materials, financing status, leasing, operations, use, tax status, income and
expense or any other matter pertaining to the Properties.
36
<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: February 4, 1998
CONTRIBUTOR:
Columbia Executive I Assoc., a New York general
partnership
By: Washington Avenue Ventures, Inc., a New York
corporation, its general partner
By:/s/ David M. Buicko
Name: David M. Buicko
Title: Executive Vice President
Columbia Executive II Assoc., a New York general
partnership
By: Rotterdam Ventures, Inc., a New York
corporation, its general partner
By:/s/ David M. Buicko
Name: David M. Buicko
Title: Executive Vice President
37
<PAGE>
Columbia Executive III Assoc., a New York general
partnership
By: Rotterdam Ventures, Inc., a New York
corporation, its general partner
By:/s/ David M. Buicko
Name: David M. Buicko
Title: Executive Vice President
Columbia Executive V Assoc., a New York general
partnership
By: Equinox Equities, Inc., a Vermont
corporation, its general partner
By:/s/ David M. Buicko
Name: David M. Buicko
Title: Executive Vice President
Columbia Executive VI Assoc., a New York general
partnership
By: Equinox Equities, Inc., a Vermont
corporation, its general partner
By:/s/ David M. Buicko
Name: David M. Buicko
Title: Executive Vice President
Columbia Executive VII Assoc., a New York general
partnership
By: Equinox Equities, Inc., a Vermont
corporation, its general partner
By:/s/ David M. Buicko
Name: David M. Buicko
Title: Executive Vice President
38
<PAGE>
Columbia Executive VIII Assoc., a New York limited
liability company
By: Eastwick Development Corp., a New York
corporation, a member
By:/s/ David M. Buicko
Name: David M. Buicko
Title: Executive Vice President
Date: February 4, 1998
39
<PAGE>
OP UNIT RECIPIENTS:
The undersigned each hereby (i) agrees 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 such OP Unit
Recipient:
/s/ Donald R. Led Duke
Name: Donald R. Led Duke
/s/ Michael F. Bette
Name: Michael F. Bette
/s/Joseph R. Nicolla
Name: Joseph R. Nicolla
/s/Kevin Bette
Name: Kevin Bette
/s/Eugene Sneeringer, Jr.
Name: Eugene Sneeringer, Jr.
/s/Peter Bette
Name: Peter Bette
/s/Matthew Bette
Name: Matthew Bette
/s/Christopher Bette
Name: Christopher Bette
/s/Mark Bette
Name: Mark Bette
SWF, L.P.
By:/s/Donald Led Duke
Name: Donald Led Duke
Title: General Partner
Date: February 4, 1998
40
<PAGE>
Exhibit 10-3
AGREEMENT OF SALE AND PURCHASE
THIS AGREEMENT is made as of the 11th day of June, 1998 by and
between JERRY L. ROBINSON, GENE A. GOOD and ROBERT J. BIONDI ("Seller"), and
AMERICAN REAL ESTATE INVESTMENT, L.P., a Delaware Limited Partnership ("Buyer").
W I T N E S S E T H :
1. Agreement to Sell and Purchase. Seller agrees to sell to Buyer, and Buyer
agrees to purchase from Seller, subject to the terms and conditions of this
Agreement, certain property, consisting of the following:
(a) All of the following certain tracts of land: (i) the parcel of land
containing 17.773 acres situate in Urbana Township, Champaign County, Ohio,
which is more fully described by metes and bounds on Exhibit A-1 hereto
("Urbana Land"); (ii) the parcel of land containing 17 acres situate in the
City of Marysville, County of Union, Ohio, which is more fully described by
metes and bounds on Exhibit A-2 hereto ("Marysville Land"); and (iii) the
parcel of land containing 22.084 acres situate in the City of Zanesville,
County of Muskingun, Ohio, which is more fully described by metes and bounds
on Exhibit A-3 hereto ("Zanesville Land"); the aforesaid three (3) tracts of
land being herein collectively called the "Land"; together with all
improvements thereon, including, without limitation, a building containing
approximately 200,000 square feet of enclosed floor area on the Urbana Land,
a building containing approximately 133,500 square feet of enclosed floor
area on the Marysville Land, and a building containing approximately 300,000
square feet of enclosed floor area on the Zanesville Land; together with all
appurtenances thereto (including, without limitation, all easements,
rights-of-way, water rights, mineral and timber rights, development rights,
privileges, licenses and other rights and benefits belonging to, running with
the owner of, or in any way relating to the Land); and together with all
rights, title and interest of Seller, if any, in and to all land lying in the
bed of any street, open or proposed, abutting the Land and all right, title
and interest of Seller in and to any unpaid award for the taking by eminent
domain of any part of the Land or for damages to the Land by reason of a
change of grade of any street (all of the property, rights, and privileges
described in this
<PAGE>
Section 1(a) herein being collectively called the "Real Property").
(b) All fixtures, attached or appurtenant to the Real Property; and all
intangible personal property used in the ownership, operation or maintenance
of the Real Property, which is not owned by the Tenants; including, without
limitation, the items set forth on Exhibit B hereto (all of the foregoing
items of property being herein collectively called the "Personal Property").
Certain Tenant leasehold improvements are owned by the respective Tenants, to
the extent set forth in attachments to the Leases.
(c) Property. The Urbana Land and the buildings and improvements
thereon are sometimes herein called the "Urbana Real Property". The
Marysville Land and the buildings and improvements thereon are sometimes
herein called the "Marysville Real Property". The Zanesville Land and the
buildings and improvements thereon are sometimes herein called the
"Zanesville Real Property". The Urbana Real Property, the Marysville Real
Property and the Zanesville Real Property are sometimes herein called the
"Real Property". The Real Property and the Personal Property are sometimes
collectively called the "Property".
2. Purchase Price.
(a) The purchase price (the "Purchase Price") for the Property, subject
to adjustments and allocation as provided in this Agreement, shall be Twelve
Million Dollars ($12,000,000), and shall be paid as follows:
(i) One Hundred Thousand Dollars ($100,000) (such sum, plus all
interest which accrues thereon, being herein called "the Deposit") shall be
paid by Buyer to First American Title Insurance Company ("Title Company") on
or prior to the third business day to occur after the date on which the
Inspection Period (as defined below) ends. The Deposit shall be held by the
Title Company in one or more federally-insured money market accounts
acceptable to both Seller and Buyer, or in short-term United States
Government obligations having a maturity date which is not later than the
Closing Date (as defined below).
(ii) The balance of the Purchase Price shall be paid at Closing by
wire transfer of immediately available funds.
(b) The Purchase Price shall be allocated between the Urbana Real
Property, the Marysville Real Property, and the
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<PAGE>
Zanesville Real Property as follows (each of the following amounts is herein
called an "Allocation Amount"):
<TABLE>
<S> <C>
Urbana Property - $4,100,000
Marysville Property - $2,800,000
Zanesville Property - $5,100,000
</TABLE>
3. Disposition of Deposit; Defaults.
(a) The Deposit shall be held in escrow and disbursed by the Title
Company in accordance with the terms of this Agreement. Seller and Buyer each
agrees, upon request, to execute the Title Company's customary form of escrow
agreement with respect to the Deposit.
(b) If Buyer, without the right to do so and in default of its
obligations under this Agreement fails to complete Closing, Seller shall have
the right to be paid the Deposit as liquidated damages and not as a penalty.
Buyer and Seller acknowledge that the damages which may be incurred by Seller
in the event of Buyer's default are difficult to quantify as of the date of
this Agreement; the Deposit represents the parties' reasonable estimate of
Seller's probable future damages in the event of Buyer's default; and that
the Deposit represents fair and reasonable compensation to Seller in the
event of Buyer's default. The right of Seller to be paid the Deposit shall be
Seller's exclusive and sole remedy, and Seller waives any right to recover
the balance of the Purchase Price, or any part thereof, and the right to
pursue any other remedy permitted by law or in equity against Buyer.
(c) If Seller, without the right to do so and in default of its
obligations under this Agreement fails to complete Closing or otherwise
defaults under or breaches this Agreement, Buyer shall have the right to be
paid the Deposit, which right shall be in addition to all other rights and
remedies of Buyer under this Agreement, at law or in equity, including
without limitation the right to specific performance and injunctive relief.
(d) If Closing is completed hereunder, the Title Company shall pay the
Deposit to Seller on account of the Purchase Price.
(e) Notwithstanding anything contained in this Section 3, if either
party terminates this Agreement as a result of the other's default or
pursuant to the exercise of any right of termination conferred by this
Agreement, the Title Company shall not disburse the Deposit until the earlier
to occur of:
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<PAGE>
(i) receipt by the Title Company of written instructions from Seller and Buyer
or (ii) entry of a final adjudication determining which party is entitled to
receive the Deposit, as applicable, at which time the Deposit shall be
distributed in accordance with such written instructions or adjudication. In the
event of a dispute between the parties with respect to the Deposit, the Title
Company may deposit the Deposit with a court of proper jurisdiction and commence
an interpleader action. Upon notifying Seller and Buyer of the commencement of
such action, the Title Company shall be released of all liability with respect
to the Deposit, except to the extent of accounting for any monies previously
delivered by the Title Company out of escrow. The Title Company shall not be
liable to either Seller or Buyer other than for the performance of its duties
under this Agreement, its gross negligence or intentional wrongdoing.
4. Closing. The closing of this transaction ("Closing") shall take place at the
offices of Wolf, Block, Schorr and Solis-Cohen, Twelfth Floor Packard Building,
15th and Chestnut Streets, Philadelphia, Pennsylvania 19102. Closing shall
commence at 10:00 a.m. on Friday, May 29, 1998 (the "Closing Date"). This
transaction shall close in escrow, pursuant to the terms of the Exchange
Agreement attached hereto as Exhibit C.
5. Condition of Title.
(a) (i) Title to the Property shall be good and marketable and free and
clear of all liens, restrictions, easements, encumbrances, leases, tenancies
and other title objections, except for the Permitted Encumbrances (as defined
below), and shall be insurable as such and as provided in this Agreement at
ordinary rates by the Title Company pursuant to an ALTA Owner's Policy of
Title Insurance, 1970 Form B, amended October 17, 1970 and October 17, 1984
(the "Owner's Policy of Title Insurance").
(ii) The Owner's Policy of Title Insurance shall also contain
endorsements insuring that the covenants, conditions and restrictions
included in the Permitted Encumbrances have not been violated and that a
future violation thereof will not cause a forfeiture or reversion of title.
(iii) The premium (at ordinary rates) for the Owner's Policy of
Title Insurance and such endorsements will be paid by Buyer.
(b) If Seller is unable to convey title to the Urbana Property, the
Marysville Property, and/or the Zanesville Property to Buyer at Closing in
accordance with the requirements
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<PAGE>
of this Agreement, Buyer shall have the options: (i) of taking such title to the
defective Property or defective Properties as Seller is able to convey with
abatement of the Purchase Price in the amount (fixed or ascertainable) of any
mortgages or other monetary liens on such defective Property or defective
Properties; or (ii) of terminating Buyer's obligations under this Agreement and
being repaid the Deposit; or (iii) of terminating Buyer's obligations under this
Agreement with respect only to any defective Property, and having this Agreement
continue in effect as to the Property or Properties with respect to which Buyer
did not terminate with a reduction of the Purchase Price in the amount of the
Allocated Amount for the defective Property (or defective Properties) as to
which Buyer has terminated. Upon payment to Buyer of the Deposit pursuant to
clause (ii) above, this Agreement shall be null and void and neither party shall
have any further obligations hereunder. If Buyer terminates this Agreement
pursuant to clause (ii) above, Seller and Buyer shall immediately deliver to the
Title Company written instructions to pay the Deposit to Buyer. Notwithstanding
the foregoing, if title to the Property is not as described in Section 5(a),
Buyer shall also be entitled to pursue all other remedies available to Buyer at
law or in equity.
(c) Promptly after the execution of this Agreement, Buyer shall order
from the Title Company a Commitment for Title Insurance ("Title Commitment")
with respect to the Real Property. Buyer shall give to Seller Notice
("Exception Notice") of any exceptions to title set forth in the Title
Commitment which are not acceptable to Buyer ("Unacceptable Exceptions").
Seller shall, within five (5) days from the date of Seller's receipt of the
Exception Notice, deliver to Buyer an endorsement to the Title Commitment
issued by the Title Company stating which, if any, of the Unacceptable
Exceptions the Title Company has or will commit to remove from the Title
Commitment; and if the Title Company has not issued an endorsement to the
Title Commitment removing (or committing to remove) all of the Unacceptable
Exceptions from the Title Commitment within five (5) days from the date of
Seller's receipt of the Exception Notice, Buyer shall have the right to
terminate this Agreement. If Buyer does not terminate this Agreement pursuant
to the provisions of this Section 5(c), then the exceptions remaining on
Schedule B, Section 2 of the Title Commitment which are not liens securing
payment of monetary sums ("Monetary Liens") shall be the "Permitted
Encumbrances". Seller agrees to pay all Monetary Liens and cause all Monetary
Liens to be released and satisfied of record prior to the completion of
Closing.
6. Possession. Possession of the Property shall be given to Buyer at Closing,
subject only to the right of occupancy of
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<PAGE>
the Tenants under the Tenant Leases, by delivery of Seller's Special Warranty
Deeds with covenants against the Grantor's acts (the "Deeds") and Bills of Sale
(the "Bills of Sale"), duly executed and acknowledged by Seller and in proper
form for recording, pursuant to the Exchange Agreement attached hereto as
Exhibit C. If Buyer causes surveys to be made of the Real Property, then at
Buyer's option, the descriptions of the Real Property contained in the Deeds
shall be based upon the surveys.
7. Apportionments; Transfer Taxes
(a) (i) Real estate taxes (on the basis of the actual fiscal years for
which such taxes are assessed) on the Real Property; personal property taxes
on the Personal Property; minimum water and sewer charges; minimum rent and
additional rent and other sums paid by the Tenants to the Seller prior to
Closing under the Tenant Leases; and payments due under the Service
Agreements (as defined below) which are to be assigned to Buyer, if any,
shall be apportioned pro rata between Seller and Buyer on a per diem basis as
of the Closing Date; provided, however, that there shall be no apportionment
between Buyer and Seller at Closing with respect to real estate taxes,
utility charges and other sums paid by the Tenants to the taxing authorities,
utility companies or other third parties pursuant to the Tenant Leases for a
period or periods of time from and after the Closing Date.
(ii) If the Closing Date is not the first day of a calendar month
and if as of the Closing Date any of the Tenants has not paid the monthly
installment of minimum rent ("Delinquent Installment") due under its Tenant
Lease with respect to the month in which Closing occurs, then at Closing
Buyer shall receive a credit against the Purchase Price in an amount equal to
the portion of the Delinquent Installment applicable to the period of time
from and after the Closing Date and through the balance of the applicable
month; and upon Buyer's receipt of the Delinquent Installment from the
Tenant, Buyer shall pay the full amount thereof to Seller.
(iii) If, at Closing, the Property is affected by an assessment
which is payable in installments of which the first installment is then a
charge or lien, or has been paid, then all unpaid installments of such
assessments, including those which are to become due and payable after
Closing, shall be deemed to be due and payable and to be a lien upon the
Property and shall be paid and discharged by Seller at Closing.
(b) Seller and Buyer shall, at Closing, split equally all transfer
taxes, documentary taxes and all other
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<PAGE>
taxes, assessments or charges imposed upon the Deeds and/or the conveyance of
the Real Property from Seller to Buyer.
(c) The total sum of all Tenant security, utility, key and other
deposits, together with all interest earned thereon as of the Closing Date
which the Tenants are entitled to receive, shall be given to Buyer at Closing
as a credit against the Purchase Price.
(d) Seller shall obtain readings of the water, electric, gas and other
utility meters servicing the Real Property (other than meters which
exclusively measure utility consumption which is to be paid in full by any of
the Tenants under Tenant Leases) to a date no more than five (5) days prior
to the Closing Date. At or prior to Closing, Seller shall pay all charges
based upon such meter readings, adjusted to include a reasonable estimate of
the additional charges due for the period from the dates of the respective
readings until the Closing Date. If Seller is unable to obtain readings of
any meters prior to the Closing Date, Closing shall be completed without such
readings and upon the obtaining thereof, Seller shall pay the charges
incurred prior to the Closing Date as reasonably determined by Buyer based
upon such readings, and at Closing, Seller shall deposit with the Title
Company an amount reasonably estimated to represent the anticipated
obligation of Seller under this sentence.
8. Representations and Warranties of Seller. Seller, to induce Buyer to enter
into this Agreement and to complete Closing, makes the following representations
and warranties to Buyer, which representations and warranties are true and
correct as of the date of this Agreement, and shall be true and correct at and
as of the Closing Date in all respects as though such representations and
warranties were made both at and as of the date of this Agreement, and at and as
of the Closing Date:
(a) The only leases or other agreement with respect to rights of use
and occupancy of the Property in effect are the leases ("Tenant Leases")
listed on Schedule 1 hereto ("Rent Roll") with the tenants ("Tenants")
designated on Schedule 1 hereto. The Tenant Lease originally entered into
between Seller, as landlord, and Dow Brands, as tenant, as been assigned by
Dow Brands to S.C. Johnson & Son, Inc. and Seller, as landlord, as executed
an Agreement consenting to such assignment and S.C. Johnson & Son, Inc. has
executed an Agreement assuming the obligations of the tenant under such
Tenant Lease.
(b) The Tenant Leases are valid and existing and in full force and
effect; the Tenants are in actual possession of
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<PAGE>
the Property; and neither the Tenants nor the Seller are in default of their
respective obligations under the Tenant Leases.
(c) The copies of the Tenant Leases previously delivered by Seller to
Buyer and initialed by Seller and Buyer for identification are true and
complete copies of the Tenant Leases; the Tenant Leases have not been
amended, modified, or supplemented; and the Tenants do not have any right to
extend or renew the terms of the Tenant Leases except as expressly set forth
in the Tenant Leases.
(d) The Tenants have not asserted any claims which could adversely
affect the right of the landlord to collect rent from the Tenants; and no
notice of default or breach on the part of landlord under the Tenant Leases
has been received by Seller from the Tenant which have not been cured.
(e) All construction, painting, repairs, alterations, improvements and
other work required to be performed by the landlord under the Tenant Leases,
and all of the other obligations of the landlord required to be performed
under the Tenant Leases as of the Closing Date, have been fully performed and
paid for in full by Seller.
(f) The rents and other payments set forth on the Rent Roll and in the
Tenant Leases are the actual rents, income and charges presently being
collected by Seller under the Tenant Leases; all minimum rent payable under
the Tenant Leases is payable monthly in advance and there are no restrictions
upon the amount of rent which may be charged or collected under the Tenant
Leases nor upon tenants to whom space can be leased in the Property by virtue
of rent control laws, ordinances, or regulations, or by virtue of existing
agreements or regulations.
(g) Except as set forth in the Tenant Leases, the Tenants are not
entitled to any concession, allowance, rebate or refund.
(h) The Tenants have not prepaid any rent or other charges for more
than the current month under the Tenant Leases.
(i) Neither the Tenant Leases nor the rent or other amounts payable
under the Tenant Leases have been assigned, pledged or encumbered other than
to the holder of any existing mortgage as collateral security, which
assignment shall be terminated at Closing; and the Tenant Leases may be
assigned by Seller to Buyer at Closing.
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<PAGE>
(j) No security deposits have been paid by the Tenants under the Tenant
Leases, except as set forth on the Rent Roll.
(k) No brokerage or leasing commissions or other compensation is or
will be due or payable to any party with respect to or on account of the
Tenant Leases or any extensions or renewals thereof or any other actions by
Tenants thereunder.
(l) Except as provided in the Leases, the Tenants do not have any right
or option to acquire to the Property or any portion thereof; and there are no
outstanding agreements with any other party granting any right or creating
any obligation to acquire the Property or any portion thereof or any interest
therein.
(m) Except a backup diesel powered generator at the Marysville
location, the Tenants do not have the right to remove from the Property any
of the currently attached heating, ventilating, air conditioning, mechanical,
electrical and other systems located within the buildings on the Real
Property.
(n) All of the books, records, information, data and other items
supplied by Seller to Buyer are true, complete and correct in all material
respects, and fairly and accurately presented the results of operations of
the Property.
(o) Seller has not received any notice ("Defect Notice") from any
insurance company which has issued a policy with respect to the Property or
from any board of fire underwriters (or other body exercising similar
functions) claiming any defects or deficiencies in the Property or suggesting
or requesting the performance of any repairs, alterations or other work to
the Property.
(p) There are no management, service, equipment, supply, security,
maintenance, construction, concession or other agreements with respect to or
affecting the Property, except for any agreements under which only the
Tenants are bound and except for the agreements listed on Exhibit D to this
Agreement (collectively, the "Service Agreements"); Seller is not in default
under the Service Agreements; each of the Service Agreements designated on
Exhibit D to be assigned to Buyer at Closing is assignable by Seller and will
not be invalidated, violated or otherwise adversely affected by the
assignment thereof or by the transfer of the Property to Buyer; the copies of
the Service Agreements previously delivered by Seller to Buyer and initialed
by Seller and Buyer for identification are true and
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<PAGE>
complete copies of such Service Agreements and the same have not been amended,
modified or supplemented; and each of the Service Agreements designated on
Exhibit D to be terminated shall be terminated by Seller at or prior to Closing
and all sums due thereunder paid in full by Seller.
(q) No employee of Seller who performs services at or in connection
with the Property is covered by an employment agreement or union contract; no
demand has been made upon Seller for recognition of a union or collective
bargaining agent for the employees of Seller at the Property; and none of the
employment arrangements with respect to Seller's employees will be binding
upon Buyer or any subsequent owner of the Property after Closing.
(r) With the exception of landscape and curb completion of the
Marysville location, all buildings and improvements (including all roads,
parking areas, curbs, sidewalks, sewers and other utilities) included within
the Property have been completed and installed in accordance with the plans
and specifications therefor approved by the governmental authorities having
jurisdiction; no municipal or other governmental improvements affecting the
Property are in the course of construction or installation, and no such
improvement has been ordered to be made; all street paving, curbing, sanitary
sewers, storm sewers and other municipal or other governmental improvements
which have been constructed or installed have been paid for and will not
hereafter be assessed, and all assessments heretofore made have been paid in
full; and there are no private contractual obligations relating to the
installation of or connection to any sanitary sewers or storm sewers. Ten
Thousand Dollars ($10,000.00) will be escrowed at Closing with the Title
Company for completion of the Marysville landscape and curb improvements.
Seller shall complete said improvements within sixty (60) days after the
Closing Date, and upon completion, Seller shall be entitled to be paid the
Ten Thousand Dollar ($10,000.00) amount from the Escrow Fund. If Seller fails
to complete construction of such improvements within sixty (60) days after
the Closing Date, Buyer shall have the right, at Buyer's option, to complete
such items and to be entitled to receipt of the Ten Thousand Dollar
($10,000.00) sum from the Escrow Fund.
(s) All permanent certificates of occupancy and all other licenses,
permits, authorizations, consents, certificates and approvals required by all
governmental authorities having jurisdiction and the requisite certificates
of the local board of fire underwriters (or other body exercising similar
functions) have been issued for the Property, have been paid for, are in full
force and effect, are assignable by Seller, and will not be invalidated,
violated or otherwise adversely
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affected by the assignment thereof or by the transfer of the Property to Buyer.
(t) The current zoning classification of the Urbana Property is "M-1,"
and the Marysville Property is "M-2"; and the Zanesville Property is not
within a zoning classification; and the construction, operation and use of
the buildings and other improvements constituting the Real Property do not
violate any zoning, subdivision, building or similar law, ordinance, order,
regulation or recorded plat or any certificate of occupancy issued for the
Property; no zoning variances, special exceptions or zoning board of
adjustment certificates were issued for the construction of the Property or
for its present use; and the buildings and improvements on the Real Property
are not non-conforming uses or structures.
(u) No portion of the Property and no method of operation of the
Property is in violation ("Violation") of any applicable law, ordinance,
code, rule, order, regulation or requirement of any governmental authority,
the requirements of any local board of fire underwriters (or other body
exercising similar functions), and there are no presently outstanding and
uncured notices of Violations.
(v) Seller has no knowledge of any defective condition, structural or
otherwise, with respect to the Property; and to Seller's knowledge the
heating, ventilating and air conditioning, plumbing, sprinkler, electrical
and drainage systems, roofs, and all other fixtures, equipment and systems at
or serving the Property are in good condition, repair and working order.
(w) Exhibit E to this Agreement sets forth the only fire and extended
coverage insurance policies ("Policies") maintained by Seller with respect to
the Property; the Policies are in full force and effect and all premiums due
thereunder have been paid; and neither Seller nor (to Seller's knowledge) any
of the Tenants has received any notice from the insurance companies which
issued the Policies, indicating that the Policies will not be renewed or will
be renewed at a higher premium than is presently payable therefor.
(x) There is no action, suit or proceeding pending or, to the knowledge
of Seller, threatened against or affecting Seller or the Property or any
portion thereof or any of the Tenant Leases or relating to or arising out of
the ownership, management or operation of the Property, in any court or
before or by any federal, state, county or municipal department,
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commission, board, bureau or agency or other governmental instrumentality.
(y) All real estate taxes currently due and payable with respect to the
Property have been paid; each of the parcels constituting the Real Property
constitute separate tax parcels and are separately assessed for real estate
tax purposes; there is no proceeding pending for the adjustment of the
assessed valuation of all or any portion of the Property; the Property has
been assessed and real estate taxes have been paid on the basis of the value
of all improvements as completed; and there is no abatement, reduction or
deferral in effect with respect to the Marysville Property. The Zanesville
and Urbana Properties are subject currently to real estate tax abatements;
and Seller has delivered to Buyer true and complete copies of all agreements
applicable to such abatements and such abatements shall remain in full force
and effect for the benefit of Buyer after Closing.
(z) No portion of the Property, except a portion of the Marysville
Property (upon which no flood plain warranty or representation is made), is
located within an area designated as a flood hazard area or an area which
will require the purchase of flood insurance for the obtaining of any
federally insured or federally related loan; and no portion of the Real
Property is located in any area constituting a "wetland".
(aa) Water, sanitary sewer, storm sewer, drainage, electric, telephone,
gas, and other public utility systems and lines serve the Property with
capacity and in a manner adequate for the present use of the Property and are
directly connected to the lines and/or other facilities of the respective
public authorities or utility companies providing such services or accepting
such discharge, either adjacent to the Real Property or through easements or
rights of way appurtenant to and forming a part of the Real Property; such
easements or rights-of-way have been fully granted, and all charges therefore
have been fully paid by Seller and all charges for the aforesaid utility
systems and the connection of the Real Property to such systems, including
without limitation connection fees, "tie-in" charges and other charges now or
hereafter to become due and payable, have been fully paid by Seller; and the
water and sanitary sewer service described above is supplied by public
authority.
(bb) Seller has not received any notice of any condemnation proceeding
or other proceedings in the nature of eminent domain ("Taking") in connection
with the Property, and to Seller's knowledge no Taking has been threatened.
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(cc) Each of the parcels constituting the Real Property has direct
access to a public road owned and maintained by the applicable municipal
authority.
9. Operations Prior to Closing. Between the date of this Agreement and Closing:
(a) Seller shall, at its expense: perform all of its obligations under
the Tenant Leases and cause the Tenants to perform all of their obligations
under the Tenant Leases; and cure (or cause the Tenants to cure) all notices
of any Violations and/or Defect Notices issued prior to Closing.
(b) Seller shall not enter into any agreement to modify, amend or
otherwise alter any of the terms or provisions of the Tenant Leases or any of
the Service Agreements; and Seller shall not enter into an new lease or other
agreement with respect to the use or occupancy of the Property and/or the
maintenance or operation thereof, without the prior written consent of Buyer.
(c) Seller shall perform all acts, and shall make all payments,
necessary to cause the representations and warranties of Seller in this
Agreement to be true and correct.
(d) (i) Buyer, its attorneys, accountants, architects, engineers and
other representatives shall be afforded access to the Property and to all
books, records and files relating thereto from time to time prior to Closing
for the purposes of inspections, preparation of plans, taking of
measurements, making of surveys, making of appraisals, and generally for the
ascertainment of the condition of the Property, including but not limited to
the physical and financial condition of the Property; and there shall be
furnished to Buyer all plans and specifications, engineering reports,
feasibility studies, operating statements, governmental permits and
approvals, contracts, leases, surveys, title information and other
documentation concerning the Property in the possession of Seller and/or
Seller's management agent for the Property.
(ii) Buyer, its attorneys, accountants and other representatives,
shall be permitted to make and are authorized to make any searches of
governmental records as they deem necessary with respect to the Property; and
Seller agrees fully to cooperate with Buyer and its attorneys and other
representatives in this regard and to issue any consents or authorizations
required therefor.
(iii) Buyer agrees to indemnify, defend and reimburse Seller for all
costs, expenses (including, without
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limitation, attorney's fees, consultant and expert fees and court costs) loss
and liabilities suffered or incurred by Seller as the result of any injuries to
persons or properties caused by Buyer's entry upon the Property prior to Closing
pursuant to the provisions of this Section 9(d). The obligations of Buyer
pursuant to this Section 9(d)(iii) shall survive Closing and/or any termination
of this Agreement.
(e) Promptly after receipt thereof by Seller, Seller shall deliver to
Buyer the following:
(i) a copy of any notice of default given or received under any of
the Tenant Leases or the Service Agreements;
(ii) a copy of any tax bill, notice or statement of value, or notice
of change in a tax rate affecting or relating to the Property;
(iii) a copy of any notice of an actual or alleged Violation; and
(iv) a copy of any notice of Taking.
(f) Seller shall complete and deliver for execution by each of the
Tenants a written certification in the form of Exhibits F-1, F-2 and F-3 to
this Agreement, but modified and supplemented by Buyer's counsel to reflect
the terms and provisions of each of the respective Tenant Leases (each,
"Tenant Estoppel Certificate"); and shall obtain an executed Tenant Estoppel
Certificate (dated no more than 10 days prior to the Closing Date) from each
of the Tenants. Seller shall deliver to Buyer a copy of each of the executed
Tenant Estoppel Certificates delivered to Seller promptly after receiving
each such certificate.
(g) Seller shall deliver for execution by each of the Tenants a
Subordination, Non-Disturbance and Attornment agreement in the form required
by Buyer's lender ("SNDA"); and Seller shall obtain an executed SNDA from
each of the Tenants. Seller shall deliver to Buyer a copy of each of the
executed SNDAs delivered to Seller promptly after receiving each such SNDA.
The SNDAs shall be in the forms attached hereto as Exhibits J-1, J-2 and J-3.
(h) Seller shall obtain from the Tenants written amendments to each of
the Tenant Leases (in form satisfactory to Buyer) in which each of the
Tenants shall waive and delete the
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options to purchase portions of the Property set forth therein ("Lease
Amendments").
10. Environmental Matters.
(a) Beyond two Phase-I Environmental audits performed on the Urbana and
Zanesville locations. Seller has made no independent inquiry; however, Seller
represents that to the best of Seller's knowledge:
(i) The Property and all activities and conditions at the Property
are in compliance with all applicable federal, state and local environmental
statutes, ordinances, regulations, orders and requirements of common law,
including without limitation: those relating to the construction, operation,
maintenance or repair of any improvements or equipment; the discharge,
emission or release of any item or substance to the air, soil, surface water
or ground water; the discharge of any dredge or fill material to a wetland or
other water of the United States; the storage, treatment, disposal or
handling of any Contaminant; or the construction, operation, maintenance or
repair of aboveground or underground storage tanks (collectively,
"Environmental Laws").
(ii) No item or substance that may require remediation under any
Environmental Law ("Contaminant") is present on, over or under or is
migrating from the Property.
(iii) Neither Seller, the Tenants nor any other party has generated,
stored, treated, disposed of, discharged, released, emitted or otherwise
handled any Contaminant on, over, under, from or in any manner affecting the
Property or any premises adjacent to the Property. For the purposes of this
subsection (iv) only, "Contaminant" shall not include office equipment, fuel
and other similar products contained in vehicles and cleaning solutions and
other maintenance materials that are customarily used or stored incidental to
and are reasonably necessary for the operation or maintenance of the Property.
(iv) Neither the Property nor any adjacent premises, is listed or
proposed for listing on the National Priorities List established pursuant to
Section 105(8)(B) of CERCLA, 42 U.S.C. ss.9605(8)(B), or on any other
hazardous site list promulgated by any federal, state or local government or
governmental agency.
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(v) No underground or above ground storage tanks are present at the
Property, except an above ground fuel storage tank located on the Marysville
Property.
(vi) Seller has provided Buyer with copies of all: (A) permits,
licenses, certificates, registrations, approvals, and any amendments thereto
required for the Property pursuant to or necessary for compliance with
Environmental Laws; (B) applications, reports or other materials submitted to
any governmental agency in connection with any Environmental Law; (C) records
or manifests required to be maintained pursuant to Environmental Laws or
which are relevant to the issue of compliance with Environmental Laws; (D)
correspondence, notices of violation, summonses, orders, administrative,
civil or criminal complaints, requests for information or other documents
received by Seller or its agents pertaining to compliance with Environmental
Laws or the generation, storage, treatment, handling, discharge, emission,
release or migration of any Contaminant on, over, under, from or affecting
the Property; and (E) records and analyses of any environmental tests
pertaining to the Property, including without limitation the results of any
air, water or soil analyses or tank integrity testing, which are in the
possession of Seller for the Property or the existence of which is known to
Seller.
(vii) No civil, criminal or administrative proceeding is pending or
threatened relating to Environmental Laws or Contaminants on, over, under,
from or affecting the Property; neither Seller nor any of the Tenants has
received any notice of violation or potential liability regarding the
Property or activities thereon relating to Environmental Law or Contaminants
on, over, under, from or affecting the Property and Seller has no reason to
believe such notices will be received and has no reason to know of
circumstances that would give rise to such notices or proceedings in the
future; neither Seller nor any of the Tenants has entered into any consent
order, consent decree, administrative order, judicial order or settlement
relating to Environmental Laws or Contaminants on, over, under, migrating
from or affecting the Property.
(b) Seller will assist Buyer in giving notice to applicable government
agencies and in transferring or reissuing to Buyer any permit, license,
certificate, registration or other approval necessary to continue operations
at the Property, or in obtaining for Buyer any new permit, license,
certificate, registration or approval required of Buyer under any
Environmental Law.
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11. Casualty.
(a) Seller shall maintain the Policies in effect until the time of
Closing, and shall deliver to Buyer, within ten (10 ) days after the date of
this Agreement, an endorsement to each of the Policies issued by the
insurance company issuing the Policies evidencing that the Policies are in
effect, and that the Policies will not be canceled or materially modified
without at least thirty (30) days prior written notice to Buyer. If Closing
is not completed under this Agreement, Buyer agrees to deliver to Seller,
upon request, a written direction to each of the insurance companies which
has issued the Policies, directing that Buyer's name as an additional insured
party be deleted therefrom.
(b)
(i) If at any time prior to the Closing Date any portion of the
Property is destroyed or damaged as a result of fire or any other casualty
("Casualty"), Seller shall promptly give written notice ("Casualty Notice")
thereof to Buyer. If the Urbana Property, the Marysville Property and/or the
Zanesville Property is (are) the subject of a Casualty, Buyer shall have the
right, at its sole option, of terminating this Agreement (by written notice
to Seller given within ten (10) days after receipt of the Casualty Notice
from Seller) with respect to the entire Property or with respect to only the
Property which is the subject of the Casualty unless, (i) the cost fully to
repair or restore such damage is less than Twenty Five Thousand Dollars
($25,000) and sufficient insurance proceeds are available fully to restore
such damage, and (ii) the insurance companies issuing the Policies have
confirmed in writing prior to the end of such ten (10) day period that such
Casualty is covered by the Policies and that no defense to payment of the
claim exists, and (iii) such Casualty will not result in any of the Tenants
terminating any of the Tenant Leases or asserting a right to terminate any of
the Tenant Leases as and (iv) any loan commitment obtained by Buyer for
financing to acquire the Property is not canceled or suspended as a result of
such Casualty. If a Casualty Notice is given to Buyer less than ten (10) days
prior to Closing, at Buyer's option Closing shall be postponed to a date not
earlier than ten (10) days after Buyer's receipt of the Casualty Notice.
(ii) If Buyer terminates this Agreement with respect to the entire
Property pursuant to this Section 11(b), Seller and Buyer shall forthwith
deliver to the Title Company written instructions to pay the Deposit to
Buyer. If Buyer terminates this Agreement pursuant to this Section 11(b) with
respect to the Urbana Property, the Marysville Property, or the
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Zanesville Property but not with respect to the entire Property, this Agreement
shall continue in effect with respect to the Property as to which Buyer did not
terminate and the Purchase Price shall be reduced in the amount of the Allocated
Amount for the Property as to which Buyer terminated.
(iii) If this Agreement continues in effect with respect to any of
the Properties, the proceeds of any insurance with respect to such Property
paid between the date of this Agreement and the Closing Date together with an
amount equal to Seller's deductible under the Policies with respect to such
Property, shall be paid to Buyer at the time of Closing and all unpaid claims
and rights in connection with losses to such Property shall be assigned to
Buyer at Closing without in any manner affecting the Purchase Price.
(c) If the Property is the subject of a Casualty, but Buyer does not
have the right to terminate this Agreement pursuant to the provisions of
Section 11(b) above (or Buyer does not exercise such right), then Seller
shall promptly cause all temporary repairs to be made to the Property as
shall be required to prevent further deterioration and damage to the
Property; provided, however, that any such repairs shall first be approved by
Buyer. Seller shall have the right to be reimbursed from the proceeds of any
insurance with respect to the Property paid between the date of this
Agreement and the Closing Date for the cost of all such repairs made pursuant
to this Section 11(c). Except for the obligation of Seller to repair the
Property set forth in this Section 11(c), Seller shall have no other
obligation to repair any Casualty damage in the event Buyer does not elect to
terminate this Agreement pursuant to the provisions of Section 11(b), and in
such event, Buyer shall accept the Property at Closing as damaged or
destroyed by the Casualty and Buyer shall have the right to enter the Real
Property prior to Closing for the purpose of performing such repairs thereto
as are reasonably necessary to protect the Property against further damage
prior to the Closing Date.
(d) At Closing, at Buyer's option, Seller shall (i) assign to Buyer all
of Seller's rights, title and interest in, to and under the Policies and
Seller shall deliver to Buyer the Policies and an endorsement to the Policies
reflecting that Buyer has become the insured party thereunder; or (ii) cancel
policy and return any rebate with prepaid premiums.
12. Eminent Domain. (a) If at any time prior to the Closing Date: a Taking
affects all or any part of the Property, or if any proceeding for a Taking is
commenced, or if notice of the contemplated commencement of a Taking is given,
Seller shall
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promptly give written notice ("Taking Notice") thereof to Buyer. If the Urbana
Property, the Marysville Property and/or the Zanesville Property is (are) Taken,
Buyer shall have the right, at its sole option, of terminating this Agreement
with respect to the entire Property or with respect only to the Property which
has been Taken. If a Taking Notice is given to Buyer less than ten (10) days
prior to Closing, at Buyer's option Closing shall be postponed to a date not
earlier than ten (10) days after Buyer's receipt of the Taking Notice.
(b) If Buyer terminates this Agreement with respect to the entire
Property pursuant to this Section 12, Seller and Buyer shall forthwith
deliver to the Title Company written instructions to pay the Deposit to
Buyer. If Buyer terminates this Agreement with respect to the Urbana
Property, the Marysville Property or the Zanesville Property, but not with
respect to the entire Property, this Agreement shall continue in effect with
respect to the Property as to which Buyer did not terminate and the Purchase
Price shall be reduced in the amount of the Allocated Amount for the Property
as to which Buyer terminated.
(c) If this Agreement continues in effect with respect to any of the
Properties, the Purchase Price shall be reduced by the total of any awards or
damages received by Seller with respect to such Property and Seller shall, at
Closing, be deemed to have assigned to Buyer all of Seller's right, title and
interest in and to any awards or damages with respect to such Property to
which Seller may have become entitled or may thereafter be entitled by reason
of any exercise of the power of eminent domain or condemnation with respect
to or for the Taking of such Property or any portion thereof.
13. Conditions of Buyer's Obligations.
(a) The obligations of Buyer under this Agreement are subject to the
satisfaction at the time of Closing of each of the following conditions (any
one of which may be waived in whole or in part in writing by Buyer at or
prior to Closing):
(i) all of the representations and warranties by Seller set forth in
this Agreement shall be true and correct;
(ii) no representation or warranty by Seller contained in this
Agreement shall contain any untrue statement or shall omit a material fact
necessary to make the statement of fact therein recited not misleading;
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(iii) Seller shall have performed all covenants, agreements and
conditions required by this Agreement to be performed by Seller prior to or
as of the Closing Date;
(iv) there shall have been no material adverse change in the
financial condition of Seller or any of the Tenants during the period from
the date of this Agreement to the Closing Date; and
(v) Buyer shall have received the executed Tenant Estoppel
Certificates and SNDAs from the any of the Tenants under the Tenant Leases.
(b) In the event any of the conditions set forth in Section 13(a) are
not satisfied as of the Closing Date, Buyer shall have the right (in addition
to all other rights and remedies available to Buyer under this Agreement, at
law or equity), at Buyer's sole option (by written notice to Seller) to (i)
terminate Buyer's obligations under this Agreement and have the Deposit
returned to Buyer, or (ii) to terminate this Agreement as to less than all of
the Property and have the Purchase Price reduced by the Allocated Amount
applicable to the Property terminated, or (iii) complete Closing
notwithstanding the unsatisfied condition, or (iv) if such condition is not
fulfilled by reason of Seller's intentional act or omission and can be
remedied by the payment of an ascertainable sum, Buyer may complete Closing
and deduct such sum from the Purchase Price.
14. Inspection Period.
(a) Buyer shall, during the period ("Inspection Period") which
commenced on February 27, 1998 and which shall end at 11:59 P.M. on Friday,
May 15, 1998, have the opportunity to examine the Property, the Tenant
Leases, the Service Agreements, the Policy, the Permitted Encumbrances and
any items to be delivered by Seller to Buyer, and to conduct such other
inspections of the Property (including, without limitation, environmental
surveys and inspections and engineering surveys and inspections) as Buyer, in
its discretion, may elect.
(b) (i) Seller acknowledges that Buyer may commission, prior to
Closing, at Buyer's sole cost and expense, an investigation of (without
limitation): compliance with Environmental Laws, the presence of Contaminants
on, over, under, migrating from or affecting the Property including without
limitation in connection with the use and operation of any Personal Property,
and the presence of conditions that may affect Buyer's intended use.
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(ii) Seller will cooperate with Buyer and Buyer's agents in Buyer's
investigation, including without limitation: (A) complying with requests for
information and records; (B) warranting that responses to such requests are
true and complete; (C) assisting Buyer in obtaining governmental agency or
other records and upon Buyer's request communicating directly with any
governmental agencies; (D) granting Buyer access to the Property including,
without limitation, access for collecting surface or subsurface samples of
soil, vegetation or water, or samples from buildings and other improvements
and Personal Property located on the Property, including samples from walls,
floors, ceilings, plenums, paved areas and other areas the taking of which
samples may necessitate some damage to the buildings, other improvements or
the Personal Property, and installing groundwater monitoring wells; and (E)
delivery to Buyer any communications, letters, inquiries or notices received
by Seller from any regulatory body dealing with environmental matters, water
quality, air quality, life safety and OSHA and with all reports which may
have been prepared within the past five years addressing the presence of PCB
emissions, asbestos or other hazardous materials or waste. Buyer's
investigations shall in no way limit or otherwise affect Seller's
representations and warranties under this Agreement. If Buyer does not
complete Closing, Buyer will repair any invasive testing to the condition of
the Property which had reasonably existed prior to such testing or sampling.
(c) Buyer shall have the right, at Buyer's sole option, to elect to
terminate this Agreement with respect to either or all of the Urbana
Property, the Marysville Property and/or the Zanesville Property (for any
reason whatsoever) by giving notice of such termination to Seller on or prior
to the second business day to occur after the date on which the Inspection
Period ends. If Buyer terminates this Agreement pursuant to this Section
14(c) with respect to all of the Property, Seller and Buyer shall forthwith
deliver to the Title Company written instructions to pay the Deposit to
Buyer; and this Agreement shall be null and void and neither party shall have
any further obligations under this Agreement. If Buyer terminates this
Agreement with respect to the Urbana Property, the Marysville Property or the
Zanesville Property, but not with respect to all of the Property, this
Agreement shall be null and void with respect to the Property as to which
Buyer has terminated but shall continue in effect with respect to the other
Property or Properties with a reduction of the Purchase Price in the amount
of the Allocated Amount for the Property or Properties as to which Buyer has
terminated this Agreement.
15. Items to be Delivered at Closing.
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(a) At Closing, Seller shall deliver to Buyer the following:
(i) The Deeds.
(ii) An original counterpart of each of the Lease Amendments fully
executed by the Seller and each of the Tenants.
(iii) Assignments in the form of Exhibits G and H, respectively, of
the Tenant Leases and the Service Agreements designated on Exhibit C to be
assigned to Buyer, duly executed and acknowledged by Seller and in proper
form for recording, assigning to Buyer all of the lessor's and Seller's
rights, title and interest in the Tenant Leases and such Service Agreements,
together with all correspondence between Seller and the Tenants; an original
executed copy of each of the Tenant Leases and each such Service Agreement; a
letter, duly executed by Seller, in form satisfactory to Buyer, addressed to
each of the Tenants and other parties under the Service Agreements informing
it of the assignments. Seller shall also deliver to Buyer at Closing evidence
of Seller's termination of those Service Agreements not assigned to Buyer and
payment of all sums owing to the parties to such Service Agreements.
(iv) An assignment, duly executed and acknowledged by Seller, of (and
delivery to Buyer of originals or copies of): all permanent certificates of
occupancy and all other licenses, permits, authorizations, consents,
certificates and approvals required by all governmental authorities having
jurisdiction over the Property; all fees, escrow and/or security funds,
deposits and other sums heretofore paid by Seller to any governmental
authority in connection with the Property; all certificates issued by the
local Board of Fire Underwriters (or other body exercising similar
functions); all plans, specifications and project manuals for the Property in
Seller's possession; and all guarantees, bonds and warranties with respect to
the Property (together with original counterparts of such instruments).
(v) An original counterpart of each of the Tenant Estoppel Certificates
and each of the SNDAs.
(vi) Such resolutions and certificates as the Title Company shall
require to evidence the due authorization of the execution and performance of
this Agreement and the documents to be delivered pursuant hereto; and all
affidavits, indemnities and other agreements required by the
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Title Company to permit it to issue to Buyer the Owner's Policy of Title
Insurance required pursuant to Section 5(a).
(vii) A statement, certified by Seller (and accompanied with all
relevant back-up documentation) setting forth all information necessary or
required to permit Buyer to calculate and collect after Closing all payments
of additional rent and other charges due under the Tenant Leases.
(viii) All proper instruments for the conveyance of the awards
referred to in Sections 1(a), 1(b) and 12.
(ix) Duplicate copies of all books, records and operating reports in
Seller's possession which are necessary to insure continuity of operation of
the Property.
(x) Any other documents required to be delivered by Seller pursuant
to any other provisions of this Agreement.
(b) At Closing, Buyer shall deliver to Seller the following:
(i) The portion of the Purchase Price payable pursuant to Section
2(b).
(ii) Assumption agreements, in the form of Exhibits G and
respectively, of the Tenant Leases and of the Service Agreements designated
on Exhibit D to be assigned to Buyer, duly executed and acknowledged by Buyer
and in proper form for recording.
(iii) Any other document required to be delivered by Buyer pursuant
to any other provisions of this Agreement.
16. Indemnity by Seller. Seller agrees to indemnify, defend and hold harmless
Buyer from and against, and to reimburse Buyer with respect to, any and all
claims, demands, causes of action, losses, damages, liabilities, costs and
expenses (including without limitation reasonable attorney's fees and court
costs) asserted against or incurred by Buyer by reason of or arising out of (a)
a breach of any representation or warranty of Seller as set forth in this
Agreement, and (b) the failure of Seller to perform any obligation required by
this Agreement to be performed by it. Notwithstanding any provision of this
Agreement to the contrary, it is understood and agreed that the remedy of
indemnity pursuant to this Section 16 and Buyer's remedies at law may be
inadequate in the case of any breach by Seller of its
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representations, warranties and obligations under this Agreement, and Seller
agrees that Buyer shall be entitled to equitable relief and the remedy of
specific enforcement with respect thereto.
17. Brokerage. Each of Seller and Buyer represents and warrants to the other
that it has dealt with no broker, finder or other intermediary in connection
with this sale, other than Oxford Realty Services and CB Commercial. In reliance
upon the representations and warranties of Seller and Buyer set forth above in
this Paragraph 17, Seller agrees to pay all broker commissions due to CB
Commercial pursuant to a separate brokerage agreement between Seller and CB
Commercial and Buyer agrees to pay all brokerage commissions due to Oxford
Realty Services pursuant to a separate brokerage agreement between Buyer and
Oxford Realty Services.
18. No Other Representations. Buyer acknowledges that neither Seller nor anyone
acting, or purporting to act, on behalf of Seller, has, except as expressly set
forth in this Agreement, made any representation or warranty with respect to the
Property.
19. Successors and Assigns. Buyer may assign its rights under this Agreement
(including an assignment to an intermediary in a tax-free exchange) without the
prior consent of Seller, but such assignment shall not relieve or release Buyer
of its obligations under this Agreement. This Agreement shall be binding upon,
and shall inure to the benefit of, the parties hereto and their respective
successors and assigns.
20. FIRPTA.
(a) Section 1445 of the Internal Revenue Code of 1986, as amended (the
"Code") provides that a transferee of a United States real property interest
must withhold tax if the transferor is a foreign person. To inform Buyer that
withholding of tax is not required upon the disposition by Seller of a United
States real property interest, the undersigned parties executing this
Agreement on behalf of Seller hereby certify the following on behalf of
Seller:
(i) Seller is not a foreign corporation, foreign partnership,
foreign trust, or foreign estate (as those terms are defined in the Code and
Income Tax Regulations);
(ii) Seller's Social Security Numbers are:
Jerry L. Robinson: ###-##-####
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<PAGE>
Gene A. Good: ###-##-####
Robert J. Biondi: ###-##-####
and
(iii) Seller's office address is:
2758 Road 55
Bellefontaine, Ohio 43311
Seller, and the parties executing this Agreement on behalf of Seller, understand
that this certification may be disclosed to the Internal Revenue Service by
Buyer and that any false statement made here could be punished by fine,
imprisonment, or both. Under penalties of perjury, the undersigned parties
executing this Agreement on behalf of Seller declare that they have examined
this certification and to the best of their knowledge and belief, it is true,
correct and complete; and they further declare that they have authority to sign
this document on behalf of Seller.
(b) Seller, and the parties executing this Agreement on behalf of
Seller, shall deliver to Buyer at Closing, a restatement of the above
certifications of Seller and of the parties executing this Agreement on
behalf of Seller in the form attached to this Agreement as Exhibit I.
21. Notices.
(a) All notices, demands, requests or other communications from each
party to the other required or permitted under the terms of this Agreement
shall be in writing and, unless and until otherwise specified in a written
notice by the party to whom notice is intended to be given, shall be sent to
the parties at the following respective addresses:
if intended for Buyer:
Plymouth Meeting Executive Campus
620 West Germantown Pike
Suite 200
Plymouth Meeting, PA 19462
Attn: Stephen J. Butte
Fax: (610) 834-9560
if intended for Seller:
2758 Road 55
Bellefontaine, Ohio 43311
Fax: (937) 593-6582
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<PAGE>
Notices may be given on behalf of any party by its legal counsel.
(b) Each such notice, demand, request or other communication shall be
given (i) against a written receipt of delivery, or (ii) by registered or
certified mail of the United States Postal Service, return receipt requested,
postage prepaid, or (iii) by a nationally recognized overnight courier
service for next business day delivery, or (iv) via telecopier or facsimile
transmission to the facsimile number listed above, provided, however, that if
such communication is given via telecopier or facsimile transmission, an
original counterpart of such communication shall concurrently be sent in
either the manner specified in clause (i) or (iii) above.
(c) Each such notice, demand, request or other communication shall be
deemed to have been given upon the earliest of (i) actual receipt or refusal
by the addressee if sent pursuant to Section (b)(i) or (b)(iv) or (ii)
deposit thereof at any main or branch United States post office if sent in
accordance with section (b)(ii) above or (iii) deposit thereof with the
courier if sent pursuant to section (b)(iii) above.
22. Miscellaneous.
(a) Captions. The captions in this Agreement are inserted for
convenience of reference only; they form no part of this Agreement and shall
not affect its interpretation.
(b) Entire Agreement; Governing Law. This Agreement contains the entire
understanding of the parties with respect to the subject matter hereof,
supersedes all prior or other negotiations, representations, understandings
and agreements (including, without limitation, the letter of intent between
Seller and Buyer dated February 27, 1998) of, by or among the parties,
express or implied, oral or written, which are fully merged herein. The
express terms of this Agreement control and supersede any course of
performance and/or customary practice inconsistent with any such terms. Any
agreement hereafter made shall be ineffective to change, modify, discharge or
effect an abandonment of this Agreement unless such agreement is in writing
and signed by the party against whom enforcement of such change,
modification, discharge or abandonment is sought. This Agreement shall be
governed by and construed under the laws of the State of Ohio.
(c) Provisions Separable. The provisions of this Agreement are
independent of and separable from each other, and no provision shall be
affected or rendered invalid or
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<PAGE>
unenforceable by virtue of the fact that for any reason any other provision may
be invalid or unenforceable in whole or in part.
(d) Waiver of Tender of Deed and Purchase Monies. The tender of an
executed Deed by Seller and the tender by Buyer of the Purchase Price are
mutually waived, but nothing in this Agreement shall be construed as a waiver
of Seller's obligation to deliver the Deed and/or of the concurrent
obligation of Buyer to pay the portion of the Purchase Price payable at
Closing.
(e) Gender, etc. Words used in this Agreement, regardless of the number
and gender specifically used, shall be deemed and construed to include any
other number, singular or plural, and any other gender, masculine, feminine
or neuter, as the context indicates is appropriate.
(f) Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be deemed to be an original as against any
party whose signature appears thereon, and all of which shall together
constitute one and the same instrument. This Agreement shall be binding when
one or more counterparts hereof, individually or taken together, shall bear
the signatures of all of the parties reflected on this Agreement as the
signatories.
(g) Exhibits. All exhibits attached to this Agreement are incorporated
by reference into and made a part of this Agreement.
(h) No Waiver. Neither the failure nor any delay on the part of either
party to this Agreement to exercise any right, remedy, power or privilege
under this Agreement shall operate as a waiver thereof, nor shall any single
or partial exercise of any right, remedy, power or privilege preclude any
other or further exercise of the same or of any other right, remedy, power or
privilege, nor shall any waiver of any right, remedy, power or privilege with
respect to any occurrence be construed as a waiver of any such right, remedy,
power or privilege with respect to any other occurrence. No waiver shall be
effective unless it is in writing and is signed by the party asserted to have
granted such waiver.
(i) Interpretation. No provision of this Agreement is to be
interpreted for or against either party because that party or that party's
legal representative or counsel drafted such provision.
(j) Time. In computing the number of days for purposes of this
Agreement, all days shall be counted, including
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<PAGE>
Saturdays, Sundays and holidays; provided, however, that if the final day of any
time period provided in this Agreement shall end on a Saturday, Sunday or legal
holiday, then the final day shall extend to 5:00 p.m. of the next full business
day. For the purposes of this Section, the term "holiday" shall mean a day other
than a Saturday or Sunday on which banks in the State of Ohio are or may elect
to be closed.
(k) Attorney's Fees. In connection with any litigation arising out of
this Agreement, the prevailing party shall be entitled to recover all costs
incurred, including reasonable attorney's fees. However, the provisions of
this Section are expressly subject to the limitation on Buyer's liability
specified in Section 3.
(l) Buyer's Exercise of Right to Terminate. If Buyer desires to
terminate its obligations under this Agreement pursuant to any of the
provisions of this Agreement, Buyer shall do so by delivering written notice
of termination to Seller. Upon any such termination with respect to the
entire Property, the Deposit shall be paid to Buyer, and except as otherwise
expressly provided herein, this Agreement shall be and become null and void
and neither party shall have any further rights or obligations under this
Agreement. Upon any such termination which does not apply to the entire
Property, except as otherwise expressly provided herein, this Agreement shall
be and become null and void with respect to the Property which Buyer
terminated and neither party shall have any further rights or obligations
under this Agreement with respect to such Property.
(m) Survival. The representations, warranties and agreements of Seller
set forth in Sections 8 and 9 of this Agreement shall survive a termination
of this Agreement, or Closing for a period of 24 months, and thereafter shall
survive to the extent that Buyer shall have given to Seller written notice of
breach thereof. The obligations of Seller and Buyer pursuant to Sections 7,
10, 16, 17, 20, 21, 22(k), 22(n), 23 and 24 of this Agreement shall survive
Closing. Except as otherwise provided in the preceding two sentences of this
Section 22(m), the agreements of Seller and Buyer set forth in this Agreement
shall not survive Closing and shall merge into the delivery of the Deed at
Closing.
(n) Further Assurances. After Closing, each party shall execute,
acknowledge and deliver, for no further consideration but at the cost of the
requesting party, all documents and instruments as the other party may
reasonably request to further evidence or effectuate the purposes of this
Agreement.
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<PAGE>
23. Tax Free Exchange. Each of Seller and Buyer shall cooperate with the
other in effecting an exchange described in Section 1031 of the Internal
Revenue Code ("Tax Free Exchange"), provided, that: (a) the Tax Free Exchange
shall not impose additional financial or legal obligations in addition to
those set forth elsewhere in this Agreement; (b) neither Seller nor Buyer
shall have any obligation to take title to any exchange property; (c) the
exchanging party shall indemnify, defend and save and hold the other party
harmless of an from all expenses, liabilities, claims, losses or actions as a
result of participation in the Tax Free Exchange; and (d) the other party
shall have no obligation to modify any of the provisions of this Agreement to
effect the Tax Free Exchange. Buyer and Seller agree that Seller may
substitute an intermediary ("Intermediary") to act in place of Seller as the
seller of the Real Property. Intermediary shall be designated in writing by
Seller. Upon designation of Intermediary and upon Intermediary's written
assumption of Seller's obligations, Intermediary shall be substituted for
Seller for the sale of the Real Property; provided, however, that Seller
shall remain personally liable for all of the obligations of Seller pursuant
to this Agreement. Subject to Seller remaining personally liable, Buyer
agrees to accept the Real Property and all other required performance and any
escrow instructions from Intermediary and to render its performance of all of
its obligations to Intermediary. Buyer agrees that performance by
Intermediary will be treated as performance by Seller, and Seller agrees that
Buyer's performance to Intermediary will be treated as performance to Seller.
24. Reports. For the period of time commencing on the date of this Agreement
and continuing through the first anniversary of the Closing Date, and without
limitation of the other document production otherwise required of Seller
hereunder, Seller shall, from time to time, upon reasonable advance written
notice from Buyer, provide to Buyer and its representatives: (i) access to
all financial and other information pertaining to the period of Seller's
ownership and operation of the Property, which information is relevant and
reasonably necessary, in the opinion of Buyer's outside, third party
accountants ("Accountants") to enable Buyer and its 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 Securities and Exchange Commission (the
"Commission"), as applicable to Buyer; (b) any other rule issued by the
Commission and applicable to Buyer; and (c) any registration statement,
report or disclosure statement filed with the Commission by, or on behalf of
Buyer; and (ii) a representation letter, in form specified by, or otherwise
satisfactory to the Accountants, signed by the individual(s) responsible for
Seller's financial reporting, as prescribed by
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<PAGE>
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 Seller's financial statements.
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<PAGE>
IN WITNESS WHEREOF, intending to be legally bound, the parties have
executed this Agreement as a sealed instrument as of the day and year first
above written.
Witness: SELLER:
/s/ Jerry L. Robinson(SEAL)
Name: JERRY L. ROBINSON
Title: Partner
/s/ Gene A. Good(SEAL)
Name: GENE A. GOOD
Title: Partner
/s/ Robert J. Biondi(SEAL)
Name: ROBERT J. BIONDI
Title: Partner
BUYER:
AMERICAN REAL ESTATE INVESTMENT, L.P.
By: AMERICAN REAL ESTATE
INVESTMENT CORPORATION,
General Partner
By: /s/ Jeffrey E. Kelter
Name: Jeffrey E. Kelter
Title: President
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<PAGE>
Exhibit 10.4
REVOLVING CREDIT AGREEMENT
DATED AS OF APRIL 29, 1998
among
AMERICAN REAL ESTATE INVESTMENT, L.P.,
AMERICAN REAL ESTATE INVESTMENT CORPORATION
and
BANKBOSTON, N.A.,
DLJ CAPITAL FUNDING, INC.
and
OTHER LENDERS THAT MAY BECOME
PARTIES TO THIS AGREEMENT
and
BANKBOSTON, N.A.,
AS AGENT
<PAGE>
REVOLVING CREDIT AGREEMENT
THIS REVOLVING CREDIT AGREEMENT (this "Agreement") is made as of the
29th day of April, 1998, by and among AMERICAN REAL ESTATE INVESTMENT, L.P. , a
Delaware limited partnership ("Borrower"), AMERICAN REAL ESTATE INVESTMENT
CORPORATION, a Maryland corporation ("REA"), each having its principal place of
business at 620 West Germantown Pike, Plymouth Meeting, Pennsylvania 19462,
BANKBOSTON, N.A. ("BankBoston"), DLJ CAPITAL FUNDING, INC. ("DLJ") and the other
lending institutions that may become parties hereto pursuant to Section 18
(together with BankBoston and DLJ, the "Lenders"), and BANKBOSTON, N.A., as
Agent for the Lenders (the "Agent").
R E C I T A L S
WHEREAS, subject to and upon the terms and conditions set forth herein,
the Lenders are willing to make available to the Borrower the credit facilities
provided for herein;
NOW, THEREFORE, in consideration of the mutual covenants and agreements
contained herein, the parties hereto agree as follows:
Section 1 DEFINITIONS AND RULES OF INTERPRETATION.
Section 1.1 Definitions. The following terms shall have the meanings
set forth in this Section l or elsewhere in the provisions of this Agreement
referred to below:
Affiliate. As applied to any Person, (i) any other Person directly or
indirectly Controlling, Controlled by, or under common Control with such Person;
(ii) any officer, director, member, partner or shareholder of such Person; or
(iii) if such Person is an individual, any member of the immediate family
(including parents, spouse, children and siblings) of such individual, any trust
whose principle beneficiary is such individual or one or more members of the
immediate family of such individual and any Person who Controls, is Controlled
by or is under common Control with any such trust.
Agent. BankBoston, N.A., acting as administrative agent for the
Lenders, and its successors and assigns.
Agent's Head Office. The Agent's head office located at 100 Federal
Street, Boston, Massachusetts 02110, or at such other location as the Agent may
designate from time to time by notice to the Borrower and the Lenders.
Agreement. This Revolving Credit Agreement, including the Schedules and
Exhibits hereto.
Appraisal. An MAI appraisal of the value of a parcel of Real Estate,
determined on a fair value basis, performed by an independent appraiser selected
by the Agent who is not an employee of the Borrower, REA, the Guarantors, the
Agent or a Lender or any Affiliate of any thereof, the form and substance of
such appraisal and the identity of the appraiser to be in
<PAGE>
accordance with regulatory laws and policies (both regulatory and internal)
applicable to the Lenders and otherwise reasonably acceptable to the Agent.
Appraised Value. The fair value of a Mortgaged Property determined by
the most recent Appraisal or update obtained pursuant to Section 5.2, subject,
however, to such changes or adjustments to the value determined thereby as
provided in Section 5.2(d).
Assignment of Leases and Rents. Each of the assignments of leases and
rents from the Borrower, REA or a Guarantor to the Agent, pursuant to which
there shall be assigned to the Agent for the benefit of the Lenders a security
interest in the interest of the Borrower, REA or such Guarantor as lessor with
respect to all Leases of all or any part of each Mortgaged Property, each such
assignment to be substantially in the form of Exhibit A annexed hereto.
Balance Sheet Date. December 31, 1997.
BankBoston. As defined in the preamble.
Base Rate. The greater of (a) the fluctuating annual rate of interest
announced from time to time by the Agent at the Agent's Head Office as its "base
rate" or (b) one-half of one percent (0.5%) above the Federal Funds Effective
Rate (rounded upwards, if necessary, to the next one-eighth of one percent). Any
change in the rate of interest payable hereunder resulting from a change in the
Base Rate shall become effective as of the opening of business on the day on
which such change in the Base Rate becomes effective.
Base Rate Loans. Those Loans bearing interest calculated by reference
to the Base Rate.
Borrower. As defined in the preamble hereto.
Borrowing Base. At any time the Borrowing Base shall be the aggregate
for all Mortgaged Properties of the lesser of the following amounts as most
recently determined or calculated by the Agent for each Mortgaged Property: (a)
sixty-five percent (65%) of the Appraised Value of such Mortgaged Property, and
(b) sixty-five percent (65%) of the purchase price and ordinarily related
reasonable purchase transaction costs of such Mortgaged Property paid or to be
paid at or prior to the inclusion of such Mortgaged Property in the Collateral
by the Borrower, REA or a Guarantor, without deduction for depreciation, or if
developed by Borrower, REA or a Guarantor sixty-five percent (65%) of the
purchase price of the undeveloped land plus the completed construction costs
paid or to be paid at or prior to the inclusion of such Mortgaged Property in
the Collateral by the Borrower, REA or a Guarantor, determined in accordance
with GAAP, without deduction for depreciation, but at no time shall the
Borrowing Base for the Mortgaged Properties exceed the Debt Service Coverage
Amount for the Mortgaged Properties.
Building. With respect to each Mortgaged Property or parcel of Real
Estate, all of the buildings, structures and improvements now or hereafter
located thereon.
Business Day. Any day on which banking institutions located in the same
city and State as the Agent's Head Office are located are open for the
transaction of banking business and, in the case of Eurodollar Rate Loans, which
also is a Eurodollar Business Day.
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<PAGE>
Capital Event Proceeds. (i) Any proceeds resulting from the sale,
exchange, transfer, financing or refinancing of all or any portion of any
Mortgaged Property and (ii) any other extraordinary, non-recurring income
generated by any Mortgaged Property (other than rental loss or business
interruption proceeds with respect to any Mortgaged Property), in each case net
of reasonable transaction costs and/or reasonable amounts actually expended to
collect the same.
Capital Improvement Project. With respect to any Real Estate now or
hereafter owned or leased by the Borrower, REA, a Guarantor or any of their
respective Subsidiaries, capital improvements consisting of rehabilitation,
refurbishment, replacement and improvements to the existing Buildings on such
Real Estate which may be properly capitalized under GAAP.
Capital Improvement Reserve. With respect to any Real Estate now or
hereafter owned or leased by the Borrower, REA, any Guarantor or any of their
respective Subsidiaries, a reserve for Capital Improvement Projects, leasing
commissions and tenant improvements in an amount equal to (i) fifteen cents
($.15) multiplied by the Net Rentable Area contained therein for industrial
properties, (ii) seventy-five cents ($.75) multiplied by the Net Rentable Area
contained therein for office properties, (iii) twenty-five cents ($.25)
multiplied by the Net Rentable Area contained therein for any strip mall retail
shopping center that the Borrower may be permitted to acquire under Section 8.3
hereof and (iv) the amount reasonably determined by the Agent in its good faith
business judgment with respect to any other type of Real Estate that the
Majority Lenders may elect in their sole discretion to approve as Eligible Real
Estate in accordance with this Agreement.
Capitalized Lease. A lease under which the discounted future rental
payment obligations of the lessee or the obligor are required to be capitalized
on the balance sheet of such Person in accordance with GAAP.
CERCLA. See Section 6.20.
Closing Date. April 29, 1998.
Code. The Internal Revenue Code of 1986, as amended.
Collateral. All of the property, rights and interests of the Borrower,
REA and each Guarantor which are or are intended to be subject to the security
interests, security title, liens and mortgages created by the Security
Documents, including, without limitation, the Mortgaged Properties.
Commitment. With respect to each Lender, the amount set forth on
Schedule 1 hereto as the amount of such Lender's commitment to make or maintain
Loans to the Borrower, as the same may be changed from time to time in
accordance with the terms of this Agreement.
Commitment Percentage. With respect to each Lender, the percentage set
forth on Schedule 1 hereto as such Lender's percentage of the Total Commitment,
as the same may be changed from time to time in accordance with the terms of
this Agreement.
Compliance Certificate. See Section 7.4(c).
3
<PAGE>
Condemnation Proceeds. All compensation, awards, damages, rights of
action and proceeds awarded to the Borrower, REA or a Guarantor by reason of any
Taking, net of all reasonable amounts actually expended to collect the same.
Consolidated. With reference to any term defined herein, that term as
applied to the accounts of a Person and its Subsidiaries, determined on a
consolidated basis in accordance with GAAP.
Consolidated Operating Cash Flow. With respect to any Determination
Period of a Person, an amount equal to the Operating Cash Flow of such Person
and its Subsidiaries for such Determination Period determined on a consolidated
basis in accordance with GAAP.
Consolidated Tangible Net Worth. With respect to any Person, the
Tangible Net Worth of such Person and its Subsidiaries determined on a
consolidated basis in accordance with GAAP.
Consolidated Total Assets. With respect to any Person, the Total Assets
of such Person and its Subsidiaries determined on a consolidated basis in
accordance with GAAP.
Consolidated Total Liabilities. With respect to any Person, the Total
Liabilities of such Person and its Subsidiaries determined on a consolidated
basis in accordance with GAAP.
Construction Inspector. EMG, or another firm of professional engineers
or architects selected by the Agent and, so long as no Default or Event of
Default exists hereunder, reasonably acceptable to the Borrower.
Control (including, with correlative meanings, the terms "Controlling",
"Controlled by" and "under common Control with"). As applied to any Person, the
possession, directly or indirectly, of the power to direct or cause the
direction of the management and policies of that Person, whether through the
ownership of voting securities, ownership interests, by contract or otherwise.
Conversion/Continuation Request. A notice given by the Borrower to the
Agent of its election to convert or continue a Loan in accordance with Section
4.1.
Debt Service. For any Person and any Determination Period, the sum of
all interest (including capitalized interest) and mandatory principal payments
due and payable during such period in respect of any Indebtedness of such Person
excluding any balloon payments due upon maturity of any such Indebtedness.
Debt Service Coverage Amount. For the Mortgaged Properties, an amount
equal to the maximum principal loan amount which, when payable based on a 25
year mortgage style amortization schedule (expressed as a mortgage constant
percentage) and bearing interest at a rate per annum equal to the greater of (a)
the then current annual yield on ten (10) year obligations issued by the United
States Treasury most recently prior to the date of determination plus one and
three quarters percent (1.75%), and (b) the then applicable interest rate
payable on the Loans, could be paid by the monthly principal and interest
payment amount resulting from
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<PAGE>
dividing (x) the quotient obtained by dividing an amount equal to (i) the Net
Operating Income from the Mortgaged Properties for the preceding four fiscal
quarters minus (without duplication of any reserves included in Operating
Expenses for the Mortgaged Properties) the Capital Improvement Reserve for the
Mortgaged Properties by (ii) 1.30 by (y) 12. An example of the calculation of
the Debt Service Coverage Amount is set forth in Schedule 2 attached hereto. The
Debt Service Coverage Amount shall be determined by the Agent and such
determination may involve adjustments made by the Agent in the exercise of its
good faith business judgment to address either negative or positive factors
affecting the occupancy of a Mortgaged Property (such as Lease terminations and
new Leases) and any such determination, so long as the same shall be made by the
Agent in the exercise of its good faith business judgment, shall be conclusive
and binding absent manifest error.
Default. See Section 12.1.
Determination Period. Any period of time for which Debt Service, Gross
Cash Receipts, Interest Expense, Net Income (or Deficit), Net Operating Income,
Operating Cash Flow and/or Operating Expenses are being determined in accordance
with the terms of this Agreement.
Distribution. With respect to any Person, the declaration or payment of
any cash, dividend or distribution on or in respect of any shares of any class
of capital stock or other beneficial interest of such Person; the purchase,
redemption, exchange or other retirement by such Person of any shares of any
class of capital stock or other beneficial interest of such Person, directly or
indirectly through a Subsidiary of such Person or otherwise; the return of
capital by such Person to its shareholders or partners as such; or any other
distribution on or in respect of any shares of any class of capital stock or
other beneficial interest of such Person; provided, however, that the dividend
or distribution of common stock of a Person shall not constitute a Distribution
with respect to such Person.
DLJ. As defined in the preamble.
Dollars or $. Dollars in lawful currency of the United States of
America.
Domestic Lending Office. Initially, the office of each Lender
designated as such on Schedule 1 hereto; thereafter, such other office of such
Lender, if any, located within the United States that will be making or
maintaining Base Rate Loans.
Drawdown Date. The date on which any Loan is made or is to be made, and
the date on which any Loan which is made prior to the Maturity Date is converted
in accordance with Section 4.1.
Eligible Ground Lease. Any lease (a) which is a ground lease granted by
the fee owner of Real Estate (whether directly or by assignment) to the
Borrower, REA or a Guarantor, (b) which may be encumbered, transferred and/or
assigned without the consent of the lessor, (c) which has a remaining term
(including any renewal terms exercisable at the sole option of the lessee) of at
least 40 years or if less than 40 years, includes a provision acceptable to the
Agent pursuant to which the lessee has the right to obtain title to the fee
interest in the Real Estate from the lessor upon the payment of a nominal
purchase price, (d) under which no default has occurred and is
5
<PAGE>
continuing, and (e) which contains terms and conditions satisfactory to the
Agent including, without limitation, mortgagee protection provisions to the
effect that (i) the lessor shall notify any holder of a security interest in
such lease of the occurrence of any default by the lessee under such lease and
shall afford such holder a reasonable period of time to cure such default, (ii)
the lessor shall not terminate the lease because of a default by the lessee
thereunder during any period in which any holder of a security interest in such
lease is in the process of prosecuting remedies to obtain possession of the
leasehold estate in the Real Estate, and (iii) in the event that such lease is
terminated, any holder of a security interest in such lease shall have the
option to enter into a new lease with the lessor for the remainder of the term
thereof and having terms substantially identical to those contained in the
terminated lease.
Eligible Real Estate. Real Estate:
(a) which is owned in fee or leased pursuant to an Eligible
Ground Lease (or other ground lease acceptable to the Majority Lenders
in their sole discretion) by the Borrower, REA or a Guarantor;
(b) which is located within the contiguous 48 States of the
continental United States, excluding those States which prescribe a
"single-action" or similar rule limiting the rights of creditors
secured by real property, which exclusion shall apply, without
limitation, to the States of California and Washington except to the
extent such exclusion is waived in writing by the Majority Lenders with
respect to a specific parcel of Real Estate;
(c) which is improved by an office and/or industrial Building
or other income-producing Real Estate satisfactory to the Majority
Lenders (it being agreed that the property known as Urban Farms located
in Franklin Lakes, New Jersey is other income-producing Real Estate
which is satisfactory to the Majority Lenders under this clause (c));
(d) which is approved by the Majority Lenders in their sole
judgment;
(e) as to which all of the representations set forth in
Section 6 of this Agreement concerning Mortgaged Property are true and
correct;
(f) as to which the Agent has received all Eligible Real
Estate Qualification Documents;
(g) whose Borrowing Base does not exceed twenty percent (20%)
of the aggregate Borrowing Base of such Real Estate and all Mortgaged
Properties; and
(h) which, if added to the Collateral after January 1, 1999,
does not cause the aggregate Borrowing Base of the Mortgaged Properties
which are located in any one Metropolitan Statistical Area to equal or
exceed forty percent (40%) of the aggregate Borrowing Base of all of
the Mortgaged Properties.
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<PAGE>
Eligible Real Estate Qualification Documents. See Schedule 3 attached
hereto.
Employee Benefit Plan. Any employee benefit plan within the meaning of
Section 3(3) of ERISA maintained or contributed to by either of the Borrower or
any ERISA Affiliate, other than a Guaranteed Pension Plan or Multiemployer Plan.
Environmental Engineer. EMG or another firm of independent professional
engineers or other scientists generally recognized as expert in the detection,
analysis and remediation of Hazardous Substances and related environmental
matters and acceptable to the Agent and, so long as no Default or Event of
Default exists hereunder, reasonably acceptable to the Borrower
Environmental Laws. See Section 6.20(a).
Equity Offering. The issuance and sale after the Closing Date by the
Borrower, REA or any Guarantor of any equity securities of such Person.
ERISA. The Employee Retirement Income Security Act of 1974, as amended
and in effect from time to time.
ERISA Affiliate. Any Person which is treated as a single employer with
the Borrower, REA, the Guarantors or their respective Subsidiaries under Section
414 of the Code.
ERISA Reportable Event. A reportable event with respect to a Guaranteed
Pension Plan within the meaning of Section 4043 of ERISA and the regulations
promulgated thereunder as to which the requirement of notice has not been
waived.
Eurocurrency Reserve Rate. For any day with respect to a Eurodollar
Rate Loan, the maximum rate (expressed as a decimal) at which any Lender subject
thereto would be required to maintain reserves under Regulation D of the Board
of Governors of the Federal Reserve System (or any successor or similar
regulations relating to such reserve requirements) against "Eurocurrency
Liabilities" (as that term is used in Regulation D or any successor or similar
regulation), if such liabilities were outstanding. The Eurodollar Rate shall be
adjusted automatically on and as of the effective date of any change in the
Eurocurrency Reserve Rate.
Eurodollar Business Day. Any day on which commercial banks are open for
international business (including dealings in Dollar deposits) in London or such
other interbank eurodollar market as may be selected by the Reference Bank in
its sole discretion acting in good faith.
Eurodollar Lending Office. Initially, the office of each Lender
designated as such on Schedule 1 hereto; thereafter, such other office of such
Lender, if any, that shall be making or maintaining Eurodollar Rate Loans.
Eurodollar Rate. For any Interest Period with respect to a Eurodollar
Rate Loan, the rate per annum equal to the quotient (rounded upwards to the
nearest 1/16 of one percent) of (a) the rate at which the Reference Bank's
Eurodollar Lending Office is offered Dollar deposits three (3) Eurodollar
Business Days prior to the beginning of such Interest Period in whatever
interbank eurodollar market may be selected by the Reference Bank in its sole
discretion, acting in good
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faith, for delivery on the first day of such Interest Period for the number of
days comprised therein and in an amount comparable to the amount of the
Eurodollar Rate Loan to which such Interest Period applies, divided by (b) a
number equal to 1.00 minus the Eurocurrency Reserve Rate.
Eurodollar Rate Loans. Loans bearing interest calculated by reference
to a Eurodollar Rate.
Event of Default. See Section 12.1.
Federal Funds Effective Rate. For any day, the rate per annum equal to
the weighted average of the rates on overnight Federal funds transactions with
members of the Federal Reserve System arranged by Federal funds brokers, as
published for such day (or, if such day is not a Business Day, for the next
preceding Business Day) by the Federal Reserve Bank of New York, or, if such
rate is not so published the average of the quotations for such day on such
transactions received by the Agent from three (3) Federal funds brokers of
recognized standing selected by the Agent.
Funds from Operations. With respect to any Person for any fiscal
period, an amount equal to the Net Income (or Deficit) of such Person for such
period, computed in accordance with GAAP, excluding financing costs and gains
(or losses) from debt restructuring and sales of property, but including
depreciation and amortization and other non-cash items.
GAAP. Principles that are (a) consistent with the principles
promulgated or adopted by the Financial Accounting Standards Board and its
predecessors, as in effect from time to time and (b) consistently applied with
past financial statements of the Person adopting the same principles; provided
that a certified public accountant would, insofar as the use of such accounting
principles is pertinent, be in a position to deliver an unqualified opinion
(other than a qualification regarding changes in generally accepted accounting
principles) as to financial statements in which such principles have been
properly applied.
Gross Cash Receipts. Gross Cash Receipts shall mean with respect to a
Mortgaged Property the sum of cash received during any Determination Period by
or for the account of the Borrower, REA or the Guarantor which owns or leases
such Mortgaged Property in payment of the following items:
(a) rentals, including minimum or base rent, percentage rent,
and rent attributable to recovery of tenant improvements costs received
from tenants occupying space in such Mortgaged Property.
(b) all amounts paid by tenants under Leases with respect to
taxes and assessments imposed on such Mortgaged Property or in
reimbursement of Operating Expenses of such Mortgaged Property;
(c) parking revenues received in connection with the operation
of parking facilities at such Mortgaged Property; and
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(d) receipts from vending machines, recreational facilities
and any and all other operating revenues received from such Mortgaged
Property.
In the event that the Borrower, REA or a Guarantor receives a payment
of Gross Cash Receipts other than on a monthly basis, then for the purpose of
determining the Gross Cash Receipts for any Determination Period, only the
amount of such payment which relates to such Determination Period (as opposed to
a period either before or after such Determination Period) shall be included in
the calculation of Gross Cash Receipts for such Determination Period.
Any payment of Gross Cash Receipts received from a tenant of a
Mortgaged Property which is delinquent shall be applied to the oldest
outstanding delinquencies relating to such tenant.
If the Borrower, REA or a Guarantor shall receive cash by reason of
Insurance Proceeds, proceeds of rental loss or business interruption insurance
(except to the extent that such proceeds replace the rental payments which
otherwise would have been due to the Borrower or a Guarantor from tenants of a
Mortgaged Property), title insurance, the forfeiting by tenants of security or
other deposits (except the forfeiting by tenants of security or other deposits
to pay rent), Condemnation Proceeds, Capital Event Proceeds, or any other items
of income which are extraordinary or of a non-recurring nature, such amounts
shall not be included in Gross Cash Receipts. Gross Cash Receipts for any
Determination Period shall include that portion of any payments made by tenants
prior to or during such Determination Period to cancel their Leases which is
equal to the rent that would have otherwise been payable during such
Determination Period under such Leases, provided that if the space vacated by
any such tenant is subsequently re-let for all or any portion of a Determination
Period, any rent paid by the new tenant during such period shall be deemed
included in Gross Cash Receipts for such Determination Period and a
corresponding portion of any lease cancellation payment attributable to such
period shall not be included in Gross Cash Receipts for such period. Gross Cash
Receipts shall not include any amounts payable by tenants holding over pursuant
to expired or terminated Leases. With respect to tenants which are occupying a
Mortgaged Property pursuant to a month-to-month Lease, Gross Cash Receipts from
such Leases shall not exceed five percent (5%) of the aggregate Gross Cash
Receipts in any Determination Period. In addition, Gross Cash Receipts for any
Determination Period shall be reduced by such amount as may be required by the
Agent as a result of negative factors affecting the occupancy of a Mortgaged
Property during such Determination Period and/or the fiscal quarter immediately
following such period as determined by the Agent in its good faith business
judgment, such as defaults by tenants under Leases, potential set-off against
rent, landlord concessions which become effective following a Determination
Period or anticipated or actual lease terminations or expirations. For example
(but without limiting the generality of the foregoing), in the event that a
Lease is scheduled to terminate in the fiscal quarter immediately following a
Determination Period, the Agent may exclude all Gross Cash Receipts received
pursuant to such Lease for such Determination Period. Any such reduction in
Gross Cash Receipts as a result of terminated or expired Leases, or Leases which
are due to terminate or expire, shall be offset by such amount as may be
approved by the Agent in its good faith business judgment as a result of
executed Leases for the premises covered by the terminated or expired Lease.
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Gross Cash Receipts shall be determined on the basis of sound cash
basis accounting practices applied on a consistent basis.
Guaranteed Pension Plan. Any employee pension benefit plan within the
meaning of Section 3(2) of ERISA maintained or contributed to by the Borrower,
REA or a Guarantor or any ERISA Affiliate the benefits of which are guaranteed
on termination in full or in part by the PBGC pursuant to Title IV of ERISA,
other than a Multiemployer Plan.
Guarantors. Each wholly-owned Subsidiary of the Borrower owning a
Mortgaged Property which becomes a Guarantor in accordance herewith.
Guaranty. Each Unconditional Guaranty of Payment and Performance which
is required to be executed and delivered to the Agent by a Guarantor pursuant to
Section 5.3 hereof; and pursuant to which such Guarantor guarantees the
Obligations to the extent provided therein, each such guaranty to be
substantially in the form of Exhibit B annexed hereto.
Hazardous Substances. See Section 6.20(b).
Indebtedness. All obligations, contingent and otherwise, that in
accordance with GAAP should be classified upon a Person's balance sheet as
liabilities, or to which reference should be made by footnotes thereto,
including in any event and whether or not so classified: (a) all debt and
similar monetary obligations, whether direct or indirect (including, without
limitation, any obligations evidenced by bonds, debentures, notes or similar
debt instruments and all subordinated debt); (b) all liabilities secured by any
mortgage, pledge, security interest, lien, charge or other encumbrance existing
on property owned or acquired subject thereto, whether or not the liability
secured thereby shall have been assumed; (c) all guarantees, endorsements and
other contingent obligations whether direct or indirect in respect of
indebtedness of others, including any obligation to supply funds to or in any
manner to invest directly or indirectly in a Person, to purchase indebtedness,
or to assure the owner of indebtedness against loss through an agreement to
purchase goods, supplies or services for the purpose of enabling the debtor to
make payment of the indebtedness held by such owner or otherwise, and the
obligation to reimburse the issuer in respect of any letter of credit; (d) any
obligation as a lessee or obligor under a Capitalized Lease; and (e) a Person's
pro rata share of any of the above-described obligations of its unconsolidated
Affiliates.
Indemnity Agreements. Each of the Indemnity Agreements Regarding
Hazardous Materials now or hereafter made by the Borrower, REA or a Guarantor in
favor of the Agent and the Lenders, pursuant to which the Borrower, REA and each
Guarantor agree to indemnify the Agent and the Lenders with respect to Hazardous
Substances and Environmental Laws, each such agreement to be substantially in
the form of Exhibit C annexed hereto.
Insurance Proceeds. All insurance proceeds, damages, claims and rights
of action and the right thereto under any insurance policies relating to any
portion of any Collateral, net of all reasonable amounts actually expended to
collect the same.
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Interest Expense. For any Determination Period, the sum of all interest
(including capitalized interest) due and payable during such Determination
Period by the Borrower, REA, each Guarantor and their respective Subsidiaries on
a consolidated basis during such Determination Period.
Interest Payment Date. (a) As to each Loan, the first (1st) day of each
calendar month during the term of such Loan, and (b) also as to each Eurodollar
Rate Loan, the last day of each Interest Period relating thereto.
Interest Period. With respect to each Eurodollar Rate Loan (a)
initially, the period commencing on the Drawdown Date of such Eurodollar Rate
Loan and ending one, two or three months thereafter, and (b) thereafter, each
period commencing on the day following the last day of the next preceding
Interest Period applicable to such Loan and ending on the last day of one of the
periods set forth above, as selected by the Borrower in a Loan Request or
Conversion/Continuation Request; provided that all of the foregoing provisions
relating to Interest Periods are subject to the following:
(A) if any Interest Period with respect to a Eurodollar Rate
Loan would otherwise end on a day that is not a Eurodollar Business
Day, such Interest Period shall end on the next succeeding Eurodollar
Business Day, unless such next succeeding Eurodollar Business Day
occurs in the next calendar month, in which case such Interest Period
shall end on the next preceding Eurodollar Business Day, as determined
conclusively by the Reference Bank in accordance with the then current
bank practice in the applicable Eurodollar interbank market; and (B) if
the Borrower shall fail to give notice as provided in Section 4.1, the
Borrower shall be deemed to have requested a conversion of the affected
Eurodollar Rate Loan to a Base Rate Loan on the last day of the then
current Interest Period with respect thereto; and
(B) no Interest Period relating to any Eurodollar Rate Loan
shall extend beyond the Maturity Date.
Investments. With respect to any Person, all shares of capital stock,
evidences of Indebtedness and other securities issued by any other Person and
owned by such Person, all loans, advances, or extensions of credit to, or
contributions to the capital of, any other Person, all purchases of the
securities or business or integral part of the business of any other Person and
commitments and options to make such purchases, all interests in real property,
and all other investments; provided, however, that the term "Investment" shall
not include (i) equipment, inventory and other tangible personal property
acquired in the ordinary course of business, or (ii) current trade and customer
accounts receivable for services rendered in the ordinary course of business and
payable in accordance with customary trade terms. In determining the aggregate
amount of Investments outstanding at any particular time: (a) there shall be
included as an Investment all interest accrued with respect to Indebtedness
constituting an Investment unless and until such interest is paid; (b) there
shall be deducted in respect of each Investment any amount received as a return
of capital; (c) there shall not be deducted in respect of any Investment any
amounts received as earnings on such Investment, whether as dividends, interest
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or otherwise, except that accrued interest included as provided in the foregoing
clause (a) may be deducted when paid; and (d) there shall not be deducted in
respect of any Investment any decrease in the value thereof.
Lease Summaries. Summaries of the material terms of the Leases. Such
Lease Summaries shall be in form and substance reasonably satisfactory to the
Agent.
Leases. Leases, licenses and agreements, whether written or oral,
relating to the use or occupation of space in any Building or of any Real
Estate.
Lenders. BankBoston, DLJ and any other Person which becomes an assignee
of any rights of a Lender pursuant to Section 18 (but not including any
participant as described in Section 18).
Loan Documents. This Agreement, the Notes, the Security Documents and
all other documents, instruments or agreements now or hereafter executed or
delivered by or on behalf of the Borrower, REA or any Guarantor in connection
with the Loans.
Loan Request. See Section 2.6.
Loans. The aggregate Loans to be made by the Lenders hereunder.
Majority Lenders. As of any date, the Lender or Lenders whose aggregate
Commitment Percentage is equal to or greater than 66 2/3%.
Management Agreements. Agreements, whether written or oral, providing
for the management of the Mortgaged Properties or any of them.
Maturity Date. April 29, 2001 or such earlier date on which the Loans
shall become due and payable pursuant to the terms hereof.
Metropolitan Statistical Area. A geographic area designated as a
"Metropolitan Statistical Area" by the United States Office of Management and
Budget and included in published standards that are applied to data promulgated
by the United States Census Bureau.
Minority Interest. As to any Person, an ownership or other equity
investment in any other Person, which investment is not consolidated with the
accounts of such Person in accordance with GAAP.
Minimum Tangible Net Worth. At any time, the sum of (a) the greater of
$100,000,000 and the Consolidated Tangible Net Worth of the Borrower as of the
Closing Date plus (b) eighty percent (80%) of the aggregate net proceeds
received by the Borrower, REA or any other Guarantor after the Closing Date in
connection with any Equity Offering to any other Person.
Mortgaged Property or Mortgaged Properties. The Eligible Real Estate
owned by the Borrower, REA or a Guarantor which is security for the Obligations
pursuant to the Mortgages.
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Mortgages. The Mortgages, Deeds to Secure Debt and/or Deeds of Trust
from the Borrower, REA or a Guarantor to the Agent for the benefit of the
Lenders (or to trustees named therein acting on behalf of the Agent for the
benefit of the Lenders), pursuant to which the Borrower, REA or a Guarantor has
conveyed or granted a mortgage lien upon or a conveyance in fee simple of a
Mortgaged Property as security for the Obligations, each such mortgage to be
substantially in the form of Exhibit D annexed hereto.
Multiemployer Plan. Any multiemployer plan within the meaning of
Section 3(37) of ERISA maintained or contributed to by the Borrower, REA or any
ERISA Affiliate.
Net Income (or Deficit). With respect to any Person (or any asset of
any Person) for any Determination Period, the Net Income (or Deficit) of such
Person (or attributable to such asset), after deduction of all expenses, taxes
and other proper charges, determined in accordance with GAAP. The Net Income (or
Deficit) of a Person shall include, without duplication, the allocable share of
the Net Income (or Deficit) of any other Person in which a Minority Interest is
owned by such Person based on the ownership of such Person in such other Person.
Net Operating Income. For any Determination Period for a Mortgaged
Property, the sum of Gross Cash Receipts from such Mortgaged Property for such
Determination Period less Operating Expenses of such Mortgaged Property for such
Determination Period.
Net Rentable Area. With respect to any Real Estate, the floor area of
any buildings, structures or improvements available for leasing to tenants
determined in accordance with the Rent Roll for such Real Estate, the manner of
such determination to be reasonably consistent for all Real Estate of the same
type unless otherwise approved by the Agent.
Nomura Indebtedness. The obligations of FLIP/BRE, INC., a New Jersey
corporation ("FLIP"), OIP/BRE, L.L.C., a New Jersey limited liability company
("OIP"), MBP/BRE, L.L.C., a New Jersey limited liability company ("MBP"), and
NJA/BRE, L.L.C., a New Jersey limited liability company ("NJA" and, together
with FLIP, OIP and MBP, the "Nomura Borrowers") to Nomura Asset Capital
Corporation ("Nomura") pursuant to the Loan Agreement dated as of September 22,
1997 among Nomura and the Nomura Borrowers.
Non-recourse Indebtedness. Indebtedness of a Person which is secured by
Real Estate (other than the Mortgaged Properties) and related personal property
or interests therein and is not a general obligation of such Person, the holder
of such Indebtedness having recourse solely to the Real Estate and related
personal property or interests therein securing such Indebtedness, the Building
and Leases thereon and the rents and profits thereof. The loan documents
relating to such Non-recourse Indebtedness may contain customary exceptions to
the limitation on recourse to such Person and its partners or other principals
and still be considered as Non-recourse Indebtedness for the purposes hereof.
Notes. See Section 2.4.
Notice. See Section 19.
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Obligations. All indebtedness, obligations and liabilities of the
Borrower, REA or any Guarantor to any of the Lenders or the Agent, individually
or collectively, under this Agreement or any of the other Loan Documents or in
respect of any of the Loans or the Notes, or other instruments at any time
evidencing any of the foregoing, whether existing on the date of this Agreement
or arising or incurred hereafter, direct or indirect, joint or several, absolute
or contingent, matured or unmatured, liquidated or unliquidated, secured or
unsecured, arising by contract, operation of law or otherwise.
Operating Cash Flow. With respect to any Person (or any asset of any
Person), for any Determination Period, an amount equal to the sum of (a) the Net
Income of such Person (or attributable to such asset) for such Determination
Period plus (b) depreciation and amortization, Interest Expense and any
extraordinary or non-recurring losses deducted in calculating such Net Income
minus (c) any extraordinary or non-recurring gains included in calculating such
Net Income minus (d) any Capital Improvement Reserve attributable to such asset
for such Determination Period, all as determined in accordance with GAAP. In the
event that a Person has a Minority Interest in any other Person, then the
Operating Cash Flow of such Person shall include, without duplication, the
allocable share of the Operating Cash Flow of such other Person, based on the
ownership interest of such Person in such other Person.
Operating Expenses. Operating Expenses shall mean with respect to a
Mortgaged Property during any Determination Period, the sum of the following:
(a) all taxes and assessments imposed upon such Mortgaged
Property actually paid by or on behalf of the Borrower, REA or a
Guarantor during such Determination Period;
(b) the amounts paid by or on behalf of the Borrower, REA or a
Guarantor during such Determination Period on account of insurance
premiums for insurance carried in connection with such Mortgaged
Property or the ownership and operation thereof, and deductible amounts
expended during such Determination Period by the Borrower, REA or a
Guarantor and not reimbursed under any such insurance;
(c) expenses paid by or on behalf of the Borrower, REA or a
Guarantor during such Determination Period for the operation, cleaning,
marketing, leasing, maintenance, repair and replacement of such
Mortgaged Property properly chargeable against income according to
GAAP; and
(d) an amount approved by the Agent and actually funded as a
reasonable reserve for expenses relating to such Mortgaged Property by
the Borrower, REA or a Guarantor, which are not payable on a regular
basis during such Determination Period (including, but not limited to,
taxes and insurance), but excluding any amounts paid from funded
reserves.
For the purposes of this Agreement, Operating Expenses shall not
include any of the following:
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(i) foreign, U.S., state, and local income taxes, franchise
taxes or other taxes based on income imposed on the Borrower, REA or
any Guarantor generally and not as owner of a Mortgaged Property;
(ii) depreciation and any other non-cash expenditures of the
Borrower, REA or any Guarantor for income tax purposes;
(iii) the cost of any improvements to a Mortgaged Property of
a capital nature (as determined in accordance with GAAP);
(iv) any expense paid in connection with the sale of all or
any part of a Mortgaged Property or any interest therein;
(v) any costs, expenses, fees, commissions or other
compensation paid by or on behalf of the Borrower, REA or any Guarantor
in connection with the renovation, improvement or development of a
Mortgaged Property except as provided in clause (c) of this definition;
and
(vi) any payment of principal or interest under the Notes or
other fees or charges payable under this Agreement or the other Loan
Documents.
Operating Expenses shall be determined on the basis of sound cash basis
accounting practices applied on a consistent basis, modified as described above.
Outstanding. With respect to the Loans, the aggregate unpaid principal
thereof as of any date of determination.
PBGC. The Pension Benefit Guaranty Corporation created by Section 4002
of ERISA and any successor entity or entities having similar responsibilities.
Permitted Liens. Liens, security interests and other encumbrances
permitted by Section 8.2.
Person. Any individual, corporation, limited liability company,
partnership, trust, unincorporated association, business, or other legal entity,
and any government or any governmental agency or political subdivision thereof.
Personal Property. All fixtures, machinery, equipment, furniture,
furnishings, inventory, building supplies, appliances and other articles of
personal property, including, but not limited to, all vehicles, books, gas and
electric fixtures, radiators, heaters, furnaces, engines and machinery, boilers,
ranges, ovens, elevators and motors, bathtubs, sinks, commodes, basins, pipes,
faucets and other plumbing, heating and air conditioning equipment, mirrors,
refrigerating plant, refrigerators, iceboxes, dishwashers, carpeting, floor
coverings, furniture, light fixtures, signs, lawn equipment, water heaters, and
cooking apparatus and appurtenances, and all other fixtures and equipment now or
hereafter owned by the Borrower, REA or any Guarantor and located in, on or
about, and used or intended to be used primarily with or in connection with the
use, operation, or enjoyment of, any Mortgaged Property, whether installed in
such a way as to become a part thereof or not, including all extensions,
additions, improvements, betterments, renewals and replace-
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ments of any of the foregoing and all the right, title and interest of the
Borrower, REA or any Guarantor in and to any of the foregoing now owned or
hereafter acquired by the Borrower, REA or any Guarantor.
Potential Collateral. Any property of the Borrower, REA or a Guarantor
which is not at the time included in the Collateral and which consists of (i)
Eligible Real Estate, or (ii) Real Estate which is capable of becoming Eligible
Real Estate through the approval of the Majority Lenders and the completion and
delivery of Eligible Real Estate Qualification Documents.
Project Approvals. See Section 6.24(f).
REA. As defined in the preamble hereto.
Real Estate. All real property at any time owned or leased (as lessee
or sublessee) by the Borrower, REA, any Guarantor or any of their respective
Subsidiaries, including, without limitation, the Mortgaged Properties.
Record. The grid attached to any Note, or the continuation of such
grid, or any other similar record, including computer records, maintained by any
Lender with respect to any Loan referred to in such Note.
Reference Bank. The Agent.
Register. See Section 18.2.
REIT Status. With respect to REA, its status as a real estate
investment trust as defined in Section 856(a) of the Code.
Release. See Section 6.20(c)(iii).
Rent Roll. A report prepared by the Borrower, REA or a Guarantor
showing for each Mortgaged Property owned or leased by it, its occupancy, lease
expiration dates, lease rent and other information in substantially the form
presented to the Lenders prior to the date hereof or in such other form as may
have been approved by the Agent.
Requirements. See Section 6.24(e).
Security Documents. The Mortgages, the Assignments of Leases and Rents,
the Indemnity Agreements, UCC-1 financing statements and any further collateral
assignments to the Agent for the benefit of the Lenders.
Short-term Investments. Investments described in subsections (a)
through (g), inclusive, of Section 8.3. For all purposes of this Agreement and
the other Loan Documents, the value of Short-term Investments at any time shall
be the current market value thereof determined in a manner reasonably
satisfactory to the Agent.
State. A state of the United States of America.
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Subordination, Attornment and Non-Disturbance Agreement. An agreement
among the Agent, the Borrower, REA or a Guarantor and a tenant under a Lease
pursuant to which such tenant agrees to subordinate its rights under the Lease
to the lien or security title of the applicable Mortgage and agrees to recognize
the Agent or its successor in interest as landlord under the Lease in the event
of a foreclosure under such Mortgage, and the Agent agrees to not disturb the
possession of such tenant, such agreement to be substantially in the form of
Exhibit E annexed hereto.
Subsidiary. Any corporation, association, partnership, trust, or other
business entity of which the designated parent shall at any time own directly or
indirectly through a Subsidiary or Subsidiaries greater than fifty percent (50%)
(by number of votes or controlling interests) of the outstanding voting
interests or other economic interest, or any other entity the accounts of which
are consolidated with the parent.
Survey. An instrument survey of each parcel of Mortgaged Property
prepared by a registered land surveyor which shall show the location of all
buildings, structures, easements and utility lines on such property, shall be
sufficient to remove the standard survey exception from the Title Policy, shall
show that all buildings and structures are within the lot lines of the Mortgaged
Property and shall not show any encroachments by others (or to the extent any
encroachments are shown, such encroachments shall be acceptable to the Agent in
its sole discretion), shall show rights of way, adjoining sites, establish
building lines and street lines, the distance to and names of the nearest
intersecting streets and such other details as the Agent may reasonably require;
and shall show whether or not the Mortgaged Property is located in a flood
hazard district as established by the Federal Emergency Management Agency or any
successor agency or is located in any flood plain, flood hazard or wetland
protection district established under federal, state or local law and shall
otherwise be in form and substance reasonably satisfactory to the Agent.
Surveyor Certification. With respect to each parcel of Mortgaged
Property, a certificate executed by the surveyor who prepared the Survey with
respect thereto, dated as of a recent date and containing such information
relating to such parcel as the Agent or the Title Insurance Company may
reasonably require, such certificate to be reasonably satisfactory to the Agent
in form and substance.
Taking. The taking or appropriation (including by deed in lieu of
condemnation) of any Mortgaged Property, or any part thereof or interest
therein, for public or quasi-public use under the power of eminent domain, by
reason of any public improvement or condemnation proceeding, or in any other
manner or any damage or injury or diminution in value through condemnation,
inverse condemnation or other exercise of the power of eminent domain.
Tangible Net Worth. With respect to any Person, the amount by which the
Total Assets of such Person exceeds the Total Liabilities of such Person, less
the sum of:
(a) the total book value of all assets of such Person properly
classified as intangible assets under GAAP, including such items as
good will, the purchase price of acquired assets in excess of the fair
market value thereof, trademarks,
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trade names, service marks, brand names, copyrights, patents and
licenses, and rights with respect to the foregoing; plus
(b) all amounts representing any write-up in the book value of
any assets of such Person resulting from a revaluation thereof
subsequent to the Balance Sheet Date.
Title Insurance Company. First American Title Insurance Company,
Stewart Title Insurance Company and/or any other title insurance company or
companies approved by the Agent and the Borrower.
Title Policy. With respect to each parcel of Mortgaged Property, an
ALTA standard form title insurance policy (or, if such form is not available, an
equivalent, legally promulgated form of mortgagee title insurance policy
reasonably acceptable to the Agent) issued by a Title Insurance Company (with
such reinsurance as the Agent may reasonably require, any such reinsurance to be
with direct access endorsements to the extent available under applicable law) in
an amount as the Agent may reasonably require (but in no event exceeding the
Appraised Value of such Mortgaged Property) insuring the priority of the
Mortgage thereon and that the Borrower, REA or a Guarantor holds marketable fee
simple title to or a valid and subsisting leasehold interest in such parcel,
subject only to the encumbrances permitted by the Mortgage and which shall not
contain standard exceptions for mechanics liens, persons in occupancy (other
than tenants as tenants only under Leases) or matters which would be shown by a
survey, shall not insure over any matter except to the extent that any such
affirmative insurance is acceptable to the Agent in its sole discretion, and
shall contain (a) a revolving credit endorsement and (b) such other endorsements
and affirmative insurance as the Agent may reasonably require and is available
in the State in which the Real Estate is located, including but not limited to
(i) a comprehensive endorsement, (ii) a variable rate of interest endorsement,
(iii) a usury endorsement (if the Lenders have not received a satisfactory
opinion regarding usury from counsel satisfactory to the Lenders), (iv) a doing
business endorsement, (v) an ALTA form 3.1 zoning endorsement (in States where
same is available from the Title Insurance Company without an opinion of counsel
concerning such matters and where other evidence of zoning compliance has not
been delivered to the Agent in the Agent's good faith business judgment), (vi) a
"tie-in" endorsement relating to all Title Policies issued by such Title
Insurance Company in respect of other Mortgaged Property and (vii) a "first
loss" endorsement.
Total Assets. With respect to any Person, all assets of such Person
determined in accordance with GAAP. All real estate assets shall be valued on an
undepreciated cost basis. In the event that a Person has a Minority Interest in
any other Person, then the Total Assets of such Person shall include, without
duplication, the allocable share of the Total Assets of such other Person, based
on the ownership interest of such Person in such other Person.
Total Commitment. The sum of the Commitments of the Lenders, as in
effect from time to time. On the Closing Date, the Total Commitment shall be
$150,000,000.
Total Liabilities. With respect to any Person, all liabilities of such
Person determined in accordance with GAAP and, without duplication, all
Indebtedness of such Person, whether or not
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so classified. In the event that a Person has a Minority Interest in any other
Person, then the Total Liabilities of such Person shall include, without
duplication, the allocable share of the Total Liabilities of such other Person,
based on the ownership interest of such Person in such other Person.
Type. As to any Loan, its nature as a Base Rate Loan or a Eurodollar
Rate Loan.
Under Development. Any Real Estate shall be considered Under
Development until such time as (a) a certificate of occupancy (or, to the extent
a certificate of occupancy is not available in the jurisdiction in which such
Real Estate is located, an equivalent certificate or other evidence satisfactory
to the Agent) has been obtained, and (b) the Gross Cash Receipts from the
operation of such Real Estate shall have been not less than the Operating
Expenses of such Real Estate for three (3) consecutive months (including a
reserve (in an amount reasonably satisfactory to the Agent) for any expenses not
payable during such period, such as taxes and insurance).
Section 1.2 Rules of Interpretation. (a) A reference to any document or
agreement shall include such document or agreement as amended, modified or
supplemented from time to time in accordance with its terms and the terms of
this Agreement.
(b) The singular includes the plural and the plural includes the
singular.
(c) A reference to any law includes any amendment or modification of
such law.
(d) A reference to any Person includes its permitted successors and
permitted assigns.
(e) Accounting terms not otherwise defined herein have the meanings
assigned to them by GAAP applied on a consistent basis by the accounting entity
to which they refer.
(f) The words "include", "includes" and "including" are not limiting.
(g) The words "approval" and "approved", as the context requires, means
an approval in writing given to the party seeking approval after full and fair
disclosure to the party giving approval of all material facts necessary in order
to determine whether approval should be granted.
(h) All terms not specifically defined herein or by GAAP, which terms
are defined in the Uniform Commercial Code as in effect in the State of New
York, have the meanings assigned to them therein.
(i) Reference to a particular "Section ", refers to that section of
this Agreement unless otherwise indicated.
(j) The words "herein", "hereof", "hereunder" and words of like import
shall refer to this Agreement as a whole and not to any particular section or
subdivision of this Agreement.
Section 2 THE REVOLVING CREDIT FACILITY.
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Section 2.1 Commitment to Lend. Subject to the terms and conditions set
forth in this Agreement, each of the Lenders severally agrees to lend to the
Borrower, and the Borrower may borrow (and repay and reborrow) from time to time
between the Closing Date and the Maturity Date upon notice by the Borrower to
the Agent given in accordance with Section 2.6, such sums as are requested by
the Borrower for the purposes set forth in Section 2.8 up to a maximum aggregate
principal amount outstanding (after giving effect to all amounts requested) at
any one time equal to the lesser of (a) such Lender's Commitment and (b) such
Lender's Commitment Percentage of the Borrowing Base; provided, that, in all
events no Default or Event of Default shall have occurred and be continuing; and
provided, further, that the outstanding principal amount of the Loans (after
giving effect to all amounts requested) shall not at any time exceed the Total
Commitment or cause a violation of the covenant set forth in Section 9.1. The
Loans shall be made pro rata in accordance with each Lender's Commitment
Percentage. Each request for a Loan hereunder shall constitute a representation
and warranty by the Borrower that all of the conditions set forth in Section 10
and Section 11 have been satisfied on the date of such request.
Section 2.2 Facility Fee. The Borrower agrees to pay to the Agent for
the account of the Lenders in accordance with their respective Commitment
Percentages a facility fee calculated at the rate per annum of one quarter of
one percent (0.25%) on the average daily amount by which the Total Commitment
exceeds the outstanding principal amount of Loans during each calendar quarter
or portion thereof commencing on the date hereof and ending on the Maturity
Date. The facility fee shall be payable quarterly in arrears on the first day of
each calendar quarter for the immediately preceding calendar quarter or portion
thereof, on any earlier date on which the applicable Commitments shall be
reduced and on the Maturity Date.
Section 2.3 Reduction and Termination of Commitments. The Borrower
shall have the right at any time and from time to time upon five (5) Business
Days' prior written notice to the Agent to reduce by $5,000,000 or an integral
multiple of $1,000,000 in excess thereof (provided that in no event shall the
Total Commitment be reduced in such manner to an amount less than $75,000,000)
or to terminate entirely the unborrowed portion of the Commitments, whereupon
the Commitments of the Banks shall be reduced pro rata in accordance with their
respective Commitment Percentages of the amount specified in such notice or, as
the case may be, terminated, any such termination or reduction to be without
penalty except as otherwise set forth in Section 4.8; provided, however, that no
such termination or reduction shall be permitted if, after giving effect
thereto, the Outstanding Loans would exceed the Commitments of the Lenders as so
terminated or reduced. Promptly after receiving any notice from the Borrower
delivered pursuant to this Section 2.3, the Agent will notify the Lenders of the
substance thereof. Upon the effective date of any such reduction or termination,
the Borrower shall pay to the Agent for the respective accounts of the Lenders
the full amount of any facility fee under Section 2.2 then accrued on the amount
of the reduction. No reduction or termination of the Commitment may be
reinstated.
Section 2.4 Notes. The Loans shall be evidenced by separate promissory
notes of the Borrower in substantially the form of Exhibit F hereto
(collectively, the "Notes"), dated the Closing Date (except as otherwise
provided in Section 18.3) and completed with appropriate insertions. One Note
shall be payable to the order of each Lender in the principal amount equal to
such Lender's Commitment or, if less, the outstanding amount of all Loans made
by such Lender, plus interest accrued thereon, as set forth below. The Borrower
irrevocably authorizes each Lender to
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make or cause to be made, at or about the time of the Drawdown Date of any Loan
or the time of receipt of any payment of principal thereof, an appropriate
notation on such Lender's Record reflecting the making of such Loan or (as the
case may be) the receipt of such payment. The outstanding amount of the Loans
set forth on such Lender's Record shall be prima facie evidence of the principal
amount thereof owing and unpaid to such Lender, but the failure to record, or
any error in so recording, any such amount on such Lender's Record shall not
limit or otherwise affect the obligations of the Borrower hereunder or under any
Note to make payments of principal of or interest on any Note when due.
Section 2.5 Interest on Loans. (a) Each Base Rate Loan shall bear
interest for the period commencing with the Drawdown Date thereof and ending on
the date on which such Base Rate Loan is repaid or converted to a Eurodollar
Rate Loan at the rate per annum equal to the Base Rate.
(b) Each Eurodollar Loan shall bear interest for the period commencing
with the Drawdown Date thereof and ending on the last day of each Interest
Period with respect thereto at the rate per annum equal to the sum of the
Eurodollar Rate determined for such Interest Period plus one and six hundred
twenty five thousandths percent (1.625%).
(c) The Borrower promises to pay interest on each Loan in arrears (i)
on each Interest Payment Date with respect thereto, (ii) upon any prepayment of
the Loans (to the extent accrued on the amount being prepaid to the date of
prepayment) and (iii) at maturity of the Loans.
(d) Base Rate Loans and Eurodollar Loans may be converted to Loans of
the other Type as provided in Section 4.1.
Section 2.6 Requests for Loans. The Borrower shall give to the Agent
written notice in the form of Exhibit G hereto (or telephonic notice confirmed
in writing in the form of Exhibit G hereto) of each Loan requested hereunder (a
"Loan Request") no less than one (1) Business Day prior to the proposed Drawdown
Date with respect to Base Rate Loans and three (3) Business Days prior to the
proposed Drawdown Date with respect to Eurodollar Rate Loans. Each such notice
shall specify with respect to the requested Loan the proposed principal amount
of such Loan, the Type of Loan, the initial Interest Period (if applicable) for
such Loan and the Drawdown Date. Each such notice shall also contain (i) a
general statement as to the purpose for which such advance shall be used (which
purpose shall be in accordance with the terms of Section 2.8), (ii) a
certification by the chief financial officer or chief accounting officer of the
Borrower that the Borrower, REA and the Guarantors are and will be in compliance
with all covenants under the Loan Documents after giving effect to the making of
such Loan, and (iii) a Compliance Certificate prepared using the financial
statements of REA most recently provided or required to be provided to the Agent
under Section 6.4 or Section 7.4 adjusted in the best good faith estimate of the
Borrower to give effect to the proposed advance. Promptly upon receipt of any
such notice, the Agent shall notify each of the Lenders thereof. Except as
provided in this Section 2.6, each such Loan Request shall be irrevocable and
binding on the Borrower and shall obligate the Borrower to accept the Loan
requested from the Lenders on the proposed Drawdown Date; provided that, in
addition to the Borrower's other remedies against any Lender which fails to
advance its proportionate share of a requested Loan, such Loan Request may be
revoked by the Borrower by
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notice received by the Agent no later than the Drawdown Date if any Lender fails
to advance its proportionate share of the requested Loan in accordance with the
terms of this Agreement; and provided further that the Borrower shall be liable
in accordance with the terms of this Agreement to any Lender which is prepared
to advance its proportionate share of the requested Loan for any costs, expenses
or damages actually incurred by such Lender as a result of the Borrower's
election to revoke such Loan Request. Nothing herein shall prevent the Borrower
from seeking recourse against any Lender that fails to advance its proportionate
share of a requested Loan as required by this Agreement. Each Loan Request shall
be (a) for a Base Rate Loan in a minimum aggregate amount of $1,000,000 or an
integral multiple of $100,000 in excess thereof; or (b) for a Eurodollar Rate
Loan in a minimum aggregate amount of $2,000,000 or an integral multiple of
$100,000 in excess thereof; provided, however, that there shall be no more than
eight (8) Eurodollar Rate Loans outstanding at any one time.
Section 2.7 Funds for Loans. (a) Not later than 11:00 a.m. (Boston
time) on the proposed Drawdown Date of any Loans, each of the Lenders will make
available to the Agent, at the Agent's Head Office, in immediately available
funds, the amount of such Lender's Commitment Percentage of the amount of the
requested Loans which may be disbursed pursuant to Section 2.1. Upon receipt
from each Lender of such amount, and upon receipt of the documents required by
Section 10 and Section 11 and the satisfaction of the other conditions set forth
therein, to the extent applicable, the Agent will make available to the Borrower
the aggregate amount of such Loans made available to the Agent by the Lenders by
crediting such amount to the account of the Borrower maintained at the Agent's
Head Office. The failure or refusal of any Lender to make available to the Agent
at the aforesaid time and place on any Drawdown Date the amount of its
Commitment Percentage of the requested Loans shall not relieve any other Lender
from its several obligation hereunder to make available to the Agent the amount
of such other Lender's Commitment Percentage of any requested Loans, including
any additional Loans that may be requested subject to the terms and conditions
hereof to provide funds to replace those not advanced by the Lender so failing
or refusing. In the event of any such failure or refusal, the Lenders not so
failing or refusing shall be entitled to a priority secured position as against
the Lender or Lenders so failing or refusing to make available to the Borrower
the amount of its or their Commitment Percentage for such Loans as provided in
Section 12.4.
(b) Unless the Agent shall have been notified by any Lender prior to
the applicable Drawdown Date that such Lender will not make available to Agent
such Lender's pro rata share of a proposed Loan, the Agent may in its discretion
assume that such Lender has made such Loan available to Agent in accordance with
the provisions of this Agreement and the Agent may, if it chooses, in reliance
upon such assumption make such Loan available to the Borrower, and such Lender
shall be liable to the Agent for the amount of such advance.
Section 2.8 Use of Proceeds. The Borrower will use the proceeds of the
Loans solely to provide financing (a) for the acquisition by the Borrower
pursuant to the terms thereof fee interests or leasehold interests in Real
Estate which (except as otherwise agreed by the Majority Lenders as referred to
in clause (c) of the definition of Eligible Real Estate) is utilized for office
and/or industrial purposes, (b) for Capital Improvement Projects for Real
Estate; (c) for working capital purposes (provided that the aggregate amount of
Loans outstanding for working capital
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purposes shall not at any one time exceed $25,000,000), and (d) for such other
purposes as the Majority Lenders in their sole discretion from time to time may
agree in writing.
Section 3 REPAYMENT OF THE LOANS.
Section 3.1 Stated Maturity. The Borrower promises to pay on the
Maturity Date and there shall become absolutely due and payable on the Maturity
Date all of the Loans outstanding on such date, together with any and all
accrued and unpaid interest thereon.
Section 3.2 Mandatory Prepayments. If at any time the aggregate
outstanding principal amount of the Loans exceeds the aggregate Commitments or
the Borrowing Base for the Loans, then the Borrower shall immediately pay the
amount of such excess to the Agent for the respective accounts of the Lenders
for application to such Loans. In the event there shall have occurred a casualty
with respect to any Mortgaged Property and the Borrower is required to repay the
Loans pursuant to Section 7.7 or a Taking and the Borrower is required to repay
the Loans pursuant to a Mortgage, the Borrower shall prepay the Loans
concurrently with the date of receipt by the Borrower or the Agent of any
Insurance Proceeds or Condemnation Proceeds in respect of such casualty or
Taking, as applicable, or as soon thereafter as is reasonably practicable, in
the amount required pursuant to the relevant provisions of Section 7.7 or such
Mortgage.
Section 3.3 Optional Prepayments. The Borrower shall have the right, at
its election, to prepay the outstanding amount of the Loans, as a whole or in
part, at any time without penalty or premium; provided, that the full or partial
prepayment of the outstanding amount of any Eurodollar Rate Loans pursuant to
this Section 3.3 may be made only on the last day of the Interest Period
relating thereto except as otherwise required pursuant to Section 4.7. The
Borrower shall give the Agent, no later than 10:00 a.m., Boston time, at least
five (5) days prior written notice of any prepayment pursuant to this Section
3.3, in each case specifying the proposed date of prepayment of Loans and the
principal amount to be prepaid.
Section 3.4 Partial Prepayments. Each partial prepayment of the Loans
under Section 3.3 shall be in a minimum amount of $1,000,000.00 or an integral
multiple of $100,000 in excess thereof, shall be accompanied by the payment of
accrued interest on the principal prepaid to the date of payment and shall be
applied, in the absence of instruction by the Borrower, first to the principal
of Base Rate Loans and then to the principal of Eurodollar Rate Loans.
Section 3.5 Effect of Prepayments. Amounts of the Loans prepaid under
Section 3.2 and Section 3.3 prior to the Maturity Date may be reborrowed as
provided in Section 2.
Section 3.6 Additional Payments. Each voluntary or mandatory prepayment
of the Loans pursuant to this Article shall be accompanied by the payment of (i)
accrued interest on the principal amount so prepaid to the date of prepayment,
and (ii) the amount, if any, required to be paid to the Lenders pursuant to
Section 4.8.
Section 4 CERTAIN GENERAL PROVISIONS.
Section 4.1 Conversion Options. (a) The Borrower may elect from time to
time to convert any of its outstanding Loans to a Loan of another Type and such
Loan shall thereafter bear
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interest as a Base Rate Loan or a Eurodollar Rate Loan, as applicable; provided
that (i) with respect to any such conversion of a Eurodollar Rate Loan to a Base
Rate Loan, the Borrower shall give the Agent at least one (1) Business Day's
prior written notice of such election, and such conversion shall only be made on
the last day of the Interest Period with respect to such Eurodollar Rate Loan;
(ii) with respect to any such conversion of a Base Rate Loan to a Eurodollar
Rate Loan, the Borrower shall give the Agent at least three (3) Eurodollar
Business Days' prior written notice of such election and the Interest Period
requested for such Loan, the principal amount of the Loan so converted shall be
in a minimum aggregate amount of $2,000,000 or an integral multiple of $100,000
in excess thereof and, after giving effect to the making of such Loan, there
shall be no more than eight (8) Eurodollar Rate Loans outstanding at any one
time; and (iii) no Loan may be converted into a Eurodollar Rate Loan when any
Default or Event of Default has occurred and is continuing. All or any part of
the outstanding Loans of any Type may be converted as provided herein, provided
that no partial conversion shall result in a Base Rate Loan in a principal
amount of less than $1,000,000 or a Eurodollar Rate Loan in a principal amount
of less than $2,000,000 and that the principal amount of each Loan shall be in
an integral multiple of $100,000. On the date on which such conversion is being
made, each Lender shall take such action as is necessary to transfer its
Commitment Percentage of such Loans to its Domestic Lending Office or its
Eurodollar Lending Office, as the case may be. Each Conversion/Continuation
Request relating to the conversion of a Base Rate Loan to a Eurodollar Rate Loan
shall be irrevocable by the Borrower.
(b) Any Eurodollar Rate Loan may be continued as such Type upon the
expiration of an Interest Period with respect thereto by compliance by the
Borrower with the terms of Section 4.1; provided that no Eurodollar Rate Loan
may be continued as such when any Default or Event of Default has occurred and
is continuing, but shall be automatically converted to a Base Rate Loan on the
last day of the Interest Period relating thereto ending during the continuance
of any Default or Event of Default.
(c) In the event that the Borrower does not notify the Agent of its
election hereunder with respect to any Eurodollar Rate Loan, such Loan shall be
automatically converted to a Base Rate Loan at the end of the applicable
Interest Period.
Section 4.2 Commitment Fee. The Borrower agrees to pay to BankBoston,
BancBoston Securities, Inc. and DLJ a commitment fee for services rendered or to
be rendered in connection with the Loans as provided pursuant to an Agreement
Regarding Fees dated as of even date herewith among the Borrower, REA,
BankBoston, BancBoston Securities, Inc. and DLJ. Such commitment fee shall be
solely for the account of BankBoston, BancBoston Securities, Inc. and DLJ as
provided in such Agreement Regarding Fees.
Section 4.3 Agent's Fee. The Borrower shall pay to the Agent, for the
Agent's own account, an annual Agent's fee as provided in the Agreement
Regarding Fees. The Agent's fee shall be payable quarterly in arrears on the
first day of each calendar quarter for the immediately preceding calendar
quarter or portion thereof. The Agent's fee shall also be paid upon the Maturity
Date or earlier termination of the Commitments. The Agent's fee for any partial
quarter shall be prorated.
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Section 4.4 Funds for Payments. (a) All payments of principal,
interest, facility fees, closing fees and any other amounts due hereunder or
under any of the other Loan Documents shall be made to the Agent, for the
respective accounts of the Lenders and the Agent, as the case may be, at the
Agent's Head Office, not later than 1:00 p.m. (Boston time) on the day when due,
in each case in immediately available funds. The Agent is hereby authorized to
charge the accounts of the Borrower with BankBoston, on the dates when the
amount thereof shall become due and payable, with the amounts of the principal
of and interest on the Loans and all fees, charges, expenses and other amounts
owing to the Agent and/or the Lenders under the Loan Documents.
(b) All payments by the Borrower hereunder and under any of the other
Loan Documents shall be made without setoff or counterclaim and free and clear
of and without deduction for any taxes (other than income or franchise taxes
imposed on any Lender), levies, imposts, duties, charges, fees, deductions,
withholdings, compulsory loans, restrictions or conditions of any nature now or
hereafter imposed or levied by any jurisdiction or any political subdivision
thereof or taxing or other authority therein unless the Borrower is compelled by
law to make such deduction or withholding; provided that no such payment shall
constitute a waiver of any rights that the Borrower may have hereunder. If any
such obligation is imposed upon the Borrower with respect to any amount payable
by it hereunder or under any of the other Loan Documents, the Borrower will pay
to the Agent, for the account of the Lenders or (as the case may be) the Agent,
on the date on which such amount is due and payable hereunder or under such
other Loan Document, such additional amount in Dollars as shall be necessary to
enable the Lenders or the Agent to receive the same net amount which the Lenders
or the Agent would have received on such due date had no such obligation been
imposed upon the Borrower. The Borrower will deliver promptly to the Agent
certificates or other valid vouchers for all taxes or other charges deducted
from or paid with respect to payments made by the Borrower hereunder or under
any other Loan Document.
(c) Each Lender organized under the laws of a jurisdiction outside the
United States, if requested in writing by the Borrower (but only so long as such
Lender remains lawfully able to do so), shall provide the Borrower with such
duly executed form(s) or statement(s) which may, from time to time, be
prescribed by law and, which, pursuant to applicable provisions of (i) an income
tax treaty between the United States and the country of residence of such
Lender, (ii) the Code, or (iii) any applicable rules or regulations in effect
under (i) or (ii) above, indicates the withholding status of such Lender;
provided that nothing herein (including without limitation the failure or
inability to provide such form or statement) shall relieve the Borrower of its
obligations under Section 4.4(b). In the event that the Borrower shall have
delivered the certificates or vouchers described above for any payments made by
the Borrower and such Lender receives a refund of any taxes paid by the Borrower
pursuant to Section 4.4(b), such Lender will pay to the Borrower the amount of
such refund promptly upon receipt thereof; provided that if at any time
thereafter such Lender is required to return such refund, the Borrower shall
promptly repay to such Lender the amount of such refund.
Section 4.5 Computations. All computations of interest on the Loans and
of other fees to the extent applicable shall be based on a 360-day year and paid
for the actual number of days elapsed. Except as otherwise provided in the
definition of the term "Interest Period" with respect to Eurodollar Rate Loans,
whenever a payment hereunder or under any of the other Loan
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Documents becomes due on a day that is not a Business Day, the due date for such
payment shall be extended to the next succeeding Business Day, and interest
shall accrue during such extension.
Section 4.6 Inability to Determine Eurodollar Rate. In the event that,
prior to the commencement of any Interest Period relating to any Eurodollar Rate
Loan, the Agent shall determine that adequate and reasonable methods do not
exist for ascertaining the Eurodollar Rate for such Interest Period, the Agent
shall forthwith give notice of such determination (which shall be conclusive and
binding on the Borrower and the Lenders absent manifest error) to the Borrower
and the Lenders. In such event (a) any Loan Request with respect to a Eurodollar
Rate Loan shall be automatically withdrawn and shall be deemed a request for a
Base Rate Loan and (b) each Eurodollar Rate Loan will automatically, on the last
day of the then current Interest Period applicable thereto, become a Base Rate
Loan, and the obligations of the Lenders to make Eurodollar Rate Loans shall be
suspended until the Agent determines that the circumstances giving rise to such
suspension no longer exist, whereupon the Agent shall so notify the Borrower and
the Lenders.
Section 4.7 Illegality. Notwithstanding any other provisions herein, if
any present or future law, regulation, treaty or directive or the interpretation
or application thereof shall make it unlawful, or any central bank or other
governmental authority having jurisdiction over a Lender or its Eurodollar
Lending Office shall assert that it is unlawful, for any Lender to make or
maintain Eurodollar Rate Loans, such Lender shall forthwith give notice of such
circumstances to the Agent and the Borrower and thereupon (a) the commitment of
the Lenders to make Eurodollar Rate Loans shall forthwith be suspended and (b)
the Eurodollar Rate Loans then outstanding shall be converted automatically to
Base Rate Loans on the last day of each Interest Period applicable to such
Eurodollar Rate Loans or within such earlier period as may be required by law.
Notwithstanding the foregoing, before giving such notice, the applicable Lender
shall designate a different lending office if such designation will void the
need for giving such notice and will not, in the judgment of such Lender, be
otherwise materially disadvantageous to such Lender.
Section 4.8 Compensation. The Borrower shall compensate the Lenders,
upon the Agent's written request (which request shall set forth the basis for
requesting such compensation), for all reasonable losses, expenses and
liabilities (including, without limitation, any loss, expenses and liabilities
(incurred by reason of the liquidation or reemployment of deposits or other
funds required by the Lenders to fund Loans but excluding any loss of
anticipated profit with respect to such Loans) which the Lenders may sustain:
(i) if for any reason (other than a default by the Lenders) a borrowing of a
Loan does not occur on a date specified therefor in a notice of such borrowing
received from the Borrower (whether or not withdrawn by the Borrower or deemed
withdrawn pursuant to Section 4.6); (ii) if any repayment or prepayment of a
Eurodollar Rate Loan occurs on a date which is not the last day of an Interest
Period applicable thereto; (iii) if any prepayment of any Loan is not made on
any date specified in a notice of prepayment given by the Borrower; or (iv) as a
consequence of (x) any other Default by the Borrower to repay Loans when
required by the terms of this Agreement or (y) an election made pursuant to
Section 4.1.
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Section 4.9 Additional Costs, Etc. Notwithstanding anything herein to
the contrary, if any present or future applicable law, which expression, as used
herein, includes statutes, rules and regulations thereunder and interpretations
thereof by any competent court or by any governmental or other regulatory body
or official charged with the administration or the interpretation thereof and
requests, directives, instructions and notices at any time or from time to time
hereafter made upon or otherwise issued to any Lender or the Agent by any
central bank or other fiscal, monetary or other authority (whether or not having
the force of law), shall:
(a) subject any Lender or the Agent to any tax, levy, impost,
duty, charge, fee, deduction or withholding of any nature with respect
to this Agreement, the other Loan Documents, such Lender's Commitment
or the Loans (other than taxes based upon or measured by the income or
profits of such Lender or the Agent or its franchise tax), or
(b) materially change the basis of taxation (except for
changes in taxes on income or profits) of payments to any Lender of the
principal of or the interest on any Loans or any other amounts payable
to any Lender under this Agreement or the other Loan Documents, or
(c) impose or increase or render applicable any special
deposit, reserve, assessment, liquidity, capital adequacy or other
similar requirements (whether or not having the force of law and which
are not already reflected in any amounts payable by Borrower hereunder)
against assets held by, or deposits in or for the account of, or loans
by, or commitments of an office of any Lender, or
(d) impose on any Lender or the Agent any other conditions or
requirements with respect to this Agreement, the other Loan Documents,
the Loans, such Lender's Commitment, or any class of loans or
commitments of which any of the Loans or such Lender's Commitment forms
a part;
and the result of any of the foregoing is:
(i) to increase the cost to any Lender of making, funding,
issuing, renewing, extending or maintaining any of the Loans or such
Lender's Commitment, or
(ii) to reduce the amount of principal, interest or other
amount payable to any Lender or the Agent hereunder on account of such
Lender's Commitment or any of the Loans, or
(iii) to require any Lender or the Agent to make any payment
or to forego any interest or other sum payable hereunder, the amount of
which payment or foregone interest or other sum is calculated by
reference to the gross amount of any sum receivable or deemed received
by such Lender or the Agent from the Borrower hereunder,
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then, and in each such case, the Borrower will, within fifteen (15) days of
demand made by such Lender or (as the case may be) the Agent at any time and
from time to time and as often as the occasion therefor may arise, pay to such
Lender or the Agent such additional amounts as such Lender or the Agent shall
determine in good faith to be sufficient to compensate such Lender or the Agent
for such additional cost, reduction, payment or foregone interest or other sum.
Each Lender and the Agent in determining such amounts may use any reasonable
averaging and attribution methods generally applied by such Lender or the Agent.
Section 4.10 Capital Adequacy. If after the date hereof any Lender
determines that (a) the adoption of or change in any law, rule, regulation or
guideline regarding capital requirements for banks or bank holding companies or
any change in the interpretation or application thereof by any governmental
authority charged with the administration thereof, or (b) compliance by such
Lender or its parent bank holding company with any guideline, request or
directive of any such entity regarding capital adequacy (whether or not having
the force of law), has the effect of reducing the return on such Lender's or
such holding company's capital as a consequence of such Lender's commitment to
make Loans hereunder to a level below that which such Lender or holding company
could have achieved but for such adoption, change or compliance (taking into
consideration such Lender's or such holding company's then existing policies
with respect to capital adequacy and assuming the full utilization of such
entity's capital) by any amount deemed by such Lender to be material, then such
Lender may notify the Borrower thereof. The Borrower agrees to pay to such
Lender the amount of such reduction in the return on capital as and when such
reduction is determined, upon presentation by such Lender of a statement of the
amount setting forth the Lender's calculation thereof. In determining such
amount, such Lender may use any reasonable averaging and attribution methods
generally applied by such Lender.
Section 4.11 Intentionally omitted.
Section 4.12 Interest on Overdue Amounts; Late Charge. Overdue
principal and (to the extent permitted by applicable law) overdue interest on
the Loans and all other overdue amounts payable hereunder or under any of the
other Loan Documents shall bear interest payable on demand at a rate per annum
equal to four percent (4.0%) above the Base Rate until such amount shall be paid
in full (after as well as before judgment). In addition, the Borrower shall pay
a late charge equal to three percent (3%) of any amount of interest and/or
principal payable on the Loans or any other amounts payable hereunder or under
the Loan Documents, which is not paid by the Borrower within ten (10) days of
the date when due.
Section 4.13 Intentionally Omitted.
Section 4.14 Certificate. A certificate setting forth any amounts
payable pursuant to Section 4.8, Section 4.9, Section 4.10, or Section 4.12 and
a reasonably detailed explanation of such amounts which are due, submitted by
any Lender or the Agent to the Borrower, shall be conclusive in the absence of
manifest error.
Section 4.15 Limitation on Interest. Notwithstanding anything in this
Agreement or the other Loan Documents to the contrary, all agreements between or
among the Borrower, REA, the Guarantors, the Lenders and the Agent, whether now
existing or hereafter arising and whether
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written or oral, are hereby limited so that in no contingency, whether by reason
of acceleration of the maturity of any of the Obligations or otherwise, shall
the interest contracted for, charged or received by the Lenders exceed the
maximum amount permissible under applicable law. If, from any circumstance
whatsoever, interest would otherwise be payable to the Lenders in excess of the
maximum lawful amount, the interest payable to the Lenders shall be reduced to
the maximum amount permitted under applicable law; and if from any circumstance
the Lenders shall ever receive anything of value deemed interest by applicable
law in excess of the maximum lawful amount, an amount equal to any excessive
interest shall be applied to the reduction of the principal balance of the
Obligations and to the payment of interest or, if such excessive interest
exceeds the unpaid balance of principal of the Obligations, such excess shall be
refunded to the Borrower. All interest paid or agreed to be paid to the Lenders
shall, to the extent permitted by applicable law, be amortized, prorated,
allocated and spread throughout the full period until payment in full of the
principal of the Obligations (including the period of any renewal or extension
thereof) so that the interest thereon for such full period shall not exceed the
maximum amount permitted by applicable law. This section shall control all
agreements between or among the Borrower, REA, the Guarantors, the Lenders and
the Agent.
Section 5 COLLATERAL SECURITY.
Section 5.1 Collateral. The Obligations shall be secured by (i) a
perfected first priority lien to be held by the Agent for the benefit of the
Lenders on the Mortgaged Properties, pursuant to the terms of the Mortgages,
(ii) a perfected first priority security interest to be held by the Agent for
the benefit of the Lenders in the Leases pursuant to the terms of the
Assignments of Leases and Rents and (iii) the Indemnity Agreements and the other
Security Documents.
Section 5.2 Appraisals. (a) The Agent on behalf of the Lenders shall
require Appraisals of each of the Mortgaged Properties, which will be ordered by
the Agent and reviewed and approved by the appraisal department of the Agent
from time to time, in order to determine the current Appraised Value and
Borrowing Base of each Mortgaged Property, and the Borrower shall pay to the
Agent on demand all reasonable out-of-pocket costs of all such Appraisals
relating to the Mortgaged Properties (which costs shall include any reasonable
internal appraisal review fees of the Agent); provided, however, that so long as
no Default or Event of Default shall have occurred and be continuing and
regulatory requirements of any Lender generally applicable to real estate loans
of the category made under this Agreement as reasonably interpreted by such
Lender shall not require more frequent Appraisals, and except as otherwise
provided in Section 5.2(b) or Section 5.2(e), the Borrower shall not be required
to pay for an Appraisal for a particular Mortgaged Property more often than once
in any twenty-four (24) month period, with the result that, except as otherwise
provided in Section 5.2(b) or Section 5.2(e), the first Appraisal of a Mortgaged
Property for which the Borrower shall be financially responsible shall not be
required prior to the date which is twenty-four (24) months from the date of
initial Appraisal for such Mortgaged Property delivered to the Agent pursuant to
this Agreement.
(b) Notwithstanding the provisions of Section 5.2(a), the Agent on
behalf of the Lenders may, for the purpose of determining the current Appraised
Value and Borrowing Base of a Mortgaged Property, obtain (and the Borrower shall
pay to the Agent on demand all reasonable out-of-pocket costs (which costs shall
include any reasonable internal appraisal review fees of the
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Agent) of an Appraisal (or an update of the existing Appraisal) of such
Mortgaged Property (i) at any time that the regulatory requirements of a Lender
generally applicable to real estate loans of the category made under this
Agreement as reasonably interpreted by such Lender shall require an Appraisal,
or (ii) at any time following: (x) a condemnation of or a casualty affecting
more than twenty five percent 25% of the Net Rentable Area of such Mortgaged
Property, (y) the termination or expiration of Leases affecting more than twenty
five percent (25%) of the Net Rentable Area of such Mortgaged Property or (z)
the occurrence of a material adverse change with respect to such Mortgaged
Property as determined by the Majority Lenders in the exercise of their good
faith business judgment. If an Appraisal (or an update of the existing
Appraisal) is being done in respect of a Mortgaged Property that has been
affected by a condemnation or casualty which is being restored in accordance
with the relevant provisions of Section 7.7 hereof or the Mortgage encumbering
such Mortgaged Property, such Appraisal (or an update of the existing Appraisal)
shall, at the election of the Agent on behalf of the Lenders, either (A) be
undertaken only following the completion of such restoration or (B) take into
account the fact that such restoration has not been completed and be prepared on
an "as-built" basis, based on the plans and specifications for such restoration;
and in either such case any such Appraisal (or an update of the existing
Appraisal) shall take into account any termination of any Leases that have
occurred as a result of such condemnation or casualty.
(c) In the event that the Agent shall advise the Borrower, on the basis
of any Appraisal (or update of an existing Appraisal), that the Borrowing Base
is insufficient to comply with the requirements of Section 9.1, then until the
Borrowing Base is increased or the outstanding principal amount of the Loans is
reduced such that the Borrowing Base is in compliance with Section 9.1, the
Lenders shall not be required to make advances under Section 2.1.
(d) The Borrower, REA and each Guarantor acknowledge that the Agent may
make changes or adjustments to the value set forth in any Appraisal (or update
of an existing Appraisal) at the time such Appraisal (or update of an existing
Appraisal) is received as may be required by the appraisal department of the
Agent in its good faith business judgment, and that the Lenders are not bound by
the value set forth in any Appraisal performed pursuant to this Agreement and do
not make any representations or warranties with respect to any such Appraisal.
The Borrower, REA and each Guarantor further agree that the Lenders shall have
no liability as a result of or in connection with any Appraisal (or update of an
existing Appraisal) for statements contained in such Appraisal (or update of an
existing Appraisal), including without limitation, the accuracy and completeness
of information, estimates, conclusions and opinions contained in such Appraisal
(or update of an existing Appraisal), or variance of such Appraisal (or update
of an existing Appraisal) from the fair value of the Mortgaged Property that is
the subject of such Appraisal (or update of an existing Appraisal) given by the
local tax assessor's office, or the Borrower's, REA's or each Guarantor's idea
of the value of the Mortgaged Property.
(e) If requested to do so by the Borrower following the completion of a
Capital Improvement Project at a Mortgaged Property, the Agent shall obtain, at
the sole cost and expense of the Borrower, an Appraisal (or an update of the
existing Appraisal) of such Mortgaged Property, and the Appraised Value as
determined based on such new or updated Appraisal shall be used in order to
determine the Borrowing Base of such Mortgaged Property.
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Section 5.3 Replacement or Addition of Mortgaged Properties. After the
Closing Date, the Borrower shall have the right, subject to the consent of the
Majority Lenders and the satisfaction by the Borrower of the conditions set
forth in this Section 5.3, to add Potential Collateral to the Collateral or to
replace any Mortgaged Property which is Collateral with Potential Collateral.
Subject to Section 7.17, the Borrower from time to time after the Closing Date
may also request that certain Real Estate of one or more of its wholly-owned
Subsidiaries (collectively, the "Subsidiary Collateral") be included as a
Mortgaged Property for the purpose of increasing the Borrowing Base or replacing
existing Collateral. In the event the Borrower desires to replace Collateral or
add additional Potential Collateral or Subsidiary Collateral as aforesaid, the
Borrower shall provide written notice to the Agent of such request (which the
Agent shall promptly furnish to the Lenders), together with all documentation
and other information required to permit the Agent to determine whether such
Real Estate is Eligible Real Estate. Thereafter, the Agent shall have fifteen
(15) days from the date of the receipt of such documentation and other
information to advise the Borrower whether the Majority Lenders consent to the
acceptance of such Subsidiary Collateral or Potential Collateral.
Notwithstanding the foregoing, no Subsidiary Collateral or Potential Collateral
shall be included as Collateral unless and until the following conditions
precedent shall have been satisfied:
(i) such Subsidiary Collateral or Potential Collateral shall
be Eligible Real Estate;
(ii) the owner or lessee of any Subsidiary Collateral shall
have executed a Guaranty of the Obligations in form and substance
satisfactory to the Agent, or, in the Agent's sole discretion, shall
have been added as an additional Borrower hereunder pursuant to an
amendment to this Agreement in form and substance satisfactory to the
Agent and Agent's counsel;
(iii) the Borrower or the owner or lessee of the Subsidiary
Collateral or Potential Collateral, as applicable, shall have executed
and delivered to the Agent all Eligible Real Estate Qualification
Documents, all of which instruments, documents or agreements shall be
in form and substance satisfactory to the Agent in its sole discretion;
and
(iv) after giving effect to the inclusion of such Subsidiary
Collateral or Potential Collateral, each of the representations and
warranties made by or on behalf of the Borrower, REA or the Guarantors
or any of their respective Subsidiaries contained in this Agreement,
the other Loan Documents or in any document or instrument delivered
pursuant to or in connection with this Agreement shall be true in all
material respects both as of the date as of which it was made and shall
also be true as of the time of the replacement or addition of Mortgaged
Properties, with the same effect as if made at and as of that time (it
being understood and agreed that any representation or warranty which
by its terms is made as of a specified date shall be required to be
true and correct only as of such specified date), and no Default or
Event of Default shall have occurred and be continuing, and each of the
Lenders shall have received a certificate of the Borrower and REA
signed by an authorized representative of the Borrower and REA to such
effect.
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The Borrower acknowledges that the decision of the Majority Lenders to
grant or withhold their consent to the acceptance of Subsidiary Collateral or
Potential Collateral under this Section 5.3 shall be based entirely on such
factors as the Lenders deem relevant in their sole discretion, including,
without limitation, those enumerated in clauses (i) through (iv) hereinabove,
and such consent may be granted or withheld solely at the discretion of the
Majority Lenders.
In connection with each such addition or substitution, the Borrower,
within fifteen (15) days of the Borrower's request to add such assets to the
Collateral, shall pay to the Agent for the account of the Lenders a review fee
of $7,500 for each asset to be added or replaced, which review fee shall be
split equally among the Lenders, without regard to their respective Commitment
Percentages.
Section 5.4 Release of Mortgaged Property. Provided no Default or Event
of Default shall have occurred hereunder and be continuing (or would exist
immediately after giving effect to the transactions contemplated by this Section
5.4), the Agent shall release a Mortgaged Property from the lien or security
title of the Security Documents encumbering the same upon the request of the
Borrower subject to and upon the following terms and conditions:
(a) the Agent shall determine that the Mortgaged Properties
remaining following such release (i) have a Borrowing Base of not less
than $25,000,000 and (ii) are otherwise satisfactory to the Majority
Lenders in their good faith business judgment;
(b) the Borrower shall deliver to the Agent written notice of
its desire to obtain such release no later than fifteen (15) days prior
to the date on which such release is to be effected;
(c) the Borrower shall submit to the Agent with such request a
Compliance Certificate prepared using the financial statements of REA
most recently provided or required to be provided to the Agent under
Section 6.4 or Section 7.4 adjusted in the best good faith estimate of
the Borrower to give effect to the proposed release and demonstrating
that no Default or Event of Default with respect to the covenants
referred to therein shall exist after giving effect to such release;
(d) all release documents to be executed by the Agent shall be
in form and substance reasonably satisfactory to the Agent;
(e) the Borrower shall pay all reasonable costs and expenses
of the Agent in connection with such release, including without
limitation, reasonable attorney's fees;
(f) the Borrower shall pay to the Agent for the account of the
Lenders a release price, which payment shall be applied to reduce the
outstanding principal balance of the Loans in an amount equal to the
amount which is necessary to
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reduce the outstanding principal balance of the Loans so that no
Default or Event of Default shall exist under Section 9 following such
release;
(g) at no time during the term of this Agreement shall there
be less than five (5) Mortgaged Properties securing the Obligations;
and
(h) any release of a Mortgaged Property after January 1, 1999
will not cause the aggregate Borrowing Base of the remaining Mortgaged
Properties which are located in any one Metropolitan Statistical Area
to equal or exceed forty percent (40%) of the aggregate Borrowing Base
of all of the Mortgaged Properties.
Section 6 REPRESENTATIONS AND WARRANTIES.
Each of the Borrower and REA represents and warrants to the
Agent and the Lenders as follows.
Section 6.1 Corporate Authority, Etc.
(a) Incorporation; Good Standing. The Borrower is a Delaware limited
partnership duly organized pursuant to a certificate of limited partnership
dated as of November 3, 1993 and is in good standing under the laws of Delaware.
REA is a Maryland corporation duly organized pursuant to amended and restated
articles of incorporation dated as of December 12, 1997, and is in good standing
under the laws of Maryland. REA is a real estate investment trust in full
compliance with and entitled to the benefits of Section 856 of the Code. Each of
the Borrower and REA (i) has all requisite power to own its respective property
and conduct its respective business as now conducted and as presently
contemplated, and (ii) is in good standing and is duly authorized to do business
in the jurisdictions where the Mortgaged Properties owned or leased by it are
located and in each other jurisdiction where a failure to be so qualified in
such other jurisdiction could have a materially adverse effect on the business,
assets or financial condition of such Person.
(b) Subsidiaries. Each of the Guarantors and each of the Subsidiaries
of the Borrower, REA and each Guarantor (i) is a corporation, limited
partnership, general partnership, limited liability company or trust duly
organized under the laws of its State of organization and is validly existing
and in good standing under the laws thereof, (ii) has all requisite power to own
its property and conduct its business as now conducted and as presently
contemplated and (iii) is in good standing and is duly authorized to do business
in each jurisdiction where a failure to be so qualified could have a materially
adverse effect on the business, assets or financial condition of the Borrower,
REA, the Guarantors or such Subsidiary.
(c) Authorization. The execution, delivery and performance of this
Agreement and the other Loan Documents to which any of the Borrower, REA or any
Guarantor is a party and the transactions contemplated hereby and thereby (i)
are within the authority of such Person, (ii) have been duly authorized by all
necessary proceedings on the part of such Person, (iii) do not and will not
conflict with or result in any breach or contravention of any provision of law,
statute,
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rule or regulation to which such Person is subject or any judgment, order, writ,
injunction, license or permit applicable to such Person, (iv) do not and will
not conflict with or constitute a default (whether with the passage of time or
the giving of notice, or both) under any provision of the partnership agreement,
articles of incorporation or other charter documents or bylaws of, or any
agreement or other instrument binding upon, such Person or any of its
properties, and (v) do not and will not result in or require the imposition of
any lien or other encumbrance on any of the properties, assets or rights of such
Person.
(d) Enforceability. The execution and delivery of this Agreement and
the other Loan Documents to which any of the Borrower, REA or any Guarantor is a
party are valid and legally binding obligations of such Person enforceable in
accordance with the respective terms and provisions hereof and thereof, except
as enforceability is limited by bankruptcy, insolvency, reorganization,
moratorium or other laws relating to or affecting generally the enforcement of
creditors' rights and general principles of equity.
Section 6.2 Governmental Approvals. The execution, delivery and
performance of this Agreement and the other Loan Documents to which the
Borrower, REA or any Guarantor is a party and the transactions contemplated
hereby and thereby do not require the approval or consent of, or filing with,
any governmental agency or authority other than those already obtained and the
filing of the Security Documents in the appropriate records office with respect
thereto.
Section 6.3 Title to Properties:. Except as indicated on Schedule 6.3
hereto, REA, the Borrower, the Guarantors and their respective Subsidiaries own
or lease all of the assets reflected in the consolidated balance sheet of REA as
at the Balance Sheet Date or acquired or leased since that date (except property
and assets sold or otherwise disposed of in the ordinary course of business
since that date), subject to no rights of others, including any mortgages,
leases, conditional sales agreements, title retention agreements, liens or other
encumbrances except Permitted Liens.
Section 6.4 Financial Statements. REA has furnished to the Agent the
financial information described on Schedule 6.4 hereof relating to REA, the
Borrower, the Guarantors, their respective Subsidiaries and the Real Estate.
Such balance sheet and information fairly present the financial condition of
REA, Borrower, the Guarantors and their respective Subsidiaries as of such dates
and the results of the operations of the Borrower, REA, the Guarantors, their
respective Subsidiaries and the Real Estate for such periods. There are no
liabilities, contingent or otherwise, of the Borrower, REA, the Guarantors or
any of their respective Subsidiaries involving material amounts not disclosed in
said balance sheet and the related notes thereto other than the Obligations.
Section 6.5 No Material Changes. Since the Balance Sheet Date, there
has occurred no materially adverse change in the financial condition or business
of the Borrower, REA, any Guarantor and their respective Subsidiaries taken as a
whole as shown on or reflected in the consolidated balance sheet of the REA as
of the Balance Sheet Date, or its consolidated statement of income or cash flows
for the fiscal year then ended, other than changes in the ordinary course of
business that have not had any materially adverse effect either individually or
in the aggregate on the business or financial condition of such Person.
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Section 6.6 Franchises, Patents, Copyrights, Etc. The Borrower, REA,
the Guarantors and their respective Subsidiaries possess all franchises,
patents, copyrights, trademarks, trade names, service marks, licenses and
permits, and rights in respect of the foregoing, adequate for the conduct of
their business substantially as now conducted without known conflict with any
rights of others. None of the Mortgaged Properties is owned or operated under or
by reference to any registered or protected trademark, trade name, service mark
or logo.
Section 6.7 Litigation. Except as stated on Schedule 6.7, there are no
actions, suits, proceedings or investigations of any kind pending or to the
knowledge of the Borrower or REA threatened against the Borrower, REA, any
Guarantor or any of their respective Subsidiaries before any court, tribunal or
administrative agency or board that, if adversely determined, could reasonably
be expected to, either in any case or in the aggregate, materially adversely
affect the properties, assets, financial condition or business of such Person or
materially impair the right of such Person to carry on business substantially as
now conducted by it, or result in any liability not adequately covered by
insurance, or for which adequate reserves are not maintained on the balance
sheet of such Person, or which question the validity of this Agreement or any of
the other Loan Documents, any action taken or to be taken pursuant hereto or
thereto or any lien, security title or security interest created or intended to
be created pursuant hereto or thereto, or which could reasonably be expected to
have a material, adverse affect on the ability of the Borrower, REA, any
Guarantor or any of their respective Subsidiaries to pay and perform the
Obligations in the manner contemplated by this Agreement and the other Loan
Documents.
Section 6.8 No Materially Adverse Contracts, Etc. None of the Borrower,
REA, any Guarantor or any of their respective Subsidiaries is subject to any
charter, corporate or other legal restriction, or any judgment, decree, order,
rule or regulation that has or is expected in the future to have a materially
adverse effect on the business, assets or financial condition of such Person.
None of the Borrower, REA, any Guarantor or any of their respective Subsidiaries
is a party to any contract or agreement that has or could reasonably be expected
to have a material adverse effect on the business of any of them.
Section 6.9 Compliance with Other Instruments, Laws, Etc. None of the
Borrower, REA, the Guarantors or any of their respective Subsidiaries is in
violation of any provision of its charter or other organizational documents,
bylaws, or any agreement or instrument to which it is subject or by which it or
any of its properties is bound or any decree, order, judgment, statute, license,
rule or regulation, in any of the foregoing cases in a manner that could
reasonably be expected to result in the imposition of substantial penalties or
materially and adversely affect the financial condition, properties or business
of such Person.
Section 6.10 Tax Status. Each of the Borrower, REA, the Guarantors and
their respective Subsidiaries (a) has made or filed all federal and state income
and all other tax returns, reports and declarations required by any jurisdiction
to which it is subject, as the filing periods may have been extended, (b) has
paid all taxes and other governmental assessments and charges shown or
determined to be due on such returns, reports and declarations, except those
being contested in good faith and by appropriate proceedings and (c) has set
aside on its books provisions reasonably adequate for the payment of all taxes
for periods subsequent to the periods to which such returns, reports or
declarations apply. Except as provided in the foregoing sentence, there
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are no unpaid taxes in any material amount claimed to be due by the taxing
authority of any jurisdiction, and the officers of such Person know of no basis
for any such claim.
Section 6.11 No Event of Default. No Default or Event of Default has
occurred and is continuing.
Section 6.12 Holding Company and Investment Company Acts. None of the
Borrower, REA, the Guarantors or any of their respective Subsidiaries is a
"holding company", or a "subsidiary company" of a "holding company", or an
"affiliate" of a "holding company", as such terms are defined in the Public
Utility Holding Company Act of 1935; nor is any of them an "investment company",
or an "affiliated company" or a "principal underwriter" of an "investment
company", as such terms are defined in the Investment Company Act of 1940.
Section 6.13 Absence of UCC Financing Statements, Etc. Except with
respect to Permitted Liens and in connection with any secured Indebtedness
permitted under Section 8.1, there is no financing statement, security
agreement, chattel mortgage, real estate mortgage or other document filed or
recorded with any applicable filing records, registry, or other public office,
that purports to cover, affect or give notice of any present or possible future
lien on, or security interest or security title in, any property of the
Borrower, REA, any Guarantor or their respective Subsidiaries or rights
thereunder.
Section 6.14 Setoff, Etc. The Collateral and the rights of the Agent
and the Lenders with respect to the Collateral are not subject to any setoff,
claims, withholdings or other defenses. The Borrower, REA and each Guarantor are
the owners of their respective Collateral free from any lien, security interest,
encumbrance or other claim or demand, except those encumbrances permitted in the
Mortgages.
Section 6.15 Certain Transactions. Except as disclosed on Schedule 6.15
hereto, none of the partners, officers, trustees, directors, or employees of the
Borrower, REA, any Guarantor or any of their respective Subsidiaries is a party
to any material agreement with the Borrower, REA or any Guarantor (other than
for services as partners, employees, officers and directors), including any such
agreement providing for the furnishing of services to or by, providing for
rental of real or personal property to or from, or otherwise requiring payments
to or from any partner, officer, trustee, director or such employee or, to the
knowledge of the Borrower or REA, any corporation, partnership, trust or other
entity in which any partner, officer, trustee, director, or any such employee
has a substantial interest or is an officer, director, trustee or partner.
Section 6.16 Employee Benefit Plans. The Borrower, REA, each Guarantor
and each ERISA Affiliate has fulfilled its obligation, if any, under the minimum
funding standards of ERISA and the Code with respect to each Employee Benefit
Plan, Multiemployer Plan or Guaranteed Pension Plan and is in compliance in all
material respects with the presently applicable provisions of ERISA and the Code
with respect to each Employee Benefit Plan, Multiemployer Plan or Guaranteed
Pension Plan. Neither the Borrower, any Guarantor nor any ERISA Affiliate has
(a) sought a waiver of the minimum funding standard under Section 412 of the
Code in respect of any Employee Benefit Plan, Multiemployer Plan or Guaranteed
Pension Plan, (b) failed to make any contribution or payment to any Employee
Benefit Plan, Multiemployer
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Plan or Guaranteed Pension Plan, or made any amendment to any Employee Benefit
Plan, Multiemployer Plan or Guaranteed Pension Plan, which has resulted or could
result in the imposition of a Lien or the posting of a bond or other security
under ERISA or the Code, or (c) incurred any liability under Title IV of ERISA
other than a liability to the PBGC for premiums under Section 4007 of ERISA.
None of the Mortgaged Properties constitutes a "plan asset" of any Employee
Plan, Multiemployer Plan or Guaranteed Pension Plan.
Section 6.17 Disclosure. No representation or warranty of the Borrower,
REA or any Guarantor contained in this Agreement or the other Loan Documents or
in any other document, certificate or written statement furnished to the Agent
or the Lenders by or on behalf of the Borrower, REA or any Guarantor for use in
connection with the transactions contemplated by the Loan Documents contains any
untrue statement of a material fact or omits to state a material fact necessary
in order to make the statements contained herein or therein, taken as a whole,
not misleading in light of the circumstances in which the same were made or will
be made.
Section 6.18 Trade Name; Place of Business. Neither the Borrower, REA
nor any Guarantor uses any trade name and conducts business under any name other
than its actual name set forth in the Loan Documents. The principal place of
business of each of the Borrower, REA and each Guarantor is 620 West Germantown
Pike Suite 200, Plymouth Meeting, Pennsylvania 19462.
Section 6.19 Regulations U and X. No portion of any Loan is to be used
for the purpose of purchasing or carrying any "margin security" or "margin
stock" as such terms are used in Regulations U and X of the Board of Governors
of the Federal Reserve System, 12 C.F.R. Parts 221 and 224.
Section 6.20 Environmental Compliance. To the best of the knowledge and
belief of the Borrower and REA, except as specifically set forth in the written
environmental site assessment reports of the Environmental Engineer provided to
the Agent on or before the date hereof, or in the case of Real Estate acquired
after the date hereof, the environmental site assessment reports with respect
thereto provided to the Agent:
(a) Neither the Borrower, REA, any Guarantor, their respective
Subsidiaries nor any operator of the Real Estate, nor any operations
thereon, is in violation, or alleged violation, of any judgment,
decree, order, law, license, rule or regulation pertaining to
environmental matters, including without limitation, those arising
under the Resource Conservation and Recovery Act ("RCRA"), the
Comprehensive Environmental Response, Compensation and Liability Act of
1980 as amended ("CERCLA"), the Superfund Amendments and
Reauthorization Act of 1986 ("SARA"), the Federal Clean Water Act, the
Federal Clean Air Act, the Toxic Substances Control Act, or any state
or local statute, regulation, ordinance, order or decree relating to
the environment (hereinafter "Environmental Laws"), which violation
involves Real Estate and would have a material adverse effect on the
environment or the business, assets or financial condition of the
Borrower, REA, the Guarantors or any of their respective Subsidiaries.
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(b) Neither the Borrower, REA, any Guarantor nor any of their
respective Subsidiaries has received notice from any third party
including, without limitation, any federal, state or local governmental
authority, (i) that it has been identified by the United States
Environmental Protection Agency ("EPA") as a potentially responsible
party under CERCLA with respect to a site listed on the National
Priorities List, 40 C.F.R. Part 300 Appendix B (1986); (ii) that any
hazardous waste, as defined by 42 U.S.C. Section 9601(5), any hazardous
substances as defined by 42 U.S.C. Section 9601(14), any pollutant or
contaminant as defined by 42 U.S.C. Section 9601(33) or any toxic
substances, oil or hazardous materials or other chemicals or substances
regulated by any Environmental Laws ("Hazardous Substances") which it
has generated, transported or disposed of have been found at any site
at which a federal, state or local agency or other third party has
conducted or has ordered that the Borrower, REA, any Guarantor or any
of their respective Subsidiaries conduct a remedial investigation,
removal or other response action pursuant to any Environmental Law; or
(iii) that it is or shall be a named party to any claim, action, cause
of action, complaint, or legal or administrative proceeding (in each
case, contingent or otherwise) arising out of any third party's
incurrence of costs, expenses, losses or damages of any kind whatsoever
in connection with the release of Hazardous Substances.
(c) (i) No portion of the Real Estate has been used for the
handling, processing, storage or disposal of Hazardous Substances
except in accordance with applicable Environmental Laws, and no
underground tank or other underground storage receptacle for Hazardous
Substances is located on any portion of the Real Estate; (ii) in the
course of any activities conducted by the Borrower, REA, any Guarantor,
their respective Subsidiaries or the operators of their properties, no
Hazardous Substances have been generated or are being used on the Real
Estate except in the ordinary course of business and in accordance with
applicable Environmental Laws; (iii) there has been no past or present
releasing, spilling, leaking, pumping, pouring, emitting, emptying,
discharging, injecting, escaping, disposing or dumping (other than the
storing of materials in reasonable quantities to the extent necessary
for the operation of an office building in the ordinary course of
business, and in any event in compliance with all Environmental Laws)
(a "Release") or threatened Release of Hazardous Substances on, upon,
into or from the Real Estate, or on, upon, into or from the other
properties of the Borrower, REA, any Guarantor or their respective
Subsidiaries, which Release would have a material adverse effect on the
value of any of the Real Estate or adjacent properties or the
environment; (iv) there have been no Releases on, upon, from or into
any real property in the vicinity of any of the Real Estate which,
through soil or groundwater contamination, may have come to be located
on, and which would have a material adverse effect on the value of, the
Real Estate; and (v) any Hazardous Substances that have been generated
on any of the Real Estate have been transported off-site in accordance
with all applicable Environmental Laws.
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(d) Neither the Borrower, REA, any Guarantor, their respective
Subsidiaries nor the Real Estate is subject to any applicable
Environmental Law requiring the performance of Hazardous Substances
site assessments, or the removal or remediation of Hazardous
Substances, or the giving of notice to any governmental agency or the
recording or delivery to other Persons of an environmental disclosure
document or statement by virtue of the transactions set forth herein
and contemplated hereby, or as a condition to the recording of the
Mortgages or to the effectiveness of any other transactions
contemplated hereby.
(e) None of the following are or will be located in, on, under
or constitute a part of the Real Estate: asbestos or
asbestos-containing material in any form or condition; urea
formaldehyde insulation; or transformers or other equipment which
contain dielectric fluid containing polychlorinated biphenyls.
(f) There are no existing or closed sanitary landfills, solid
waste disposal sites, or hazardous waste treatment, storage or disposal
facilities on or affecting the Real Estate.
(g) There has been no claim by any party that any use,
operation, or condition of the Real Estate has caused any nuisance or
any other liability or adverse condition on any other property nor is
there any knowledge of any basis for such a claim.
Section 6.21 Intentionally omitted.
Section 6.22 Leases. The Borrower has delivered to the Agent true
copies of the Leases relating to each Mortgaged Property required to be
delivered as a part of the Eligible Real Estate Qualification Documents as of
the date hereof.
Section 6.23 Intentionally omitted.
Section 6.24 Mortgaged Property. The Borrower and REA make the
following representations and warranties concerning each of the Mortgaged
Properties:
(a) Off-Site Utilities. All water, sewer, electric, gas,
telephone and other utilities necessary for the use and operation of
the Mortgaged Property are installed to the property lines of the
Mortgaged Property through dedicated public rights-of-way or through
perpetual private easements approved by the Agent with respect to which
the applicable Mortgage creates a valid and enforceable first lien or
security title and, except in the case of drainage facilities, are
connected to the Building located thereon with valid permits and are
adequate to service the Building in compliance with applicable law.
(b) Access, Etc. The streets abutting the Mortgaged Property
are dedicated and accepted public roads, to which the Mortgaged
Property has direct access by trucks and other motor vehicles and by
foot, or are perpetual private ways or easements (with direct access by
trucks and other motor vehicles and by
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foot to public roads) to which the Mortgaged Property has direct access
approved by the Agent and with respect to which the applicable Mortgage
creates a valid and enforceable first lien or security title. All
private ways or easements providing access to the Mortgaged Property
are zoned in a manner which will permit access to the Building over
such ways or easements by trucks and other commercial and industrial
vehicles.
(c) Independent Building. The Building is fully independent in
all respects including, without limitation, in respect of structural
integrity, heating, ventilating and air conditioning, plumbing,
mechanical and other operating and mechanical systems, and electrical,
sanitation and water systems, all of which are connected directly to
off-site utilities located in public streets or ways or through insured
perpetual private easements approved by the Agent. The Building is
located on a lot which is separately assessed for purposes of real
estate tax assessment and payment. The Building, all Personal Property
and all paved or landscaped areas related to or used in connection with
the Building are located wholly within the perimeter lines of the lot
or lots on which the Mortgaged Property is located, except as may be
specifically shown on the Survey for such Mortgaged Property.
(d) Condition of Building. To the best of the knowledge and
belief of the Borrower and REA, the Building is structurally sound, in
good repair and free of defects in materials and workmanship. To the
best of the knowledge and belief of the Borrower and REA, all major
building systems located within the Building, including without
limitation heating, ventilating and air conditioning, electrical,
sprinkler, plumbing or other mechanical systems (but excluding any
systems which are required to be maintained by tenants), are in good
working order and condition. To the best of the knowledge and belief of
the Borrower and REA, since the date of the property condition reports
delivered to the Agent prior to the date hereof, there has been no
materially adverse change to the physical condition of any of the
Mortgaged Property, including as a result of any fire, explosion,
accident, flood or other casualty.
(e) Building Compliance with Law. Neither the Borrower, REA
nor any Guarantor has received any notice of, and has no knowledge of,
any violation by the Building as presently constructed, used, occupied
and operated any applicable federal or state law or governmental
regulation, or any local ordinance, order or regulation, including but
not limited to laws, regulations, or ordinances relating to zoning,
building use and occupancy, subdivision control, fire protection,
health, sanitation, safety, handicapped access, tidelands, wetlands and
flood control (hereinafter referred to as the "Requirements"). The
Building complies with applicable zoning laws and regulations and is
not a so-called non-conforming use. The zoning laws permit use of the
Building for its current use. There is such number of parking spaces on
the lot or lots on which the Mortgaged Property is located as is
adequate under the zoning laws and regulations to permit use of the
Building for its current use. Each Mortgaged
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Property constitutes a separate parcel which has been properly
subdivided in accordance with all applicable state and local laws,
regulations and ordinances to the extent required thereby, and neither
the execution and delivery of the Mortgages nor the exercise of any
remedies thereunder by Agent shall violate any such law or regulation
relating to the subdivision of real property.
(f) No Required Mortgaged Property Consents, Permits, Etc.
Neither the Borrower, REA nor any Guarantor has received any notice of,
and has no knowledge of, any approvals, consents, licenses, permits
issued by any governmental or quasi-governmental authority, utility
installations and connections (including, without limitation, drainage
facilities), curb cuts and street openings, required by applicable
laws, rules, ordinances or regulations or any agreement affecting the
Mortgaged Property for the maintenance, operation, servicing and use of
the Mortgaged Property or the Building for its current use (hereinafter
referred to as the "Project Approvals") which have not been granted,
effected, or performed and completed (as the case may be), or any fees
or charges therefor which have not been fully paid, or which are no
longer in full force and effect. No Project Approvals (including,
without limitation, any railway siding agreements) will terminate, or
become void or voidable or terminable on any foreclosure sale of the
Mortgaged Property pursuant to the Mortgage. To the best knowledge of
the Borrower and REA, there are no outstanding notices, suits, orders,
decrees or judgments relating to zoning, building use and occupancy,
fire, health, sanitation or other violations affecting, against, or
with respect to, the Mortgaged Property or any part thereof.
(g) No Violations. Neither the Borrower, REA nor any Guarantor
has received written notice of, nor has any knowledge of, any violation
of any applicable Requirements, Project Approvals or any other
restrictions or agreements by which the Borrower, Guarantor or the
Mortgaged Property is bound.
(h) Insurance. Neither the Borrower, REA nor any Guarantor has
received any written notice from any insurer or its agent requiring
performance of any work with respect to the Mortgaged Property or
canceling or threatening to cancel any policy of insurance, and the
Mortgaged Property complies with the requirements of all of the
relevant insurance carriers of the Borrower, REA and the Guarantors.
(i) Real Property and other Taxes; Special Assessments. There
are no unpaid or outstanding real estate or other taxes or assessments
on or against the Mortgaged Property or any part thereof which are
payable by the Borrower, REA or any Guarantor (except real estate or
other taxes or assessments that are not yet delinquent or subject to
any penalties, interest or other late charges or which are being
contested in good faith by appropriate proceedings and for which the
Borrowers, REA or such Guarantor has set aside reserves adequate to pay
same). There are no unpaid or outstanding gross receipts, rent or sales
taxes payable by the Borrower, REA or any Guarantor with respect to the
use and operation of the
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Mortgaged Property which are due and payable. The Borrower has
delivered to the Agent true and correct copies of real estate tax bills
for the Mortgaged Property for the past three fiscal tax years. No
abatement proceedings are pending with reference to any real estate
taxes assessed against the Mortgaged Property. To the best of the
knowledge and belief of the Borrower and REA, there are no betterment
assessments or other special assessments presently pending with respect
to any portion of the Mortgaged Property, and neither the Borrower, REA
nor any Guarantor has received any written notice of any such special
assessment being contemplated.
(j) Historic Status. The Building is not a historic structure
or landmark and neither the Building nor the Mortgaged Property is
located within any historic district pursuant to any federal, state or
local law or governmental regulation.
(k) Eminent Domain; Casualty. Except as set forth on Schedule
6.24(k) hereto, there are no pending eminent domain proceedings against
the Mortgaged Property or any part thereof, and, to the best of the
knowledge and belief of the Borrower and REA no such proceedings are
presently threatened or contemplated by any taking authority. Neither
the Mortgaged Property, the Building nor any part thereof is now
materially damaged or injured as a result of any fire, explosion,
accident, flood or other casualty.
(l) Leases. An accurate and complete Rent Roll and Lease
Summary as of the date of inclusion of each Mortgaged Property in the
Collateral (or such other recent date as may be required by the Agent)
with respect to all Leases of any portion of the Mortgaged Property has
been provided to the Agent. The Leases reflected on such Rent Roll
constitute as of the date thereof the sole agreements relating to
leasing or licensing of space at such Mortgaged Property and in the
Building relating thereto. None of the Leases has been modified,
changed, altered, assigned, supplemented or amended in any respect,
except as reflected on the Rent Roll, and no tenant is entitled to any
free rent, partial rent, rebate of rent payments, credit, offset or
deduction in rent, including, without limitation, lease support
payments or lease buy-outs, except as reflected in the Rent Roll. There
are no occupancies, rights, privileges or licenses in or to any
Mortgaged Property or portion thereof other than pursuant to the Leases
reflected in Rent Rolls previously furnished to the Agent for such
Mortgaged Property. Except as set forth in each Rent Roll, the Leases
reflected therein are in full force and effect in accordance with their
respective terms, without any payment default or any other material
default thereunder, nor are there any defenses, counterclaims, offsets,
concessions or rebates available to any tenant thereunder, and neither
the Borrower, REA nor any Guarantor has given or made, any notice of
any payment or other material default, or any claim, which remains
uncured or unsatisfied, with respect to any of the Leases, and to the
best of the knowledge and belief of the Borrower and REA, there is no
basis for any such claim or notice of default by any tenant. No
property other than the Mortgaged Property which is
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the subject of the applicable Lease is necessary to comply with the
requirements (including, without limitation, parking requirements)
contained in such Lease. The Rent Rolls furnished to the Agent
accurately and completely set forth all rents payable by and security,
if any, deposited by tenants, no tenant having paid more than one
month's rent in advance. Except as described in Schedule 6.24(l)
attached hereto, all tenant improvements or work to be done, furnished
or paid for by the Borrower, REA or any Guarantor, or credited or
allowed to a tenant, for, or in connection with, the Building pursuant
to any Lease has been completed and paid for or provided for in a
manner satisfactory to the Agent, and, except as set forth on Schedule
6.24(l), no material leasing, brokerage or like commissions, fees or
payments are due from the Borrower in respect of the Leases.
(m) Management Agreement. On and as of the Closing Date, the
Mortgaged Properties are self managed by the Borrower and no Management
Agreements with any third party or Affiliate exist.
(n) Other Material Real Property Agreements; No Options. There
are no material agreements pertaining to the Mortgaged Property, any
Building thereon or the operation or maintenance of either thereof
other than as described in this Agreement (including the Schedules
hereto) or otherwise disclosed in writing to the Agent and the Lenders
by the Borrower, REA or any Guarantor; and no person or entity has any
right or option to acquire the Mortgaged Property or any Building
thereon or any portion thereof or interest therein.
Section 6.25 Brokers. Neither the Borrower, REA, any Guarantor nor any
of their respective Subsidiaries has engaged or otherwise dealt with any broker,
finder or similar entity in connection with this Agreement or the Loans
contemplated hereunder.
Section 6.26 Ownership. REA is the sole general partner of the Borrower
and as of the date hereof owns a 50.7% partnership interest in the Borrower. All
of the limited partners of the Borrower as of the date hereof are set forth on
Schedule 6.26 hereto. All of the Subsidiaries of the Borrower, REA and the
Guarantors as of the date hereof are set forth on Schedule 6.26. The form and
jurisdiction of organization of, and the ownership interests of the Borrower,
REA and each Guarantor in, each of their respective Subsidiaries as of the date
hereof are set forth in said Schedule 6.26. As of the date hereof, neither the
Borrower, REA or any Guarantor owns any interest in any joint ventures or other
entities which are not Subsidiaries.
Section 6.27 Other Debt. Neither the Borrower, REA, any Guarantor nor
any of their respective Subsidiaries is in default of the payment of any
Indebtedness or any other agreement, mortgage, deed of trust, security
agreement, financing agreement, indenture or lease to which any of them is a
party. Neither the Borrower, REA nor any Guarantor is a party to or bound by any
agreement, instrument or indenture that may require the subordination in right
or time or payment of any of the Obligations to any other indebtedness or
obligation of the Borrower, REA or any Guarantor. Schedule 6.27 hereto sets
forth all agreements, mortgages, deeds of trust, financing agreements or other
material agreements binding upon the Borrower, REA and each Guarantor or their
respective properties and entered into by the Borrower, REA and or such
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Guarantor as of the date of this Agreement with respect to any Indebtedness of
the Borrower, REA or any Guarantor, and the Borrower has provided the Agent with
true, correct and complete copies thereof.
Section 6.28 Solvency. As of the Closing Date and after giving effect
to the transactions contemplated by this Agreement and the other Loan Documents,
including all Loans made or to be made hereunder, neither the Borrower, REA nor
any Guarantor is insolvent on a balance sheet basis such that the sum of such
Person's assets exceeds the sum of such Person's liabilities, each of the
Borrower, REA and each Guarantor is able to pay its debts as they become due,
and each of the Borrower, REA and each Guarantor has sufficient capital to carry
on its business.
Section 6.29 No Bankruptcy Filing. None of the Borrower, REA or any
Guarantor is contemplating either the filing of a petition by it under any state
or federal bankruptcy or insolvency laws or the liquidation of its assets or
property, and neither the Borrower nor REA has knowledge of any Person
contemplating the filing of any such petition against it or any Guarantor.
Section 6.30 No Fraudulent Intent. Neither the execution and delivery
of this Agreement or any of the other Loan Documents nor the performance of any
actions required hereunder or thereunder is being undertaken by the Borrower,
REA or any Guarantor with or as a result of any actual intent by any of such
Persons to hinder, delay or defraud any entity to which any of such Persons is
now or will hereafter become indebted.
Section 6.31 Transaction in Best Interests of Borrower; Consideration.
The transaction evidenced by this Agreement and the other Loan Documents is in
the best interests of the Borrower, REA and each Guarantor and the creditors of
such Persons. The direct and indirect benefits to inure to the Borrower, REA and
each Guarantor pursuant to this Agreement and the other Loan Documents
constitute substantially more than "reasonably equivalent value" (as such term
is used in Section 548 of the Bankruptcy Code) and "valuable consideration,"
"fair value," and "fair consideration," (as such terms are used in any
applicable state fraudulent conveyance law), in exchange for the benefits to be
provided by the Borrower, REA and each Guarantor pursuant to this Agreement and
the other Loan Documents, and but for the willingness of REA and each Guarantor
to guaranty the Loan, the Borrower would be unable to obtain the financing
contemplated hereunder which financing will enable the Borrower, REA, each
Guarantor and their respective Subsidiaries to have available financing to
conduct and expand their business.
Section 7 AFFIRMATIVE COVENANTS.
Each of the Borrower and REA covenants and agrees that, so long as any
Loan or Note is outstanding or any Lender has any obligation to make any Loans:
Section 7.1 Punctual Payment. The Borrower will duly and punctually pay
or cause to be paid the principal and interest on the Loans and all interest and
fees provided for in this Agreement, all in accordance with the terms of this
Agreement and the Notes, as well as all other sums owing pursuant to the Loan
Documents.
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Section 7.2 Maintenance of Office. The Borrower, REA and each Guarantor
will maintain its respective chief executive office at 620 West Germantown Pike,
Plymouth Meeting, Pennsylvania 19462, or at such other place in the United
States of America as the Borrower, REA or any Guarantor shall designate upon
thirty (30) days prior written notice to the Agent and the Lenders, where
notices, presentations and demands to or upon the Borrower, REA or such
Guarantor in respect of the Loan Documents may be given or made.
Section 7.3 Records and Accounts. The Borrower, REA and each Guarantor
will (a) keep, and cause each of their respective Subsidiaries to keep, true and
accurate records and books of account in which full, true and correct entries
will be made in accordance with GAAP and (b) maintain adequate accounts and
reserves for all taxes (including income taxes), depreciation and amortization
of its properties and the properties of their respective Subsidiaries,
contingencies and other reserves. Neither the Borrower, REA, any Guarantor nor
any of their respective Subsidiaries shall, without the prior written consent of
the Majority Lenders, (x) make any material change to the accounting procedures
used by such Person in preparing the financial statements and other information
described in Section 6.4 or Section 7.4, or (y) change its fiscal year.
Section 7.4 Financial Statements, Certificates and Information. REA
will deliver or cause to be delivered to each of the Lenders:
(a) as soon as practicable, but in any event not later than
ninety (90) days after the end of each fiscal year of REA, the audited
balance sheet of REA at the end of such year (both on a consolidated
basis with the Borrower and their respective Subsidiaries and on an
unconsolidated basis), and, if requested, the related audited
statements of income, changes in capital and cash flows for such year
(both on a consolidated basis with the Borrower and their respective
Subsidiaries and if requested by the Agent, on an unconsolidated
basis), each setting forth in comparative form the figures for the
previous fiscal year and all such statements to be in reasonable
detail, prepared in accordance with GAAP, and accompanied by an
auditor's report prepared without qualification as to the scope of the
audit by a "Big Six" accounting firm, and any other information the
Lenders may need to complete a financial analysis of REA, the Borrower
and their respective Subsidiaries, in any event together with a written
statement from such accountants to the effect that they have read this
Agreement, and that, in making the examination necessary to said
certification, they have obtained no knowledge of any Default or Event
of Default, or, if such accountants shall have obtained knowledge of
any Default or Event of Default they shall disclose in such statement
any such Default or Event of Default;
(b) as soon as practicable, but in any event not later than
forty five (45) days after the end of each of the first three fiscal
quarters of REA, copies of the unaudited balance sheet of REA as at the
end of such quarter (both on a consolidated basis with the Borrower and
their respective Subsidiaries and if requested by the Agent, on an
unconsolidated basis), and the related unaudited statements of income,
changes in capital and cash flows for the portion of REA's fiscal year
then elapsed (both on a consolidated basis with the Borrower and their
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respective Subsidiaries and if requested by the Agent, on an
unconsolidated basis), and a statement showing the aging of the
receivables for the Mortgaged Properties, all in reasonable detail and
prepared in accordance with GAAP, together with a certification by the
chief financial officer or accounting officer of REA that the
information contained in such financial statements fairly presents the
financial position of REA the Borrower and their respective
Subsidiaries on the date thereof (subject to year-end adjustments);
(c) simultaneously with the delivery of the financial
statements referred to in subsections (a) and (b) above, a statement (a
"Compliance Certificate") certified by the chief financial officer or
chief accounting officer of REA in the form of Exhibit H hereto (or in
such other form as the Agent may approve from time to time) setting
forth in reasonable detail computations evidencing compliance with the
covenants contained in Section 9 and the other covenants described in
such certificate and (if applicable) setting forth reconciliations to
reflect changes in GAAP since the Balance Sheet Date. The Compliance
Certificate shall be accompanied by copies of the statements of
Consolidated Operating Cash Flow for each such fiscal quarter and the
preceding fiscal quarters for REA and a statement of Gross Cash
Receipts, Operating Expenses and Net Operating Income for each such
fiscal quarter and the preceding fiscal quarter for each of the
Mortgaged Properties, prepared on a basis consistent with the
statements furnished to the Lenders prior to the date hereof and
otherwise in form and substance satisfactory to the Agent, together
with a certification by the chief financial officer or chief accounting
officer of REA that the information contained in such statement fairly
presents the Consolidated Operating Cash Flow, Net Operating Income,
Gross Cash Receipts and Operating Expenses of REA and the Mortgaged
Properties, as applicable, for such periods;
(d) as soon as practicable but in any event not later than
forty five (45) days after the end of each fiscal quarter of REA
(including the fourth fiscal quarter in each year), an updated Rent
Roll with respect to each Mortgaged Property, a summary of each such
Rent Roll, and a leasing activity report with respect to each Mortgaged
Property setting forth the efforts to market and lease the then
unleased space in each Mortgaged Property and the results of such
efforts;
(e) simultaneously with the delivery of the financial
statement referred to in subsection (a) above, the business plan of REA
for the current fiscal year and a statement (i) listing the Real Estate
owned or leased by REA, the Borrower, the Guarantors and their
respective Subsidiaries and stating the location thereof, the date
acquired and the acquisition cost thereof, (ii) listing the
Indebtedness of REA, the Borrower, the Guarantors and their respective
Subsidiaries (excluding Indebtedness of the type described in Section
8.1(b)-(e)), which statement shall include, without limitation, a
statement of the original principal amount of such Indebtedness and the
current amount outstanding, the holder thereof, the maturity date and
any extension options, the interest rate, the collateral provided for
such Indebtedness and whether such Indebtedness is recourse or
non-recourse,
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(iii) listing the Real Estate, if any, owned or leased by REA, the
Borrower, the Guarantors and their respective Subsidiaries which is
Under Development and providing a brief summary of the status of such
development and (iv) listing any new Subsidiaries of the Borrower, REA
or any Guarantor and the ownership thereof, and any change of ownership
of any existing Subsidiaries;
(f) contemporaneously with the filing or mailing thereof,
copies of all material of a financial nature sent to the partners of
the Borrower or the partners or shareholders of REA or any Guarantor;
(g) promptly after they are filed with the Internal Revenue
Service, copies of all annual federal income tax returns and amendments
thereto of the Borrower, REA and each Guarantor; and
(h) from time to time such other financial data and
information in the possession of the Borrower, REA, each Guarantor or
their respective Subsidiaries (including without limitation auditors'
management letters, property inspection and environmental reports and
information as to zoning and other legal and regulatory changes
affecting the Borrower, REA or any Guarantor) as the Agent may
reasonably request.
Notwithstanding anything to the contrary set forth in this Agreement, during any
period of time that the percentage partnership interest of REA in the Borrower
falls below the ownership threshold which, in accordance with GAAP, would permit
the consolidation of the accounts of the Borrower with the accounts of REA:
(i) pursuant to Section 7.4(a), REA shall cause to be prepared
and delivered the audited balance sheet and financial statements of REA
and the Borrower which are described therein on an unconsolidated
basis, together with an agreed upon procedures report from the
accountants who are preparing such balance sheets and financial
statements showing the consolidation of such balance sheets and
financial statements as if such consolidation were permitted by GAAP
and otherwise in form acceptable to the Agent and, if requested by the
Agent, an audited balance sheet and financial statement of the Borrower
consolidated in accordance with GAAP;
(ii) pursuant to Section 7.4(b), REA shall prepare and deliver
the unaudited balance sheets and financial statements of REA and the
Borrower which are described therein on a consolidated basis (whether
or not such consolidation is permitted by GAAP) based on consolidation
methods and procedures in accordance with GAAP;
(iii)pursuant to Section 7.4(c), REA shall prepare and deliver
the Compliance Certificates described therein and calculate compliance
with the covenants set forth in Section 9 and the other covenants
described in such Compliance Certificates on the basis of the
consolidated balance sheets and financial statements of REA and the
Borrower which are described in subclauses (i) and (ii) hereof; and
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(iv) all other terms and provisions of this Agreement
(including defined terms) which depend upon or make reference to the
consolidated financial results, balance sheets or financial statements
of REA shall be construed to mean such consolidated results, balance
sheets or financial statements of REA and the Borrower which are
prepared and determined in accordance with subclauses (i), (ii) and
(iii) hereof.
Section 7.5 Notices.
(a) Defaults. The Borrower and REA will immediately upon becoming aware
of same notify the Agent in writing of the occurrence of any Default or Event of
Default. If any Person shall give any notice or take any other action in respect
of a claimed default (whether or not constituting an Event of Default) under
this Agreement or under any note, evidence of indebtedness, indenture or other
obligation to which or with respect to which the Borrower, REA, any Guarantor or
any of their respective Subsidiaries is a party or obligor, whether as principal
or surety, and such default would permit the holder of such note or obligation
or other evidence of indebtedness to accelerate the maturity thereof, which
acceleration would have a material adverse effect on the Borrower, REA or any
Guarantor, the Borrower and REA shall forthwith give written notice thereof to
the Agent and each of the Lenders, describing the notice or action and the
nature of the claimed default.
(b) Environmental Events. The Borrower and REA will give notice to the
Agent within five (5) Business Days of becoming aware of (i) any potential or
known Release, or threat of Release, of any Hazardous Substances at or from any
Real Estate; (ii) any violation of any Environmental Law that the Borrower, REA,
any Guarantor or any of their respective Subsidiaries reports in writing or is
reportable by such Person in writing (or for which any written report
supplemental to any oral report is made) to any federal, state or local
environmental agency or (iii) any inquiry, proceeding, investigation, or other
action, including a notice from any agency of potential environmental liability,
of any federal, state or local environmental agency or board, that in either
case involves any Real Estate and could reasonably be expected to materially
affect the assets, liabilities, financial condition or operations of the
Borrower, REA, any Guarantor or any of their respective Subsidiaries or the
Agent's liens or security title on the Collateral pursuant to the Security
Documents.
(c) Notification of Claims Against Collateral. The Borrower and REA
will give notice to the Agent in writing within five (5) Business Days of
becoming aware of any setoff, claims (including, with respect to the Real
Estate, environmental claims), withholdings or other defenses to which any of
the Collateral, or the rights of the Agent or the Lenders with respect to the
Collateral, are subject.
(d) Notice of Litigation and Judgments. The Borrower and REA will give
notice to the Agent in writing within five (5) Business Days of becoming aware
of any litigation or proceedings threatened in writing or any pending litigation
and proceedings affecting the Borrower, REA any Guarantor or any of their
respective Subsidiaries or to which the Borrower, REA, any Guarantor or any of
their respective Subsidiaries is or is to become a party involving an uninsured
claim against any of the Borrower, REA, any Guarantor or any of their respective
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Subsidiaries that could reasonably be expected to have a materially adverse
effect on the Borrower, REA or any Guarantor stating the nature and status of
such litigation or proceedings. The Borrower, REA and each Guarantor will give
notice to the Agent, in writing, in form and detail reasonably satisfactory to
the Agent and each of the Lenders, within ten days of any judgment not covered
by insurance, whether final or otherwise, against any of the Borrower, REA, any
Guarantor or any of their respective Subsidiaries in an amount in excess of
$1,000,000.
(e) Notice of Proposed Sales, Encumbrances, Refinance or Transfer of
Non-Mortgaged Property. The Borrower and REA will give notice to the Agent of
any proposed or completed sale, encumbrance, refinance or transfer of any Real
Estate (other than the Mortgaged Properties) of the Borrower, REA, any Guarantor
or their respective Subsidiaries within any fiscal quarter of REA, such notice
to be submitted together with the Compliance Certificate provided or required to
be provided to the Lenders under Section 7.4 with respect to such fiscal
quarter. The Compliance Certificate shall with respect to any proposed or
completed sale, encumbrance, refinance or transfer be adjusted in the best good
faith estimate of REA to give effect to such sale, encumbrance, refinance or
transfer and demonstrate that no Default or Event of Default with respect to the
covenants referred to therein shall exist after giving effect to such sale,
encumbrance, refinance or transfer.
(f) Notification of Lenders. Within five(5) Business Days after
receiving any notice under this Section 7.5, the Agent will forward a copy
thereof to each of the Lenders, together with copies of any certificates or
other written information that accompanied such notice.
(g) Notice of Occupancy or Termination by Tenant. The Borrower and REA
will give written notice to the Agent in writing within five (5) Business Days
of becoming aware of the termination of a Lease within a Mortgaged Property
covering either 10,000 square feet or more or five percent (5%) or more of the
aggregate Net Rentable Area of such Mortgaged Property, and such notice shall
state the name of the tenant and the Mortgaged Property affected and the amount
of the base rent and additional rent that such tenant was obligated to pay. The
Borrower and REA shall deliver to the Agent within thirty (30) days after the
end of each fiscal quarter a true and correct copy of each Lease within a
Mortgaged Property entered into by or on behalf of the Borrower, REA, any
Guarantor or their respective Subsidiaries during the preceding quarter and not
previously delivered to the Agent.
Section 7.6 Existence; Compliance with Environmental Recommendations.
(a) The Borrower will do or cause to be done all things necessary to preserve
and keep in full force and effect its existence as a Delaware limited
partnership. REA will do or cause to be done all things necessary to preserve
and keep in full force and effect its existence as a Maryland corporation. Each
Guarantor will do or cause to be done all things necessary to preserve and keep
in full force and effect its legal existence in the jurisdiction of its
incorporation or formation. The Borrower and REA will cause each of their
respective Subsidiaries to do or cause to be done all things necessary to
preserve and keep in full force and effect their legal existence in the
jurisdiction of its incorporation or formation. The Borrower and REA will do or
cause to be done all things necessary to preserve and keep in full force all of
their respective rights and franchises and those of their respective
Subsidiaries, the preservation of which is necessary to the conduct of their
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business. The Borrower and REA will, and will cause each of their respective
Subsidiaries to, continue to engage primarily in the businesses now conducted by
them and in related businesses.
(b) Without limitation of the obligations of the Borrower or REA under
this Agreement with respect to the maintenance of the Mortgaged Properties, the
Borrower and REA shall promptly and diligently comply with the recommendations
of the Environmental Engineer concerning the Mortgaged Properties contained in
the building inspection and environmental reports delivered to the Agent.
Section 7.7 Insurance. The Borrower, REA or the applicable Guarantor
will, at its expense, procure and maintain for the benefit of the Borrower, REA
or such Guarantor and the Agent, insurance policies issued by such insurance
companies, in such amounts, in such form and substance, and with such coverages,
endorsements, deductibles and expiration dates (which shall not be less than 12
months from the date of issuance of such coverage) as are reasonably acceptable
to the Agent, providing the following types of insurance covering each Mortgaged
Property:
(i) "all Risks" property insurance (including broad form
flood, broad form earthquake and comprehensive boiler and machinery
coverages) on each Building and the contents therein of the Borrower,
REA or such Guarantor and their respective Subsidiaries in an amount
not less than one hundred percent (100%) of the full replacement cost
of each such Building and the contents therein determined no less
frequently than every 24 months by an insurer, or, if not so determined
by the insurer, by a qualified appraiser selected and paid for by the
Borrower, REA or such Guarantor and acceptable to the Agent, or such
other limit as the Agent may approve, with deductibles not to exceed
$100,000 for any one occurrence, with a replacement cost coverage
endorsement, an agreed amount endorsement, and, if requested by the
Agent, a contingent liability from operation of building laws
endorsement, a demolition cost endorsement and an increased cost of
construction endorsement in such amounts as the Agent may require. Full
replacement cost as used in this Section 7.7 means the cost of
replacing a Building (exclusive of the cost of excavations, foundations
and footings below the lowest basement floor) and the contents therein
without deduction for physical depreciation thereof;
(ii) during the course of construction or repair of any
Building, the insurance required by clause (i) above shall be written
on a builders risk, completed value, non-reporting form, meeting all of
the terms required by clause (i) above, covering the total value of
work performed, materials, equipment, machinery and supplies furnished,
existing structures, and temporary structures being erected on or near
the Mortgaged Property, including coverage against collapse and damage
during transit or while being stored off-site, and containing a soft
costs (including loss of rents) coverage endorsement and a permission
to occupy endorsement;
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(iii) flood insurance if at any time any Building is located
in any federally designated "special hazard area" (including any area
having special flood, mudslide and/or flood-related erosion hazards,
and shown on a Flood Hazard Boundary Map or a Flood Insurance Rate Map
published by the Federal Emergency Management Agency as Zone A, AO,
Al-30, AE, A99, AH, VO, Vl-30, VE, V, M or E) and the broad form flood
coverage required by clause (i) above is not available, in an amount
equal to the full replacement cost or the maximum amount then available
under the National Flood Insurance Program;
(iv) rent loss insurance in an amount sufficient to recover at
least the total estimated gross receipts from all sources of income,
including without limitation, rental income, for the Mortgaged Property
for a twelve month period;
(v) commercial general liability insurance against claims for
personal injury (to include, without limitation, bodily injury and
personal and advertising injury) and property damage liability, all on
an occurrence basis, if commercially available, with such coverages as
the Agent may reasonably request (including, without limitation,
contractual liability coverage, completed operations coverage for a
period of two years following completion of construction of any
improvements on the Mortgaged Property, and coverages equivalent to an
ISO broad form endorsement), with a general aggregate limit of not less
than $2,000,000, a completed operations aggregate limit of not less
than $2,000,000 and a combined single "per occurrence" limit of not
less than $1,000,000 for bodily injury, property damage and medical
payments;
(vi) during the course of construction or repair of any
improvements on the Mortgaged Property, owner's contingent or
protective liability insurance covering claims not covered by or under
the terms or provisions of the insurance required by clause (v) above;
(vii) employers liability insurance;
(viii) umbrella liability insurance with limits of not less
than $25,000,000 to be in excess of the limits of the insurance
required by clauses (v), (vi) and (vii) above, with coverage at least
as broad as the primary coverages of the insurance required by clauses
(v), (vi) and (vii) above, with any excess liability insurance to be at
least as broad as the coverages of the lead umbrella policy. All such
policies shall be endorsed to provide defense coverage obligations;
(ix) workers' compensation insurance for all employees of the
Borrower, REA or such Guarantor or their respective Subsidiaries
engaged on or with respect to the Mortgaged Property; and
(x) such other insurance in such form and in such amounts as
may from time to time be reasonably required by the Agent against other
insurable
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hazards and casualties which at the time are commonly insured against
in the case of properties of similar character and location to the Real
Estate.
The Borrower, REA or the applicable Guarantor shall pay all premiums on
insurance policies. The insurance policies with respect to all Mortgaged
Property provided for in clauses (v), (vi) and (viii) above shall name the Agent
and each Lender as an additional insured and shall contain a cross liability/
severability endorsement. The insurance policies provided for in clauses (i),
(ii), (iii) and (iv) above shall name the Agent as mortgagee and loss payee,
shall be first payable in case of loss to the Agent, and shall contain mortgage
clauses and lender's loss payable endorsements in form and substance reasonably
acceptable to the Agent. The Borrower shall deliver duplicate originals or
certified copies of all such policies to the Agent, and the Borrower shall
promptly furnish to the Agent all renewal notices and evidence that all premiums
or portions thereof then due and payable have been paid. At least 30 days prior
to the expiration date of the policies, the Borrower shall deliver to the Agent
evidence of continued coverage, in the form of a certificate of insurance
satisfactory to the Agent.
(a) All policies of insurance required by this Agreement shall contain
clauses or endorsements to the effect that (i) no act or omission of the
Borrower, REA or any Guarantor or any or their respective Subsidiaries or anyone
acting for the Borrower, REA, any Guarantor or any such Subsidiary (including,
without limitation, any representations made in the procurement of such
insurance), which might otherwise result in a forfeiture of such insurance or
any part thereof, no occupancy or use of the Mortgaged Property for purposes
more hazardous then permitted by the terms of the policy, and no foreclosure or
any other change in title to the Mortgaged Property or any part thereof, shall
affect the validity or enforceability of such insurance insofar as the Agent is
concerned, (ii) the insurer waives any right of setoff, counterclaim,
subrogation, or any deduction in respect of any liability of the Borrower, REA,
any Guarantor, any such Subsidiary, the Agent and the Lenders, (iii) such
insurance is primary and without right of contribution from any other insurance
which may be available, (iv) such policies shall not be modified, canceled or
terminated prior to the scheduled expiration date thereof without the insurer
thereunder giving at least thirty (30) days prior written notice to the Agent,
and (v) the Agent or the Lenders shall not be liable for any premiums thereon or
subject to any assessments thereunder, and such insurance shall in all events be
in amounts sufficient to avoid any coinsurance liability.
(b) The insurance required by this Agreement may be effected through a
blanket policy or policies covering all Real Estate of the Borrower, REA, any
Guarantor or any of their respective Subsidiaries not included in the Collateral
and shall be in amount equal to the replacement cost of all Buildings located on
such Real Estate, provided that such blanket policy or policies comply with all
of the terms and provisions of this Section 7.7 and contain endorsements or
clauses assuring that any claim recovery will not be less than that which a
separate policy would provide, including, without limitation, an aggregate
limits of insurance endorsement in the case of liability insurance.
(c) All policies of insurance required by this Agreement shall be
issued by companies licensed to do business in the State where the policy is
issued and also in the states where the
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Real Estate is located and having a rating in Best's Key Rating Guide of at
least "A" and a financial size category of at least "VIII".
(d) Neither the Borrower, REA, any Guarantor nor any of their
respective Subsidiaries shall carry separate insurance, concurrent in kind or
form or contributing in the event of loss, with any insurance required under
this Agreement unless such insurance complies with the terms and provisions of
this Section 7.7.
(e) In the event of any loss or damage to the Mortgaged Property, the
Borrower, REA or the applicable Guarantor shall give prompt written notice to
the insurance carrier and the Agent, and the Agent shall furnish a copy of such
notice promptly to each of the Lenders. Each of the Borrower, REA and the
Guarantors hereby irrevocably authorizes and empowers the Agent, at the Agent's
option and in the Agent's sole discretion or at the request of the Majority
Lenders in their sole discretion, as its attorney in fact, to make proof of such
loss, to adjust and compromise any claim under insurance policies, to appear in
and prosecute any action arising from such insurance policies, to collect and
receive Insurance Proceeds, and to deduct therefrom the Agent's expenses
incurred in the collection of such Insurance Proceeds; provided, however, that
so long as no Default or Event of Default has occurred and is continuing and so
long as the Borrower, REA or any Guarantor shall in good faith diligently pursue
such claim, the Borrower, REA or such Guarantor may make proof of loss and
appear in any proceedings or negotiations with respect to the adjustment of such
claim, except that the Borrower, REA or such Guarantor may not settle, adjust or
compromise any such claim without the prior written consent of the Agent, which
consent shall not be unreasonably withheld or delayed; provided, further, that
the Borrower, REA or such Guarantor may make proof of loss and adjust and
compromise any claim under casualty insurance policies which is in an amount
less than $500,000 so long as no Default or Event of Default has occurred and is
continuing and so long as the Borrower, REA or such Guarantor shall in good
faith diligently pursue such claim. The Borrower, REA and each Guarantor further
authorize the Agent, at the Agent's option, to (i) apply the balance of such
Insurance Proceeds to the payment of the Obligations whether or not then due, or
(ii) if the Agent shall require the reconstruction or repair of the Mortgaged
Property, to hold the balance of such proceeds as trustee to be used to pay
taxes, charges, sewer use fees, water rates and assessments which may be imposed
on the Mortgaged Property and the Obligations as they become due during the
course of reconstruction or repair of the Mortgaged Property and to reimburse
the Borrower, REA or such Guarantor, in accordance with such terms and
conditions as the Agent may prescribe, for the costs of reconstruction or repair
of the Mortgaged Property, and upon completion of such reconstruction or repair
to apply any excess to the payment of the Obligations. Notwithstanding the
foregoing, the Agent shall make such net Insurance Proceeds available to the
Borrower, REA or such Guarantor to reconstruct and repair the Mortgaged
Property, in accordance with such terms and conditions as the Agent may
prescribe in the Agent's discretion for the disbursement of the proceeds,
provided that (i) the cost of such reconstruction or repair is not estimated by
the Agent to exceed twenty five percent (25%) of the replacement cost of the
damaged Building (as reasonably estimated by the Agent), (ii) no Event of
Default shall have occurred and be continuing, (iii) the Borrower, REA or such
Guarantor shall have provided to the Agent additional cash security in an amount
equal to the amount reasonably estimated by the Agent to be the amount in excess
of such proceeds which will be required to complete such repair or restoration,
(iv) the Agent shall have approved the plans and
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specifications, construction budget, construction contracts, and construction
schedule for such repair or restoration and reasonably determined that the
repaired or restored Mortgaged Property will provide the Agent with adequate
security for the Obligations (provided that the Agent shall not disapprove such
plans and specifications if the Building is to be restored to its condition
immediately prior to such damage), (v) the Borrower, REA or such Guarantor shall
have delivered to the Agent written agreements binding upon not less than
seventy-five percent (75%) of the tenants or other parties having present or
future rights to possession of any portion of the affected Mortgaged Property or
having any right to require repair, restoration or completion of the Mortgaged
Property or any portion thereof, agreeing upon a date for delivery of possession
of the Mortgaged Property or their respective portions thereof, to permit time
which is sufficient in the judgment of the Agent for such repair or restoration
and approving the plans and specifications for such repair or restoration, or
other evidence satisfactory to the Agent that none of such tenants or other
parties may terminate their Leases as a result of such casualty or as a result
of having a right to approve the plans and specifications for such repair or
restoration (it being agreed that the foregoing percentage of seventy-five
percent (75%) shall be determined by reference to those tenants in the aggregate
occupying or having rights to occupy not less than seventy-five percent (75%) of
the Net Rentable Area of the Building so damaged), (vi) the Agent shall
determine that such repair or reconstruction can be completed prior to the
Maturity Date, (vii) the Agent shall receive evidence reasonably satisfactory to
it that any such restoration, repair or rebuilding complies in all respects with
any and all applicable state, federal and local laws, ordinances and
regulations, including without limitation, zoning laws, ordinances and
regulations, and that all required permits, licenses and approvals relative
thereto have been or will be issued in a manner so as not to impede the progress
of restoration, and (viii) the Agent shall receive evidence reasonably
satisfactory to it that the insurer under such policies of fire or other
casualty insurance does not assert any defense to payment under such policies
against the Borrower, REA, any Guarantor or the Agent. Any excess Insurance
Proceeds shall be paid to the Borrower, or if an Event of Default has occurred
and is continuing, such proceeds shall be applied to the payment of the
Obligations, unless in either case by the terms of the applicable insurance
policy the excess proceeds are required to be returned to such insurer. In no
event shall the provisions of this Section be construed to extend the Maturity
Date or to limit in any way any right or remedy of the Agent upon the occurrence
of an Event of Default hereunder. If the Mortgaged Property is sold or the
Mortgaged Property is acquired by the Agent, all right, title and interest of
the Borrower, REA and any Guarantor in and to any insurance policies and
unearned premiums thereon and in and to the proceeds thereof resulting from loss
or damage to the Mortgaged Property prior to the sale or acquisition shall pass
to the Agent or any other successor in interest to the Borrower or purchaser of
the Mortgaged Property.
(f) The Borrower, REA and each and Guarantor will require any general
contractor to obtain and maintain at all times during the construction of any
improvements to the Mortgaged Property the insurance required by the general
contractor's contract approved by the Agent and such other insurance as may be
reasonably required by the Agent (including, without limitation, commercial
general liability insurance, comprehensive automobile liability insurance,
all-risk contractor's equipment floater insurance, workmen's compensation
insurance and employer liability insurance). The Borrower, REA and each and
Guarantor will require its architect, engineer and any other design professional
providing design or engineering services in
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connection with the construction of any improvements to the Mortgaged Property
to obtain and maintain professional liability insurance covering any claims
asserted with respect to the Mortgaged Property for such period of time as the
Agent may reasonably approve. All such insurance required by this paragraph
shall be in such amounts and form, to include such coverage and endorsements,
and to be issued by such insurers as shall be approved by the Agent, and to
contain the written agreement of the insurer to give the Agent thirty (30) days
prior written notice of cancellation, nonrenewal, modification or expiration.
The Borrower, REA and each Guarantor will provide or will cause its general
contractor or design professional to provide the Agent with certificates
evidencing such insurance upon the request of the Agent.
(g) The Borrower, REA and the Guarantors will, and will cause each of
their respective Subsidiaries to, at their expense, procure and maintain
insurance covering the Real Estate other than the Collateral in such amounts and
against such risks and casualties as are customary for properties of similar
character and location, due regard being given to the type of improvements
thereon, their construction, location, use and occupancy.
(h) The Borrower, REA and the Guarantors will provide to the Agent for
the benefit of the Lenders Title Policies for all of the Mortgaged Properties of
such Person. Each Title Policy shall also contain, to the extent available, a
tie-in endorsement aggregating the insurance coverage provided under all of the
policies issued by the same title insurance company relating to the Borrower,
REA and each Guarantor.
Section 7.8 Taxes. The Borrower, REA and the Guarantors will, and will
cause their respective Subsidiaries to, duly pay and discharge, or cause to be
paid and discharged, before the same shall become overdue, all taxes,
assessments and other governmental charges imposed upon them or upon the
Mortgaged Properties or the other Real Estate, sales and activities, or any part
thereof, or upon the income or profits therefrom, provided that any such tax,
assessment, charge or levy or claim need not be paid if the validity or amount
thereof shall currently be contested in good faith by appropriate proceedings
which shall suspend the collection thereof with respect to such property,
neither such property nor any portion thereof or interest therein would be in
any danger of sale, forfeiture or loss by reason of such proceeding and the
Borrower, REA, any such Guarantor or any such Subsidiary shall have set aside on
its books adequate reserves in accordance with GAAP; and provided, further, that
forthwith upon the commencement of proceedings to foreclose any lien that may
have attached as security therefor, the Borrower, REA, any such Guarantor or any
such Subsidiary either (i) will provide a bond issued by a surety reasonably
acceptable to the Agent and sufficient to stay all such proceedings or (ii) if
no such bond is provided, will pay each such tax, assessment, charge or levy.
Section 7.9 Inspection of Properties and Books. The Borrower, REA and
the Guarantors will, and will cause their respective Subsidiaries to, permit the
Lenders, through the Agent or any representative designated by the Agent, at the
Borrower's expense and upon reasonable prior notice to visit and inspect any of
the properties of the Borrower, REA, each Guarantor or any of their respective
Subsidiaries, to examine the books of account of the Borrower, REA, each
Guarantor and their respective Subsidiaries (and to make copies thereof and
extracts therefrom) and to discuss the affairs, finances and accounts of the
Borrower, REA, any Guarantor and their respective Subsidiaries with, and to be
advised as to the same by, their respective officers, all at
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such reasonable times and intervals as the Agent or any Lender may reasonably
request. The Lenders shall use good faith efforts to coordinate such visits and
inspections so as to minimize the interference with and disruption to the normal
business operations of the Borrower, REA, the Guarantors and their respective
Subsidiaries.
Section 7.10 Compliance with Laws, Contracts, Licenses, and Permits.
The Borrower, REA and the Guarantors will, and will cause each of their
respective Subsidiaries to, comply in all respects with (i) all applicable laws
and regulations now or hereafter in effect wherever its business is conducted,
including all Environmental Laws, (ii) the provisions of its corporate charter,
partnership agreement, limited liability company agreement or declaration of
trust, as the case may be, and other charter documents and bylaws, (iii) all
agreements and instruments in all material respects to which it is a party or by
which it or any of its properties may be bound, (iv) all applicable decrees,
orders, and judgments, and (v) all licenses and permits required by applicable
laws and regulations for the conduct of its business or the ownership, use or
operation of its properties. If any authorization, consent, approval, permit or
license from any officer, agency or instrumentality of any government shall
become necessary or required in order that the Borrower, REA, any Guarantor or
their respective Subsidiaries may fulfill any of its obligations hereunder, the
Borrower, REA, such Guarantor or such Subsidiary will immediately take or cause
to be taken all steps necessary to obtain such authorization, consent, approval,
permit or license and furnish the Agent and the Lenders with evidence thereof.
Section 7.11 Further Assurances. The Borrower, REA and each Guarantor
will and will cause each of their respective Subsidiaries to, cooperate with the
Agent and the Lenders and execute such further instruments and documents as the
Lenders or the Agent shall reasonably request to carry out to their satisfaction
the transactions contemplated by this Agreement and the other Loan Documents.
Section 7.12 Intentionally Omitted.
Section 7.13 Management. (a) There shall not occur, without the prior
written consent of the Majority Lenders, any material change in any unaffiliated
third party management of the Mortgaged Properties (including, without
limitation, the hiring or termination of any unaffiliated third party property
manager).
(b) Each of the Borrower, REA and each Guarantor shall have the right
to cause its Mortgaged Property to be managed pursuant to a Management Agreement
that (i) is with a property manager which is not an Affiliate and which has been
approved by the Agent, and (ii) contains provisions reasonably satisfactory to
the Agent, including with respect to compensation of the property manager,
subordination of management fees, termination rights and exercise by the Agent
of its remedies under the Loan Documents following an Event of Default. Neither
the Borrower, REA nor any Guarantor shall directly or indirectly enter into any
Management Agreement or similar agreement delegating to another Person which is
not an Affiliate substantial authority over the leasing, maintenance or
operation of any Mortgaged Property other than as aforesaid.
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Section 7.14 Leases of the Property. Neither the Borrower, REA nor any
Guarantor will lease all or any portion of a Mortgaged Property or amend,
supplement or otherwise modify, terminate or cancel, or accept the surrender of,
or consent to the assignment or subletting of, or grant any concessions to or
waive the performance of any obligations of any tenant, lessee or licensee
under, any now existing or future Lease without the prior written consent of the
Agent; provided, however, with respect to any Lease which covers less than the
lesser of 20,000 square feet or five percent (5%) of the aggregate Net Rentable
Area of the Mortgaged Properties, the Borrower, REA or any Guarantor may amend,
supplement or otherwise modify, terminate or cancel, or accept the surrender of,
or consent to the assignment or subletting of, or granting concessions to or
waive the performance of any obligations of any tenant, lessee or licensee under
any such Lease in the ordinary course of business consistent with sound leasing
and management practices for similar properties. The Borrower, at the Agent's
request, shall furnish the Agent with executed copies of all Leases hereafter
made. Within 30 days from the date hereof, the Borrower will submit to the Agent
a form lease for use for office properties and a form lease for industrial
properties (collectively, the "Form Lease") for the Mortgaged Properties, which
shall be reasonably satisfactory to the Agent and shall thereafter be utilized
in connection with all leasing of space at the Mortgaged Properties. Upon the
Agent's request, the Borrower, REA and each Guarantor shall make a separate and
distinct assignment to the Agent as additional security, of all Leases hereafter
made. Notwithstanding the foregoing, following the Agent's approval of the
"Leasing Parameters" (as hereinafter defined) for a Mortgaged Property, the
Borrower, REA or any Guarantor may, without the prior approval of the Agent,
enter into any Lease provided that the Lease covers less than the lesser of
20,000 square feet or five percent (5%) of the aggregate Net Rentable Area of
the Mortgaged Properties, is a bona fide arm's length lease entered into in the
ordinary course of business with a party which is not an Affiliate of the
Borrower, REA or any Guarantor, falls within the Leasing Parameters and is on
the Form Lease (without material modification or addition). Any Lease submitted
to the Agent for approval shall be deemed approved by the Agent unless the Agent
expressly disapproves the same by written notice delivered to the Borrower
(which shall state the reasons for disapproval) within five (5) Business Days
after the date of the delivery of such Lease to the Agent for approval and all
other information reasonably requested by the Agent in order to make such
determination. As used herein, "Leasing Parameters" means leasing parameters for
a Mortgaged Property approved by the Agent. Leasing Parameters shall include,
without limitation, the minimum and maximum term, the minimum rent, tax and
operating stops, tenant standard improvements, tenant allowances and other
tenant inducements and leasing commissions, and shall be approved by the Agent
prior to the commencement of each calendar year during the term of the Notes.
The Agent agrees to provide a Subordination, Attornment and Nondisturbance
Agreement for the tenant under any Lease that covers more than the lesser of
20,000 square feet or five (5%) of the aggregate Net Rentable Area of the
Mortgaged Properties as requested by the Borrower, provided that (a) such tenant
is not an Affiliate of the Borrower, REA or any Guarantor, (b) the Lease is on
the Form Lease (without modifications or additions), (c) the Lease falls within
the Leasing Parameters, and (d) the terms of the Subordination, Attornment and
Nondisturbance Agreement are otherwise acceptable to the Agent. The Agent shall
provide a Subordination, Attornment and Nondisturbance Agreement with respect to
each other Lease that is approved by the Agent provided that the terms of the
Subordination, Attornment and Nondisturbance Agreement are acceptable to the
Agent.
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Section 7.15 Fundamental Changes of Borrower. Each of the Borrower, REA
and each Guarantor: (a) does not own and will not own or lease any encumbered
asset other than (i) the Mortgaged Properties and incidental personal property
necessary for the operation of the Mortgaged Properties (which will only be
encumbered by liens in favor of the Agent), and (ii) other properties as
permitted by Section 8.2(iv), Section 8.2(v) and Section 8.2(viii); (b) is not
engaged and will not engage in any business other than the ownership, management
or leasing of the Mortgaged Properties and Investments permitted pursuant to
Section 8.3; (c) except for those agreements described on Schedule 6.15, has not
entered and will not enter into any contract or agreement with any of its
general partners, principals or Affiliates or any Affiliate of any such general
partner except upon terms and conditions that are intrinsically fair and
substantially similar to those that would be available on an arms-length basis
with third parties other than an Affiliate; (d) has not made and will not make
any loans or advances to any third party (including any Affiliate (other than
the loan evidenced by the promissory note described in Section 8.1(v)); (e) is
and will be solvent and pay its debt from its assets as the same shall become
due; (f) will not, nor will any partner, limited or general, or shareholder
thereof, amend, modify or otherwise change its partnership certificate,
partnership agreement, limited liability company agreement, articles of
incorporation or by-laws, except in connection with the admission of new limited
partners in the Borrower in accordance with the terms of this Agreement, or such
other amendments, modifications or changes to such organizational documents
which do not adversely affect the Lenders or their rights hereunder; (g) will
conduct and operate its business substantially as presently conducted and
operated and in compliance with the terms and conditions of this Agreement; (h)
will maintain books and records and accounts separate from those of its
Affiliates, including its general partners; (i) will be, and at all times will
hold itself out to the public as, a legal entity separate and distinct from any
other entity (including any Affiliate thereof, including any general partner or
any Affiliate of any general partner of the Borrower, REA or any Guarantor); (j)
will file its own tax returns; (k) will maintain adequate capital for the normal
obligations reasonably foreseeable in a business of its size and character and
in light of its contemplated business operations; (l) will not seek the
dissolution or winding up, in whole or in part, of the Borrower, REA or any
Guarantor; (m) will not commingle the funds and other assets of the Borrower,
REA or any Guarantor with those of any general partner, any Affiliate or any
other Person; (n) has and will maintain its assets in such a manner that it is
not costly or difficult to segregate, ascertain or identify their respective
individual assets from those of any affiliate or any other person; and (o)
except as contemplated hereunder, does not and will not hold itself out to be
responsible for the debts or obligations of any other person.
Section 7.16 Registered Servicemark. Without the prior written consent
of the Agent, none of the Mortgaged Properties shall be owned or operated by the
Borrower, REA or any Guarantor under any registered or protected trademark,
tradename, servicemark or logo. Without limiting the foregoing, the Agent may
condition its consent to the use of any of the foregoing upon the granting to
the Agent for the benefit of the Lenders of a perfected first priority security
interest therein.
Section 7.17 Ownership of Real Estate. All Real Estate and all
interests (whether direct or indirect) of REA, the Borrower, the Guarantors and
any of their respective Subsidiaries in income-producing real estate assets now
owned or leased or acquired or leased after the Closing Date shall be owned or
leased directly by the Borrower; provided, however that (i) subject to the
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restrictions contained in Section 8.3, the Borrower shall be permitted to own or
lease interests in Real Estate together with other third party joint venture
partners; (ii) Real Estate which is encumbered by Non-recourse Indebtedness of
the type described in Section 8.1 (f) or 8.1(h) may be owned or leased by the
Borrower or any of its Subsidiaries; and (iii) the Subsidiaries of the Borrower
or REA listed on Schedule 7.17 hereto may own or lease the Real Estate described
therein.
Section 7.18 Intentionally Omitted.
Section 7.19 Change in Control. The Borrower and REA covenant and agree
that: (i) REA will at all times (a) be the sole general partner of the Borrower,
(b)own the largest percentage interest of any partner in the Borrower which
percentage will be sufficient to permit the accounts of the Borrower and REA to
be determined on a consolidated basis in accordance with GAAP and (c) be
responsible for making all day-to-day operational and management decisions to be
made by the Borrower in the conduct of its business and (ii) each Guarantor will
be and remain a wholly owned subsidiary of the Borrower, except for Virginia
Street Associates Limited Partnership ("Virginia"), as to which a 0.1% limited
partnership interest may continue to be owned by Gail Mulvihill.
Section 7.20 Intentionally Omitted.
Section 7.21 REIT Status. Subject to the terms of Section 8.7, REA
shall at all times comply with all requirements of applicable laws and
regulations necessary to maintain REIT Status.
Section 7.22 Maintenance of Property; Repair; Alterations. Each of the
Borrower, REA and each Guarantor (i) shall maintain or cause to be maintained
its Mortgaged Property and all other items of its Collateral in good condition
and repair, reasonable wear and tear excepted, (ii) except to the extent
required by any Lease, shall not remove, demolish or structurally alter, or
permit or suffer the removal, demolition or structural alteration of, any
Buildings except with the prior written consent of the Agent which consent shall
not be unreasonably withheld, conditioned or delayed, (iii) shall complete any
Buildings which may be now or hereafter constructed on any Mortgaged Property
and restore in like manner any portion of the Buildings which may be damaged or
destroyed thereof from any cause whatsoever, and pay when due all claims for
labor performed and materials furnished therefor, (iv) shall comply in all
material respects with all applicable requirements of insurance policies
required hereunder and all covenants, conditions and restrictions now or
hereafter affecting its Mortgaged Property or any other item of Collateral or
any part thereof or requiring any alterations or improvements, (v) shall not
commit, suffer or permit any act to be done in or upon the Collateral in
violation of any applicable law, (vi) except to the extent required by any
Lease, shall not remove any item of the Collateral without replacing it with a
comparable item of equal or greater quality, value and usefulness except for
sales in the ordinary course of business of property which is obsolete or no
longer useful, (vii) will cause to be made all necessary repairs, renewals,
replacements, betterments and improvements of its Mortgaged Property and all
other items of Collateral in all cases in which the failure so to do would have
a material adverse effect on the condition of the applicable Mortgaged Property
or Collateral or on the financial condition, assets or operations of the
Borrower, REA, each Guarantor and their respective Subsidiaries and (viii) will
cause all of their respective properties and those of their respective
Subsidiaries used or useful in the conduct of their respective
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business or the business of their respective Subsidiaries to be maintained and
kept in good condition, repair and working order (ordinary wear and tear
excepted) and supplied with all necessary equipment.
Section 7.23 Payment of Liens. (a) In the event that, notwithstanding
the covenants contained in Section 8.2, a lien not otherwise permitted under
Section 8.2 may encumber any Mortgaged Property or Collateral or any portion
thereof, the Borrower shall promptly discharge such lien or cause such lien to
be discharged by payment to the lienor or lien claimant or promptly secure
removal of such lien by bonding or deposit with the country clerk or otherwise
or, at the Agent's option, promptly obtain insurance against, any such lien
within thirty (30) days after the receipt of written notice thereof. The
Borrower shall make available to the Agent upon request all receipts or other
evidence satisfactory to the Agent of payment of taxes, assessments, liens or
any other item which may cause any such lien to be filed against any Mortgaged
Property or Collateral. The Borrower shall fully preserve the liens and the
priority of the Mortgages without cost or expense to the Agent.
(b) If the Borrower fails to promptly discharge or remove any such lien
described in paragraph (a) of this Section 7.23 within thirty (30) days after
the receipt of written notice thereof, then the Agent may, but shall not be
required to, procure the release and discharge of such lien, and any judgment or
decree thereon, and in furtherance thereof may, in its sole discretion, effect
any settlement or compromise with the lienor or lien claimant or post any bond
or furnish any security or indemnity as the Agent, in its sole discretion, may
elect. In settling, compromising or arranging for the discharge of any liens
under this subsection, the Agent shall not be required to establish or confirm
the validity or amount of the lien. The Borrower agrees that all costs and
expenses expended or otherwise incurred pursuant to this Section (including
reasonable attorneys' fees and disbursements) by the Lender shall be paid by the
Borrower in accordance with the terms hereof.
(c) In the event that the Agent reasonably suspects that a lien not
otherwise permitted under Section 8.2 may encumber any Mortgaged Property or
Collateral or any portion thereof, the Agent may, at the expense of the
Borrower, obtain an updated title and/or lien search regarding such Mortgaged
Property or Collateral; provided that if no such lien not otherwise permitted
hereunder is revealed by such updated title or lien search, the Borrower shall
have no obligation to pay for or reimburse the Agent in respect of, such title
or lien search.
Section 7.24 Distributions of Income to the Borrower. The Borrower
shall cause all of its Subsidiaries to promptly distribute to the Borrower (but
not less frequently than once each fiscal quarter of the Borrower, unless
otherwise approved by the Agent), whether in the form of dividends,
distributions or otherwise, all profits, proceeds or other income relating to or
arising from its Subsidiaries' use, operation, financing, refinancing, sale or
other disposition of their respective assets and properties after (a) the
payment by each Subsidiary of its Debt Service and Operating Expenses for such
quarter and (b) the establishment of reasonable reserves for the payment of
Operating Expenses not paid on at least a quarterly basis and capital
improvements to be made to such Subsidiary's assets and properties approved by
such Subsidiary in the ordinary course of business consistent with its past
practices.
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Section 8 NEGATIVE COVENANTS.
Each of the Borrower and REA covenants and agrees that, so long as any
Loan or Note is outstanding or any of the Lenders has any obligation to make any
Loans:
Section 8.1 Restrictions on Indebtedness. Subject to the further
limitations contained in this Section 8.1, the Borrower REA and the Guarantors
will not, and will not permit their respective Subsidiaries to, create, incur,
assume, guarantee or be or remain liable, contingently or otherwise, with
respect to any Indebtedness other than:
(a) Indebtedness to the Lenders arising under any of the Loan
Documents;
(b) current liabilities of the Borrower, REA, the Guarantors
or their respective Subsidiaries incurred in the ordinary course of
business but not incurred through (i) the borrowing of money, or (ii)
the obtaining of credit except for credit on an open account basis
customarily extended and in fact extended in connection with normal
purchases of goods and services;
(c) Indebtedness in respect of taxes, assessments,
governmental charges or levies and claims for labor, materials and
supplies to the extent that payment therefor shall not at the time be
required to be made in accordance with the provisions of Section 7.8;
(d) Indebtedness in respect of judgments or awards for so long
as the existence of same is not an Event of Default under Section
12.1A(k);
(e) endorsements for collection, deposit or negotiation and
warranties of products or services, in each case incurred in the
ordinary course of business;
(f) subject to the provisions of Section 9, Non-recourse
Indebtedness in an aggregate principal amount not exceeding
$50,000,000; provided that (i) no such Non-recourse Indebtedness shall
be incurred unless the Borrower shall have provided to the Lenders a
statement that no Default or Event of Default exists and a Compliance
Certificate demonstrating compliance with the covenants referred to
therein after giving effect to such incurrence, (ii) such Non-recourse
Indebtedness bears interest at a fixed rate and has a maturity date
that is later than the Maturity Date; provided, that this clause (ii)
shall not apply to Non-recourse Indebtedness secured by a lien on Real
Estate which was proposed for inclusion in the Collateral pursuant to
Section 5.3 but not accepted by the Majority Lenders in accordance with
Section 5.3;
(g) Subject to the provisions of Section 9, the Non-recourse
Indebtedness described on Schedule 8.1 hereto;
(h) Subject to the provisions of Section 9, Non-recourse
Indebtedness that is assumed by the Borrower or a Subsidiary of the
Borrower in connection with the
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acquisition of Real Estate; provided that the aggregate principal
amount of such Indebtedness shall not exceed (i) $150,000,000 during
any period that the Consolidated Total Assets of REA are less than
$750,000,000, and (ii) twenty percent (20%) of the Consolidated Total
Assets of REA during any period that the Consolidated Total Assets of
REA equal or exceed $750,000,000;
(i) Indebtedness in respect of reverse repurchase agreements
having a term of not more than 180 days with respect to Investments
described in Section 8.3(d) or (e); and
(j) That certain promissory note issued by REA to the Borrower
in the amount of $10,000,000.
Section 8.2 Restrictions on Liens, Etc. The Borrower, REA and the
Guarantors will not, and will not permit their respective Subsidiaries to (a)
create or incur or suffer to be created or incurred or to exist any lien,
security title, encumbrance, mortgage, pledge, negative pledge, charge,
restriction or other security interest of any kind upon any of their respective
property or assets of any character whether now owned or hereafter acquired, or
upon the income or profits therefrom; (b) transfer any of any of their property
or assets or the income or profits therefrom for the purpose of subjecting the
same to the payment of Indebtedness or performance of any other obligation in
priority to payment of its general creditors; (c) acquire, or agree or have an
option to acquire, any property or assets upon conditional sale or other title
retention or purchase money security agreement, device or arrangement; (d)
suffer to exist for a period of more than thirty (30) days after the same shall
have been incurred any Indebtedness or claim or demand against any of them that
if unpaid might by law or upon bankruptcy or insolvency, or otherwise, be given
any priority whatsoever over any of their general creditors; (e) sell, assign,
pledge or otherwise transfer any accounts, contract rights, general intangibles,
chattel paper or instruments, with or without recourse; or (f) incur or maintain
any obligation to any holder of Indebtedness of the Borrower, REA, any Guarantor
or any such Subsidiary which prohibits the creation or maintenance of any lien
securing the Obligations; provided that the Borrower, REA, the Guarantors and
any such Subsidiary may create or incur or suffer to be created or incurred or
to exist:
(i) liens on properties to secure taxes, assessments and other
governmental charges or claims for labor, material or supplies in
respect of obligations not overdue;
(ii) liens on Real Estate other than the Mortgaged Property or
any interest therein (including the rents, issues and profits
therefrom) in respect of Indebtedness which is permitted by Section
8.1(d), Section 8.1(f), Section 8.1(g) or Section 8.1(h);
(iii) liens on Real Estate other than the Mortgaged Properties
or any interest therein in respect of judgments or awards for so long
as the existence of the same is not an Event of Default under Section
12.1A.(k);
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(iv) encumbrances on properties other than the Mortgaged
Property consisting of easements, rights of way, zoning restrictions,
restrictions on the use of real property and defects and irregularities
in the title thereto, landlord's or lessor's liens under leases to
which the Borrower, REA, the Guarantors or any such Subsidiary is a
party, and other minor non-monetary liens or encumbrances none of which
interferes materially with the use of the property affected in the
ordinary conduct of the business of the Borrower, REA, the Guarantors
or any such Subsidiary, which defects do not individually or in the
aggregate have a materially adverse effect on the business of the
Borrower, REA or the Guarantors individually or of the Borrower, REA or
the Guarantors and their respective Subsidiaries on a consolidated
basis;
(v) liens on Short-term Investments securing Indebtedness
permitted by Section 8.1(h);
(vi) liens in favor of the Agent and the Lenders under the
Loan Documents;
(vii) liens and encumbrances on a Mortgaged Property expressly
permitted under the terms of the Mortgage relating thereto; and
(viii) equipment leases of personal property in connection
with the operation of its Real Estate in the ordinary course of
business.
Section 8.3 Restrictions on Investments. The Borrower, REA and the
Guarantors will not, and will not permit any of their respective Subsidiaries
to, make or permit to exist or to remain outstanding any Investment except
Investments in:
(a) marketable direct or guaranteed obligations of the United
States of America that mature within one (1) year from the date of purchase by
the Borrower, REA, any Guarantor or any such Subsidiary;
(b) marketable direct obligations of any of the following: Federal
Home Loan Mortgage Corporation, Student Loan Marketing Association, Federal Home
Loan Banks, Federal National Mortgage Association, Government National Mortgage
Association, Bank for Cooperatives, Federal Intermediate Credit Banks, Federal
Financing Banks, Export-Import Bank of the United States, Federal Land Banks, or
any other agency or bank of the United States of America;
(c) demand deposits, certificates of deposit, bankers acceptances
and time deposits of any of the Lenders or any United States banks having total
assets in excess of $100,000,000; provided, however, that the aggregate amount
at any time so invested with any single bank having total assets of less than
$1,000,000,000 will not exceed $1,000,000;
(d) securities commonly known as "commercial paper" issued by any
Lender, or by a corporation organized and existing under the laws of the United
States of America or any State which at the time of purchase are rated by
Moody's Investors Service, Inc. or by Standard &
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Poor's Corporation at not less than "P 1" if then rated by Moody's Investors
Service, Inc., and not less than "A 1", if then rated by Standard & Poor's
Corporation;
(e) mortgage-backed securities guaranteed by the Government
National Mortgage Association, the Federal National Mortgage Association or the
Federal Home Loan Mortgage Corporation and other mortgage-backed bonds which at
the time of purchase are rated by Moody's Investors Service, Inc. or by Standard
& Poor's Corporation at not less than "Aa" if then rated by Moody's Investors
Service, Inc. and not less than "AA" if then rated by Standard & Poor's
Corporation;
(f) repurchase agreements having a term not greater than 180 days
and fully secured by securities described in the foregoing subsections (a), (b)
or (e) with the Lenders, banks described in the foregoing subsection (c) or
financial institutions or other corporations having total assets in excess of
$500,000,000;
(g) shares of so-called "money market funds" registered with the
Securities and Exchange Commission under the Investment Company Act of 1940
which maintain a level per-share value, invest principally in investments
described in the foregoing subsections (a) through (f) and have total assets in
excess of $50,000,000;
(h) subject to Section 7.17 and Section 9, fee interests and
leasehold interests in Real Estate utilized or to be utilized principally for
office and/or industrial purposes, including earnest money deposits relating
thereto and transaction costs; provided that the Borrower, REA, or its
Subsidiaries shall be permitted to acquire or lease interests in Real Estate
which is not utilized or to be utilized for office or industrial purposes if (i)
such Real Estate is acquired or leased by the Borrower, REA, or its Subsidiaries
in connection with the acquisition of a portfolio of predominantly office and/or
industrial properties and (ii) the aggregate cost of such non-office/industrial
Real Estate and all other non-office/industrial Real Estate previously acquired
or leased by the Borrower pursuant to this proviso does not exceed at any time
ten percent (10%) of the Consolidated Total Assets of REA;
(i) Subsidiaries of the Borrower listed on Schedule 6.21 and any
wholly-owned Subsidiaries of the Borrower who become Guarantors pursuant to
Section 5.3 hereof; and
(j) Subject to Section 7.17, joint ventures formed for the purpose
of owning, leasing and/or developing Real Estate and which are not Subsidiaries
of REA or the Borrower; provided that the aggregate amount of such Investments
shall not at any time exceed ten percent (10%) of the Consolidated Total Assets
of REA.
Section 8.4 Merger, Consolidation. The Borrower, REA and the
Guarantors will not, and will not permit their respective Subsidiaries to,
become a party to any merger, consolidation or other business combination or
agree to effect any asset acquisition, stock acquisition or other acquisition,
in each case without the prior written consent of the Majority Lenders, except
for (i) the merger or consolidation of two or more Subsidiaries of the Borrower,
REA or any Guarantor, and (ii) the merger or consolidation of one or more of the
Subsidiaries of the Borrower, REA or any Guarantor with and into the Borrower,
REA or any Guarantor where the Borrower, REA or a
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Guarantor is the sole surviving entity; provided that both the Borrower and REA
shall at all times continue their existence as separate entities.
Section 8.5 Sale and Leaseback. The Borrower, REA and the
Guarantors will not, and will not permit their respective Subsidiaries to enter
into any arrangement, directly or indirectly, whereby the Borrower, REA, any
Guarantor or any such Subsidiary shall sell or transfer any Real Estate owned by
it in order that then or thereafter the Borrower, REA, a Guarantor or any such
Subsidiary shall lease back such Real Estate.
Section 8.6 Compliance with Environmental Laws. The Borrower, REA
and the Guarantors will not, and will not permit their respective Subsidiaries
to, do any of the following: (a) use any of the Real Estate or any portion
thereof as a facility for the handling, processing, storage or disposal of
Hazardous Substances, except for small quantities of Hazardous Substances used
in the ordinary course of business and in compliance with all applicable
Environmental Laws, (b) cause or permit to be located on any of the Real Estate
any underground tank or other underground storage receptacle for Hazardous
Substances except in full compliance with Environmental Laws, (c) generate any
Hazardous Substances on any of the Real Estate except in full compliance with
Environmental Laws, (d) conduct any activity at any Real Estate or use any Real
Estate in any manner so as to cause a Release of Hazardous Substances on, upon
or into the Real Estate or any surrounding properties or any threatened Release
of Hazardous Substances which might give rise to liability under CERCLA or any
other Environmental Law, or (e) directly or indirectly transport or arrange for
the transport of any Hazardous Substances (except in compliance with all
Environmental Laws).
The Borrower, REA and the Guarantors shall, and shall cause their
respective Subsidiaries to:
(i) in the event of any change in Environmental Laws governing
the assessment, release or removal of Hazardous Substances, take all
reasonable action (including, without limitation, the conducting of
engineering tests at the sole expense of the Borrower) to confirm that
no Hazardous Substances are or ever were Released or disposed of on the
Real Estate in violation of applicable Environmental Laws, changed as
aforesaid; and
(ii) if any Release or disposal of Hazardous Substances shall
occur or shall have occurred on the Real Estate (including without
limitation any such Release or disposal occurring prior to the
acquisition or leasing of such Real Estate by the Borrower, REA,
Guarantor or any such Subsidiary), cause the prompt containment and
removal of such Hazardous Substances and remediation of the Real Estate
in full compliance with all applicable laws and regulations; provided,
that each of the Borrower, REA, the Guarantors and their respective
Subsidiaries shall be deemed to be in compliance with Environmental
Laws for the purpose of this clause (ii) so long as it or a responsible
third party with sufficient financial resources is taking reasonable
action to remediate or manage any event of noncompliance to the
satisfaction of the Majority Lenders and no action shall have been
commenced by any enforcement agency. The Majority
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Lenders may engage their own Environmental Engineer to review the
environmental assessments and the compliance with the covenants
contained herein. Notwithstanding the foregoing, if any Release or
disposal of Hazardous Substances shall occur or shall have occurred on
the Real Estate (except any such Release or disposal occurring prior to
the acquisition or leasing of such Real Estate by the Borrower, REA, a
Guarantor or any such Subsidiary and disclosed in an environmental
assessment delivered to the Agent prior to the inclusion of such Real
Estate in the Collateral) and such Real Estate is a Mortgaged Property,
the Agent shall have the right to require that the Borrower, in
compliance with Section 9, provide to the Agent a substitute Mortgaged
Property which is Eligible Real Estate within ninety (90) days of
demand by the Agent in accordance with Section 5.3 or obtain the
release of such Mortgaged Property pursuant to Section 5.4.
At any time after an Event of Default shall have occurred hereunder,
or, whether or not an Event of Default shall have occurred, at any time that the
Agent or the Majority Lenders shall have reasonable grounds to believe that a
Release or threatened Release of Hazardous Substances may have occurred,
relating to any Real Estate, or that any of the Real Estate is not in compliance
with Environmental Laws, the Agent may at its election (and will at the request
of the Majority Lenders) obtain such environmental assessments of such Real
Estate prepared by an Environmental Engineer as may be necessary or advisable
for the purpose of evaluating or confirming (i) whether any Hazardous Substances
are present in the soil or water at or adjacent to such Real Estate and (ii)
whether the use and operation of such Mortgaged Property comply with all
Environmental Laws. Environmental assessments may include detailed visual
inspections of such Real Estate including, without limitation, any and all
storage areas, storage tanks, drains, dry wells and leaching areas, and the
taking of soil samples, as well as such other investigations or analyses as are
necessary or appropriate for a complete determination of the compliance of such
Real Estate and the use and operation thereof with all applicable Environmental
Laws. All such environmental assessments shall be at the sole cost and expense
of the Borrower; except for those assessments required by the Agent at a time
when an Event of Default does not exist and which fail to reveal the existence
of a Release of Hazardous Substance and/or that the Real Estate is not in
compliance with Environmental Laws, which assessments shall be at the sole cost
and expense of the Lenders.
Section 8.7 Distributions. Neither the Borrower, REA or the
Guarantors will, or will permit their respective Subsidiaries to, make any
Distributions which would violate any of the following covenants:
(a) Neither the Borrower nor REA will pay any Distribution to
its partners or shareholders the amount of which, when added to the
amount of all other Distributions paid by it in the same fiscal quarter
and the three immediately preceding fiscal quarters, would exceed one
hundred percent (100%) of its Funds from Operations for such period;
(b) In the event that an Event of Default shall have occurred
and be continuing, neither the Borrower nor REA shall make any
Distributions other than the minimum Distributions required under the
Code to maintain the REIT Status
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of REA, as evidenced by a certification of an authorized representative
of each of the Borrower and REA containing calculations in reasonable
detail satisfactory in form and substance to the Agent; and
(c) In the event that an Event of Default shall have occurred
and be continuing and the maturity of the Obligations has been
accelerated, neither the Borrower, REA, the Guarantors nor any of their
respective Subsidiaries shall make any Distributions whatsoever, either
directly or indirectly.
Section 8.8 Asset Sales. Neither the Borrower, REA or the
Guarantors will, or will permit their respective Subsidiaries to, sell, transfer
or otherwise dispose of any Real Estate or equity interests therein (except as
the result of a condemnation or casualty and except for the granting of
Permitted Liens) unless there shall have been delivered to the Lenders a
statement of the Borrower that no Default or Event of Default exists and, in the
event that such disposition is of Real Estate having a value greater than
$10,000,000, a Compliance Certificate demonstrating compliance with the
covenants referred to therein after giving effect to such sale, transfer or
other disposition.
Section 8.9 Development Activity. Neither the Borrower, REA or the
Guarantors will, or will permit respective Subsidiaries to, engage, directly or
indirectly (including through any joint venture in which the Borrower, REA, any
Guarantor or their respective Subsidiaries owns a Minority Interest), in the
development of properties without the prior written consent of the Majority
Lenders in their sole discretion; provided that without the consent of the
Majority Lenders the Borrower, REA, the Guarantors or their respective
Subsidiaries may engage in the development of any number of properties to be
used principally for office and/or industrial purposes provided that the
aggregate cost (on a fully developed basis) of acquisition and development of
properties Under Development at any time shall not exceed twenty percent (20%)
of the Consolidated Total Assets of REA. Each of the Borrower, REA and the
Guarantors will, and will cause each of its respective Subsidiaries to, at all
times that it is engaging in any development as provided herein, maintain
available sources of capital equal to the total cost to acquire and complete
such developments and to purchase such properties, which sources of capital
shall be acceptable to the Agent in its reasonable discretion. Amounts available
to be disbursed for such purposes pursuant to this Agreement may be considered
as a source of capital for the purposes of this Section 8.9.
Section 8.10 Restriction on Prepayment of Indebtedness. Neither the
Borrower, REA or the Guarantors will, or will permit their respective
Subsidiaries to, prepay after the occurrence of any Event of Default the
principal amount, in whole or in part, of any Indebtedness other than the
Obligations; provided, that this Section 8.10 shall not prohibit the prepayment
of Indebtedness which is financed solely from the proceeds of a new loan which
would otherwise be permitted by the terms of Section 8.1.
Section 8.11 Zoning and Contract Changes and Compliance. Neither the
Borrower, REA nor any Guarantor shall initiate or consent to any zoning
reclassification of any of its Mortgaged Property or seek any variance under any
existing zoning ordinance or use or permit the use of any Mortgaged Property in
any manner that could result in such use becoming a non-conforming use
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under any zoning ordinance or any other applicable land use law, rule
or regulation. Neither the Borrower, REA, nor the Guarantors shall
initiate or consent to any change in any laws, requirements of
governmental authorities or obligations created by private contracts
and Leases which now or hereafter may materially adversely affect the
ownership, occupancy, use or operation of any Mortgaged Property.
Section 8.12 Intentionally Omitted.
Section 8.13 Payments to Subsidiaries. Neither REA nor the Borrower
will make any payments to any of its Subsidiaries for any purpose other than to
provide any such Subsidiary with funds to be used by such Subsidiary to (a)
subject to Section 7.17, acquire Eligible Real Estate which will be added to the
Borrowing Base or (b) acquire Real Estate that is subject to Non-recourse
Indebtedness described in Section 8.1(f) or Section 8.1(h).
Section 8.14 Undeveloped Land. The aggregate cost of acquiring the
direct and indirect interests of the Borrower, REA, the Guarantors and their
respective Subsidiaries in undeveloped land will not at any time exceed ten
percent (10%) of the Consolidated Total Assets of REA. For the purposes of this
Section 8.14, land will not be considered "undeveloped" if grading and site
improvement permits have been obtained and such site improvement work has
commenced.
Section 9 FINANCIAL COVENANTS.
Each of the Borrower and REA covenants and agrees that, so long as any
Loan or Note is outstanding or any Lender has any obligation to make any Loans:
Section 9.1 Borrowing Base. The outstanding principal balance of the
Loans will not be greater than the Borrowing Base.
Section 9.2 Debt Coverage. The aggregate Net Operating Income of
the Mortgaged Properties for any rolling four (4) fiscal quarters minus the
Capital Improvement Reserves for the Mortgaged Properties for such period will
not be less than 1.3 times the Debt Service of the Borrower for such period.
Section 9.3 Net Worth. The Consolidated Tangible Net Worth of the
Borrower will not at any time be less than Minimum Tangible Net Worth.
Section 9.4 Liabilities to Assets Ratio. The ratio of Consolidated
Total Liabilities of REA to Consolidated Total Assets of REA at the end of any
fiscal quarter shall not exceed the ratios set forth below:
<TABLE>
<CAPTION>
Fiscal Quarter Ending on or Before: Ratio
<S> <C>
March 31, 1999 .65 to 1
March 31, 2000 .55 to 1
Thereafter .50 to 1
</TABLE>
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Section 9.5 Consolidated Operating Cash Flow Coverage. The Consolidated
Operating Cash Flow of REA for (i) each of the first three fiscal quarters of
1998 and (ii) each twelve month period ending on the last day of the fourth
fiscal quarter of 1998 and the last day of each fiscal quarter thereafter will
not be less than the multiple of Debt Service of REA on a consolidated basis for
such period as set forth below:
<TABLE>
<CAPTION>
Fiscal Quarter Ending on or Before: Multiple of Debt Service:
<S> <C>
March 31, 1999 1.60
March 31, 2000 1.65
Thereafter 1.75
</TABLE>
Section 10 CLOSING CONDITIONS.
The obligation of the Lenders to make the Loans to be advanced on the
Closing Date shall be subject to the satisfaction of the following conditions
precedent:
Section 10.1 Loan Documents. Each of the Loan Documents shall have
been duly executed and delivered by the respective parties thereto and shall be
in full force and effect. The Agent shall have received a fully executed
counterpart of each such document, except that each Lender shall have received
the fully executed original of its Note.
Section 10.2 Certified Copies of Organizational Documents. The Agent
shall have received from the Borrower, REA and each applicable Guarantor the
partnership agreement, corporate charter or other organizational documents of
the Borrower, REA or such Guarantor, certified as true and complete as of a
recent date by (i) the appropriate officer of each State in which the Borrower,
REA and each such Guarantor, as applicable, is organized and in which the
Mortgaged Properties are located, and (ii) a duly authorized officer of the
Borrower, REA and each such Guarantor. In addition, the Agent shall have
received evidence of the Borrower's, REA's and each applicable Guarantor's
qualification to do business, as applicable, as in effect on such date of
certification.
Section 10.3 Bylaws; Resolutions. All action on the part of the
Borrower, REA and each applicable Guarantor, as applicable, necessary for the
valid execution, delivery and performance by such Person of this Agreement and
the other Loan Documents to which such Person is or is to become a party shall
have been duly and effectively taken, and evidence thereof satisfactory to the
Agent shall have been provided to the Agent.
Section 10.4 Incumbency Certificate; Authorized Signers. The Agent
shall have received from REA and each applicable corporate Guarantor an
incumbency certificate, dated as of the Closing Date, signed by a duly
authorized officer of such Person and giving the name and bearing a specimen
signature of each individual who shall be authorized to sign, in the name and on
behalf of such Person, each of the Loan Documents to which such Person is or is
to become a party. The Agent shall have also received from the Borrower and each
applicable partnership Guarantor a certificate, dated as of the Closing Date,
signed by a duly authorized representative of such Person and giving the name
and specimen signature of each individual who shall be authorized to
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make Loan Requests and to give notices and to take other action on behalf of the
Borrower under the Loan Documents.
Section 10.5 Opinion of Counsel. The Agent shall have received an
opinion addressed to the Lenders and the Agent and dated as of the Closing Date
from counsel to the Borrower, REA and each Guarantor in form and substance
satisfactory to the Agent.
Section 10.6 Payment of Fees. The Borrower shall have paid to the Agent
the fees payable pursuant to Section 4.2.
Section 10.7 Intentionally omitted.
Section 10.8 Intentionally omitted.
Section 10.9 Insurance. The Agent shall have received duplicate
originals or certified copies of all policies of insurance required by this
Agreement.
Section 10.10 Performance; No Default. Each Borrower, REA and the
applicable Guarantors shall have performed and complied with all terms and
conditions herein required to be performed or complied with by it on or prior to
the Closing Date, and on the Closing Date there shall exist no Default or Event
of Default.
Section 10.11 Representations and Warranties. The representations and
warranties made by the Borrower, REA and the applicable Guarantors in the Loan
Documents or otherwise made by or on behalf of the Borrower, REA and the
applicable Guarantors in connection therewith or after the date thereof shall
have been true and correct in all material respects when made and shall also be
true and correct in all material respects on the Closing Date.
Section 10.12 Proceedings and Documents. All proceedings in
connection with the transactions contemplated by this Agreement and the other
Loan Documents shall be reasonably satisfactory to the Agent and the Agent's
counsel in form and substance, and the Agent shall have received all information
and such counterpart originals or certified copies of such documents and such
other certificates, opinions, assurances, consents, approvals or documents as
the Agent and the Agent's counsel may reasonably require.
Section 10.13 Eligible Real Estate Qualification Documents. The
Eligible Real Estate Qualification Documents for each Mortgaged Property
included in the Collateral as of the Closing Date shall have been delivered to
the Agent at the Borrower's expense and shall be in form and substance
satisfactory to the Agent.
Section 10.14 Compliance Certificate. The Agent shall have received a
Compliance Certificate dated as of the date of the Closing Date demonstrating
compliance with each of the covenants calculated therein as of the most recent
fiscal quarter for which REA has provided financial statements under Section 6.4
adjusted in the best good faith estimate of REA as of the Closing Date.
Section 10.15 Intentionally Omitted.
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Section 10.16 Intentionally Omitted.
Section 11 CONDITIONS TO ALL BORROWINGS.
The obligations of the Lenders to make any Loan, whether on or after
the Closing Date, shall also be subject to the satisfaction of the following
conditions precedent:
Section 11.1 Prior Conditions Satisfied. All conditions set forth in
Section 10 shall continue to be satisfied with respect to all of the Mortgaged
Properties and otherwise as of the date upon which any Loan is to be made.
Section 11.2 Representations True; No Default. Each of the
representations and warranties made by or on behalf of the Borrower, REA or the
Guarantors or any of their respective Subsidiaries contained in this Agreement,
the other Loan Documents or in any document or instrument delivered pursuant to
or in connection with this Agreement shall be true in all material respects both
as of the date as of which they were made and shall also be true as of the time
of the making of such Loan, with the same effect as if made at and as of that
time (it being understood and agreed that any representation or warranty which
by its terms is made as of a specified date shall be required to be true and
correct only as of such specified date), and no Default or Event of Default
shall have occurred and be continuing. Each of the Lenders shall have received a
certificate of the Borrower and REA signed by an authorized representative of
the Borrower and REA to such effect.
Section 11.3 Intentionally Omitted.
Section 11.4 Intentionally Omitted.
Section 11.5 Proceedings and Documents. All proceedings in
connection with such Loan shall be reasonably satisfactory in substance and in
form to the Agent, and the Agent's counsel in form and substance and the Agent
shall have received all information and such counterpart originals or certified
or other copies of such documents and such other certificates, opinions,
assurances, consents, approvals or documents as the Agent and the Agent's
counsel may reasonably require.
Section 11.6 Borrowing Documents. The Agent shall have received a
fully completed Loan Request for such Loan and the other documents and
information (including, without limitation, a Compliance Certificate) as
required by Section 2.6.
Section 11.7 Endorsement to Title Policy. At such times as Agent
shall determine in its discretion, to the extent available under applicable law,
a "date down" endorsement to each Title Policy indicating no change in the state
of title and containing no survey exceptions not approved by the Agent, which
endorsement shall, expressly or by virtue of a proper "revolving credit" clause
or endorsement in each Title Policy, increase the coverage of each Title Policy
to the aggregate amount of all Loans advanced and outstanding on or before the
effective date of such endorsement (provided that the amount of coverage under
an individual Title Policy for an individual Mortgaged Property need not equal
the aggregate amount of all Loans), or if such endorsement is not available,
such other evidence and assurances as the Agent may reasonably
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require (which evidence may include, without limitation, an affidavit from the
Borrower stating that there have been no changes in title from the date of the
last effective date of the Title Policy).
Section 11.8 Future Advances Tax Payment. As a condition precedent
to any Lender's obligations to make any Loans available to the Borrower
hereunder, the Borrower will pay to the Agent any mortgage, recording,
intangible, documentary stamp or other similar taxes and charges which the Agent
reasonably determines to be payable as a result of such Loan to any state or any
county or municipality thereof in which any of the Mortgaged Properties are
located, and deliver to the Agent such affidavits or other information which the
Agent reasonably determines to be necessary in connection with such payment in
order to insure that the Mortgages on Mortgaged Property located in such state
secure the Borrower' obligation with respect to the Loans then being requested
by the Borrower. The provisions of this Section 11.8 shall not limit the
Borrower's obligations under other provisions of the Loan Documents, including
without limitation Section 15 hereof.
Section 12 EVENTS OF DEFAULT; ACCELERATION; ETC.
Section 12.1 A. Events of Default and Acceleration. If any of the
following events ("Events of Default" or, if the giving of notice or the lapse
of time or both is required, then, prior to such notice or lapse of time,
"Defaults") shall occur:
(a) the Borrower shall fail to pay any principal of the Loans
when the same shall become due and payable, whether at the stated date
of maturity or any accelerated date of maturity or at any other date
fixed for payment;
(b) the Borrower shall fail to pay any interest on the Loans
or any other sums due hereunder or under any of the other Loan
Documents, within three (3) days from the date the same shall become
due and payable, whether at the stated date of maturity or any
accelerated date of maturity or at any other date fixed for payment;
(c) the Borrower or REA shall fail to comply with the covenant
contained in Section 9.1 and such failure shall continue to exist after
written notice thereof shall have been given to the Borrower by the
Agent and the cure period provided in Section 12.1B(a) shall have
ended;
(d) the Borrower or REA shall fail to comply with any covenant
contained in Section 9.2, Section 9.3, Section 9.4 or Section 9.5 and
such failure shall continue for thirty (30) days after written notice
thereof shall have been given to the Borrower by the Agent;
(e) any of the Borrower, REA, the Guarantors, or any of their
respective Subsidiaries shall fail to perform any other term, covenant
or agreement contained herein or in any of the other Loan Documents
which they are required to perform (other than those specified in the
other subclauses of this Section 12) and such failure shall continue
for thirty (30) days after written notice thereof shall have been given
to the Borrower by the Agent or such longer period, not to exceed an
additional sixty (60) days, as may be required to cure such default,
provided that cure is being diligently pursued;
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(f) any representation or warranty made by or on behalf of the
Borrower, REA, the Guarantors, or any of their respective Subsidiaries
in this Agreement or any other Loan Document, or any report,
certificate, financial statement, request for a Loan, or in any other
document or instrument delivered pursuant to or in connection with this
Agreement, any advance of a Loan or any of the other Loan Documents
shall prove to have been false in any material respect upon the date
when made or deemed to have been made or repeated and such
representation or warranty shall continue to be false after written
notice thereof shall have been given to the Borrower by the Agent and
the cure period provided in Section 12.1(B)(c) shall have ended;
(g) any of the Borrower, REA, the Guarantors, or any of their
respective Subsidiaries (i) shall fail to pay at maturity, or within
any applicable period of grace, any obligation for borrowed money or
credit received or other Indebtedness in a principal amount exceeding
$2,000,000, or (ii) shall fail to observe or perform any term, covenant
or agreement contained in any agreement by which it is bound,
evidencing or securing any obligation for borrowed money or credit
received or other Indebtedness in a principal amount exceeding
$2,000,000 for such period of time as would permit (assuming the giving
of appropriate notice if required) the holder or holders thereof or of
any obligations issued thereunder to accelerate the maturity thereof;
(h) any of the Borrower, REA, the Guarantors, or any of their
respective Subsidiaries, (i) shall make an assignment for the benefit
of creditors, or admit in writing its general inability to pay or
generally fail to pay its debts as they mature or become due, or shall
petition or apply for the appointment of a trustee or other custodian,
liquidator or receiver for it or any substantial part of its assets,
(ii) shall commence any case or other proceeding relating to it under
any bankruptcy, reorganization, arrangement, insolvency, readjustment
of debt, dissolution or liquidation or similar law of any jurisdiction,
now or hereafter in effect, or (iii) shall take any action to authorize
or in furtherance of any of the foregoing;
(i) a petition or application shall be filed for the
appointment of a trustee or other custodian, liquidator or receiver of
any of the Borrower, REA, the Guarantors, or any of their respective
Subsidiaries or any substantial part of the assets of any thereof, or a
case or other proceeding shall be commenced against any such Person
under any bankruptcy, reorganization, arrangement, insolvency,
readjustment of debt, dissolution or liquidation or similar law of any
jurisdiction, now or hereafter in effect, and any such Person shall
indicate its approval thereof, consent thereto or acquiescence therein
or such petition, application, case or proceeding shall not have been
dismissed within ninety (90) days following the filing or commencement
thereof;
(j) a decree or order is entered appointing a trustee,
custodian, liquidator or receiver for any of the Borrower, REA, the
Guarantors, or any of their respective Subsidiaries or adjudicating any
such Person, bankrupt or insolvent, or approving a petition in any such
case or other proceeding, or a decree or order for relief is entered in
respect of any such Person in an involuntary case under federal
bankruptcy laws as now or hereafter constituted;
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(k) there shall remain in force, undischarged, unsatisfied and
unstayed, for more than sixty (60) days, whether or not consecutive,
one or more uninsured final judgments against any of the Borrower, REA,
the Guarantors, or any of their respective Subsidiaries that, either
individually or in the aggregate, exceed $2,000,000;
(l) any of the Loan Documents shall be canceled, terminated,
revoked or rescinded otherwise than in accordance with the terms
thereof or the express prior written agreement, consent or approval of
the Lenders, or any action at law, suit in equity or other legal
proceeding to cancel, revoke or rescind any of the Loan Documents shall
be commenced by or on behalf of any of the Borrower, REA or the
Guarantors, or any court or any other governmental or regulatory
authority or agency of competent jurisdiction shall make a
determination, or issue a judgment, order, decree or ruling, to the
effect that any one or more of the Loan Documents is illegal, invalid
or unenforceable in accordance with the terms thereof;
(m) any dissolution, termination, partial or complete
liquidation, merger or consolidation of any of the Borrower, REA or any
Guarantor shall occur or any sale, transfer or other disposition of the
assets of any of the Borrower, REA or any Guarantor shall occur other
than as permitted under the terms of this Agreement or the other Loan
Documents;
(n) the Borrower or REA shall fail to comply with the covenant
contained in Section 7.19;
(o) all of any portion of a Mortgaged Property (or any
interest therein) is forfeited as a result of any criminal or
quasi-criminal activity by the owner thereof (or any Person related to
the owner thereof);
(p) with respect to any Guaranteed Pension Plan, an ERISA
Reportable Event shall have occurred and the Majority Lenders shall
have determined in their reasonable discretion that such event
reasonably could be expected to result in liability of any of the
Borrower, REA, the Guarantors or any of their respective Subsidiaries
to the PBGC or such Guaranteed Pension Plan in an aggregate amount
exceeding $2,000,000 and such event in the circumstances occurring
reasonably could constitute grounds for the termination of such
Guaranteed Pension Plan by the PBGC or for the appointment by the
appropriate United States District Court of a trustee to administer
such Guaranteed Pension Plan; or a trustee shall have been appointed by
the United States District Court to administer such Plan; or the PBGC
shall have instituted proceedings to terminate such Guaranteed Pension
Plan;
(q) Jeffrey Kelter shall cease to have chief executive
responsibilities of REA, and a competent and experienced successor for
such Person shall not be approved by the Majority Lenders within six
(6) months of such event, such approval not to be unreasonably
withheld;
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(r) REA shall fail to pay or perform any of its obligations
under Section 32 or any Guarantor shall fail to pay or perform any of
its obligations under its Guaranty; or
(s) an event of default under any of the other Loan Documents
shall occur;
then, and in any such event, the Agent may, and upon the request of the Majority
Lenders shall, by notice in writing to the Borrower declare all amounts owing
with respect to this Agreement, the Notes and the other Loan Documents to be,
and they shall thereupon forthwith become, immediately due and payable without
presentment, demand, protest or other notice of any kind, all of which are
hereby expressly waived by the Borrower; provided that in the event of any Event
of Default specified in Section 12.1(h), Section 12.1(i) or Section 12.1(j), all
such amounts shall become immediately due and payable automatically and without
any requirement of presentment , demand, protest or other notice of any kind
from any of the Lenders or the Agent.
Section 12.1 B. Certain Cure Periods.
(a) Within five (5) Business Days following its receipt of
notice from the Agent that a Default has occurred under Section 12.1 A. (c), the
Borrower shall notify the Agent in writing as to whether or not it will attempt
to cure such Default by providing additional Collateral consisting of Potential
Collateral and/or reducing the outstanding principal amount of Loans made to it.
Any such notice (the "Cure Proposal Notice") from the Borrower to the Agent
shall describe in detail the cure which the Borrower proposes to make. In the
event that the Agent does not receive the Cure Proposal Notice from the Borrower
within such five (5) Business Day period, the Borrower's cure period shall end
and the Default under Section 12.1 A. (c) shall immediately become an Event of
Default without any further notice from or other action by the Agent or the
Lenders. In the event that the Agent receives the Cure Proposal Notice from the
Borrower within such five (5) Business Day period, the Agent shall promptly
deliver the same to the Lenders and the actions proposed to be taken by the
Borrower as specified therein shall be completed not later than fifteen (15)
days following the date on which the Borrower is notified by the Agent that the
Majority Lenders have approved the Borrower's proposed actions (or within thirty
(30) days in the event that the Borrower's proposed actions include the Borrower
providing additional Collateral consisting of Potential Collateral). Within five
(5) Business Days after their receipt of the Cure Proposal Notice, the Agent
shall advise the Borrower as to whether or not the Majority Lenders approve the
Borrower's proposed actions based on their good faith business judgment as to
whether the actions proposed by the Borrower are sufficient to cure the Default
under Section 12.1 A. (c) without the creation of any other Default. In the
event that the Agent notifies the Borrower of the disapproval by the Majority
Lenders of the Borrower's proposed actions based on the determination by the
Majority Lenders that in their good faith business judgment that the actions
proposed by the Borrower are insufficient to so cure such Default, the Borrower
may, within three (3) Business Days following its receipt of such notice, submit
to the Agent an alternative cure proposal or evidence establishing that the
Borrower's original cure proposal was so sufficient. Any such submission by the
Borrower shall be in writing and shall describe in detail the alternative
actions which the Borrower proposes to take or the evidence establishing that
the Borrower's original cure proposal was so sufficient. In the event that the
Agent does not receive such submission within such three (3) Business Day
period, the Borrower's cure period shall end and the Default under Section 12.1
A. (c) shall immediately become an Event of Default
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without any further notice from or other action by the Agent or the Lenders. In
the event that the Agent receives such submission from the Borrower within such
three (3) Business Day period, the Agent shall promptly deliver the same to the
Lenders and the Agent shall, within five (5) Business Days following their
receipt of such submission, advise the Borrower as to whether in the Majority
Lenders' good faith business judgment such alternative cure proposal is
sufficient to cure such Default without the creation of any other Default
hereunder or the Borrower's original cure proposal is so sufficient. In the
event that the Majority Lenders determine that the original or alternative cure
proposal is so sufficient, the actions so approved by the Majority Lenders to be
taken by the Borrower shall be completed not later than fifteen (15) days
following the date on which the Borrower is notified by the Agent that the
Majority Lenders have approved such original or alternative proposal (or within
thirty (30) days in the event that the approved actions include the Borrower
providing additional Collateral consisting of Potential Collateral). In the
event that the Agent notifies the Borrower that the Majority Lenders have
determined that the original or alternative cure proposal is not so sufficient,
the Borrower's cure period shall end and the Default under Section 12.1 A. (c)
shall immediately become an Event of Default without any further notice from or
other actions by the Agent or the Lenders. During any period that a Default
exists under Section 12.1 A. (c), the Lenders shall have no obligation to make
any further Loans hereunder.
(b) In the event that the Borrower shall elect under
subsection 12.1B(a) to provide additional Collateral consisting of Potential
Collateral, the Real Estate to be added to the Collateral shall be Eligible Real
Estate and on or prior to the expiration of the 30-day period referred to in
subclause (a) above each of the Eligible Real Estate Qualification Documents
shall have been completed at the Borrower's expense and provided to the Agent
for the benefit of the Lenders.
(c) Within five (5) Business Days following its receipt of
notice from the Agent that a Default has occurred under Section 12.1A(f) with
respect to any representation and warranty to Mortgaged Property (including,
without limitation, the representations and warranties contained in Section 6.20
and Section 6.24), the Borrower shall notify the Agent in writing as to whether
or not it will attempt to cure such Default by substituting for such Mortgaged
Property additional Collateral consisting of Potential Collateral. The Cure
Proposal Notice from the Borrower to the Agent shall describe in detail the cure
which the Borrower proposes to make. In the event that the Agent does not
receive the Cure Proposal Notice from the Borrower within such five (5) Business
Day period, the Borrower's Cure period shall end and the Default under Section
12.1 A. (f) shall immediately become an Event of Default without any further
notice from or other action by the Agent or the Lenders. In the event that the
Agent receives the Cure Proposal Notice from the Borrower within such five (5)
Business Day period, the Agent shall promptly deliver the same to the Lenders
and the actions proposed to be taken by the Borrower as specified therein shall
be completed not later than thirty (30) days following the date on which the
Borrower is notified by the Agent that the Majority Lenders have approved the
Borrower's proposed actions. Within five (5) Business Days after their receipt
of the Cure Proposal Notice, the Agent shall advise the Borrower as to whether
or not the Majority Lenders approve the Borrower's proposed actions based on
their good faith business judgment as to whether the actions proposed by the
Borrower are sufficient to cure the Default under Section 12.1 A. (f) without
the creation of any other Default. In the event that the Agent notifies the
Borrower of the disapproval by the Majority Lenders of the
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Borrower's proposed actions based on the determination by the Majority Lenders
that in their good faith business judgment the actions proposed by the Borrower
are insufficient to so cure such Default, the Borrower may, within three (3)
Business Days following its receipt of such notice, submit to the Agent an
alternative cure proposal or evidence establishing that the Borrower's original
cure proposal was so sufficient. Any such submission by the Borrower shall be in
writing and shall describe in detail the alternative actions which the Borrower
proposes to take or the evidence establishing that the Borrower's original cure
proposal was so sufficient. In the event that the Agent does not receive such
submission within such three (3) Business Day period, the Borrower's cure period
shall end and the Default under Section 12.1 A. (f) shall immediately become an
Event of Default without any further notice from or other action by the Agent or
the Lenders. In the event that the Agent receives such submission from the
Borrower within such three (3) Business Day period, the Agent shall promptly
deliver the same to the Lenders and the Agent shall, within five (5) Business
Days following their receipt of such submission, advise the Borrower as to
whether in the Majority Lenders' good faith business judgment such alternative
cure proposal is sufficient to cure such Default without the creation of any
other Default hereunder or the Borrower's original cure proposal is so
sufficient. In the event that the Majority Lenders determine that the original
or alternative cure proposal is so sufficient, the actions so approved by the
Majority Lenders to be taken by the Borrower shall be completed not later than
thirty (30) days following the date on which the Borrower is notified by the
Agent that the Majority Lenders have approved such original or alternative cure
proposal. In the event that the Agent notifies the Borrower that the Majority
Lenders have determined that the original or alternative cure proposal is not so
sufficient, the Borrower's cure period shall end and the Default under Section
12.1 A. (f) shall immediately become an Event of Default without any further
notice from or other actions by the Agent or the Lenders. During any period that
a Default exists under Section 12.1A. (f), the Lenders shall have no obligation
to make any further Loans hereunder.
Section 12.2 Termination of Commitments. If any one or more Events of
Default specified in Section 12.1A.(h), Section 12.1A.(i) or Section 12.1A.(j)
shall occur, then immediately and without any action on the part of the Agent or
any Lender any unused portion of the credit hereunder shall terminate and the
Lenders shall be relieved of all obligations to make Loans to the Borrower. If
any other Event of Default shall have occurred, the Agent, upon the election of
the Majority Lenders, shall by notice to the Borrower terminate the obligation
to make Loans to the Borrower. No termination under this Section 12.2 shall
relieve the Borrower of its obligations to the Lenders arising under this
Agreement or the other Loan Documents.
Section 12.3 Remedies. In case any one or more Events of Default shall
have occurred and be continuing, and whether or not the Lenders shall have
accelerated the maturity of the Loans pursuant to Section 12.1A., the Agent on
behalf of the Lenders may, with the consent of the Majority Lenders but not
otherwise, proceed to protect and enforce their rights and remedies under this
Agreement, the Notes and/or any of the other Loan Documents by suit in equity,
action at law or other appropriate proceeding, including to the full extent
permitted by applicable law the specific performance of any covenant or
agreement contained in this Agreement and the other Loan Documents, the
obtaining of the ex parte appointment of a receiver, and, if any amount shall
have become due, by declaration or otherwise, the enforcement of the payment
thereof. No remedy herein conferred upon the Agent or the holder of any Note is
intended to be exclusive of any
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other remedy and each and every remedy shall be cumulative and shall be in
addition to every other remedy given hereunder or now or hereafter existing at
law or in equity or by statute or any other provision of law. In the event that
all or any portion of the Obligations is collected by or through an
attorney-at-law, the Borrower shall pay all costs of collection including, but
not limited to, reasonable attorney's fees.
Section 12.4 Distribution of Collateral Proceeds. In the event that,
following the occurrence and during the continuance of any Event of Default, any
monies are received in connection with the enforcement of any of the Security
Documents, or otherwise with respect to the realization upon any of the
Collateral, such monies shall be distributed for application as follows:
(a) First, to the payment of, or (as the case may be) the
reimbursement of the Agent for or in respect of, all reasonable costs,
expenses, disbursements and losses which shall have been paid, incurred
or sustained by the Agent to protect or preserve the Collateral or in
connection with the collection of such monies by the Agent, for the
exercise, protection or enforcement by the Agent of all or any of the
rights, remedies, powers and privileges of the Agent or the Lenders
under this Agreement or any of the other Loan Documents or in respect
of the Collateral or in support of any provision of adequate indemnity
to the Agent against any taxes or liens which by law shall have, or may
have, priority over the rights of the Agent or the Lenders to such
monies;
(b) Second, to all other Obligations in such order or
preference as the Majority Lenders shall determine; provided, that (i)
distributions in respect of such other Obligations shall include, on a
pari passu basis, the Agent's fee payable pursuant to Section 4.3; (ii)
in the event that any Lender shall have wrongfully failed or refused to
make an advance under Section 2.7 and such failure or refusal shall be
continuing, advances made by other Lenders during the pendency of such
failure or refusal shall be entitled to be repaid as to principal and
accrued interest in priority to the other Obligations described in this
subsection (b), and (iii) except as otherwise provided in clause (ii),
Obligations owing to the Lenders with respect to each type of
Obligation such as interest, principal, fees and expenses shall be made
among the Lenders pro rata; and provided, further that the Majority
Lenders may in their discretion make proper allowance to take into
account any Obligations not then due and payable; and
(c) Third, the excess, if any, shall be returned to the
Borrower or to such other Persons as are entitled thereto.
Section 13 SETOFF.
Regardless of the adequacy of any Collateral, during the continuance of
any Event of Default, any deposits (general or specific, time or demand,
provisional or final, regardless of currency, maturity, or the branch where such
deposits are held) or other sums credited by or due from any Lender to the
Borrower, REA or the Guarantors and any securities or other property of the
Borrower , REA or the Guarantors in the possession of such Lender may be applied
to or set
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off against the payment of Obligations and any and all other liabilities,
direct, or indirect, absolute or contingent, due or to become due, now existing
or hereafter arising, of the Borrower, REA or the Guarantors to such Lender.
Each of the Lenders agrees with each other Lender that if such Lender shall
receive from the Borrower, REA or the Guarantors, whether by voluntary payment,
exercise of the right of setoff, or otherwise, and shall retain and apply to the
payment of the Note or Notes held by such Lender any amount in excess of its
ratable portion of the payments received by all of the Lenders with respect to
the Notes held by all of the Lenders, such Lender will make such disposition and
arrangements with the other Lenders with respect to such excess, either by way
of distribution, pro tanto assignment of claims, subrogation or otherwise as
shall result in each Lender receiving in respect of the Notes held by it its
proportionate payment as contemplated by this Agreement; provided that if all or
any part of such excess payment is thereafter recovered from such Lender, such
disposition and arrangements shall be rescinded and the amount restored to the
extent of such recovery, but without interest.
Section 14 THE AGENT.
Section 14.1 Authorization. The Agent is authorized to take such action
on behalf of each of the Lenders and to exercise all such powers as are
hereunder and under any of the other Loan Documents and any related documents
delegated to the Agent, together with such powers as are reasonably incident
thereto, provided that no duties or responsibilities not expressly assumed
herein or therein shall be implied to have been assumed by the Agent. The
obligations of the Agent hereunder are primarily administrative in nature, and
nothing contained in this Agreement or any of the other Loan Documents shall be
construed to constitute the Agent as a trustee for any Lender or to create an
agency or fiduciary relationship. The Borrower and any other Person shall be
entitled to conclusively rely on a statement from the Agent that it has the
authority to act for and bind the Lenders pursuant to this Agreement and the
other Loan Documents.
Section 14.2 Employees and Agents. The Agent may exercise its powers
and execute its duties by or through employees or agents and shall be entitled
to take, and to rely on, advice of counsel concerning all matters pertaining to
its rights and duties under this Agreement and the other Loan Documents. The
Agent may utilize the services of such Persons as the Agent may reasonably
determine, and all reasonable fees and expenses of any such Persons shall be
paid by the Borrower.
Section 14.3 No Liability. Neither the Agent nor any of its
shareholders, directors, officers or employees nor any other Person assisting
them in their duties nor any agent, or employee thereof, shall be liable to any
of the Lenders for any waiver, consent or approval given or any action taken, or
omitted to be taken, in good faith by it or them hereunder or under any of the
other Loan Documents, or in connection herewith or therewith, or be responsible
for the consequences of any oversight or error of judgment whatsoever, except
that the Agent or such other Person, as the case may be, shall be liable for
losses due to its willful misconduct or gross negligence.
Section 14.4 No Representations. The Agent shall not be responsible for
the execution or validity or enforceability of this Agreement, the Notes, any of
the other Loan Documents or any instrument at any time constituting, or intended
to constitute, collateral security for the Notes, or for the value of any such
collateral security or for the validity, enforceability or collectibility of
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any amounts owing with respect to the Notes, or for any recitals or statements,
warranties or representations made herein or in any of the other Loan Documents
or in any certificate or instrument hereafter furnished to it by or on behalf of
the Borrower, REA, the Guarantors or any of their respective Subsidiaries, or be
bound to ascertain or inquire as to the performance or observance of any of the
terms, conditions, covenants or agreements herein or in any of the other Loan
Documents. The Agent shall not be bound to ascertain whether any notice,
consent, waiver or request delivered to it by the Borrower, REA, the Guarantors
or any holder of any of the Notes shall have been duly authorized or is true,
accurate and complete. The Agent has not made nor does it now make any
representations or warranties, express or implied, nor does it assume any
liability to the Lenders, with respect to the creditworthiness or financial
condition of the Borrower, REA, the Guarantors, or any of their respective
Subsidiaries, or the value of the Collateral or any other assets of the
Borrower, REA or the Guarantors. Each Lender acknowledges that it has,
independently and without reliance upon the Agent or any other Lender, and based
upon such information and documents as it has deemed appropriate, made its own
credit analysis and decision to enter into this Agreement. Each Lender also
acknowledges that it will, independently and without reliance upon the Agent or
any other Lender, based upon such information and documents as it deems
appropriate at the time, continue to make its own credit analysis and decisions
in taking or not taking action under this Agreement and the other Loan
Documents.
Section 14.5 Payments.
(a) A payment by the Borrower, REA or any Guarantor to the Agent
hereunder or under any of the other Loan Documents for the account of any Lender
shall constitute a payment to such Lender. The Agent agrees to distribute to
each Lender not later than one Business Day after the Agent's receipt of good
funds, determined in accordance with the Agent's customary practices, such
Lender's pro rata share of payments received by the Agent for the account of the
Lenders except as otherwise expressly provided herein or in any of the other
Loan Documents.
(b) If in the opinion of the Agent the distribution of any amount
received by it in such capacity hereunder, under the Notes or under any of the
other Loan Documents might involve it in liability, it may refrain from making
distribution until its right to make distribution shall have been adjudicated by
a court of competent jurisdiction. If a court of competent jurisdiction shall
adjudge that any amount received and distributed by the Agent is to be repaid,
each Person to whom any such distribution shall have been made shall either
repay to the Agent its proportionate share of the amount so adjudged to be
repaid or shall pay over the same in such manner and to such Persons as shall be
determined by such court.
(c) Notwithstanding anything to the contrary contained in this
Agreement or any of the other Loan Documents, any Lender that fails (i) to make
available to the Agent its pro rata share of any Loan or (ii) to comply with the
provisions of Section 13 with respect to making dispositions and arrangements
with the other Lenders, where such Lender's share of any payment received,
whether by setoff or otherwise, is in excess of its pro rata share of such
payments due and payable to all of the Lenders, in each case as, when and to the
full extent required by the provisions of this Agreement, shall be deemed
delinquent (a "Delinquent Lender") and shall be deemed a Delinquent Lender until
such time as such delinquency is satisfied. A Delinquent Lender shall be deemed
to have assigned any and all payments due to it from the Borrower, REA
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or the Guarantors, whether on account of outstanding Loans, interest, fees or
otherwise, to the remaining nondelinquent Lenders for application to, and
reduction of, their respective pro rata shares of all outstanding Loans. The
Delinquent Lender hereby authorizes the Agent to distribute such payments to the
nondelinquent Lenders in proportion to their respective pro rata shares of all
outstanding Loans. A Delinquent Lender shall be deemed to have satisfied in full
a delinquency when and if, as a result of application of the assigned payments
to all outstanding Loans of the nondelinquent Lenders or as a result of other
payments by the Delinquent Lenders to the nondelinquent Lenders, the Lenders'
respective pro rata shares of all outstanding Loans have returned to those in
effect immediately prior to such delinquency and without giving effect to the
nonpayment causing such delinquency.
Section 14.6 Holders of Notes. Subject to the terms of Section 18, the
Agent may deem and treat the payee of any Note as the absolute owner or
purchaser thereof for all purposes hereof until it shall have been furnished in
writing with a different name by such payee or by a subsequent holder, assignee
or transferee.
Section 14.7 Indemnity. The Lenders ratably agree hereby to indemnify
and hold harmless the Agent from and against any and all claims, actions and
suits (whether groundless or otherwise), losses, damages, costs, expenses
(including any expenses for which the Agent has not been reimbursed by the
Borrower as required by Section 15), and liabilities of every nature and
character arising out of or related to this Agreement, the Notes, or any of the
other Loan Documents or the transactions contemplated or evidenced hereby or
thereby, or the Agent's actions taken hereunder or thereunder, except to the
extent that any of the same shall be directly caused by the Agent's willful
misconduct or gross negligence.
Section 14.8 Agent as Lender. In its individual capacity, BankBoston
shall have the same obligations and the same rights, powers and privileges in
respect to its Commitment and the Loans made by it, and as the holder of any of
the Notes as it would have were it not also the Agent.
Section 14.9 Resignation. The Agent may resign at any time by giving 60
days' prior written notice thereof to the Lenders and the Borrower. Upon any
such resignation, the Majority Lenders (and so long as no Default or Event of
Default exists hereunder, after consultation with the Borrower) shall have the
right to appoint as a successor Agent any Lender or any financial institution
whose senior debt obligations are rated not less than "A" or its equivalent by
Moody's Investors Service, Inc. or not less than "A" or its equivalent by
Standard & Poor's corporation and which has a net worth of not less than
$500,000,000. Unless a Default or Event of Default shall have occurred and be
continuing, such successor Agent shall be reasonably acceptable to the Borrower.
If no successor Agent shall have been so appointed by the Majority Lenders and
shall have accepted such appointment within 30 days after the retiring Agent's
giving of notice of resignation, then the retiring Agent may, on behalf of the
Lenders, appoint a successor Agent, which shall be any Lender or any financial
institution whose senior debt obligations are rated not less than "A" or its
equivalent by Moody's Investors Service, Inc. or not less than "A" or its
equivalent by Standard & Poor's Corporation and which has a net worth of not
less than $500,000,000. Upon the acceptance of any appointment as Agent
hereunder by a successor Agent, such successor Agent shall thereupon succeed to
and become vested with all the rights,
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powers, privileges and duties of the retiring Agent, and the retiring Agent
shall be discharged from its duties and obligations hereunder as Agent. After
any retiring Agent's resignation, the provisions of this Agreement and the other
Loan Documents shall continue in effect for its benefit in respect of any
actions taken or omitted to be taken by it while it was acting as Agent.
Section 14.10 Duties in the Case of Enforcement. In case one or more
Events of Default have occurred and shall be continuing, and whether or not
acceleration of the Obligations shall have occurred, the Agent shall, if (a) so
requested by the Majority Lenders and (b) the Lenders have provided to the Agent
such additional indemnities and assurances against expenses and liabilities as
the Agent may reasonably request, proceed to enforce the provisions of the
Security Documents authorizing the sale or other disposition of all or any part
of the Collateral and exercise all or any such other legal and equitable and
other rights or remedies as it may have in respect of such Collateral. The
Majority Lenders may direct the Agent in writing as to the method and the extent
of any such sale or other disposition, the Lenders hereby agreeing to indemnify
and hold the Agent harmless from all liabilities incurred in respect of all
actions taken or omitted in accordance with such directions.
Section 15 EXPENSES.
The Borrower agrees to pay (a) the reasonable costs of reproducing this
Agreement, the other Loan Documents and the other agreements and instruments
mentioned herein, (b) any taxes (including any interest and penalties in respect
thereto) payable by the Agent or any of the Lenders (other than taxes based upon
the Agent's or any Lender's gross or net income, except that the Agent and the
Lenders shall be entitled to indemnification for any and all amounts paid by
them in respect of taxes based on income or other taxes assessed by any State in
which Mortgaged Property or other Collateral is located, such indemnification to
be limited to taxes due solely on account of the granting of Collateral under
the Security Documents and to be net of any credit allowed to the indemnified
party from any other State on account of the payment or incurrence of such tax
by such indemnified party), including any recording, mortgage, documentary or
intangibles taxes in connection with the Mortgages and other Loan Documents, or
other taxes payable on or with respect to the transactions contemplated by this
Agreement, including any such taxes payable by the Agent or any of the Lenders
after the Closing Date (the Borrower hereby agreeing to indemnify the Agent and
each Lender with respect thereto), (c) all title insurance premiums, appraisal
fees, engineer's fees, environmental reviews and the reasonable fees, expenses
and disbursements of the counsel to the Agent and any local counsel to the Agent
incurred in connection with the preparation, administration, syndication or
interpretation of the Loan Documents and other instruments mentioned herein
(excluding, however, the preparation of agreements evidencing participations
granted under Section 18.4), and amendments, modifications, approvals, consents
or waivers hereto or hereunder, (d) all other reasonable out of pocket fees,
expenses and disbursements of the Agent actually incurred by the Agent in
connection with the preparation or interpretation (arising from a request from
Borrower or any failure by Borrower, REA or the Guarantors to perform any of
their obligations under the Loan Documents) of the Loan Documents and other
instruments mentioned herein, the addition or substitution of additional
Mortgaged Properties or other Collateral, the review of leases and
Subordination, Nondisturbance and Attornment Agreements, the making of each
advance
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hereunder and the syndication of the Commitments pursuant to Section 18 (without
duplication of those items addressed in subparagraph (c), above), (e) all
reasonable out-of-pocket expenses (including reasonable attorneys' fees and
costs, and the fees and costs of appraisers, engineers, investment bankers or
other experts retained by any Lender or the Agent) actually incurred by any
Lender or the Agent in connection with (i) the enforcement of or preservation of
rights under any of the Loan Documents against the Borrower, REA or the
Guarantors or the administration thereof after the occurrence of a Default or
Event of Default and (ii) any litigation, proceeding or dispute whether arising
hereunder or otherwise, in any way related to the Agent's or any of the Lenders'
relationship with the Borrower, REA or the Guarantors, (f) all reasonable fees,
expenses and disbursements of any Lender or the Agent incurred in connection
with UCC searches, UCC filings, title rundowns, title searches or mortgage
recordings, and (g) all reasonable fees, expenses and disbursements (including
reasonable attorneys' fees and costs) which may be incurred by BankBoston or DLJ
in connection with the execution and delivery of this Agreement and the other
Loan Documents (without duplication of any of the items listed above). The
covenants of this Section 15 shall survive the repayment of the Loans and the
termination of the obligations of the Lenders hereunder.
Section 16 INDEMNIFICATION.
The Borrower agrees to indemnify and hold harmless the Agent and the
Lenders and each director, officer, employee, agent and Person who controls the
Agent or any Lender from and against any and all claims, actions and suits,
whether groundless or otherwise, and from and against any and all liabilities,
losses, damages and expenses of every nature and character arising out of or
relating to this Agreement or any of the other Loan Documents or the
transactions contemplated hereby and thereby including, without limitation, (a)
any and all claims for brokerage, leasing, finders or similar fees which may be
made relating to the Mortgaged Properties or the Loans (other than claims
resulting from agreements made by a Lender providing for the payment of such
fees), (b) any condition of the Mortgaged Properties, (c) any actual or proposed
use by the Borrower of the proceeds of any of the Loans, (d) any actual or
alleged infringement of any patent, copyright, trademark, service mark or
similar right of the Borrower, REA, the Guarantors, or any of their respective
Subsidiaries comprised in the Collateral, (e) the Borrower, REA and the
Guarantors entering into or performing this Agreement or any of the other Loan
Documents, or (f) any actual or alleged violation of any law, ordinance, code,
order, rule, regulation, approval, consent, permit or license relating to the
Mortgaged Property, in each case including, without limitation, the reasonable
fees and disbursements of counsel incurred in connection with any such
investigation, litigation or other proceeding; provided, however, that the
Borrower shall not be obligated under this Section 16 to indemnify any Person
for liabilities arising from such Person's own gross negligence or willful
misconduct. In litigation, or the preparation therefor, the Lenders and the
Agent shall be entitled to select a single law firm as their own counsel and, in
addition to the foregoing indemnity, the Borrower agrees to pay promptly the
reasonable fees and expenses of such counsel. If, and to the extent that the
obligations of the Borrower under this Section 16 are unenforceable for any
reason, the Borrower hereby agrees to make the maximum contribution to the
payment in satisfaction of such obligations which is permissible under
applicable law. The provisions of this Section 16 shall survive the repayment of
the Loans and the termination of the obligations of the Lenders hereunder.
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Section 17 SURVIVAL OF COVENANTS, ETC.
All covenants, agreements, representations and warranties made herein,
in the Notes, in any of the other Loan Documents or in any documents or other
papers delivered by or on behalf of the Borrower, REA or the Guarantors or any
of their respective Subsidiaries pursuant hereto or thereto shall be deemed to
have been relied upon by the Lenders and the Agent, notwithstanding any
investigation heretofore or hereafter made by any of them, and shall survive the
making by the Lenders of any of the Loans, as herein contemplated, and shall
continue in full force and effect so long as any amount due under this Agreement
or the Notes or any of the other Loan Documents remains outstanding or any
Lender has any obligation to make any Loans. The indemnification obligations of
the Borrower provided herein and in the other Loan Documents shall survive the
full repayment of amounts due and the termination of the obligations of the
Lenders hereunder and thereunder to the extent provided herein and therein. All
statements contained in any certificate delivered to any Lender or the Agent at
any time by or on behalf of the Borrower, REA or the Guarantors or any of their
respective Subsidiaries pursuant hereto or in connection with the transactions
contemplated hereby shall constitute representations and warranties by such
Person hereunder.
Section 18 ASSIGNMENT AND PARTICIPATION.
Section 18.1 Conditions to Assignment by Lenders. Except as provided
herein, each Lender may assign to one or more banks or other entities all or a
portion of its interests, rights and obligations under this Agreement (including
all or a portion of its Commitment Percentage and Commitment and the same
portion of the Loans at the time owing to it and the Notes held by it); provided
that (a) the Agent and, so long as no Default or Event of Default exists
hereunder, the Borrower shall have each given its prior written consent to such
assignment, which consent shall not be unreasonably withheld or delayed
(provided that such consent shall not be required for any assignment to another
Lender, to a lender which is and remains under common control with the assigning
Lender or to a wholly-owned Subsidiary of such Lender, provided that such
assignee shall remain a wholly-owned Subsidiary of such Lender), (b) each such
assignment shall be of a constant, and not a varying, percentage of all the
assigning Lender's rights and obligations under this Agreement, (c) the parties
to such assignment shall execute and deliver to the Agent, for recording in the
Register (as hereinafter defined), a notice of such assignment, (d) in no event
shall any voting, consent or approval rights of a Lender be assigned to any
Person controlling, controlled by or under common control with, or which is not
otherwise free from influence or control by, the Borrower or REA, which rights
shall instead be allocated pro rata among the other remaining Lenders (e) such
assignee shall have a net worth as of the date of such assignment of not less
than $200,000,000, (f) such assignee shall acquire an interest in the Loans of
not less than $5,000,000 (or if less the remaining Loans of the assignor), and
(g) such assignment shall be of an equal percentage of such assignee's
Commitment Percentage. In addition, each Lender shall attempt (but shall not be
obligated) to assign its interests, rights and obligations under this Agreement
to a Person who shall be able to deliver to the Borrower the documentation
described in Section 4.4(c) evidencing no need to withhold or deduct amounts
from payments to be made such Person hereunder. Upon execution, delivery,
acceptance and recording of such notice of assignment, (i) the assignee
thereunder shall be a party hereto and all other Loan Documents executed by the
Lenders and have the rights and obligations of a Lender hereunder, (ii) the
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assigning Lender shall, upon payment to the Agent of the registration fee
referred to in Section 18.2, be released from its obligations under this
Agreement arising after the effective date of such assignment with respect to
the assigned portion of its interests, rights and obligations under this
Agreement, and (iii) the Agent may unilaterally amend Schedule 1 to reflect such
assignment. In connection with each assignment, the assignee shall represent and
warrant to the Agent, the assignor and each other Lender as to whether such
assignee is controlling, controlled by, under common Control with or is not
otherwise free from influence or control by, the Borrower or REA.
Section 18.2 Register. The Agent shall maintain on behalf of the
Borrower a copy of each assignment delivered to it and a register or similar
list (the "Register") for the recordation of the names and addresses of the
Lenders and the Commitment Percentages of and principal amount of the Loans
owing to the Lenders from time to time. The entries in the Register shall be
conclusive, in the absence of manifest error, and the Borrower, REA, the
Guarantors, the Agent and the Lenders may treat each Person whose name is
recorded in the Register as a Lender hereunder for all purposes of this
Agreement. The Register shall be available for inspection by the Borrower and
the Lenders at any reasonable time and from time to time upon reasonable prior
notice. Upon each such recordation, the assigning Lender agrees to pay to the
Agent a registration fee in the sum of $2,000.
Section 18.3 New Notes. Upon its receipt of an assignment executed by
the parties to such assignment, the Agent shall (a) record the information
contained therein in the Register, and (b) give prompt notice thereof to the
Borrower and the Lenders (other than the assigning Lender). The assigning Lender
shall deliver to the Agent each Note which is the subject of an assignment.
Within five (5) Business Days after receipt of confirmation from the Agent that
it has received each Note subject to such assignment, the Borrower, at its own
expense, shall execute and deliver to the Agent, in exchange for each
surrendered Note, a new Note to the order of such assignee in an amount equal to
the amount assigned to such assignee pursuant to such assignment and, if the
assigning Lender has retained some portion of its obligations hereunder, a new
Note to the order of the assigning Lender in an amount equal to the amount
retained by it hereunder. Such new Notes shall provide that they are
replacements for the surrendered Notes, shall be in an aggregate principal
amount equal to the aggregate principal amount of the surrendered Notes, shall
be dated the effective date of such assignment and shall otherwise be in
substantially the form of the assigned Notes. The surrendered Notes shall be
canceled and returned to the Borrower.
Section 18.4 Participations. Each Lender may sell participations to one
or more Lenders or other entities in all or a portion of such Lender's rights
and obligations under this Agreement and the other Loan Documents; provided that
(a) any such sale or participation shall not affect the rights and duties of the
selling Lender hereunder, (b) such participation shall not entitle such
participant to any rights or privileges under this Agreement or any Loan
Documents, including without limitation, rights granted to the Lenders under
Section 4.8, Section 4.9 and Section 4.10, (c) such participation shall not
entitle the participant to the right to approve waivers, amendments or
modifications, (provided that the Lender granting the participation interest
shall not be prohibited from granting any participant (in the participation
agreement to be entered into between the Lender and such participant) the right
to approve waivers, amendments or modifications if any such waiver, amendment or
modification would (i) extend the Maturity Date or reduce the rate or
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extend the time of payment of interest on the Loans or any fees payable in
respect thereof or reduce the principal amount thereof or increase the amount of
the participant's participation over the amount thereof then in effect (it being
understood that a waiver of any Default or Event of Default or of a mandatory
reduction in the Commitments or any amendment to the Borrowing Base shall not
constitute a change in the terms of such participation, and that an increase in
any Commitment or Loan shall be permitted without the consent of any participant
if the participant's participation is not increased as a result thereof) or (ii)
constitute a consent to the assignment or transfer by the Borrower of any of its
rights or obligations under this Agreement), (d) such participant shall have no
direct rights against the Borrower, (e) such sale is effected in accordance with
all applicable laws, and (f) such participant shall not be a Person Controlling,
Controlled by or under common Control with, or which is not otherwise free from
influence or control by any of the Borrower or REA.
Section 18.5 Pledge by Lender. Any Lender may at any time pledge all or
any portion of its interest and rights under this Agreement (including all or
any portion of its Note) to any of the twelve Federal Reserve Lenders organized
under Section 4 of the Federal Reserve Act, 12 U.S.C. Section 341. No such
pledge or the enforcement thereof shall release the pledgor Lender from its
obligations hereunder or under any of the other Loan Documents.
Section 18.6 No Assignment by Borrower. The Borrower shall not assign
or transfer any of its rights or obligations under this Agreement without the
prior written consent of each of the Lenders.
Section 18.7 Disclosure. The Borrower and REA agree that in addition to
disclosures made in accordance with standard banking practices any Lender may
disclose information obtained by such Lender pursuant to this Agreement to
BankBoston Securities, Inc., assignees or participants and potential assignees
or participants hereunder. The Agent and each Lender shall otherwise use
reasonable efforts to hold any confidential information which it may receive
from the Borrower or REA pursuant to this Agreement in confidence, except for
disclosure to (i) legal counsel, accountants and other professional advisors to
the Agent, any Lender, any assignee, participant, potential assignee or
participant, (ii) regulatory officials having jurisdiction over Agent, any
Lender or any assignee, participant, potential assignee or participant, and
(iii) as required by law or legal process or in connection with any legal
proceeding to which the Agent, any Lender or any assignee, participant,
potential assignee or participant is a party. Confidential information shall not
include any information which is or subsequently becomes publicly available, or
prior to the delivery to the Agent or the Lenders hereunder is within the
possession of such party, or is disclosed with the prior written approval of the
Borrower.
Section 18.8 Amendments to Mortgages. Upon any such assignment or
participation, the Borrower, REA and the Guarantors shall, upon the request of
the Agent, enter into such documents as may be reasonably required by the Agent
to modify the Loan Documents to reflect such assignment or participation.
Section 19 NOTICES.
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Each notice, demand, election or request provided for or permitted to
be given pursuant to this Agreement (hereinafter in this Section 19 referred to
as "Notice"), but specifically excluding to the maximum extent permitted by law
any notices of the institution or commencement of foreclosure proceedings, must
be in writing and shall be deemed to have been properly given or served by
personal delivery or by sending same by overnight courier or by depositing same
in the United States Mail, postpaid and registered or certified, return receipt
requested, or as expressly permitted herein, by telegraph, telecopy, telefax or
telex, and addressed as follows:
If to the Agent or BankBoston:
BankBoston, N.A.
100 Federal Street
Boston, Massachusetts 02110
Attn: Real Estate Division
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With a copy to:
BankBoston, N.A.
115 Perimeter Center Place, N.E.
Suite 500
Atlanta, Georgia 30346
Attn: Jay Johns
Telecopy No.: (770) 390-8434
If to DLJ:
DLJ Capital Funding, Inc.
277 Park Avenue
New York, New York 10172
Attn: Michael Dana
Telecopy No: (212) 892-2462
If to the Borrower:
American Real Estate Investment, L.P.
620 West Germantown Pike
Suite 200
Plymouth Meeting, Pennsylvania 19462
Attn: Stephen Butte
Telecopy No.: (610) 834-9560
If to REA:
American Real Estate Investment Corporation
620 West Germantown Pike
Suite 200
Plymouth Meeting, Pennsylvania 19462
Attn: Stephen Butte
Telecopy No.: (610) 834-9560
and to any Lender which may hereafter become a party to this Agreement, at such
address as may be designated by such Lender. Each Notice shall be effective upon
being personally delivered or upon being sent by overnight courier or upon being
deposited in the United States Mail as aforesaid. The time period in which a
response to such Notice must be given or any action taken with respect thereto
(if any), however, shall commence to run from the date of receipt if personally
delivered or sent by overnight courier, or if so deposited in the United States
Mail, the earlier of three (3) Business Days following such deposit or the date
of receipt as disclosed on the return receipt. Rejection or other refusal to
accept or the inability to deliver because of changed address for which no
notice was given shall be deemed to be receipt of the Notice sent. By giving at
least fifteen (15) days prior Notice thereof, the Borrower, a Lender or Agent
shall have the right from
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time to time and at any time during the term of this Agreement to change their
respective addresses and each shall have the right to specify as its address any
other address within the United States of America.
Section 20 RELATIONSHIP.
The relationship between each Lender and the Borrower is solely that of
a lender and borrower, and nothing contained herein or in any of the other Loan
Documents shall in any manner be construed as making the parties hereto
partners, joint venturers or any other relationship other than lender and
borrower.
Section 21 GOVERNING LAW; CONSENT TO JURISDICTION AND SERVICE.
THIS AGREEMENT AND EACH OF THE OTHER LOAN DOCUMENTS, EXCEPT AS
OTHERWISE SPECIFICALLY PROVIDED HEREIN OR THEREIN, SHALL FOR ALL PURPOSES BE
CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE LAWS OF SUCH STATE (EXCLUDING
THE LAWS APPLICABLE TO CONFLICTS OR CHOICE OF LAW). EACH OF THE BORROWER, REA
AND THE GUARANTORS AGREE THAT ANY SUIT FOR THE ENFORCEMENT OF THIS AGREEMENT OR
ANY OF THE OTHER LOAN DOCUMENTS MAY BE BROUGHT IN THE COURTS OF THE STATE OF NEW
YORK OR ANY FEDERAL COURT SITTING THEREIN AND CONSENTS TO THE NONEXCLUSIVE
JURISDICTION OF SUCH COURT AND THE SERVICE OF PROCESS IN ANY SUCH SUIT BEING
MADE UPON THE BORROWER, REA OR THE GUARANTOR S BY MAIL AT THE ADDRESS SPECIFIED
IN Section 19. EACH OF THE BORROWER, REA AND THE GUARANTORS HEREBY WAIVES ANY
OBJECTION THAT IT MAY NOW OR HEREAFTER HAVE TO THE VENUE OF ANY SUCH SUIT OR ANY
SUCH COURT OR THAT SUCH SUIT IS BROUGHT IN AN INCONVENIENT COURT.
Section 22 HEADINGS.
The captions in this Agreement are for convenience of reference only
and shall not define or limit the provisions hereof.
Section 23 COUNTERPARTS.
This Agreement and any amendment hereof may be executed in several
counterparts and by each party on a separate counterpart, each of which when so
executed and delivered shall be an original, and all of which together shall
constitute one instrument. In proving this Agreement it shall not be necessary
to produce or account for more than one such counterpart signed by the party
against whom enforcement is sought.
Section 24 ENTIRE AGREEMENT, ETC.
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The Loan Documents express the entire understanding of the parties with
respect to the transactions contemplated hereby. Neither this Agreement nor any
term hereof may be changed, waived, discharged or terminated, except as provided
in Section 27.
Section 25 WAIVER OF JURY TRIAL AND CERTAIN DAMAGE CLAIMS.
EACH OF THE BORROWER, REA, THE GUARANTORS, THE AGENT AND THE LENDERS
HEREBY WAIVES ITS RIGHT TO A JURY TRIAL WITH RESPECT TO ANY ACTION OR CLAIM
ARISING OUT OF ANY DISPUTE IN CONNECTION WITH THIS AGREEMENT, ANY NOTE OR ANY OF
THE OTHER LOAN DOCUMENTS, ANY RIGHTS OR OBLIGATIONS HEREUNDER OR THEREUNDER OR
THE PERFORMANCE OF SUCH RIGHTS AND OBLIGATIONS. EXCEPT TO THE EXTENT EXPRESSLY
PROHIBITED BY LAW, THE BORROWER, REA, AND THE GUARANTORS HEREBY WAIVE ANY RIGHT
THEY MAY HAVE TO CLAIM OR RECOVER IN ANY SUCH LITIGATION ANY SPECIAL, EXEMPLARY,
PUNITIVE OR CONSEQUENTIAL DAMAGES OR ANY DAMAGES OTHER THAN, OR IN ADDITION TO,
ACTUAL DAMAGES. THE BORROWER, REA, AND THE GUARANTORS (A) CERTIFY THAT NO
REPRESENTATIVE, AGENT OR ATTORNEY OF ANY LENDER OR THE AGENT HAS REPRESENTED,
EXPRESSLY OR OTHERWISE, THAT SUCH LENDER OR THE AGENT WOULD NOT, IN THE EVENT OF
LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVERS AND (B) ACKNOWLEDGE THAT THE
AGENT AND THE LENDERS HAVE BEEN INDUCED TO ENTER INTO THIS AGREEMENT AND THE
OTHER LOAN DOCUMENTS TO WHICH THEY ARE PARTIES BY, AMONG OTHER THINGS, THE
WAIVERS AND CERTIFICATIONS CONTAINED IN THIS Section 25. THE BORROWER, REA AND
THE GUARANTORS ACKNOWLEDGE THAT THEY HAVE HAD AN OPPORTUNITY TO REVIEW THIS
Section 25 WITH THEIR LEGAL COUNSEL AND THAT THE BORROWER, REA AND THE
GUARANTORS AGREE TO THE FOREGOING AS THEIR FREE, KNOWING AND VOLUNTARY ACT.
Section 26 DEALINGS WITH THE BORROWER.
The Lenders and their Affiliates may accept deposits from, extend
credit to and generally engage in any kind of banking, trust or other business
with the Borrower, REA, the Guarantors and their respective Subsidiaries or any
of their Affiliates regardless of the capacity of the Lender hereunder.
Section 27 CONSENTS, AMENDMENTS, WAIVERS, ETC.
Except as otherwise expressly provided in this Agreement, any consent
or approval required or permitted by this Agreement may be given, and any term
of this Agreement or of any other instrument related hereto or mentioned herein
may be amended, and the performance or observance by the Borrower, REA or the
Guarantors of any terms of this Agreement or such other instrument or the
continuance of any Default or Event of Default may be waived (either generally
or in a particular instance and either retroactively or prospectively) with, but
only with, the written consent of the Majority Lenders. Notwithstanding the
foregoing, none of the
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following may occur without the written consent of each Lender: a change in the
rate of interest on or the term of the Notes; a change in the amount of the
Commitments of the Lenders; a forgiveness, reduction or waiver of the principal
of any unpaid Loan or any interest thereon or fee payable under the Loan
Documents; a change in the amount of any fee payable to a Lender hereunder; the
postponement of any date fixed for any payment of principal of or interest on
the Loan; an extension of the Maturity Date; a change in the manner of
distribution of any payments to the Lenders or the Agent; the release of the
Borrower, REA, any Guarantor, or any Collateral except as otherwise provided
herein; an amendment of the definition of Majority Lenders or of any requirement
for consent by all of the Lenders; any modification to require a Lender to fund
a pro rata share of a request for an advance of the Loan made by the Borrower
other than based on its Commitment Percentage; an amendment to this Section 27;
or an amendment of any provision of this Agreement or the Loan Documents which
requires the approval of all of the Lenders or the Majority Lenders to require a
lesser number of Lenders to approve such action. The provisions of Section 14
may not be amended without the written consent of the Agent. No waiver shall
extend to or affect any obligation not expressly waived or impair any right
consequent thereon. No course of dealing or delay or omission on the part of the
Agent or any Lender in exercising any right shall operate as a waiver thereof or
otherwise be prejudicial thereto. No notice to or demand upon any of the
Borrower, REA or the Guarantors shall entitle the Borrower, REA or any Guarantor
to other or further notice or demand in similar or other circumstances.
Section 28 SEVERABILITY.
The provisions of this Agreement are severable, and if any one clause
or provision hereof shall be held invalid or unenforceable in whole or in part
in any jurisdiction, then such invalidity or unenforceability shall affect only
such clause or provision, or part thereof, in such jurisdiction, and shall not
in any manner affect such clause or provision in any other jurisdiction, or any
other clause or provision of this Agreement in any jurisdiction.
Section 29 TIME OF THE ESSENCE.
Time is of the essence with respect to each and every covenant,
agreement and obligation of the Borrower, REA and the Guarantors under this
Agreement and the other Loan Documents.
Section 30 NO UNWRITTEN AGREEMENTS.
THE LOAN DOCUMENTS REPRESENT THE FINAL AGREEMENT BETWEEN THE PARTIES
AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS OR SUBSEQUENT
ORAL AGREEMENTS OF THE PARTIES. THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN
THE PARTIES.
Section 31 REMEDIES OF THE BORROWER.
In the event that a claim is made that the Agent has, or the Lenders
have, acted unreasonably or unreasonably delayed acting in any case where by law
or under this Agreement or the other Loan Documents, the Agent has, or the
Lenders have an obligation to act reasonably
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or promptly, each of the Borrower, REA and the Guarantors agrees to the extent
permitted by law, that neither the Agent nor the Lenders shall be liable for any
monetary damages, and the sole remedy of the Borrower, REA and the Guarantors
shall be limited to commencing an action seeking injunctive relief or
declaratory judgment. In any action or proceeding to determine whether the Agent
has, or the Lenders have, acted reasonably or promptly, each of the Borrower,
REA and the Guarantors agrees to the extent permitted by law, that neither the
Agent nor the Lenders nor their respective agents shall be liable for any
monetary damages, and the sole remedies of the Borrower, REA and the Guarantors
shall be limited to commencing an action seeking injunctive relief or
declaratory judgment. The parties hereto agree that any action or proceeding to
determine whether the Agent has, or the Lenders have, acted reasonably shall be
determined by an action seeking declaratory judgment.
Section 32 REA Guaranty
Section 32.1 The Guaranty. In order to induce the Lenders and the Agent
to enter into this Agreement and to extend credit hereunder and in recognition
of the direct benefits to be received by REA from the proceeds of the Loans, REA
hereby agrees with the Agent and each of the Lenders as follows: REA hereby
unconditionally and irrevocably guarantees as primary obligor and not merely as
surety the full and prompt payment and performance when due, whether upon
maturity, by acceleration or otherwise, of any and all of the Obligations. If
any or all of the Obligations becomes due and payable hereunder, REA
unconditionally promises to pay such indebtedness to the Lenders or order, on
written demand, together with any and all reasonable expenses which may be
incurred by the Lenders in collecting any of the Obligations, and until paid to
the Lenders, such sums shall bear interest at the interest rate payable on
overdue amounts set forth in Section 4.12.
Section 32.2 Bankruptcy. Additionally, REA unconditionally and
irrevocably guarantees the payment and performance of any and all of the
Obligations to the Lenders and the Agent whether or not then due or payable by
the Borrower upon the occurrence in respect of the Borrower of any of the events
specified in Section 12.1A(h), (i) or (j), and unconditionally and irrevocably
promises to pay the Obligations to the Lenders, or order, on demand, in lawful
money of the United States.
Section 32.3 Nature of Liability. The liability of REA hereunder is
exclusive and independent of any security for or other guaranty of the
Obligations whether executed by REA, any Guarantor or by any other party, and
the liability of REA hereunder shall not be affected or impaired by (a) any
direction as to application of payment by the Borrower or by any other party, or
(b) any other continuing or other guaranty, undertaking or maximum liability of
a Guarantor or of any other party as to the Obligations or (c) any payment on or
in reduction of any such other guaranty or undertaking, or (d) any dissolution,
termination or increase, decrease or change in personnel by the Borrower, or (e)
any payment made to any Lenders on the indebtedness which such Lenders repay the
Borrower pursuant to court order in any bankruptcy, reorganization, arrangement,
moratorium or other debtor relief proceeding, and REA waives any right to the
deferral or modification of its obligations hereunder by reason of any such
proceeding.
Section 32.4 Independent Obligation. This is a guaranty of payment and
performance and not of collection. The obligations of REA hereunder are
independent of the obligations of any
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Guarantor or the Borrower, and a separate action or actions may be brought and
prosecuted against REA whether or not action is brought against any Guarantor or
the Borrower and whether or not any Guarantor or the Borrower be joined in any
such action or actions. Any payment or performance by the Borrower or other
circumstance which operates to toll any statute of limitations as to the
Borrower shall operate to toll the statute of limitations as to REA.
Section 32.5 Authorization. REA authorizes the Agent and each of the
Lenders without notice or demand (except as shall be required by applicable
statue and cannot be waived), and without affecting or impairing its liability
hereunder, from time to time to:
(e) change the manner, place or terms of payment or
performance of, and/or change or extend the time of payment or
performance of, renew, increase, accelerate or alter, any of the
Obligations (including any increase or decrease in the rate of interest
thereon), any security therefor, or any liability incurred directly or
indirectly in respect thereof, and the guaranty herein made shall apply
to the Obligations as so changed, extended, renewed or altered;
(f) take and hold security for the payment and performance of
the Obligations and sell, exchange, release, surrender, realize upon or
otherwise deal with in any manner and in any order any property by
whomsoever at any time pledged or mortgaged to secure, or howsoever
securing, the Obligations or any liabilities (including any of those
hereunder) incurred directly or indirectly in respect thereof or
hereof, and/or any offset thereagainst;
(g) exercise or refrain from exercising any rights against the
Borrower, any Guarantor or any other Person or otherwise act or refrain
from acting;
(h) release or substitute one or more of the Borrower, the
Guarantors, endorsers, and guarantors or other obligors;
(i) settle or compromise any of the Obligations, any security
therefor or any liability (including any of those hereunder) incurred
directly or indirectly in respect thereof or hereof, and may
subordinate the payment of all or any part thereof to the payment of
any liability (whether due or not) of the Borrower to its creditors
other than the Lenders;
(j) apply any sums by whomsoever paid or howsoever realized to
any liability or liabilities of the Borrower to the Lenders regardless
of what liability or liabilities of the Borrower remain unpaid;
(k) consent to or waive any breach of, or any act, omission or
default under, this Agreement or any of the instruments or agreements
referred to herein, or otherwise amend, modify or supplement this
Agreement or any of such other instruments or agreements; and/or
(l) take any other lawful action which would, under otherwise
applicable principles of common law, give rise to a legal or equitable
discharge of REA from its liabilities under this Section 32.
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Section 32.6 Partial Invalidity. No invalidity, irregularity or
unenforceability of all or any part of the Obligations or of any security
therefore shall affect, impair or be a defense to this guaranty, and this
guaranty shall be primary, absolute, irrevocable and unconditional
notwithstanding the occurrence of any event or the existence of any other
circumstances which might constitute a legal or equitable discharge of a surety
or guarantor except payment in full of the Obligations.
Section 32.7 Continuing Obligation. This guaranty is a continuing one
and all liabilities to which it applies or may apply under the terms hereof
shall be conclusively presumed to have been created in reliance hereon. No
failure or delay on the part of the Agent or any Lender in exercising any right,
power or privilege hereunder shall operate as a waiver thereof; nor shall any
single or partial exercise of any right, power or privilege hereunder preclude
any other or further exercise thereof or the exercise thereof or the exercies of
any other right, power or privilege. The rights and remedies herein expressly
specified are cumulative and not exclusive of any rights or remedies which the
Agent or any Lender would otherwise have. No notice to or demand on REA in any
case shall entitle REA to any other or further notice or demand in similar or
other circumstances or constitute a waiver of the rights of the Agent or any
Lender to any other or further action in any circumstances without notice or
demand. It is not necessary for the Agent or any Lender to inquire into the
capacity or powers of the Borrower or the officers, directors, partners or
agents acting or purporting to act on its behalf, and any indebtedness made or
created in reliance upon the professed exercised of such powers shall be
guaranteed hereunder.
Section 32.8 Reliance. It is not necessary for the Agent or the other
Lenders to inquire into the capacity or powers of the Borrower or any Guarantor
or the officers, directors, partners or agents acting or purporting to act on
its behalf, and any Obligations made or created in reliance upon the professed
exercise of such powers shall be guaranteed hereunder.
Section 32.9 Subordination. Any indebtedness of the Borrower now or
hereafter owing to REA is hereby subordinated to the Obligations and if the
Agent so requests at a time when an Event of Default exists, all such
indebtedness of the Borrower to REA shall be collected, enforced and received by
REA for the benefit of the Lenders and be paid over to the Agent on behalf of
the Lenders on account of the Obligations but without affecting or impairing in
any manner the liability of REA under the other provisions of this guaranty.
Prior to the transfer by REA of any note or negotiable instrument evidencing any
of the indebtedness of the Borrower to REA, REA shall mark such note or
negotiable instrument with a legend that the same is subject to this
subordination. Without limiting the generality of the foregoing, REA hereby
agrees with the Lenders that it will not exercise any right of subrogation which
it may at any time otherwise have as a result of this guaranty (whether
contractual, under Section 509 of the Bankruptcy Code, or otherwise) until all
Obligations have been paid in full in cash (it being understood that REA is not
waiving any right of subrogation that it may otherwise have but is only waiving
the exercise thereof as provided above).
Section 32.10 Waiver. (a) REA waives any right (except as shall be
required by applicable law and cannot be waived) to require the Agent or the
other Lenders to (i) proceed against the Borrower, any Guarantor or any other
Person, (ii) proceed against or exhaust any security held from the Borrower, any
Guarantor or any other Person or (iii) pursue any other remedy in the Agent's or
the other Lender's power whatsoever. REA waives (except as shall be required by
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applicable law and cannot be waived) any defense to its obligations under this
Section 32 based on or arising out of any defense of the Borrower, any Guarantor
or any other Person, other than payment and performance in full of the
Obligations, based on or arising out of the disability of the Borrower, any
Guarantor or any other person, or the unenforceability of the Obligations or any
part thereof from any cause, or the cessation from any cause of the liability of
the Borrower other than payment and performance in full of the Obligations. The
Agent and the other Lenders may, at their selection, foreclose on any security
held by the Agent or the other Lenders by one or more judicial or nonjudicial
sales, whether or not every aspect of any such sale is commercially reasonable
(to the extent such sale is permitted by applicable law), or exercise any other
right or remedy the Agent and the other Lenders may have against the Borrower or
any other party, or any security, without affecting or impairing in any way the
liability of REA hereunder except to the extent the Obligations have been paid
or performed. REA waives any defense arising out of any such election by the
Agent and the other Lenders, even though such election operates to impair or
extinguish any right of reimbursement or subrogation or other right or remedy of
REA against the Borrower or any other party or any security.
(b) REA waives, except as shall be required by applicable law and
cannot be waived, all presentments, demands for performance, protests and
notices, including without limitation notices of nonperformance, notices of
protest, notices of dishonor, notices of acceptance of this guaranty, and
notices of the existence, creation of incurring of new or additional
Obligations. REA assumes all responsibility for being and keeping itself
informed of the financial condition and assets of the Borrower, and of all other
circumstances bearing upon the risk of nonpayment of the Obligations and the
nature, scope and extent of the risks which REA assumes and incurs hereunder,
and agrees that the Agent and the other Lenders shall have no duty to advise REA
of information known to them regarding such circumstances or risks. REA warrants
and agrees that each of the waivers set forth above is made with full knowledge
of its significance and consequences and that if any of such waivers are
determined to be contrary to any applicable law or public policy, such waivers
shall be effective only to the maximum extent permitted by law.
Section 32.11 Nature of Liability. It is the desire and intent of REA
and the Lenders that this guaranty shall be enforced against REA to the fullest
extent permissible under the laws and public policies applied in each
jurisdiction in which enforcement is sought. If, however, and to the extent
that, the obligations of REA under this guaranty shall be adjudicated to be
invalid or unenforceable for any reason (including, without limitation, because
of any applicable state or federal law relating to fraudulent conveyances or
transfers), then, solely for purposes of this Section 32 and without relieving
the Borrower or any Guarantor of liability for the Obligations, the amount of
the Obligations shall be deemed to be reduced and REA shall pay the maximum
amount of the Obligations which would be permissible under applicable law.
Section 32.12 Rights in Bankruptcy. In the event of the business
failure of REA or if there shall be pending any bankruptcy or insolvency case or
proceeding with respect to REA under federal bankruptcy law or any other
applicable law or in connection with the insolvency of REA or if a liquidator,
receiver, or trustee shall have been appointed for REA or REA's properties or
assets, the Agent or the Lenders may file such proofs of claim and other papers
or documents as may be necessary or advisable in order to have the claims of the
Agent and the Lenders allowed in any proceedings relative to REA, or any of
REA's properties or assets, and, irrespective of
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whether the Obligations of the Borrower guaranteed hereby shall then be due and
payable, by declaration or otherwise, the Agent or the Lenders shall be entitled
and empowered to file and prove a claim for the whole amount of any sum or sums
owing with respect to the Obligations of the Borrower guaranteed hereby, and to
collect and receive any moneys or other property payable or deliverable on any
such claim. REA covenants and agrees that upon the commencement of a voluntary
or involuntary bankruptcy proceeding by or against Borrower, REA shall not seek
a supplemental stay or otherwise pursuant to 11 U.S.C. Section 105 or any other
provision of the Bankrutpcy Reform Act of 1978, as amended, or any other debtor
relief law (whether statutory, common law, case law, or otherwise) of any
jurisdiction whatsoever, now or hereafter in effect, which may be or become
applicable, to stay, interdict, condition, reduce or inhibit the ability of the
Agent or the Lenders to enforce any rights of the Agent or the Lenders against
REA by virtue of this guaranty or otherwise.
Section 32.13 Set-off. REA hereby grants to each Lender, as security
for the full and prompt payment and performance of REA's obligations hereunder,
a continuing lien on and security interest in any and all securities or other
property belonging to REA now or hereafter held by such Lender and in any and
all deposits (general or specific, time or demand, provisional or final,
regardless of currency, maturity, or the branch of such Lender where the
deposits are held) now or hereafter held by such Lender and other sums credited
by or due from such Lender to REA or subject to withdrawal by REA; and
regardless of the adequacy of any collateral or other means of obtaining
repayment of such obligations, during the continuance of any Event of Default
under the Notes or the other Loan Documents, each Lender may at any time and
without notice to REA set-off and apply the whole or any portion or portions of
any or all such deposits and other sums against amounts payable under this
guaranty, whether or not any other Person or Persons could withdraw money
therefrom. Any security now or hereafter held by or for REA and provided by the
Borrower, or by anyone on Borrower's behalf, in respect of liabilities of REA
hereunder shall be held in trust for the Lenders as security for the liabilities
of REA hereunder.
Section 32.14 Assignment. This guaranty is assignable by any Lender in
whole or in part in conjunction with any assignment of the Notes or portions
thereof, and any assignment hereof or any transfer or assignment of the Notes or
portions thereof by such Lender shall operate to vest in any such assignee the
rights and powers, in whole or in part, as appropriate, herein conferred upon
and granted to such Lender.
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IN WITNESS WHEREOF, each of the undersigned have caused this Agreement
to be executed by its duly authorized representatives as of the date first set
forth above.
AMERICAN REAL ESTATE INVESTMENT,
L.P., a Delaware limited partnership
By: American Real Estate Investment
Corporation, its general partner
By:/s/ Stephen J. Butte
Name: Stephen J. Butte
Title: Vice President
AMERICAN REAL ESTATE
INVESTMENT CORPORATION
By: /s/ Stephen J. Butte
Name: Stephen J. Butte
Title: Vice President
BANKBOSTON, N.A., individually and as
Agent
By: /s/ Mark Basham
Name: Mark Basham
Title: Managing Director
DLJ CAPITAL FUNDING, INC.
By: /s/ Stephen P. Hickey
Name: Stephen P. Hickey
Title: Managing Director
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SCHEDULE 1
LENDERS AND COMMITMENTS
<TABLE>
<CAPTION>
Commitment
Commitment Percentage
------------ -----------
<S> <C> <C>
BankBoston, N.A. $75,000,000 50%
100 Federal Street
Boston, Massachusetts 02110
Attn: Real Estate Division
Eurodollar Lending Office:
Same as above
$75,000,000 50%
DLJ Capital Funding, Inc.
277 Park Avenue
New York, New York
Eurodollar Lending
Office:
</TABLE>
- --------------------
<PAGE>
SCHEDULE 2
EXAMPLE OF CALCULATION OF
DEBT SERVICE COVERAGE AMOUNT
<PAGE>
SCHEDULE 3
ELIGIBLE REAL ESTATE QUALIFICATION DOCUMENTS
With respect to any parcel of Real Estate of the Borrower, REA or a Guarantor
proposed to be included in the Collateral, each of the following:
(a) Security Documents. Such Security Documents relating to such
Real Estate as the Agent shall require, duly executed and delivered by the
respective parties thereto.
(b) Enforceability Opinion. The favorable legal opinion of counsel
to Borrower, REA or such Guarantor, from counsel reasonably acceptable to the
Agent and qualified to practice in the State in which such Real Estate is
located, addressed to the Lenders and the Agent covering the enforceability
of such Security Documents and such other matters as the Agent shall
reasonably request.
(c) Perfection of Liens. Evidence reasonably satisfactory to the
Agent that the Security Documents are effective to create in favor of the
Agent a legal, valid and enforceable first lien or security title and
security interest in such Real Estate and that all filings, recordings,
deliveries of instruments and other actions necessary or desirable to protect
and preserve such liens or security title or security interests have been
duly effected.
(d) Survey and Taxes. The Survey of such Real Estate, together with
the Surveyor Certification and evidence of payment of all real estate taxes,
assessments and municipal charges on such Real Estate which on the date of
determination are required to have been paid under Section 7.8.
(e) Title Insurance; Title Exception Documents. The Title Policy
covering such Real Estate, including all endorsements thereto, and together
with proof of payment of all fees and premiums for such policy, and true and
accurate copies of all documents listed as exceptions under such policy.
(f) UCC Certification. A certification from the Title Insurance
Company or counsel satisfactory to the Agent that a search of the appropriate
public records disclosed no conditional sales contracts, security agreements,
chattel mortgages, leases of personalty, financing statements or title
retention agreements which affect any property, rights or interests of the
Borrower, REA or such Guarantor that are or are intended to be subject to the
security interest, security title, assignments, and mortgage liens created by
the Security Documents relating to such Real Estate except to the extent that
the same are discharged and removed prior to or simultaneously with the
inclusion of the Real Estate in the Collateral.
(g) Management Agreement. A true copy of the Management Agreement,
if any, relating to such Real Estate.
<PAGE>
Schedule 3
Page 2
(h) Leases. True copies of all Leases relating to such Real Estate
together with Lease Summaries for all such Leases if available, and a Rent
Roll for such Real Estate certified by the Borrower or Guarantor as accurate
and complete as of a recent date.
(i) Lease Form. The form of Lease to be used by the Borrower, REA or
such Guarantor in connection with future leasing of such Mortgaged Property.
(j) Subordination Agreements. A Subordination, Attornment and
Non-Disturbance Agreement from each tenant of such Real Estate as required by
the Agent.
(k) Estoppel Certificates. Estoppel certificates from (i) tenants
occupying at least seventy five percent (75%) of the Net Rentable Area of
such Real Estate in the aggregate and (ii) each tenant of Real Estate which
occupies 10,000 square feet or more of such Real Estate or fifteen percent
(15%) or more of the Net Rentable Area of such Real Estate, and the Borrower
shall use reasonable efforts to obtain estoppel certificates from all other
tenants of such Real Estate as such certificates to be dated not more than
sixty (60) days prior to the inclusion of such Real Estate in the Collateral,
each such estoppel certificate to be in form and substance satisfactory to
the Agent.
(l) Certificates of Insurance. Each of (i) a current certificate of
insurance as to the insurance maintained by the Borrower, REA or such
Guarantor on such Real Estate (including flood insurance if necessary) from
the insurer or an independent insurance broker dated as of the date of
determination, identifying insurers, types of insurance, insurance limits,
and policy terms; (ii) certified copies of all policies evidencing such
insurance (or certificates therefor signed by the insurer or an agent
authorized to bind the insurer); and (iii) such further information and
certificates from the Borrower, REA or such Guarantor, its insurers and
insurance brokers as the Agent may reasonably request, all of which shall be
in compliance with the requirements of this Agreement.
(m) Hazardous Substance Assessments. A hazardous waste site
assessment report addressed to the Agent (or the subject of a reliance letter
addressed to, and in a form satisfactory to, the Agent) concerning Hazardous
Substances and asbestos on such Real Estate dated or updated not more than
three months prior to the inclusion of such Real Estate in the Collateral,
from the Environmental Engineer, such report to contain no qualifications
except those that are acceptable to the Majority Lenders in their sole
discretion and to otherwise be in form and substance satisfactory to the
Agent in its sole discretion.
(n) Certificate of Occupancy. A copy of the certificate(s) of
occupancy issued for such parcel of Real Estate permitting the use and
occupancy of the Building thereon (or, to the extent a certificate of
occupancy is not available in the jurisdiction in which such Real Estate is
located, an equivalent certificate or other evidence satisfactory to the
Agent) and evidence satisfactory to the Agent that any certificate(s) of
occupancy previously issued to a prior owner of such parcel of Real Estate is
not required to be reissued to the Borrower or Guarantor.
(o) Appraisal. An Appraisal of such Real Estate dated not more than
three months prior to the inclusion of such Real Estate in the Collateral.
<PAGE>
Schedule 3
Page 3
(p) Zoning and Land Use Compliance. Such evidence regarding zoning
and land use compliance as the Agent may require and approve in its
reasonable discretion.
(q) Construction Inspector Report and Capital Expenditure Budget. A
report or written confirmation from the Construction Inspector satisfactory
in form and content to the Majority Lenders, dated or updated not more than
three months prior to the inclusion of such Real Estate in the Collateral,
addressing such matters as the Majority Lenders may reasonably require,
including without limitation that the Construction Inspector has reviewed the
plans and specifications or other available materials for all Buildings on
the Real Estate, that the condition of the Buildings is good, that all
Buildings were constructed and completed in a good and workmanlike manner,
and that the Buildings satisfy all applicable building codes and regulations.
The capital expenditure budget for the Real Estate must show adequate
reserves or cash flow to cover capital expenditure needs of the Real Estate.
(r) Permit and Legal Compliance Assurances. Evidence satisfactory to
the Agent that all activities being conducted on such Real Estate which
require federal, state or local licenses or permits have been duly licensed
and that such licenses or permits are in full force and effect, and that the
Real Estate, the Buildings and the use and occupancy thereof are in
compliance with all applicable federal, state or local laws, ordinances or
regulations (including, without limitation, the Americans with Disabilities
Act, and any laws of the State in which such Real Estate is located regarding
disability requirements).
(s) Operating Statements. Operating statements for such Real Estate
in the form of such statements delivered to the Lenders under Section 7.4(c)
covering each of the four fiscal quarters ending immediately prior to the
addition of such Real Estate to the Collateral, to the extent available.
(t) Doing Business Opinion. An opinion, dated the date of the
inclusion of such Real Estate in the Collateral, of legal counsel to the
Borrower, REA or such Guarantor reasonably acceptable to the Agent and
qualified to practice in the State in which such Real Estate is located to
the effect that neither the Agent nor any Lender shall be required to qualify
to do business in such State or any political subdivision thereof or to
become liable to pay any taxes in such State or any political subdivision
thereof solely on account of the receipt of the lien or security title on
such Real Estate securing the Obligation.
(u) Additional Documents. Such other agreements, documents,
certificates, reports or assurances as the Agent may reasonably require.
<PAGE>
SCHEDULE 6.3
List of all Encumbrances on REA Assets
Properties Owned as of December 31, 1997
<TABLE>
<CAPTION> 12/31/97
Balance
Property Entity Type Outstanding Lender
-------- ------ ---- ----------- ------
<S> <C> <C> <C> <C>
40 Potash MBP/BRE, LLC Mortgage Debt $24,565,878 Nomura Asset Capital Corporation
1655 Valley Rd. Mortgage Debt
1600 Route 208 Mortgage Debt
1500 Pollitt FLIP/BRE, Inc. Mortgage Debt 12,590,822 Nomura Asset Capital Corporation
1900 Pollitt Mortgage Debt
1701 Pollitt Mortgage Debt
1905 Nevins Mortgage Debt
95 Bauer OIP/BRE, LLC Mortgage Debt 1,464, 073 Normura Asset Capital Corporation
99 Bauer Mortgage Debt
5 Thornton NJA/BRE, LLC Mortgage Debt 6,289,424 Nomura Asset Capital Corporation
100 Oak Hill REA Mortgage Debt 1,155,000 First Union National Bank
One Tabas The Borrower Mortgage Debt 2,871, 871 Equitable of Iowa
Two Tabas Mortgage Debt 4,373,672 Equitable of Iowa
1305 Goshen Mortgage Debt 3,351,564 Equitable of Iowa
1057 Arnold McBride Properties Mortgage Debt 3,500,000 Column Financial
("McBride")
Quadrangles Village American Quadrangles Mortgage Debt 16,251,000 HUD
Apartments Partners, L.P.
Americana Virginia Mortgage Debt 10,088,000(a) GECC
Lakewood ----------
Apartments
December 31, 1997 $86,501,304
-----------
-----------
</TABLE>
<PAGE>
Schedule 6.3
Page 2
Properties Acquired Since December 31, 1997
<TABLE>
<CAPTION>
12/31/97
Balance
Property Entity Type Outstanding Lender
-------- ------ ---- ----------- ------
<S> <C> <C> <C> <C>
1 Philips Drive McBride $7,487,741 Column Financial
101 Commerce Drive American Sedona 16,972.214 Column Financial
Partners, L.P.
Steelway Boulevard Virginia 8,430,000 Column Financial
</TABLE>
Ground Lease Obligations
<TABLE>
<CAPTION>
12/31/97
Balance
Property Entity Type Outstanding Lender
-------- ------- ---- ----------- ------
<S> <C> <C> <C> <C>
1057 Arnold McBride Ground Lease $2,662,236(b) Column Financial
1091 Arnold McBride Ground Lease 1,586,187(c)
</TABLE>
Other
- -- $10,000,000 promissory note payable between REA and the Borrower. Note is
secured by REA's units of partnership interest in the Borrower.
- -- The 88 Mary Street Property is subject to a ground lease which requires an
annual payment by RROP, L.L.C. of $1.00. This property is subleased to a
tenant until July 1, 2004. This tenant has the right to purchase the
building at lease expiration for $10.00.
(a) Property was sold in January 1998.
(b) Amount represents the cumulative annual payments to be made over the
remaining lease term which will terminate in May 2029.
(c) Amount represents the cumulative annual payments to be made over the
remaining lease term which will terminate in June 2031.
<PAGE>
SCHEDULE 6.4
REA's Report On Form 10-K For The Year Ended December 31, 1997
<PAGE>
SCHEDULE 6.7
PENDING LITIGATION
None
<PAGE>
SCHEDULE 6.15
List of Transactions with Affiliates and Subsidiaries
- -- Employment agreement, dated December 12, 1997, between Jeffrey E.
Kelter and REA
- -- Employment agreement, dated December 12, 1997, between David McBride
and REA
- -- Warrant agreement, dated December 12, 1997, between the Borrower and
Jeffrey E. Kelter
- -- Warrant agreement, dated December 12, 1997, between the Borrower and
Jeffrey E. Kelter
- -- Warrant agreement, dated December 12, 1997, between REA and Hudson Bay
Partners, L.P.
- -- Leases between various entities (which are affiliates of David McBride
and Timothy McBride), listed below, and various Subsidiaries of the
Borrower.
- McBride Energy, Inc. (1600 Route 208 building)
- McBride Corporate Real Estate, Inc. (Urban Farms Shopping Center)
- McBride Enterprises, Inc. (Urban Farms Shopping Center)
- -- Management and leasing agreement(s) to be dated March 31, 1998 between
American Real Estate Management Inc., REA, the Borrower and its
Subsidiaries.
- -- Promissory note between REA and the Borrower in the amount of
$10,000,000
- -- Management agreements between American Real Estate Management Inc. and
various limited partnerships in which Jeffrey E. Kelter has an ownership
interest, as shown below:
- Management agreement between Widener Associates Limited
Partnership and FKB Management, Inc. dated July 18, 1991 as
amended on July 1, 1997
- Management and leasing agreement dated as of August 18, 1997
between 21 Roadway, L.P., and Penn Square Properties, Inc.
- -- Commission arrangements with McBride Corporate Real Estate, Inc. related
to certain leases at various properties which were acquired as a result
of the December 12, 1997 transactions.
<PAGE>
SCHEDULE 6.24(k)
PENDING CONDEMNATION/EMINENT DOMAIN
2400 Gettysburg Road, Lower Allen Township, PA, possible 20 foot road widening
to enhance access to the property and not affecting any improvements thereon.
<PAGE>
SCHEDULE 6.24(l)
TENANT IMPROVEMENTS
<TABLE>
<S> <C> <C> <C> <C>
1. Tyson Gettysburg Road lights $11,700
2. Delmar Publishing 3 Columbia Circle paint and carpet every
four years, not to exceed
$13,000 (next work -
8/13/20)
3 Nextel/Homestead 8 Airline Drive tenant fit-out
$75,000
</TABLE>
<PAGE>
SCHEDULE 6.24(l)
LEASE COMMISSION OBLIGATIONS
<TABLE>
<S> <C> <C> <C> <C>
1. Kiddie Academy 13 Columbia Circle 5/1/99 $14,906.55
5/1/01 $20,625.00
2. NY-NJ Milk Market-office 1 Columbia Circle 5/1/96-4/2002 $ 6,304.26 annually
3. NY-NJ Milk Market-storage 1 Columbia Circle 11/1/98 $ 101.88
11/1/99 $ 103.92
11/1/00 $ 106.00
11/1/01 $ 108.12
5/1/02 $ 55.14
4. Atlantic-Pacific Automotive 2404 Gettysburg Road 6/1/98-5/31/01 $ 16,174.68 annually
5. Purina Mills, Inc. 2410 Gettysburg Road 2/1/98-1/31/01 $ 6,552.00 annually
6. FDA Packaging AIP Dive 4/1/98-3/31/02 $ 13,500.00 annually
7. T.P.D.C. Inc. (Tyson) AIP Dive 3/15/98-2/28/01 $ 8,809.52 annually
8. DAS Distributors, Inc. AIP Dive 1/1/99-12/31/00 $ 6,769.22 annually
9. Reese Products AIP Dive 10/1/98-1/1/01 $ 4,620.00 annually
</TABLE>
<PAGE>
SCHEDULE 6.26
OWNERSHIP
Subsidiaries of the Borrower
<TABLE>
<CAPTION>
Form and Jurisdiction Ownership
Name of Organization Percentage
- ---- --------------------- ----------
<S> <C> <C>
Virginia Colorado limited partnership 69.9% limited partner interest and
30% general partner interest
American Emerald Partners, Delaware limited partnership 99% limited partner interest
L.P.
American Timberleaf Partners, Delaware limited partnership 99% limited partner interest
L.P.
American Quadrangles Partners, L.P. Delaware limited partnership 99% limited partner interest
American Sedona Partners, Colorado limited partnership 99% limited partner interest
L.P.
RROP, L.L.C. New Jersey limited liability Company 99.9% member interest
McBride New Jersey general partnership 99.9% general partner interest
New Jersey Associates New Jersey general partnership 99.9% general partner interest
UFSC,L.L.C New Jersey limited liability Company 99.9% general partner interest
</TABLE>
Subsidiaries of REA
<TABLE>
<CAPTION>
Form and Jurisdiction Ownership
Name of Organization Percentage
- ---- --------------------- ----------
<S> <C> <C>
American Emerald Corp. Delaware corporation 100%
American Timberleaf Corp. Delaware corporation 100%
</TABLE>
<PAGE>
SCHEDULE 6.26
Page 2
<TABLE>
<CAPTION>
Form and Jurisdiction Ownership
Name of Organization Percentage
- ---- --------------------- ----------
<S> <C> <C>
American Quadrangles Corp. Delaware corporation 100%
American Sedona Corporation Colorado corporation 100%
FLIP/BRE II, INC. New Jersey corporation 100%
REA/SPC II, INC. New Jersey corporation 100%
Avalanche Investment Corporation Maryland corporation 100%
Subsidiaries of McBride
</TABLE>
<TABLE>
<CAPTION>
Form and Jurisdiction Ownership
Name of Organization Percentage
- ---- --------------------- ----------
<S> <C> <C>
MBP/BRE, L.L.C. New Jersey limited liability company 99% member interest
</TABLE>
Subsidiaries of Virginia
None
Limited Partners of the Borrower
John Blumberg
Rosalind Davidowitz
Mariano DeCola
Floyd Hall
Hord Hardin III
JKP Family Associates
David Jones
Lervo Investments, L.L.C.
James Marshall
Houston McCollough
<PAGE>
Andrew Mulvihill
Gail Mulvihill
Gene Mulvihill, Jr.
Heather Mulvihill
James Mulvihill
Barbara Zucker Zarrett
Evan Zucker
Jeffrey E. Kelter
McBride Hudson Bay, L.P.
Washington Avenue Ventures, Inc.
Rotterdam Ventures, Inc.
Eastwick Development Corporation
Equinox Equities, Inc.
Donald LeDuke
Michael Bette
Joseph Nicolla
Kevin Bette
Eugene Sneeringer Jr.
Peter Bette
Mathew Bette
Christopher Bette
Mark Bette
SWF, L.P.
Guilderland Ventures, inc.
Northeastern Industrial Park Inc.
<PAGE>
Schedule 6.27
AGREEMENTS RELATED TO INDEBTEDNESS
Pomissory Note dated January 8, 1998 between American Sedona Partners, L.P.,
American Real Estate Investment Corporation and Column Financial, Inc. in the
principal amount of $17,000,000
Dana Perfumes Mortgage Note dated September 11, 1997 by Fair Lawn Industrial
Park, Inc. and First Union National Bank in the principal amount of $1,155,000
L&W Promissory Note dated August 4, 1995 between L&W Associates and USG
Annuity & Life Company in the principal sum of $3,525,000
Northfield Business Center Promissory Note dated December 24, 1997 between
McBride and Column Financial, Inc. in the principal amount of $3,500,000
One Tabas Promissory Note dated August 9, 1995 between Hough-Loew Associates,
Inc. and USG Annuity & Life Company in the principal amount of $3,025,000
Phillips Promissory Note dated January 5, 1998 between McBride and Column
Financial, Inc. in the amount of $7,500,000
Two Tabas Promissory Note dated August 9, 1995 between Hough-Loew Associates,
Inc. and USG Annuity & Life Company in the principal amount of $4,600,000
Loan Agreement dated September 23, 1997 by and between FLOP/BRE, Inc.
OIP/BRE, L.L.C., MBP/BRE, L.L.C., and NJA/BRE, L.L.C. and Nomura Asset
Capital Corporation
GATX Promissory Note dated April 1, 1998 between the Borrower and Column
Financial, Inc. in the amount of $8,430,000.
Loan Agreement dated as of May 1, 1993 between The Industrial Development
Authority of the City of Tempe, Arizona and Quadrangles I Limited Partnership.
(i) Modification of Deed of Trust, Note and Deed of Trust dated May 14, 1993.
(ii) Modification Agreement dated December 1, 1994.
(iii) Assignment of the Loan Agreement, the Arbitrage Regulation Agreement
and the Amended Restated Regulatory Agreement as to Tax Exemption
dated December 2, 1994.
Loan Agreement dated as of February 18, 1993 between the Independent Order of
Foresters and Columbia Executive & Associates in the principal amount of
$5,300,000.
Loan Agreement dated as of August 7, 1995 between M&T Trust Company and
Columbia Executive II Associates in the principal amount of $5,200,000.
<PAGE>
Schedule 6.27
Page 2
Loan Agreement dated as of July 31, 1996 between M&T Real Estate, Inc. and
Columbia Executive VII Associates in the principal amount of $1,600,000.
Loan Agreement dated as of October 31, 1994 between M&T Trust Company and
Columbia Executive IV Associates in the principal amount of $7,250,000.
<PAGE>
Schedule 7.17
OWNERSHIP OF REAL ESTATE BY SUBSIDIARIES
<TABLE>
<CAPTION>
Subsidiaries of the Borrower Real Estate Assets
- ---------------------------- ------------------
<S> <C>
Virginia Street Associates Limited Partnership 1001 Airpark Drive
1011 Airpark Drive
4472 Steelway Boulevard
4580 Steelway Boulevard
American Sedona Partners, L.P. 101 Commerce Drive
American Quadrangles Partners, L.P. Quadrangles Apartments
RROP, L.L.C. 88 Mary Street
McBride Properties 1057 Arnold Road
1091 Arnold Road
1 Phillips Drive
2400 Gettysburg Road
2404 Gettysburg Road
2410 Gettysburg Road
New Jersey Associates 2 Volvo Drive
128 Bauer Drive
22-08 Route 208
UFSC, L.L.C Urban Farms Shopping Center
OIP/BRE, L.L.C. 95 Bauer Drive
99 Bauer Drive
MBP/BRE, L.L.C. 40 Potash Road
1655 Valley Road
1600 Route 208
NJA/BRE, L.L.C. 5 Thornton
Subsidiaries of REA
FLIP/BRE II, Inc. 1500 Pollitt Drive
1701 Pollitt Drive
1900 Pollitt Drive
1905 Nevins Road
</TABLE>
<PAGE>
Schedule 8.1
EXISTING NON-RECOURSE INDEBTEDNESS
<TABLE>
<CAPTION>
March 31, 1998
Lender Outstanding Amount Entity Ownership Collateral
------ ------------------ ---------------- ----------
<S> <C> <C> <C>
Nomura Asset Capital Corporation $24,483,136 MBP/BRE, LLC 40 Potash Road
1655 Valley Road
1600 Route 208
Nomura Asset Capital Corporation 12,548,416 FLIP/BRE II, Inc. 1500 Pollitt Drive
1900 Pollitt Drive
1701 Pollitt Drive
1905 Nevins Road
Nomura Asset Capital Corporation 1,459,141 OIP/BRE, LLC 95 Bauer Drive
99 Bauer Drive
Nomura Asset Capital Corporation 6,268,240 NJA/BRE, LLC 5 Thornton Road
First Union 1,155,000 REA 100 Oak Hill Road
Equitable of Iowa 2,859,768 REA One Tabas Lane
Equitable of Iowa 4,355,730 REA Two Tabas Lane
Equitable of Iowa 3,337,814 REA 1305 Goshen Parkway
Column Financial 3,500,000 McBride 1057 Arnold Road
HUD 16,199,000 American Quadrangles Partners, Quadrangles Village
Limited Partnership Apartments
Column Financial 7,487,741 McBride 1 Philips Drive
Column Financial 16,972,214 American Sedona Partners, Limited 101 Commerce Drive
Partnership
Industrial Order of Forresters 5,060,984 The Borrower 1 Columbia Circle
Manufacturers and Traders Trust Company 5,034,191 The Borrower 3 Columbia Circle
Manufacturers and Traders Trust Company 1,566,124 The Borrower 13 Columbia Circle
Manufacturers and Traders Trust Company 6,837,720 The Borrower 15 Columbia Circle
Column Financial 8,430,000 Virginia Street Associates Limited 4472 Steelway Boulevard
</TABLE>
<PAGE>
Schedule 8.1
Page 2
Partnership 4580 Steelway Boulevard
<PAGE>
EXHIBITS AND SCHEDULES
<TABLE>
<S> <C>
EXHIBIT A ASSIGNMENT OF LEASES AND RENTS
EXHIBIT B UNCONDITIONAL GUARANTY OF PAYMENT AND PERFORMANCE
EXHIBIT C INDEMNITY AGREEMENT REGARDING HAZARDOUS MATERIALS
EXHIBIT D MORTGAGE AND SECURITY AGREEMENT
EXHIBIT E SUBORDINATION, ATTORNMENT AND NON-DISTURBANCE AGREEMENT
EXHIBIT F FORM OF NOTE
EXHIBIT G FORM OF REQUEST FOR LOAN
EXHIBIT H FORM OF COMPLIANCE CERTIFICATE
EXHIBIT I FORM LEASE
EXHIBIT J OPINION
SCHEDULE 1 LENDERS AND COMMITMENTS
SCHEDULE 2 EXAMPLES OF CALCULATION OF DEBT SERVICE
OVERAGE AMOUNT
SCHEDULE 3 ELIGIBLE REAL ESTATE QUALIFICATION DOCUMENTS
SCHEDULE 6.3 LIST OF ALL EMCUMBRANCES ON REA ASSETS
SCHEDULE 6.4 REA'S REPORT ON FORM 10-K FOR THE YEAR ENDED DECEMBER 31, 1997
SCHEDULE 6.7 PENDING LITIGATION
SCHEDULE 6.15 LIST OF TRANSACTIONS WITH AFFILIATES AND SUBSIDIARIES
SCHEDULE 6.24(k) PENDING CONDEMNATION/EMINENT DOMAIN
SCHDULE 6.24(l) TENANT IMPROVEMENTS; LEASING COMMISSION OBLIGATIONS
</TABLE>
<PAGE>
<TABLE>
<S> <C>
SCHEDULE 6.26 OWNERSHIP
SCHEDULE 6.27 AGREEMENTS RELATED TO INDEBTEDNESS
SCHEDULE 7.17 OWNERSHIP OF REAL ESTATE BY SUBSIDIARIES
SCHEDULE 8.1 EXISTING NON-RECOURSE INDEBTEDNESS
</TABLE>
<PAGE>
Exhibit 10-5
REGISTRATION RIGHTS AGREEMENT
THIS REGISTRATION RIGHTS AGREEMENT (this "Agreement") is made
and entered into as of July 9, 1998 by and between American Real Estate
Investment Corporation, a Maryland corporation (the "Company"), and the holders
of shares of common stock listed on Schedule A attached hereto including their
respective successors, assigns and transferees (herein referred to individually
as a "Holder" and collectively as the "Holders").
WHEREAS, on the date hereof, each Holder is receiving such
number of shares of common stock, par value $.001 per share (the "Common
Stock"), of the Company set forth opposite such Holder's name on Schedule A
attached hereto (the "Registrable Securities");
WHEREAS, in connection therewith, the Company has agreed to
grant to Holders the Registration Rights (as defined in Section 1 hereof);
NOW, THEREFORE, the parties hereto, in consideration of the
foregoing, the mutual covenants and agreements hereinafter set forth, and other
good and valuable consideration, the receipt and sufficiency of which hereby are
acknowledged, hereby agree as follows:
Section 1. Registration Rights
Each Holder shall be entitled to offer for sale from time to
time pursuant to a shelf registration statement the Registrable Securities,
subject to the terms and conditions set forth herein (the "Registration
Rights").
1.1 Registration Rights.
(a) Registration Procedure. The Company will cause to
be filed with the Securities and Exchange Commission (the "SEC") within
ten (10) days of the date of this Agreement a shelf registration
statement and related prospectus, including any preliminary prospectus
and documents incorporated by reference (the "Shelf Registration
Statement") that complies as to form in all material respects with
applicable SEC rules providing for the sale by each of the Holders of
such Holder's Registrable Securities, and agrees (subject to Section
1.2 hereof) to use its commercially reasonable best efforts to cause
such Shelf Registration Statement to be declared effective by the SEC
as soon as practicable thereafter. Each Holder agrees to provide in a
timely manner information regarding the proposed distribution by such
Holder of the Registrable Securities and such other information
reasonably requested by the Company in connection with the preparation
of and for inclusion in the Shelf Registration Statement. The Company
agrees (subject to Section 1.2 hereof) to use its commercially
reasonable best efforts to keep the Registration Statement effective
and free of material misstatements or omissions (including the
preparation and filing of any amendments and supplements necessary for
that purpose) until the earlier of (i) the first date on which all
Holders have consummated the sale of all of such Holders' Registrable
Securities registered under the Shelf Registration Statement, (ii) the
date on which all of the Registrable Securities are eligible for sale
pursuant to Rule 144(k) (or any successor provision) or in a single
transaction pursuant to Rule 144(e) (or any successor provision) under
the Securities Act of 1933, as amended (the "Securities Act") or (iii)
the second anniversary of the date of this
<PAGE>
Agreement. The Company agrees to provide to each Holder a reasonable
number of copies of the final Shelf Registration Statement and the
related prospectus (including any preliminary prospectus) and any
amendments or supplements thereto. The Company further agrees that it
will use commercially reasonable efforts to obtain the withdrawal of
any order suspending the effectiveness of the Shelf Registration
Statement at the earliest possible moment.
(b) Offers and Sales. All offers and sales by each
Holder under the Shelf Registration Statement referred to in this
Section 1.1, if any, shall be completed within the period during which
the Registration Statement is required to remain effective pursuant to
Section 1.1(a), and, upon expiration of such period, no Holder will
offer or sell any Registrable Securities under the Registration
Statement. If directed by the Company, each Holder will return all
undistributed copies of the Prospectus in its possession upon the
expiration of such period. Each Holder shall promptly, but in any event
no later than two (2) business days after a sale by such Holder of
Registrable Securities, notify the Company of any sale or other
transfer by such Holder of Registrable Securities and include in such
notice the number of Registrable securities sold or transferred by
Holder.
(c) Limitations. Each Holder agrees not to offer,
sell, offer or contract to sell, transfer, assign, grant any option for
the sale of, pledge or encumber, or otherwise convey any shares of
Common Stock until the first business day after the first anniversary
of this Agreement.
1.2 Suspension of Offering.
(a) If the Company determines in its good faith
judgment that the filing of the Shelf Registration Statement under
Section 1.1 hereof or the use of any prospectus would materially
impede, delay or interfere with any pending material financing,
acquisition or corporate reorganization or other material corporate
development involving the Company or any of its subsidiaries, or
require the disclosure of important information which the Company has a
material business purpose for preserving as confidential or the
disclosure of which would materially impede the Company's ability to
consummate a significant transaction, upon written notice of such
determination by the Company, the rights of each Holder to offer, sell
or distribute any Registrable Securities pursuant to the Shelf
Registration Statement or to require the Company to take action with
respect to the registration or sale of any Registrable Securities
pursuant to the Shelf Registration Statement (including any action
contemplated by Section 1.1 hereof) will be suspended until the date
upon which the Company notifies the Holders in writing that suspension
of such rights for the grounds set forth in this Section 1.2(a) is no
longer necessary, but, in any event, no such period shall extend for
longer than 45 days; provided the Company may deliver only two such
notices in any twelve month period.
(b) In the case of the registration of any
underwritten public offering proposed by the Company (other than any
registration by the Company on Form S-8, or a successor or
substantially similar form, of (A) an employee stock option, stock
purchase or compensation plan or of securities issued or issuable
pursuant to any such plan or (B) a dividend reinvestment plan), each
Holder agrees, if requested in writing by the managing underwriter or
underwriters administering such offering, not to effect any
underwritten offering for the resale of Registrable Securities (or any
option or right to acquire Registrable Securities) during the period
commencing on the 7th day prior to the expected effective date of the
registration statement covering such underwritten public offering or
the date on which the proposed offering is expected to commence (which
date shall be stated in such notice) and ending on the date specified
by such managing underwriter in such
2
<PAGE>
written request to such Holder, which date shall not be later than 45
days after such expected date of effectiveness or the commencement of
the offering, as the case may be.
1.3 Expenses. The Company shall pay all expenses incident to
the performance by it of its registration obligations under this Section 1,
including (i) all stock exchange, SEC and state securities registration, listing
and filing fees, (ii) all expenses incurred in connection with the preparation,
printing and distributing of the Shelf Registration Statement and prospectus
(including all expenses incurred in connection with the delivery to any Holder
of such number of copies of any prospectus as such Holder may reasonably
request), and (iii) fees and disbursements of counsel for the Company and of the
independent public accountants of the Company. Each Holder shall be responsible
for the payment of any brokerage and sales commissions, fees and disbursements
of such Holder's counsel, and any transfer taxes relating to the sale or
disposition of the Registrable Securities by such Holder.
1.4 Qualification. The Company agrees to use its commercially
reasonable efforts to register or qualify the Registrable Securities by the time
the Shelf Registration Statement is declared effective by the SEC under all
applicable state securities or "blue sky" laws of such jurisdictions as any
Holder shall reasonably request in writing, to keep each such registration or
qualification effective during the period the Shelf Registration Statement is
required to be kept effective, and to do any and all other acts and things which
may be reasonably necessary or advisable to enable each Holder to consummate the
disposition in each such jurisdiction of the Registrable Securities owned by
such Holder; provided, however, that the Company shall not be required to (x)
qualify generally to do business in any jurisdiction or to register as a broker
or dealer in such jurisdiction where it would not otherwise be required to
qualify but for this Section 1.4, (y) subject itself to taxation in any such
jurisdiction, or (z) submit to the general service of process in any such
jurisdiction.
1.5 Notices to Holders. Subject to Section 1.1(a) hereof,
during the period that the Company is required to keep the Shelf Registration
Statement effective, the Company will advise the Holders within a reasonable
time (i) when the prospectus or any prospectus supplement or post-effective
amendment thereto has been filed, and when the same has become effective, (ii)
of any request by the SEC for any amendments to, or issuance by the SEC of any
stop order with respect to the Shelf Registration Statement or any prospectus or
amendment thereto, or (iii) that an amendment or supplement to the most recent
Prospectus or prospectus supplement, as the case may be, is necessary in order
to make the statements therein, in the light of the circumstances under which
they were made, not misleading.
1.6 Listing. The Company agrees to use its reasonable efforts
to cause all Registrable Securities to be listed on any securities exchange on
which similar securities issued by the Company are listed.
Section 2. Indemnification
2.1 Indemnification by the Company. The Company agrees to
indemnify and hold harmless each Holder and each person, if any, who controls
any Holder within the meaning of Section 15 of the Securities Act or Section 20
of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), as
follows:
(a) against any and all loss, liability, claim,
damage and expense whatsoever, as incurred, arising out of or based
upon any untrue statement or alleged untrue statement of a material
fact contained in any registration statement (or any amendment thereto)
pursuant to which
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<PAGE>
the Registrable Securities were registered under the Securities Act,
including all documents incorporated therein by reference, or the
omission or alleged omission therefrom of a material fact required to
be stated therein or necessary to make the statements therein not
misleading or arising out of or based upon any untrue statement or
alleged untrue statement of a material fact contained in any
prospectus (or any amendment or supplement thereto), including all
documents incorporated therein by reference, or the omission or
alleged omission therefrom of a material fact necessary in order to
make the statements therein, in the light of the circumstances under
which they were made, not misleading;
(b) against any and all loss, liability, claim,
damage and expense whatsoever, as incurred, to the extent of the
aggregate amount paid in settlement of any litigation, or investigation
or proceeding by any governmental agency or body, commenced or
threatened, or of any claim whatsoever based upon any such untrue
statement or omission, or any such alleged untrue statement or
omission, if such settlement is effected with the written consent of
the Company, which consent shall not be unreasonably withheld; and
(c) against any and all expense whatsoever, as
incurred (including reasonable fees and disbursements of counsel),
reasonably incurred in investigating, preparing or defending against
any litigation, or investigation or proceeding by any governmental
agency or body, commenced or threatened, in each case whether or not a
party, or any claim whatsoever based upon any such untrue statement or
omission, or any such alleged untrue statement or omission, to the
extent that any such expense is not paid under subparagraph (a) or (b)
above;
provided, however, that the indemnity provided pursuant to this Section 2.1 does
not apply to any Holder with respect to any loss, liability, claim, damage or
expense to the extent arising out of (i) any untrue statement or omission or
alleged untrue statement or omission made in reliance upon and in conformity
with written information furnished to the Company by or on behalf of such Holder
expressly for use in the Shelf Registration Statement (or any amendment thereto)
or the related prospectus (or any amendment or supplement thereto), or (ii) such
Holder's failure to deliver an amended or supplemental Prospectus (provided such
Holder was notified in writing pursuant to Section 1.5, or otherwise, of the
need for an amended or supplemental Prospectus) if such loss, liability, claim,
damage or expense would not have arisen had such delivery occurred.
2.2 Indemnification by Holder. Each Holder (on a several and
not joint basis) agrees to indemnify and hold harmless the Company, and each of
its directors and officers (including each director and officer of the Company
who signed a Registration Statement), and each person, if any, who controls the
Company within the meaning of Section 15 of the Securities Act or Section 20 of
the Exchange Act, as follows:
(a) against any and all loss, liability, claim,
damage and expense whatsoever, as incurred, arising out of or based
upon any untrue statement or alleged untrue statement of a material
fact contained in any registration statement (or any amendment thereto)
pursuant to which the Registrable Securities were registered under the
Securities Act, including all documents incorporated therein by
reference, or the omission or alleged omission therefrom of a material
fact required to be stated therein or necessary to make the statements
therein not misleading or arising out of or based upon any untrue
statement or alleged untrue statement of a material fact contained in
any prospectus (or any amendment or supplement thereto), including all
documents incorporated therein by reference, or the omission or alleged
omission therefrom of a material fact necessary in
3
<PAGE>
order to make the statements therein, in the light of the
circumstances under which they were made, not misleading;
(b) against any and all loss, liability, claim,
damage and expense whatsoever, as incurred, to the extent of the
aggregate amount paid in settlement of any litigation, or investigation
or proceeding by any governmental agency or body, commenced or
threatened, or of any claim whatsoever based upon any such untrue
statement or omission, or any such alleged untrue statement or
omission, if such settlement is effected with the written consent of
Holder, which consent shall not be unreasonably withheld; and
(c) against any and all expense whatsoever, as
incurred (including reasonable fees and disbursements of counsel),
reasonably incurred in investigating, preparing or defending against
any litigation, or investigation or proceeding by any governmental
agency or body, commenced or threatened, in each case whether or not a
party, or any claim whatsoever based upon any such untrue statement or
omission, or any such alleged untrue statement or omission, to the
extent that any such expense is not paid under subparagraph (a) or (b)
above;
provided, however, that the indemnity provided pursuant to this Section 2.2
shall only apply with respect to any loss, liability, claim, damage or expense
to the extent arising out of (i) any untrue statement or omission or alleged
untrue statement or omission made in reliance upon and in conformity with
written information furnished to the Company by or on behalf of such Holder
expressly for use in the Registration Statement (or any amendment thereto) or
the related prospectus (or any amendment or supplement thereto), or (ii) such
Holder's failure to deliver an amended or supplemental prospectus (provided such
Holder was notified in writing pursuant to Section 1.5, or otherwise, of the
need for an amended or supplemental Prospectus) if such loss, liability, claim,
damage or expense would not have arisen had such delivery occurred.
Notwithstanding the provisions of this Section 2.2, no Holder shall be required
to indemnify the Company, its officers, directors or control persons with
respect to any amount in excess of the amount of the total proceeds to such
Holder from sales of the Registrable Securities of such Holder under the Shelf
Registration Statement (after deducting the amounts already paid to the Company
by such Holder or any person, if any, who controls such Holder pursuant to this
Section 2.2), and no Holder shall be liable under this Section 2.2 for any
statements or omissions of any other Holder.
2.3 Conduct of Indemnification Proceedings. The indemnified
party shall give reasonably prompt notice to the indemnifying party of any
action or proceeding commenced against it in respect of which indemnity may be
sought hereunder, but failure to so notify the indemnifying party (i) shall not
relieve it from any liability which it may have under the indemnity agreement
provided in Section 2.1 or 2.2 above, unless and to the extent it did not
otherwise learn of such action and the lack of notice by the indemnified party
results in the forfeiture by the indemnifying party of substantial rights or
defenses, and (ii) shall not, in any event, relieve the indemnifying party from
any obligations to the indemnified party other than the indemnification
obligation provided under Section 2.1 or 2.2 above. If the indemnifying party so
elects within a reasonable time after receipt of such notice, the indemnifying
party may assume the defense of such action or proceeding at such indemnifying
party's own expense with counsel chosen by the indemnifying party and approved
by the indemnified party, which approval shall not be unreasonably withheld;
provided, however, that the indemnifying party will not settle any such action
or proceeding without the written consent of the indemnified party unless, as a
condition to such settlement, the indemnifying party secures the unconditional
release of the indemnified party; and provided further, that if the indemnified
party reasonably determines that a conflict of interest exists where it is
advisable for the indemnified party to be represented by separate counsel or
that, upon advice of counsel, there may be legal
4
<PAGE>
defenses available to it which are different from or in addition to those
available to the indemnifying party, then the indemnifying party shall not be
entitled to assume such defense and the indemnified party shall be entitled to
separate counsel at the indemnifying party's expense. If the indemnifying party
is not entitled to assume the defense of such action or proceeding as a result
of the proviso to the preceding sentence, the indemnifying party's counsel shall
be entitled to conduct the indemnifying party's defense and counsel for the
indemnified party shall be entitled to conduct the defense of the indemnified
party, it being understood that both such counsel will cooperate with each other
to conduct the defense of such action or proceeding as efficiently as possible.
If the indemnifying party (i) is not so entitled to assume the defense of such
action, (ii) does not assume such defense, after having received the notice
referred to in the first sentence of this paragraph, or (iii) fails to employ
counsel that is reasonably satisfactory to the indemnified party, after having
received the notice referred to in the first sentence of this paragraph, the
indemnifying party will pay the reasonable fees and expenses of counsel for the
indemnified party. In such event, however, the indemnifying party will not be
liable for any settlement effected without the written consent of the
indemnifying party, which consent shall not be unreasonably withheld. If an
indemnifying party is entitled to assume, and assumes, the defense of such
action or proceeding in accordance with this paragraph, the indemnifying party
shall not be liable for any fees and expenses of counsel for the indemnified
party incurred thereafter in connection with such action or proceeding.
2.4 Contribution. In order to provide for just and equitable
contribution in circumstances in which the indemnity agreement provided for in
this Section 2 is for any reason held to be unenforceable by the indemnified
party although applicable in accordance with its terms, the Company and the
applicable Holder shall contribute to the aggregate losses, liabilities, claims,
damages and expenses of the nature contemplated by such indemnity agreement
incurred by the Company and such Holder, (i) in such proportion as is
appropriate to reflect the relative fault of the Company on the one hand and
such Holder on the other hand, in connection with the statements or omissions
which resulted in such losses, claims, damages, liabilities or expenses, or (ii)
if the allocation provided by clause (i) above is not permitted by applicable
law, in such proportion as is appropriate to reflect not only the relative fault
of but also the relative benefits to the Company on the one hand and such Holder
on the other hand, from the purchase and sale of the Registrable Securities, in
connection with the statements or omissions which resulted in such losses,
claims, damages, liabilities or expenses, as well as any other relevant
equitable considerations. The relative benefits to the indemnifying party and
indemnified party shall be determined by reference to, among other things, the
total proceeds received by the indemnifying party and indemnified party in
connection with the offering to which such losses, claims, damages, liabilities
or expenses relate. The relative fault of the indemnifying party and indemnified
party shall be determined by reference to, among other things, whether the
action in question, including any untrue or alleged untrue statement of a
material fact or omission or alleged omission to state a material fact, has been
made by, or relates to information supplied by, the indemnifying party or the
indemnified party, and the parties' relative intent, knowledge, access to
information and opportunity to correct or prevent such action. The obligations
of each Holder under this Section 2.4 are several and not joint.
The parties hereto agree that it would not be just or
equitable if contribution pursuant to this Section 2.4 were determined by pro
rata allocation or by any other method of allocation which does not take account
of the equitable considerations referred to in the immediately preceding
paragraph. Notwithstanding the provisions of this Section 2.4, no Holder shall
be required to contribute any amount in excess of the amount of the total
proceeds to that Holder from sales of the Registrable Securities of such Holder
under the Shelf Registration Statement.
Notwithstanding the foregoing, no person guilty of fraudulent
misrepresentation (within the
5
<PAGE>
meaning of Section 11(f) of the Securities Act) shall be entitled to
contribution from any person who was not guilty of such fraudulent
misrepresentation. For purposes of this Section 2.4, each person, if any, who
controls any Holder within the meaning of Section 15 of the Securities Act shall
have the same rights to contribution as such Holder, and each director of the
Company, each officer of the Company who signed a registration statement and
each person, if any, who controls the Company within the meaning of Section 15
of the Securities Act shall have the same rights to contribution as the Company.
Section 3. Rule 144 Compliance
The Company covenants that it will file the reports required
to be filed by the Company under the Securities Act and the Exchange Act so as
to enable each Holder to sell Registrable Securities, pursuant to Rule 144 under
the Securities Act. In connection with any sale, transfer or other disposition
by any Holder of any Registrable Securities pursuant to Rule 144 under the
Securities Act, the Company shall cooperate with such Holder to facilitate the
timely preparation and delivery of certificates representing Registrable
Securities to be sold and not bearing any Securities Act legend, and enable
certificates for such Registrable Securities to be for such number of shares and
registered in such names as such Holder may reasonably request at least five (5)
business days prior to any sale of Registrable Securities hereunder.
Section 4. Miscellaneous
4.1 Integration; Amendment. This Agreement constitutes the
entire agreement among the parties hereto with respect to the matters set forth
herein and supersedes and renders of no force and effect all prior oral or
written agreements, commitments and understandings among the parties with
respect to the matters set forth herein. Except as otherwise expressly provided
in this Agreement, no amendment, modification or discharge of this Agreement
shall be valid or binding unless set forth in writing and duly executed by the
Company and the applicable Holder.
4.2 Waivers. No waiver by a party hereto shall be effective
unless made in a written instrument duly executed by the party against whom such
waiver is sought to be enforced, and only to the extent set forth in such
instrument. Neither the waiver by any of the parties hereto of a breach or a
default under any of the provisions of this Agreement, nor the failure of any of
the parties, on one or more occasions, to enforce any of the provisions of this
Agreement or to exercise any right or privilege hereunder shall thereafter be
construed as a waiver of any subsequent breach or default of a similar nature,
or as a waiver of any such provisions, rights or privileges hereunder.
4.3 Assignment. This Agreement shall inure to the benefit of
and be binding on the successors, assigns and transferees of each of the
parties, including, without limitation and without the need for an express
assignment, subsequent Holders. If any successor, assignee or transferee of any
Holder shall acquire Registrable Securities, in any manner, whether by operation
of law or otherwise, such Registrable Securities shall be held subject to all of
the terms of this Agreement, and by taking and holding Registrable Securities
such Person shall be conclusively deemed to have agreed to be bound by all of
the terms and provisions hereof.
4.4 Notices. All notices, payments, demands or other
communications given hereunder shall be deemed to have been duly given and
received (i) upon personal delivery, (ii) in the case of notices sent within,
and for delivery within, the United States, as of the date shown on the return
receipt after mailing by registered or certified mail, return receipt requested,
postage prepaid, or (iii) the second succeeding business day after deposit with
Federal Express or other equivalent air courier delivery service,
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<PAGE>
unless the notice is held or retained by the customs service, in which case the
date shall be the fifth succeeding business day after such deposit.
4.5 Specific Performance. The parties hereto acknowledge that
the obligations undertaken by them hereunder are unique and that there would be
no adequate remedy at law if any party fails to perform any of its obligations
hereunder, and accordingly agree that each party, in addition to any other
remedy to which it may be entitled at law or in equity, shall be entitled to (i)
compel specific performance of the obligations, covenants and agreements of any
other party under this Agreement in accordance with the terms and conditions of
this Agreement and (ii) obtain preliminary injunctive relief to secure specific
performance and to prevent a breach or contemplated breach of this Agreement in
any court of the United States or any State thereof having jurisdiction.
4.6 Governing Law. This Agreement, the rights and obligations
of the parties hereto, and any claims or disputes relating thereto, shall be
governed by and construed in accordance with the laws of the State of New York,
without giving effect to the choice of law rules thereof. The parties agree that
all disputes between any of them arising out of, connected with, related to, or
incidental to the relationship established between them in connection with this
Agreement, and whether arising in law or in equity or otherwise, shall be
resolved by the federal or state courts located in New York, New York. Nothing
herein shall affect the right of any party to serve process in any other manner
permitted by law or to commence legal proceedings or otherwise proceed against
the other in any other jurisdiction. In addition, each of the parties hereto
consents to submit to the personal jurisdiction of any federal or state court
located in the state of New York in the event that any dispute arises out of
this Agreement. The parties, for themselves and their respective affiliates,
hereby irrevocably waive all right to a trial by jury in any action, proceeding
or counterclaim (whether based on contract, tort or otherwise) arising out of or
relating to the actions of the parties or their respective affiliates pursuant
to this Agreement in the negotiation, administration, performance or enforcement
thereof.
4.7 Headings. Section and subsection headings contained in
this Agreement are inserted for convenience of reference only, shall not be
deemed to be a part of this Agreement for any purpose, and shall not in any way
define or affect the meaning, construction or scope of any of the provisions
hereof.
4.8 Pronouns. All pronouns and any variations thereof shall be
deemed to refer to the masculine, feminine, neuter, singular or plural, as the
identity of the person or entity may require.
4.9 Execution in Counterparts. To facilitate execution, this
Agreement may be executed in as many counterparts as may be required. It shall
not be necessary that the signature of or on behalf of each party appears on
each counterpart, but it shall be sufficient that the signature of or on behalf
of each party appears on one or more of the counterparts. All counterparts shall
collectively constitute a single agreement. It shall not be necessary in any
proof of this Agreement to produce or account for more than a number of
counterparts containing the respective signatures of or on behalf of all of the
parties hereto.
4.10 Severability. If fulfillment of any provision of this
Agreement, at the time such fulfillment shall be due, shall transcend the limit
of validity prescribed by law, then the obligation to be fulfilled shall be
reduced to the limit of such validity; and if any clause or provision contained
in this Agreement operates or would operate to invalidate this Agreement, in
whole or in part, then such clause or provision only shall be held ineffective,
as though not herein contained, and the remainder of this
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<PAGE>
Agreement shall remain operative and in full force and effect.
IN WITNESS WHEREOF, each of the parties hereto has caused this
Agreement to be duly executed on its behalf as of the date first hereinabove set
forth.
COMPANY:
Address: AMERICAN REAL ESTATE INVESTMENT
Plymouth Meeting Executive Campus CORPORATION
620 W. Germantown Pike, Suite 200
Plymouth Meeting, PA 19462
By: /s/Stephen J. Butte
--------------------------------
Name: Stephen J. Butte
Title:Vice President
HOLDERS:
Address: CRA REAL ESTATE SECURITIES, L.P.,
259 Radnor Chestor Road, Suite 205 as attorney-in-fact for
Radnor, PA 19087 each of its clients set forth
in Schedule A
By: CRA Real Estate Securities, Inc.,
its general partner
By: /s/ T. Ritson Ferguson
--------------------------------
Name: T. Ritson Ferguson
Title: President
8
<PAGE>
SCHEDULE A
<TABLE>
<CAPTION>
Number of Shares
Name and Address of Common Stock
- ---------------- ----------------
<S> <C>
Bellsouth Corp. 34,051
IBM Retirement Fund 20,000
PA State Employees Retirement System 23,000
TRW Investment Mgt 25,000
c/o CRA Real Estate Securities
259 Radnor Chestor Road, Suite 205
Radnor, PA 19087
</TABLE>
<PAGE>
Exhibit 10-6
REGISTRATION RIGHTS AGREEMENT
THIS REGISTRATION RIGHTS AGREEMENT (this "Agreement") is made
and entered into as of July 9, 1998 by and between American Real Estate
Investment Corporation, a Maryland corporation (the "Company"), and the holders
of shares of common stock listed on Schedule A attached hereto including their
respective successors, assigns and transferees (herein referred to individually
as a "Holder" and collectively as the "Holders").
WHEREAS, on the date hereof, each Holder is receiving such
number of shares of common stock, par value $.001 per share (the "Common
Stock"), of the Company set forth opposite such Holder's name on Schedule A
attached hereto (the "Registrable Securities");
WHEREAS, in connection therewith, the Company has agreed to
grant to Holders the Registration Rights (as defined in Section 1 hereof);
NOW, THEREFORE, the parties hereto, in consideration of the
foregoing, the mutual covenants and agreements hereinafter set forth, and other
good and valuable consideration, the receipt and sufficiency of which hereby are
acknowledged, hereby agree as follows:
Section 1. Registration Rights
Each Holder shall be entitled to offer for sale from time to
time pursuant to a shelf registration statement the Registrable Securities,
subject to the terms and conditions set forth herein (the "Registration
Rights").
1.1 Registration Rights.
(a) Registration Procedure. The Company will cause to
be filed with the Securities and Exchange Commission (the "SEC") within
ten (10) days of the date of this Agreement a shelf registration
statement and related prospectus, including any preliminary prospectus
and documents incorporated by reference (the "Shelf Registration
Statement") that complies as to form in all material respects with
applicable SEC rules providing for the sale by each of the Holders of
such Holder's Registrable Securities, and agrees (subject to Section
1.2 hereof) to use its commercially reasonable best efforts to cause
such Shelf Registration Statement to be declared effective by the SEC
as soon as practicable thereafter. Each Holder agrees to provide in a
timely manner information regarding the proposed distribution by such
Holder of the Registrable Securities and such other information
reasonably requested by the Company in connection with the preparation
of and for inclusion in the Shelf Registration Statement. The Company
agrees (subject to Section 1.2 hereof) to use its commercially
reasonable best efforts to keep the Registration Statement effective
and free of material misstatements or omissions (including the
preparation and filing of any amendments and supplements necessary for
that purpose) until the earlier of (i) the first date on which all
Holders have consummated the sale of all of such Holders' Registrable
Securities registered under the Shelf Registration Statement, (ii) the
date on which all of the Registrable Securities are eligible for sale
pursuant to Rule 144(k) (or any successor provision) or in a single
transaction pursuant to Rule 144(e) (or any successor provision) under
the Securities Act of 1933, as amended (the "Securities Act") or (iii)
the second anniversary of the date of this
<PAGE>
Agreement. The Company agrees to provide to each Holder a reasonable
number of copies of the final Shelf Registration Statement and the
related prospectus (including any preliminary prospectus) and any
amendments or supplements thereto. The Company further agrees that it
will use commercially reasonable efforts to obtain the withdrawal of
any order suspending the effectiveness of the Shelf Registration
Statement at the earliest possible moment.
(b) Offers and Sales. All offers and sales by each
Holder under the Shelf Registration Statement referred to in this
Section 1.1, if any, shall be completed within the period during which
the Registration Statement is required to remain effective pursuant to
Section 1.1(a), and, upon expiration of such period, no Holder will
offer or sell any Registrable Securities under the Registration
Statement. If directed by the Company, each Holder will return all
undistributed copies of the Prospectus in its possession upon the
expiration of such period. Each Holder shall promptly, but in any event
no later than two (2) business days after a sale by such Holder of
Registrable Securities, notify the Company of any sale or other
transfer by such Holder of Registrable Securities and include in such
notice the number of Registrable securities sold or transferred by
Holder.
(c) Limitations. Each Holder agrees not to offer,
sell, offer or contract to sell, transfer, assign, grant any option for
the sale of, pledge or encumber, or otherwise convey any shares of
Common Stock until the first business day after the first anniversary
of this Agreement.
1.2 Suspension of Offering.
(a) If the Company determines in its good faith
judgment that the filing of the Shelf Registration Statement under
Section 1.1 hereof or the use of any prospectus would materially
impede, delay or interfere with any pending material financing,
acquisition or corporate reorganization or other material corporate
development involving the Company or any of its subsidiaries, or
require the disclosure of important information which the Company has a
material business purpose for preserving as confidential or the
disclosure of which would materially impede the Company's ability to
consummate a significant transaction, upon written notice of such
determination by the Company, the rights of each Holder to offer, sell
or distribute any Registrable Securities pursuant to the Shelf
Registration Statement or to require the Company to take action with
respect to the registration or sale of any Registrable Securities
pursuant to the Shelf Registration Statement (including any action
contemplated by Section 1.1 hereof) will be suspended until the date
upon which the Company notifies the Holders in writing that suspension
of such rights for the grounds set forth in this Section 1.2(a) is no
longer necessary, but, in any event, no such period shall extend for
longer than 45 days; provided the Company may deliver only two such
notices in any twelve month period.
(b) In the case of the registration of any
underwritten public offering proposed by the Company (other than any
registration by the Company on Form S-8, or a successor or
substantially similar form, of (A) an employee stock option, stock
purchase or compensation plan or of securities issued or issuable
pursuant to any such plan or (B) a dividend reinvestment plan), each
Holder agrees, if requested in writing by the managing underwriter or
underwriters administering such offering, not to effect any
underwritten offering for the resale of Registrable Securities (or any
option or right to acquire Registrable Securities) during the period
commencing on the 7th day prior to the expected effective date of the
registration statement covering such underwritten public offering or
the date on which the proposed offering is expected to commence (which
date shall be stated in such notice) and ending on the date specified
by such managing underwriter in such
2
<PAGE>
written request to such Holder, which date shall not be later than 45
days after such expected date of effectiveness or the commencement of
the offering, as the case may be.
1.3 Expenses. The Company shall pay all expenses incident to
the performance by it of its registration obligations under this Section 1,
including (i) all stock exchange, SEC and state securities registration, listing
and filing fees, (ii) all expenses incurred in connection with the preparation,
printing and distributing of the Shelf Registration Statement and prospectus
(including all expenses incurred in connection with the delivery to any Holder
of such number of copies of any prospectus as such Holder may reasonably
request), and (iii) fees and disbursements of counsel for the Company and of the
independent public accountants of the Company. Each Holder shall be responsible
for the payment of any brokerage and sales commissions, fees and disbursements
of such Holder's counsel, and any transfer taxes relating to the sale or
disposition of the Registrable Securities by such Holder.
1.4 Qualification. The Company agrees to use its commercially
reasonable efforts to register or qualify the Registrable Securities by the time
the Shelf Registration Statement is declared effective by the SEC under all
applicable state securities or "blue sky" laws of such jurisdictions as any
Holder shall reasonably request in writing, to keep each such registration or
qualification effective during the period the Shelf Registration Statement is
required to be kept effective, and to do any and all other acts and things which
may be reasonably necessary or advisable to enable each Holder to consummate the
disposition in each such jurisdiction of the Registrable Securities owned by
such Holder; provided, however, that the Company shall not be required to (x)
qualify generally to do business in any jurisdiction or to register as a broker
or dealer in such jurisdiction where it would not otherwise be required to
qualify but for this Section 1.4, (y) subject itself to taxation in any such
jurisdiction, or (z) submit to the general service of process in any such
jurisdiction.
1.5 Notices to Holders. Subject to Section 1.1(a) hereof,
during the period that the Company is required to keep the Shelf Registration
Statement effective, the Company will advise the Holders within a reasonable
time (i) when the prospectus or any prospectus supplement or post-effective
amendment thereto has been filed, and when the same has become effective, (ii)
of any request by the SEC for any amendments to, or issuance by the SEC of any
stop order with respect to the Shelf Registration Statement or any prospectus or
amendment thereto, or (iii) that an amendment or supplement to the most recent
Prospectus or prospectus supplement, as the case may be, is necessary in order
to make the statements therein, in the light of the circumstances under which
they were made, not misleading.
1.6 Listing. The Company agrees to use its reasonable efforts
to cause all Registrable Securities to be listed on any securities exchange on
which similar securities issued by the Company are listed.
Section 2. Indemnification
2.1 Indemnification by the Company. The Company agrees to
indemnify and hold harmless each Holder and each person, if any, who controls
any Holder within the meaning of Section 15 of the Securities Act or Section 20
of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), as
follows:
(a) against any and all loss, liability, claim,
damage and expense whatsoever, as incurred, arising out of or based
upon any untrue statement or alleged untrue statement of a material
fact contained in any registration statement (or any amendment thereto)
pursuant to which
3
<PAGE>
the Registrable Securities were registered under the Securities Act,
including all documents incorporated therein by reference, or the
omission or alleged omission therefrom of a material fact required to
be stated therein or necessary to make the statements therein not
misleading or arising out of or based upon any untrue statement or
alleged untrue statement of a material fact contained in any
prospectus (or any amendment or supplement thereto), including all
documents incorporated therein by reference, or the omission or
alleged omission therefrom of a material fact necessary in order to
make the statements therein, in the light of the circumstances under
which they were made, not misleading;
(b) against any and all loss, liability, claim,
damage and expense whatsoever, as incurred, to the extent of the
aggregate amount paid in settlement of any litigation, or investigation
or proceeding by any governmental agency or body, commenced or
threatened, or of any claim whatsoever based upon any such untrue
statement or omission, or any such alleged untrue statement or
omission, if such settlement is effected with the written consent of
the Company, which consent shall not be unreasonably withheld; and
(c) against any and all expense whatsoever, as
incurred (including reasonable fees and disbursements of counsel),
reasonably incurred in investigating, preparing or defending against
any litigation, or investigation or proceeding by any governmental
agency or body, commenced or threatened, in each case whether or not a
party, or any claim whatsoever based upon any such untrue statement or
omission, or any such alleged untrue statement or omission, to the
extent that any such expense is not paid under subparagraph (a) or (b)
above;
provided, however, that the indemnity provided pursuant to this Section 2.1 does
not apply to any Holder with respect to any loss, liability, claim, damage or
expense to the extent arising out of (i) any untrue statement or omission or
alleged untrue statement or omission made in reliance upon and in conformity
with written information furnished to the Company by or on behalf of such Holder
expressly for use in the Shelf Registration Statement (or any amendment thereto)
or the related prospectus (or any amendment or supplement thereto), or (ii) such
Holder's failure to deliver an amended or supplemental Prospectus (provided such
Holder was notified in writing pursuant to Section 1.5, or otherwise, of the
need for an amended or supplemental Prospectus) if such loss, liability, claim,
damage or expense would not have arisen had such delivery occurred.
2.2 Indemnification by Holder. Each Holder (on a several and
not joint basis) agrees to indemnify and hold harmless the Company, and each of
its directors and officers (including each director and officer of the Company
who signed a Registration Statement), and each person, if any, who controls the
Company within the meaning of Section 15 of the Securities Act or Section 20 of
the Exchange Act, as follows:
(a) against any and all loss, liability, claim,
damage and expense whatsoever, as incurred, arising out of or based
upon any untrue statement or alleged untrue statement of a material
fact contained in any registration statement (or any amendment thereto)
pursuant to which the Registrable Securities were registered under the
Securities Act, including all documents incorporated therein by
reference, or the omission or alleged omission therefrom of a material
fact required to be stated therein or necessary to make the statements
therein not misleading or arising out of or based upon any untrue
statement or alleged untrue statement of a material fact contained in
any prospectus (or any amendment or supplement thereto), including all
documents incorporated therein by reference, or the omission or alleged
omission therefrom of a material fact necessary in
4
<PAGE>
order to make the statements therein, in the light of the
circumstances under which they were made, not misleading;
(b) against any and all loss, liability, claim,
damage and expense whatsoever, as incurred, to the extent of the
aggregate amount paid in settlement of any litigation, or investigation
or proceeding by any governmental agency or body, commenced or
threatened, or of any claim whatsoever based upon any such untrue
statement or omission, or any such alleged untrue statement or
omission, if such settlement is effected with the written consent of
Holder, which consent shall not be unreasonably withheld; and
(c) against any and all expense whatsoever, as
incurred (including reasonable fees and disbursements of counsel),
reasonably incurred in investigating, preparing or defending against
any litigation, or investigation or proceeding by any governmental
agency or body, commenced or threatened, in each case whether or not a
party, or any claim whatsoever based upon any such untrue statement or
omission, or any such alleged untrue statement or omission, to the
extent that any such expense is not paid under subparagraph (a) or (b)
above;
provided, however, that the indemnity provided pursuant to this Section 2.2
shall only apply with respect to any loss, liability, claim, damage or expense
to the extent arising out of (i) any untrue statement or omission or alleged
untrue statement or omission made in reliance upon and in conformity with
written information furnished to the Company by or on behalf of such Holder
expressly for use in the Registration Statement (or any amendment thereto) or
the related prospectus (or any amendment or supplement thereto), or (ii) such
Holder's failure to deliver an amended or supplemental prospectus (provided such
Holder was notified in writing pursuant to Section 1.5, or otherwise, of the
need for an amended or supplemental Prospectus) if such loss, liability, claim,
damage or expense would not have arisen had such delivery occurred.
Notwithstanding the provisions of this Section 2.2, no Holder shall be required
to indemnify the Company, its officers, directors or control persons with
respect to any amount in excess of the amount of the total proceeds to such
Holder from sales of the Registrable Securities of such Holder under the Shelf
Registration Statement (after deducting the amounts already paid to the Company
by such Holder or any person, if any, who controls such Holder pursuant to this
Section 2.2), and no Holder shall be liable under this Section 2.2 for any
statements or omissions of any other Holder.
2.3 Conduct of Indemnification Proceedings. The indemnified
party shall give reasonably prompt notice to the indemnifying party of any
action or proceeding commenced against it in respect of which indemnity may be
sought hereunder, but failure to so notify the indemnifying party (i) shall not
relieve it from any liability which it may have under the indemnity agreement
provided in Section 2.1 or 2.2 above, unless and to the extent it did not
otherwise learn of such action and the lack of notice by the indemnified party
results in the forfeiture by the indemnifying party of substantial rights or
defenses, and (ii) shall not, in any event, relieve the indemnifying party from
any obligations to the indemnified party other than the indemnification
obligation provided under Section 2.1 or 2.2 above. If the indemnifying party so
elects within a reasonable time after receipt of such notice, the indemnifying
party may assume the defense of such action or proceeding at such indemnifying
party's own expense with counsel chosen by the indemnifying party and approved
by the indemnified party, which approval shall not be unreasonably withheld;
provided, however, that the indemnifying party will not settle any such action
or proceeding without the written consent of the indemnified party unless, as a
condition to such settlement, the indemnifying party secures the unconditional
release of the indemnified party; and provided further, that if the indemnified
party reasonably determines that a conflict of interest exists where it is
advisable for the indemnified party to be represented by separate counsel or
that, upon advice of counsel, there may be legal
5
<PAGE>
defenses available to it which are different from or in addition to those
available to the indemnifying party, then the indemnifying party shall not be
entitled to assume such defense and the indemnified party shall be entitled to
separate counsel at the indemnifying party's expense. If the indemnifying party
is not entitled to assume the defense of such action or proceeding as a result
of the proviso to the preceding sentence, the indemnifying party's counsel shall
be entitled to conduct the indemnifying party's defense and counsel for the
indemnified party shall be entitled to conduct the defense of the indemnified
party, it being understood that both such counsel will cooperate with each other
to conduct the defense of such action or proceeding as efficiently as possible.
If the indemnifying party (i) is not so entitled to assume the defense of such
action, (ii) does not assume such defense, after having received the notice
referred to in the first sentence of this paragraph, or (iii) fails to employ
counsel that is reasonably satisfactory to the indemnified party, after having
received the notice referred to in the first sentence of this paragraph, the
indemnifying party will pay the reasonable fees and expenses of counsel for the
indemnified party. In such event, however, the indemnifying party will not be
liable for any settlement effected without the written consent of the
indemnifying party, which consent shall not be unreasonably withheld. If an
indemnifying party is entitled to assume, and assumes, the defense of such
action or proceeding in accordance with this paragraph, the indemnifying party
shall not be liable for any fees and expenses of counsel for the indemnified
party incurred thereafter in connection with such action or proceeding.
2.4 Contribution. In order to provide for just and equitable
contribution in circumstances in which the indemnity agreement provided for in
this Section 2 is for any reason held to be unenforceable by the indemnified
party although applicable in accordance with its terms, the Company and the
applicable Holder shall contribute to the aggregate losses, liabilities, claims,
damages and expenses of the nature contemplated by such indemnity agreement
incurred by the Company and such Holder, (i) in such proportion as is
appropriate to reflect the relative fault of the Company on the one hand and
such Holder on the other hand, in connection with the statements or omissions
which resulted in such losses, claims, damages, liabilities or expenses, or (ii)
if the allocation provided by clause (i) above is not permitted by applicable
law, in such proportion as is appropriate to reflect not only the relative fault
of but also the relative benefits to the Company on the one hand and such Holder
on the other hand, from the purchase and sale of the Registrable Securities, in
connection with the statements or omissions which resulted in such losses,
claims, damages, liabilities or expenses, as well as any other relevant
equitable considerations. The relative benefits to the indemnifying party and
indemnified party shall be determined by reference to, among other things, the
total proceeds received by the indemnifying party and indemnified party in
connection with the offering to which such losses, claims, damages, liabilities
or expenses relate. The relative fault of the indemnifying party and indemnified
party shall be determined by reference to, among other things, whether the
action in question, including any untrue or alleged untrue statement of a
material fact or omission or alleged omission to state a material fact, has been
made by, or relates to information supplied by, the indemnifying party or the
indemnified party, and the parties' relative intent, knowledge, access to
information and opportunity to correct or prevent such action. The obligations
of each Holder under this Section 2.4 are several and not joint.
The parties hereto agree that it would not be just or
equitable if contribution pursuant to this Section 2.4 were determined by pro
rata allocation or by any other method of allocation which does not take account
of the equitable considerations referred to in the immediately preceding
paragraph. Notwithstanding the provisions of this Section 2.4, no Holder shall
be required to contribute any amount in excess of the amount of the total
proceeds to that Holder from sales of the Registrable Securities of such Holder
under the Shelf Registration Statement.
Notwithstanding the foregoing, no person guilty of fraudulent
misrepresentation (within the
6
<PAGE>
meaning of Section 11(f) of the Securities Act) shall be entitled to
contribution from any person who was not guilty of such fraudulent
misrepresentation. For purposes of this Section 2.4, each person, if any, who
controls any Holder within the meaning of Section 15 of the Securities Act shall
have the same rights to contribution as such Holder, and each director of the
Company, each officer of the Company who signed a registration statement and
each person, if any, who controls the Company within the meaning of Section 15
of the Securities Act shall have the same rights to contribution as the Company.
Section 3. Rule 144 Compliance
The Company covenants that it will file the reports required
to be filed by the Company under the Securities Act and the Exchange Act so as
to enable each Holder to sell Registrable Securities, pursuant to Rule 144 under
the Securities Act. In connection with any sale, transfer or other disposition
by any Holder of any Registrable Securities pursuant to Rule 144 under the
Securities Act, the Company shall cooperate with such Holder to facilitate the
timely preparation and delivery of certificates representing Registrable
Securities to be sold and not bearing any Securities Act legend, and enable
certificates for such Registrable Securities to be for such number of shares and
registered in such names as such Holder may reasonably request at least five (5)
business days prior to any sale of Registrable Securities hereunder.
Section 4. Miscellaneous
4.1 Integration; Amendment. This Agreement constitutes the
entire agreement among the parties hereto with respect to the matters set forth
herein and supersedes and renders of no force and effect all prior oral or
written agreements, commitments and understandings among the parties with
respect to the matters set forth herein. Except as otherwise expressly provided
in this Agreement, no amendment, modification or discharge of this Agreement
shall be valid or binding unless set forth in writing and duly executed by the
Company and the applicable Holder.
4.2 Waivers. No waiver by a party hereto shall be effective
unless made in a written instrument duly executed by the party against whom such
waiver is sought to be enforced, and only to the extent set forth in such
instrument. Neither the waiver by any of the parties hereto of a breach or a
default under any of the provisions of this Agreement, nor the failure of any of
the parties, on one or more occasions, to enforce any of the provisions of this
Agreement or to exercise any right or privilege hereunder shall thereafter be
construed as a waiver of any subsequent breach or default of a similar nature,
or as a waiver of any such provisions, rights or privileges hereunder.
4.3 Assignment. This Agreement shall inure to the benefit of
and be binding on the successors, assigns and transferees of each of the
parties, including, without limitation and without the need for an express
assignment, subsequent Holders. If any successor, assignee or transferee of any
Holder shall acquire Registrable Securities, in any manner, whether by operation
of law or otherwise, such Registrable Securities shall be held subject to all of
the terms of this Agreement, and by taking and holding Registrable Securities
such Person shall be conclusively deemed to have agreed to be bound by all of
the terms and provisions hereof.
4.4 Notices. All notices, payments, demands or other
communications given hereunder shall be deemed to have been duly given and
received (i) upon personal delivery, (ii) in the case of notices sent within,
and for delivery within, the United States, as of the date shown on the return
receipt after mailing by registered or certified mail, return receipt requested,
postage prepaid, or (iii) the second succeeding business day after deposit with
Federal Express or other equivalent air courier delivery service,
7
<PAGE>
unless the notice is held or retained by the customs service, in which case
the date shall be the fifth succeeding business day after such deposit.
4.5 Specific Performance. The parties hereto acknowledge that
the obligations undertaken by them hereunder are unique and that there would be
no adequate remedy at law if any party fails to perform any of its obligations
hereunder, and accordingly agree that each party, in addition to any other
remedy to which it may be entitled at law or in equity, shall be entitled to (i)
compel specific performance of the obligations, covenants and agreements of any
other party under this Agreement in accordance with the terms and conditions of
this Agreement and (ii) obtain preliminary injunctive relief to secure specific
performance and to prevent a breach or contemplated breach of this Agreement in
any court of the United States or any State thereof having jurisdiction.
4.6 Governing Law. This Agreement, the rights and obligations
of the parties hereto, and any claims or disputes relating thereto, shall be
governed by and construed in accordance with the laws of the State of New York,
without giving effect to the choice of law rules thereof. The parties agree that
all disputes between any of them arising out of, connected with, related to, or
incidental to the relationship established between them in connection with this
Agreement, and whether arising in law or in equity or otherwise, shall be
resolved by the federal or state courts located in New York, New York. Nothing
herein shall affect the right of any party to serve process in any other manner
permitted by law or to commence legal proceedings or otherwise proceed against
the other in any other jurisdiction. In addition, each of the parties hereto
consents to submit to the personal jurisdiction of any federal or state court
located in the state of New York in the event that any dispute arises out of
this Agreement. The parties, for themselves and their respective affiliates,
hereby irrevocably waive all right to a trial by jury in any action, proceeding
or counterclaim (whether based on contract, tort or otherwise) arising out of or
relating to the actions of the parties or their respective affiliates pursuant
to this Agreement in the negotiation, administration, performance or enforcement
thereof.
4.7 Headings. Section and subsection headings contained in
this Agreement are inserted for convenience of reference only, shall not be
deemed to be a part of this Agreement for any purpose, and shall not in any way
define or affect the meaning, construction or scope of any of the provisions
hereof.
4.8 Pronouns. All pronouns and any variations thereof shall be
deemed to refer to the masculine, feminine, neuter, singular or plural, as the
identity of the person or entity may require.
4.9 Execution in Counterparts. To facilitate execution, this
Agreement may be executed in as many counterparts as may be required. It shall
not be necessary that the signature of or on behalf of each party appears on
each counterpart, but it shall be sufficient that the signature of or on behalf
of each party appears on one or more of the counterparts. All counterparts shall
collectively constitute a single agreement. It shall not be necessary in any
proof of this Agreement to produce or account for more than a number of
counterparts containing the respective signatures of or on behalf of all of the
parties hereto.
4.10 Severability. If fulfillment of any provision of this
Agreement, at the time such fulfillment shall be due, shall transcend the limit
of validity prescribed by law, then the obligation to be fulfilled shall be
reduced to the limit of such validity; and if any clause or provision contained
in this Agreement operates or would operate to invalidate this Agreement, in
whole or in part, then such clause or provision only shall be held ineffective,
as though not herein contained, and the remainder of this
8
<PAGE>
Agreement shall remain operative and in full force and effect.
IN WITNESS WHEREOF, each of the parties hereto has caused this
Agreement to be duly executed on its behalf as of the date first hereinabove set
forth.
COMPANY:
Address: AMERICAN REAL ESTATE INVESTMENT
Plymouth Meeting Executive Campus CORPORATION
620 W. Germantown Pike, Suite 200
Plymouth Meeting, PA 19462
By:/s/ Stephen J. Butte
----------------------------------
Name: Stephen J. Butte
Title: Vice-President
HOLDERS:
Address: MORGAN STANLEY ASSET MANAGEMENT
1221 Avenue of the Americas INC., as attorney-in-fact for
New York, New York 10020 each of its clients set forth
Attn: Doug Funke in Schedule A
By:/s/ Ted Bigmann
----------------------------------
Name: Ted Bigmann
Title: Principal
9
<PAGE>
SCHEDULE A
<TABLE>
<CAPTION>
Number of Shares
Name and Address of Common Stock
- ---------------- ----------------
<S> <C>
Morgan Stanley Real Estate 44,320
Special Situations, Inc.
Morgan Stanley Real Estate Special Situations 17,013
Investors, L.P.
The Morgan Stanley Real Estate Special Situations 200,000
Fund I, L.P.
The Morgan Stanley Real Estate Special Situations 266,667
Fund II, L.P.
Stichting Bedrijfspensioenfonds Voor De 132,000
Metaalnijverheid
Stichting Pensioenfonds ABP 198,000
MS Special Funds Pte Ltd 132,000
c/o Morgan Stanley Asset Management
22nd Floor, Attn: Blair Kaplan
1221 Avenue of the Americas
New York, NY 10020
</TABLE>
10
<PAGE>
Exhibit 10-7
AMERICAN REAL ESTATE INVESTMENT CORPORATION,
a Maryland Corporation
SUBSCRIPTION DOCUMENTS
FOR
COMMON STOCK
American Real Estate Investment Corporation
Plymouth Meeting Executive Campus
620 W. Germantown Pike, Suite 200
Plymouth Meeting, Pennsylvania 19462
<PAGE>
AMERICAN REAL ESTATE INVESTMENT CORPORATION,
a Maryland Corporation
Instructions for Completion of Subscription Documents
To All Subscribers:
In connection with your subscription for shares (the "Shares") of
common stock, par value $.001 per share (the "Common Stock"), of American Real
Estate Investment Corporation, a Maryland corporation (the "Company"), enclosed
are the following documents, which must be properly and fully completed and
signed:
1. The SUBSCRIPTION AGREEMENT. Complete and sign.
2. INVESTOR INFORMATION SHEET, attached as EXHIBIT A. Complete.
3. ACCOUNT INFORMATION SHEET, attached as EXHIBIT B. Complete, if
applicable.
4. PURCHASER REPRESENTATIVE'S CERTIFICATE, attached as EXHIBIT C. Sign and
have your purchaser representative sign, if applicable.
5. ACCREDITED INVESTOR QUESTIONNAIRE, attached as EXHIBIT D. Complete and
sign.
NOTE TO CORPORATE, PARTNERSHIP AND TRUST SUBSCRIBERS:
(a) Corporations - Upon request of the Company, corporations will be
required to provide a copy and the filing date of the articles of incorporation
and a corporate resolution authorizing the investment in the Company and
evidence of the authority of the person(s) signing the subscription
documentation to do so.
(b) Partnerships - Upon request of the Company, partnerships will be
required to provide a copy of the agreement of partnership and any certificate
of partnership.
(c) Trusts - Upon request of the Company, trusts will be required to
provide a copy of the trust agreement showing the date of formation and evidence
of the authority of the persons(s) signing the subscription documentation to do
so.
PROPERLY COMPLETED SUBSCRIPTION DOCUMENTS MUST BE RECEIVED BY THE
COMPANY ON OR BEFORE JULY 7, 1998.
NO SUBSCRIPTION WILL BE BINDING ON THE COMPANY UNTIL ACCEPTED IN
WRITING BY THE COMPANY. THE COMPANY HAS RESERVED THE RIGHT TO
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REJECT ANY AND ALL SUBSCRIPTIONS IN ITS SOLE DISCRETION, WITH OR WITHOUT CAUSE
AT ANY TIME PRIOR TO THE CLOSING.
THE SHARES HAVE NOT BEEN REGISTERED OR QUALIFIED UNDER FEDERAL OR
STATE SECURITIES LAWS AND ARE BEING ISSUED IN RELIANCE UPON EXEMPTIONS FROM
SUCH REGISTRATION OR QUALIFICATION. ALL SECURITIES ISSUED WILL BE RESTRICTED
SECURITIES AND WILL NOT BE FREELY TRANSFERABLE. BECAUSE THE SECURITIES ARE
UNREGISTERED, ANY SECURITIES RECEIVED WILL BE SUBJECT TO RESTRICTIONS ON
TRANSFER, WHETHER BY SALE, GIFT, HYPOTHECATION OR OTHERWISE. EACH INVESTOR
SHOULD PROCEED ON THE ASSUMPTION THAT IT MUST BEAR THE ECONOMIC RISK OF THE
INVESTMENT FOR AN INDEFINITE PERIOD, SINCE THE SECURITIES MAY NOT BE RESOLD
UNLESS THEY ARE SUBSEQUENTLY REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED, OR AN EXEMPTION FROM SUCH REGISTRATION IS AVAILABLE. NO TRANSFERS
MAY BE MADE EXCEPT PURSUANT TO DUE REGISTRATION AND QUALIFICATION OR IN
ACCORDANCE WITH AVAILABLE EXEMPTIONS FROM REGISTRATION.
NO OFFER OR SALE OF SECURITIES IS MADE IN ANY JURISDICTION WHERE THE
OFFER OR SALE WOULD BE UNLAWFUL.
2
<PAGE>
American Real Estate Investment Corporation
Plymouth Meeting Executive Campus
620 W. Germantown Pike, Suite 200
Plymouth Meeting, Pennsylvania 19462
Attention: Stephen J. Butte, Vice President
Ladies and Gentlemen:
This Subscription Agreement (the "Agreement") is executed by the
undersigned in connection with the offer by American Real Estate Investment
Corporation, a Maryland corporation (the "Company"), to sell, and the
subscription by the undersigned to buy, shares (the "Shares") of common
stock, par value $.001 per share, of the Company (the "Common Stock").
Section 1.
1.1 Subscription. The undersigned hereby subscribes for the number
of Shares indicated on the counterpart signature page hereof at a price of
$16.50 per share of Common Stock (the "Purchase Price"). In respect of this
subscription, the undersigned herewith delivers to the Company (i) two
executed original signature pages of this Subscription Agreement, and (ii) a
fully completed Investor Information Sheet, Account Information Sheet, if
applicable, Purchaser Representative's Certificate, if applicable, and
Accredited Investor Questionnaire attached as Exhibits A, B, C and D,
respectively.
1.2 Closing. The purchase and sale of the Shares shall take place at
the offices of Rogers & Wells LLP, 200 Park Avenue, New York, New York, at
10:00 a.m., on July 9, 1998, subject to satisfaction of the conditions set
forth in Section 4 and Section 5, or at such other time and place as the
Company and the undersigned mutually agree (the "Closing"). At the Closing
the Company shall deliver to the undersigned a certificate representing the
Shares that the undersigned is purchasing, registered in such name or names
as the undersigned shall designate at least two (2) business days prior to
the date of the Closing, against payment of the Purchase Price thereof by
wire transfer in immediately available funds to an account designated by the
Company at least two (2) business days prior to the date of the Closing.
1.3 Purchase Price Adjustment. On the earlier of (i) the first
business day after the first anniversary of the Closing and (ii) the first
business day after a Liquidating Event (as defined below) has occurred (the
"Settlement Date"), the Purchase Price shall be adjusted as follows:
(a) If the Average Price (as defined below) is below $15.50
per share, the Company (or its successor) shall deliver to the undersigned on
the Settlement Date cash in an amount equal to (i) the difference between
$15.50 and the Average Price, multiplied by (ii) the number of Shares
purchased by the undersigned at the Closing.
(b) If the Average Price is above $19.50 per share, the
undersigned shall tender
1
<PAGE>
to the Company on the Settlement Date by delivery of a certificate, duly
endorsed for transfer in blank, for cancellation of that number of shares of
Common Stock equal to (i) the difference between the Average Price and
$19.50, divided by (ii) the Average Price, multiplied by (iii) the number of
Shares purchased by the undersigned at the Closing. The number of shares of
Common Stock to be tendered by the undersigned pursuant to this Section
1.3(b) shall be rounded to the nearest whole share. All such shares of Common
Stock tendered to the Company by the undersigned shall no longer be
outstanding and shall automatically be canceled and retired and shall revert
to the status of authorized but unissued stock, and the Company shall, if
necessary, deliver a replacement certificate representing the remaining
Shares owned by the undersigned.
(c) The "Average Price" shall be equal to the arithmetic
average of the "Sales Price" (as hereinafter defined) on each of the Trading
Days (as hereinafter defined) during the 30-day period preceding the
Settlement Date. The term "Sales Price" shall mean, on any Trading Day, the
closing price of a share of Common Stock on the American Stock Exchange or,
if the shares are no longer listed on the American Stock Exchange, such other
exchange or automated interdealer quotation system upon which the shares are
then listed or quoted, or, if not listed or quoted, the Sales Price on a
Trading Day shall be determined by independent directors of the Company
acting in good faith on the basis of such quotations and other information as
it considers, in its reasonable judgment, appropriate. The term "Trading Day"
shall mean any day on which securities are traded on the American Stock
Exchange or such other national securities exchange or automated interdealer
quotation system upon which the shares are then trading or quoted.
(d) A "Liquidating Event" shall occur if (i) the Company
sells all or substantially all of its assets and uses such proceeds solely
either to repay debt or other liabilities of the Company and/or to pay
dividends to the holders of Common Stock or (ii) the Company merges with and
into another entity where the Company is not the surviving corporation and
the surviving corporation (a) is listed on the New York Stock Exchange Inc.
or the American Stock Exchange Inc. or quoted on the National Association of
Securities Dealers Automated Quotation System ("NASDAQ") or the National
Market System of NASDAQ, and (b) has an outstanding float of publicly
available common equity in excess of $300 million (not counting for purposes
of determining the outstanding float of any company shares held by affiliates
of such company).
(e) The record date for any distribution with respect to a
Liquidating Event described in clause (i) of the definition thereof shall be
no earlier than the second business day following the date the Liquidating
Event occurred.
(f) Notwithstanding anything in clause 1.3(ii) to the
contrary, any agreement to merge the Company with and into another entity
where the Company is not the surviving corporation shall provide that for
purposes of the calculation of the amount of cash and/or the number of
securities to be distributed to holders of Common Stock, the undersigned
shall be deemed to hold the number of shares of Common Stock held by the
undersigned adjusted to give effect to Section 1.3(b) as though the
transactions contemplated therein had taken place prior to the closing of the
merger.
2
<PAGE>
Section 2.
2. Investor Representations and Warranties. The undersigned hereby
acknowledges, represents and warrants to, and agrees with, the Company as
follows:
2.1 Authorization. This Agreement constitutes a valid and legally
binding obligation on the part of the undersigned, enforceable in accordance
with its terms except as affected by (i) bankruptcy law, and (ii) equitable
principles. The undersigned represents that he, she or it has full power and
authority to enter into this Agreement.
2.2 No Advertisement or Solicitation. The undersigned acknowledges
that the offer and sale of the Shares to him, her or it has not been
accomplished by any form of general solicitation or general advertising,
including, but not limited to, (i) any advertisement, article, notice or
other communication published in any newspaper, magazine or similar media, or
broadcast over television or radio or (ii) any seminar or meeting whose
attendees have been invited by any general solicitation or general
advertising.
2.3 Restrictions on Transfer.
(a) The undersigned understands and acknowledges that the
Shares have not been registered under the Securities Act of 1933, as amended
(the "Securities Act"), or applicable state securities laws, by reason of a
specific exemption from the registration provisions thereof which exemption
depends upon, among other things, the bona fide nature of the investment
intent of the undersigned as expressed herein and the accuracy and
completeness of the other representations of the undersigned set forth herein.
(b) The undersigned understands and acknowledges that,
except as provided for by the Registration Rights Agreement attached hereto
as Exhibit E (the "Registration Rights Agreement"), none of the Shares have
been registered under the Securities Act or registered or qualified under the
securities laws of any state and none may be sold, transferred, assigned,
pledged or hypothecated (i) absent effective registration thereof under the
Securities Act and applicable state securities laws, or (ii) absent an
opinion of counsel, which opinion is satisfactory in form and substance to
the Company and its counsel, in their respective reasonable discretion, to
the effect that such registration is not required under the Securities Act or
such state securities laws or that such transaction complies with the rules
promulgated by the Securities and Exchange Commission (the "Commission")
under the Securities Act or such state securities laws or (iii) except in a
transaction in compliance with Rule 144 under the Securities Act. The
undersigned understands and acknowledges that he, she or it must bear the
economic risks of this investment resulting from such limitations.
(c) The undersigned is aware of the provisions of Rule 144
promulgated under the Securities Act, pursuant to which the undersigned may
be able to sell the Shares, subject to certain exceptions, one year after
they receive such Shares so long as certain current public
3
<PAGE>
information is available about the Company, the sale is through a broker in
an unsolicited "broker's transaction" and the undersigned does not sell, in
any three-month period, more than the greater of 1% of the outstanding Common
Stock or the average weekly trading volume of the Shares for the four-week
period preceding the sale. The undersigned generally will be able to sell the
Shares without regard to any volume or other limitations discussed above
beginning two years after they receive the Shares, unless they are affiliates
of the Company (i.e., a person controlling, controlled by or under common
control with the Company). Affiliates of the Company will continue to be
subject to the volume limitations on unregistered sales following the
expiration of the two-year period. The preceding description is a general
summary of the restrictions of Rule 144, and each of the undersigned should
consult with his, her or its own legal advisor to ensure compliance with all
of the requirements of applicable federal and state securities laws and
regulations. In this connection, the undersigned understands Rule 144 may or
may not be available for the resale of the Shares and the undersigned should
consult an attorney with regard to the availability of Rule 144. The Company
is subject to the reporting requirements under the Securities Exchange Act of
1934, as amended (the "Exchange Act"). Upon notice of issuance, the Shares
will be listed for trading on the American Stock Exchange. If not all of the
requirements of Rule 144 are met, registration under the Securities Act or
some other registration exemption will be required for any disposition of the
Shares. The undersigned understands that although Rule 144 is not exclusive,
the Commission has expressed its opinion that persons proposing to sell
restricted securities received in an offering other than a registered
offering or pursuant to Rule 144 will have a substantial burden of proof in
establishing that an exemption from registration is available for such offers
or sales that such persons and the brokers who participate in the
transactions do so at their own risk.
2.4 Disclosure of Information.The undersigned and/or the
undersigned's purchaser representative or personal advisor, as the case may
be:
(i) has been furnished with and has carefully read
and reviewed the Company's Annual Report on Form 10-KSB for its fiscal year
ended December 31, 1997, the Company's Quarterly Report on Form 10-Q for the
quarter ended March 31, 1998, the Company's Current Report on Form 8-K filed
January 23, 1998, the Company's Current Report on Form 8-K/A filed February
24, 1998, the Company's Current Report on Form 8-K filed April 10, 1998, the
Company's Current Report on Form 8-K filed May 15, 1998 and the Company's
Current Report on Form 8-K/A filed June 10, 1998, and has been afforded
access to all information necessary to evaluate the merits and risks of the
acquisition of the Shares, and has relied solely (except as indicated in
subsections (ii) and (iii) below) on such materials or documents.
(ii) has been provided an opportunity to obtain any
additional information requested concerning the Shares and the Company;
(iii) has been given the opportunity to ask questions
of, and receive answers from, the Company, or a person or persons acting on
the behalf of the Company, concerning the terms and conditions of this
Agreement and the Registration Rights Agreement and other matters pertaining
to this investment, and has been given the opportunity to obtain such
additional information necessary to verify the accuracy of the materials or
documents that were
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<PAGE>
provided in order for him, her or it to evaluate the merits and risks of an
investment in the Company to the extent the Company possesses such
information or can acquire it without unreasonable effort or expense, and has
not been furnished any other offering literature or prospectus on which they
are entitled to rely except as mentioned herein;
(iv) understands that the materials or documents
provided to the undersigned and/or the undersigned's purchaser representative
or personal advisor, as the case may be, have not been prepared by, and the
accuracy of such materials or documents have not been verified by, Donaldson,
Lufkin & Jenrette Securities Corporation ("DLJ") which is acting as placement
agent in connection with the purchase and sale of the Shares. DLJ makes no
representations or warranties with respect to the materials or documents
provided to the undersigned; and
(v) has determined that the Shares are a suitable
investment for him, her or it and that at this time he, she or it could bear
the economic risk of the investment.
2.5 Investment Experience. The undersigned represents that he, she
or it has such knowledge and experience in financial and business matters as
to be capable of evaluating alone, or together with his, her or its purchaser
representative or personal advisor the merits and risks of an investment in
the Shares and protecting his, her or its own interests in connection with
the investment and has obtained, in his, her or its judgment, alone, or
together with his, her or its purchaser representative or personal advisor
sufficient information from the Company to evaluate the merits and risks of
an investment in the Shares. The undersigned has not utilized any person as
his, her or its purchaser representative or professional advisor in
connection with evaluating such risks and merits or, if the undersigned has
utilized a person as his, her or its purchaser representative or personal
advisor to assist in evaluating the risks and merits of an investment, the
purchaser representative or personal advisor has executed the Purchaser
Representative's Certificate attached as Exhibit C to this Agreement. The
undersigned acknowledges that he, she or it has the financial ability to bear
the economic risk of his, her or its investment in the Company (including
his, her or its possible loss), has adequate means for providing for his, her
or its current needs and personal contingencies and has no need for liquidity
with respect to the investment in the Company. If other than an individual,
the undersigned also represents it has not been organized solely for the
purpose of acquiring the Shares.
2.6 Purchase Entirely for Own Account. This Agreement is made with
the undersigned in reliance upon his, her or its representation to the
Company, which by the undersigned's execution of this Agreement he, she or it
hereby confirms, that the Shares to be received by the undersigned and any
certificate which may be issuable in respect thereof (the "Certificate") will
be acquired for investment for the undersigned's own account, not as a
nominee or agent, and not with a view to the resale or distribution of any
part thereof, and that he, she or it has no present intention of selling,
granting any participation in, or otherwise distributing the same, except as
provided in the Registration Rights Agreement, or under an exemption from
registration available under the Securities Act and applicable state
securities laws.
2.7 Further Limitation on Disposition. Without in any way limiting
the representations
5
<PAGE>
set forth herein, the undersigned further agrees not to offer, sell, offer or
contract to sell, transfer, assign, grant any option for the sale of, pledge
or encumber, or otherwise convey any shares of Common Stock prior to the
Settlement Date.
2.8 Legends. In addition to the legend required by Section 6.2.9 of
the Company's Amended and Restated Articles of Incorporation, dated as of
December 12, 1997 and the statements required by Section 7.1 of the Company's
By-Laws, as amended on December 12, 1997, to the extent applicable, any
Certificate or other document issued in respect of any Shares shall be
endorsed with the legends set forth below, and the undersigned covenants
that, except to the extent such restrictions are waived by the Company, the
undersigned shall not transfer any Shares without complying with the
restrictions on transfer described in such legends:
(i) "THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN
REGISTERED UNDER THE UNITED STATES SECURITIES ACT OF 1933, AS AMENDED (THE
"SECURITIES ACT"), OR REGISTERED OR QUALIFIED UNDER THE SECURITIES LAWS OF
ANY STATE AND MAY NOT BE SOLD, TRANSFERRED, ASSIGNED, PLEDGED, OR
HYPOTHECATED (1) ABSENT AN EFFECTIVE REGISTRATION THEREOF UNDER SUCH ACT (2)
ABSENT AN OPINION OF COUNSEL, WHICH OPINION IS REASONABLY SATISFACTORY IN
FORM AND SUBSTANCE TO THE COMPANY AND ITS COUNSEL, TO THE EFFECT THAT SUCH
REGISTRATION IS NOT REQUIRED UNDER SAID ACT OR SUCH STATES OR THAT SUCH
TRANSACTION COMPLIES WITH THE RULES PROMULGATED BY THE SECURITIES AND
EXCHANGE COMMISSION UNDER SAID ACT OR SUCH STATES OR, (3) EXCEPT IN A
TRANSACTION IN COMPLIANCE WITH RULE 144 UNDER THE SECURITIES ACT."
(ii) THESE SECURITIES ARE SUBJECT TO ADJUSTMENT UNDER
THE TERMS AND CONDITIONS OF THAT CERTAIN SUBSCRIPTION AGREEMENT DATED AS OF
JULY 7, 1998, A COPY OF WHICH IS ON FILE AT THE PRINCIPAL OFFICES OF THE
COMPANY."
(iii) Any legend required by any applicable state
securities law.
Section 3.
3. Company Representations, Warranties and Covenants. The Company
hereby acknowledges, represents and warrants to, and agrees with, the
undersigned as follows:
3.1 Organization, Good Standing and Qualification. The Company 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 carry on its business as now conducted. The Company is duly
qualified to transact business and is in good standing in each jurisdiction
where the failure to so qualify would have a material adverse effect on its
business or properties.
6
<PAGE>
3.2 Authorization. All corporate action on the part of the Company,
its officers, directors and stockholders necessary for the adoption,
authorization, execution, filing (where applicable) and delivery of this
Agreement and the Registration Rights Agreement, the performance of all
obligations of the Company hereunder and thereunder, and the authorization,
issuance (or reservation for issuance), sale and delivery of the Common Stock
being sold hereunder has been taken or will be taken prior to the Closing.
This Agreement and the Registration Rights Agreement constitute valid and
legally binding obligations of the Company, enforceable in accordance with
their terms, except (i) as limited by applicable bankruptcy, insolvency,
reorganization, moratorium, and other laws of general application affecting
enforcement of creditors' rights generally, (ii) as limited by laws relating
to the availability of specific performance, injunctive relief, or other
equitable remedies, and (iii) to the extent the indemnification provisions
contained in the Registration Rights Agreement may be limited by applicable
federal or state securities laws.
3.3 Valid Issuance of Common Stock. The Common Stock that is being
purchased by the undersigned hereunder, when issued, sold and delivered in
accordance with the terms of this Agreement for the consideration expressed
herein, will be duly and validly issued, fully paid, and nonassessable, and,
based in part upon the representations of the undersigned in this Agreement,
will be issued in compliance with all applicable federal and state securities
laws. The issuance and sale of the Common Stock will not violate any
preemptive rights.
3.4 Disclosure. The Company has provided the undersigned with all
the information that the undersigned has requested for deciding whether to
purchase the Shares. Subject to Section 3.7, the written information and
certificates provided to the undersigned pursuant to this Agreement or the
Registration Rights Agreement are true and accurate in all material respects.
3.5 REIT Status. The Company, beginning with its taxable year ended
December 31, 1993 and through December 31, 1997 (i) has been subject to
taxation as a "real estate investment trust" (a "REIT") within the meaning of
the Internal Revenue Code of 1986, as amended (the "Code"), and has complied
with all requirements contained in the Code to qualify as a REIT for such
years, and (ii) has operated, and currently intends to continue to operate,
in such a manner as to qualify as a REIT for the tax year ending December 31,
1998 and thereafter.
3.6 Material Adverse Change. Since March 31, 1998 there has been no
material adverse change in the business, affairs, operations, properties,
assets or financial condition of the Company.
3.7 No Other Representations. The Company shall not be deemed to
have made to the undersigned any representation or warranty other than as
expressly made by the Company in Section 3 hereof. Without limiting the
generality of the foregoing, and notwithstanding any otherwise express
representations and warranties made by the Company, in this Section 3, the
Company makes no representation or warranty to the undersigned with respect
to any projections, estimates or budgets heretofore delivered to or made
available to the undersigned of future revenues, expenses or expenditures or
future results of operations.
7
<PAGE>
Section 4.
4. Conditions of Investors' Obligations at Closing. The obligations
of the undersigned under Section 1.2 of this Agreement are subject to the
fulfillment on or before the Closing of each of the following conditions:
4.1 Representations and Warranties. The representations and
warranties of the Company contained in Section 3 (other than those made as of
a specified date earlier than the date of Closing) shall be true and correct
in all material respects on and as of the date of the Closing with the same
effect as though such representation or warranty was made on and as of the
date of such Closing, and any representation or warranty made as of a
specified date earlier than the date of such Closing shall have been true and
correct in all material respects as of such earlier date.
4.2 Performance. The Company shall have performed and complied with,
in all material respects, all agreements, obligations and conditions
contained in this Agreement that are required to be performed or complied
with by it on or before the Closing.
4.3 Compliance Certificate. The President or a Vice President of the
Company shall deliver to the undersigned at the Closing a certificate
certifying that the conditions specified in Sections 4.1 and 4.2 have been
fulfilled.
4.4 Qualifications. All authorizations, approvals, or permits, if
any, of any governmental authority or regulatory body of the United States or
of any state that are required in connection with the lawful issuance and
sale of the Shares pursuant to this Agreement shall be duly obtained and
effective as of the Closing.
4.5 Opinion of Rogers & Wells LLP. The undersigned shall have
received from Rogers & Wells LLP, counsel for the Company, an opinion dated
as of the Closing, to the effect that the issuance of the Shares contemplated
by this Agreement is exempt from registration under the Securities Act.
4.6 Opinion of Piper & Marbury L.L.P.. The undersigned shall have
received from Piper & Marbury L.L.P., special Maryland counsel for the
Company, an opinion dated as of the Closing, to the effect that the Shares
when issued, sold and delivered in accordance with the terms of this
Agreement for the consideration expressed herein, have been duly authorized
and validly issued, are fully paid, and are nonassessable and that the
execution, delivery and performance by the Company of this Subscription
Agreement and the Registration Rights Agreement are within the Company's
corporate powers and have been duly authorized by all necessary corporate
action.
4.7 Registration Rights Agreement. The Company and the undersigned
shall have entered into the Registration Rights Agreement in the form
attached hereto as Exhibit E.
4.8 Stock Exchange Listing. The Shares shall have been approved for
listing on the
8
<PAGE>
American Stock Exchange.
4.9 Certificates. Certificates representing the number of shares of
Common Stock set forth on the counterpart signature page hereof and in such
name as the undersigned has designated pursuant to Section 1.2 hereof, shall
have been delivered to the undersigned.
Section 5.
5. Conditions of the Company's Obligations at Closing. The
obligations of the Company to the undersigned under this Agreement are
subject to the fulfillment on or before the Closing of each of the following
conditions by the undersigned:
5.1 Representations and Warranties. The representations and
warranties of the undersigned contained in Section 2 (other than those made
as of a specified date earlier than the date of Closing) shall be true and
correct in all material respects on and as of the date of the Closing with
the same effect as though such representation or warranty was made on and as
of the date of such Closing, and any representation or warranty made as of a
specified date earlier than the date of such Closing shall have been true and
correct in all material respects as of such earlier date.
5.2 Payment of Purchase Price. The undersigned shall have delivered
the Purchase Price.
5.3 Qualifications. All authorizations, approvals, or permits, if
any, of any governmental authority or regulatory body of the United States or
of any state that are required in connection with the lawful issuance and
sale of the Shares pursuant to this Agreement shall be duly obtained and
effective as of the Closing.
Section 6.
6.1 Modification. Neither this Agreement nor any provisions hereof
shall be waived, modified, discharged or terminated except by an instrument
in writing signed by the party against whom any waiver, change, discharge or
termination is sought.
6.2 Notices. All notices, payments, demands or other communications
given hereunder shall be deemed to have been duly given and received (i) upon
personal delivery, (ii) in the case of notices sent within, and for delivery
within, the United States, as of the date shown on the return receipt after
mailing by registered or certified mail, return receipt requested, postage
prepaid, or (iii) the second succeeding business day after deposit with
Federal Express or other equivalent air courier delivery service, unless the
notice is held or retained by the customs service, in which case the date
shall be the fifth succeeding business day after such deposit.
6.3 Binding Effect. Except as otherwise provided herein, this
Agreement shall be
9
<PAGE>
binding upon and inure to the benefit of the parties and their heirs,
executors, administrators, successors, legal representatives and permitted
assigns. If the undersigned is more than one person, the obligation of the
undersigned shall be joint and several and the agreements, representations,
warranties and acknowledgments herein contained shall be deemed to be made by
and be binding upon each such person and his heirs, executors, administrators
and successors.
6.4 Entire Agreement. This Agreement and all exhibits hereto
including, without limitation, the Investor Information Sheet, Account
Information Sheet, Purchaser Representative's Certificate, Accredited
Investor Questionnaire and Registration Rights Agreement, contain the entire
agreement of the parties with respect to this subscription, and there are no
representations, covenants or other agreements except as stated or referred
to herein or therein.
6.5 Assignability. This Agreement is not transferable or assignable
by the undersigned.
6.6 Applicable Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of New York applicable to
contracts made and to be performed entirely within such State without giving
effect to the conflict of law provisions thereof. The parties agree that all
disputes between any of them arising out of, connected with, related to, or
incidental to the relationship established between them in connection with
this Agreement or the Registration Rights Agreement, and whether arising in
law or in equity or otherwise, shall be resolved by the federal or state
courts located in New York, New York. Nothing herein shall affect the right
of any party to serve process in any manner permitted by law or to commence
legal proceedings or otherwise proceed against the other in any other
jurisdiction. In addition, each of the parties hereto consents to submit to
the personal jurisdiction of any federal or state court located in the state
of New York in the event that any dispute arises out of this Agreement or the
Registration Rights Agreement or any of the transactions contemplated hereby
or thereby. The parties, for themselves and their respective affiliates,
hereby irrevocably waive all right to a trial by jury in any action,
proceeding or counterclaim (whether based on contract, tort or otherwise)
arising out of or relating to the actions of the parties or their respective
affiliates pursuant to this Agreement in the negotiation, administration,
performance or enforcement thereof.
6.7 Gender. All pronouns contained herein and any variations thereof
shall be deemed to refer to the masculine, feminine or neuter, singular or
plural, as the identity of the parties hereto may require.
6.8 Counterparts. This Agreement may be executed through the use of
separate signature pages or in counterparts, and each of such counterparts
shall, for all purposes, constitute one agreement binding on the parties
hereto, notwithstanding that the parties hereto are not signatories to the
same counterpart.
6.9 Further Assurances. The undersigned will, from time to time,
execute and deliver to the Company all such other and further instruments and
documents and take or cause to be taken all such other and further action as
the Company may reasonably request in order to effect the transactions
contemplated by this Agreement.
10
<PAGE>
6.10 Expenses. Each party shall pay all costs and expenses which it
incurs in connection with the negotiation, execution, delivery and
performance of this Agreement.
<PAGE>
AMERICAN REAL ESTATE INVESTMENT CORPORATION
SUBSCRIPTION AGREEMENT
COUNTERPART SIGNATURE PAGE
The undersigned, desiring to enter into this Subscription Agreement for
the subscription of the number of Shares indicated below, hereby agrees to all
of the terms and provisions of this Subscription Agreement and agrees to be
bound by all such terms and provisions.
The undersigned has executed this Subscription Agreement as of the 7th
day of July, 1998.
No. of Shares being Subscribed: 34,051
BELL South Corp.
By: /s/ T. Ritson Ferguson
(Signature)
Name: T. Ritson Ferguson
(Print or Type)
Title: President
(Print or Type)
Agreed and Accepted this 7th day of July, 1998.
AMERICAN REAL ESTATE INVESTMENT CORPORATION,
a Maryland corporation
By:/s/ Jeffrey E. Kelter
Name: Jeffrey E. Kelter
Title:President
D-1
<PAGE>
AMERICAN REAL ESTATE INVESTMENT CORPORATION
SUBSCRIPTION AGREEMENT
COUNTERPART SIGNATURE PAGE
The undersigned, desiring to enter into this Subscription Agreement for
the subscription of the number of Shares indicated below, hereby agrees to all
of the terms and provisions of this Subscription Agreement and agrees to be
bound by all such terms and provisions.
The undersigned has executed this Subscription Agreement as of the 7th
day of July, 1998.
No. of Shares being Subscribed: 20,000
IBM Retirement Fund
By: /s/ T. Ritson Ferguson
(Signature)
Name: T. Ritson Ferguson
(Print or Type)
Title: President
(Print or Type)
Agreed and Accepted this 7th day of July, 1998.
AMERICAN REAL ESTATE INVESTMENT CORPORATION,
a Maryland corporation
By:/s/ Jeffrey E. Kelter
Name: Jeffrey E. Kelter
Title:President
D-2
<PAGE>
AMERICAN REAL ESTATE INVESTMENT CORPORATION
SUBSCRIPTION AGREEMENT
COUNTERPART SIGNATURE PAGE
The undersigned, desiring to enter into this Subscription Agreement for
the subscription of the number of Shares indicated below, hereby agrees to all
of the terms and provisions of this Subscription Agreement and agrees to be
bound by all such terms and provisions.
The undersigned has executed this Subscription Agreement as of the 7th
day of July, 1998.
No. of Shares being Subscribed: 23,000
PA State Employees Retirement System
By: /s/ T. Ritson Ferguson
(Signature)
Name: T. Ritson Ferguson
(Print or Type)
Title: President
(Print or Type)
Agreed and Accepted this 7th day of July, 1998.
AMERICAN REAL ESTATE INVESTMENT CORPORATION,
a Maryland corporation
By:/s/ Jeffrey E. Kelter
Name: Jeffrey E. Kelter
Title:President
D-3
<PAGE>
AMERICAN REAL ESTATE INVESTMENT CORPORATION
SUBSCRIPTION AGREEMENT
COUNTERPART SIGNATURE PAGE
The undersigned, desiring to enter into this Subscription Agreement for
the subscription of the number of Shares indicated below, hereby agrees to all
of the terms and provisions of this Subscription Agreement and agrees to be
bound by all such terms and provisions.
The undersigned has executed this Subscription Agreement as of the 7th
day of July, 1998.
No. of Shares being Subscribed: 25,000
TRW Investment Mgt.
By: /s/ T. Ritson Ferguson
(Signature)
Name: T. Ritson Ferguson
(Print or Type)
Title: President
(Print or Type)
Agreed and Accepted this 7th day of July, 1998.
AMERICAN REAL ESTATE INVESTMENT CORPORATION,
a Maryland corporation
By:/s/ Jeffrey E. Kelter
Name: Jeffrey E. Kelter
Title:President
D-4
<PAGE>
Exhibit 10-8
AMERICAN REAL ESTATE INVESTMENT CORPORATION,
a Maryland Corporation
SUBSCRIPTION DOCUMENTS
FOR
COMMON STOCK
American Real Estate Investment Corporation
Plymouth Meeting Executive Campus
620 W. Germantown Pike, Suite 200
Plymouth Meeting, Pennsylvania 19462
<PAGE>
AMERICAN REAL ESTATE INVESTMENT CORPORATION,
a Maryland Corporation
Instructions for Completion of Subscription Documents
To All Subscribers:
In connection with your subscription for shares (the "Shares") of
common stock, par value $.001 per share (the "Common Stock"), of American Real
Estate Investment Corporation, a Maryland corporation (the "Company"), enclosed
are the following documents, which must be properly and fully completed and
signed:
1. The SUBSCRIPTION AGREEMENT. Complete and sign.
2. INVESTOR INFORMATION SHEET, attached as EXHIBIT A. Complete.
3. ACCOUNT INFORMATION SHEET, attached as EXHIBIT B. Complete, if
applicable.
4. PURCHASER REPRESENTATIVE'S CERTIFICATE, attached as EXHIBIT C. Sign and
have your purchaser representative sign, if applicable.
5. ACCREDITED INVESTOR QUESTIONNAIRE, attached as EXHIBIT D. Complete
and sign.
NOTE TO CORPORATE, PARTNERSHIP AND TRUST SUBSCRIBERS:
(a) Corporations - Upon request of the Company, corporations will be
required to provide a copy and the filing date of the articles of incorporation
and a corporate resolution authorizing the investment in the Company and
evidence of the authority of the person(s) signing the subscription
documentation to do so.
(b) Partnerships - Upon request of the Company, partnerships will be
required to provide a copy of the agreement of partnership and any certificate
of partnership.
(c) Trusts - Upon request of the Company, trusts will be required to
provide a copy of the trust agreement showing the date of formation and evidence
of the authority of the persons(s) signing the subscription documentation to do
so.
PROPERLY COMPLETED SUBSCRIPTION DOCUMENTS MUST BE RECEIVED BY THE
COMPANY ON OR BEFORE JULY 7, 1998.
NO SUBSCRIPTION WILL BE BINDING ON THE COMPANY UNTIL ACCEPTED IN
WRITING BY THE COMPANY. THE COMPANY HAS RESERVED THE RIGHT TO
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<PAGE>
REJECT ANY AND ALL SUBSCRIPTIONS IN ITS SOLE DISCRETION, WITH OR WITHOUT CAUSE
NO LATER THAN THREE BUSINESS DAYS PRIOR TO THE CLOSING.
THE SHARES HAVE NOT BEEN REGISTERED OR QUALIFIED UNDER FEDERAL OR STATE
SECURITIES LAWS AND ARE BEING ISSUED IN RELIANCE UPON EXEMPTIONS FROM SUCH
REGISTRATION OR QUALIFICATION. ALL SECURITIES ISSUED WILL BE RESTRICTED
SECURITIES AND WILL NOT BE FREELY TRANSFERABLE. BECAUSE THE SECURITIES ARE
UNREGISTERED, ANY SECURITIES RECEIVED WILL BE SUBJECT TO RESTRICTIONS ON
TRANSFER, WHETHER BY SALE, GIFT, HYPOTHECATION OR OTHERWISE. EACH INVESTOR
SHOULD PROCEED ON THE ASSUMPTION THAT IT MUST BEAR THE ECONOMIC RISK OF THE
INVESTMENT FOR AN INDEFINITE PERIOD, SINCE THE SECURITIES MAY NOT BE RESOLD
UNLESS THEY ARE SUBSEQUENTLY REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED, OR AN EXEMPTION FROM SUCH REGISTRATION IS AVAILABLE. NO TRANSFERS MAY
BE MADE EXCEPT PURSUANT TO DUE REGISTRATION AND QUALIFICATION OR IN ACCORDANCE
WITH AVAILABLE EXEMPTIONS FROM REGISTRATION.
NO OFFER OR SALE OF SECURITIES IS MADE IN ANY JURISDICTION WHERE THE
OFFER OR SALE WOULD BE UNLAWFUL.
2
<PAGE>
American Real Estate Investment Corporation
Plymouth Meeting Executive Campus
620 W. Germantown Pike, Suite 200
Plymouth Meeting, Pennsylvania 19462
Attention: Stephen J. Butte, Vice President
Ladies and Gentlemen:
This Subscription Agreement (the "Agreement") is executed by the
undersigned (the "Holders") in connection with the offer by American Real Estate
Investment Corporation, a Maryland corporation (together with its successors,
the "Company"), to sell, and the subscription by the undersigned to buy, shares
(the "Shares") of common stock, par value $.001 per share, of the Company (the
"Common Stock").
Section 1.
1.1 Subscription. The undersigned hereby subscribes for the number of
Shares indicated on Schedule A attached hereto at a price of $16.50 per share of
Common Stock (the "Purchase Price"). In respect of this subscription, the
undersigned herewith delivers to the Company (i) two executed original signature
pages of this Subscription Agreement, and (ii) a fully completed Investor
Information Sheet, Account Information Sheet, if applicable, Purchaser
Representative's Certificate, if applicable, and Accredited Investor
Questionnaire attached as Exhibits A, B, C and D, respectively.
1.2 Closing. The purchase and sale of the Shares shall take place at
the offices of Rogers & Wells LLP, 200 Park Avenue, New York, New York, at 10:00
a.m., on July 9, 1998, subject to satisfaction of the conditions set forth in
Section 4 and Section 5, or at such other time and place as the Company and the
undersigned mutually agree (the "Closing"). At the Closing the Company shall
deliver to the undersigned a certificate representing the Shares the undersigned
is purchasing, registered in such name or names as the undersigned shall
designate at least two (2) business days prior to the date of the Closing,
against payment of the Purchase Price thereof by wire transfer in immediately
available funds to an account designated by the Company at least two (2)
business days prior to the date of the Closing.
1.3 Purchase Price Adjustment. On the earlier of (i) the first business
day after the first anniversary of the Closing and (ii) the first business day
after a Liquidating Event (as defined below) has occurred (the "Settlement
Date"), the Purchase Price shall be adjusted as follows:
(a) If the Average Price (as defined below) is below $15.50
per share, the Company shall deliver to the undersigned on the Settlement Date
cash in an amount equal to (i) the difference between $15.50 and the Average
Price, multiplied by (ii) the number of Shares purchased by the undersigned at
the Closing.
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(b) If the Average Price is above $19.50 per share, each
Holder shall tender to the Company on the Settlement Date by delivery of a
certificate, duly endorsed for transfer in blank, for cancellation of that
number of shares of Common Stock equal to (i) the difference between the Average
Price and $19.50, divided by (ii) the Average Price, multiplied by (iii) the
number of Shares purchased by such Holder at the Closing. The number of shares
of Common Stock to be tendered by the undersigned pursuant to this Section
1.3(b) shall be rounded to the nearest whole share. All such shares of Common
Stock tendered to the Company by the undersigned shall no longer be outstanding
and shall automatically be canceled and retired and shall revert to the status
of authorized but unissued stock, and the Company shall, if necessary, deliver a
replacement certificate representing the remaining Shares owned by the
undersigned.
(c) The "Average Price" shall be equal to the arithmetic
average of the "Sales Price" (as hereinafter defined) on each of the Trading
Days (as hereinafter defined) during the 30-day period preceding the Settlement
Date. The term "Sales Price" shall mean, on any Trading Day, the closing price
of a share of Common Stock on the American Stock Exchange or, if the shares are
no longer listed on the American Stock Exchange, such other exchange or
automated inter-dealer quotation system upon which the shares are then listed or
quoted, or, if not listed or quoted, the Sales Price on a Trading Day shall be
determined by a majority of the independent directors of the Board of Directors
of the Company acting in good faith on the basis of such quotations and other
information as it considers, in its reasonable judgment, appropriate (such
amount being the "Determined Price"). The Company shall send notice of the
Determined Price, if applicable, to the undersigned. The Holders may object to
the Determined Price by notice to the Company within 10 days after receipt of
notice from the Company. If a majority of the Shares purchased hereunder and
held by the undersigned (the "Majority Holders") object to the Determined Price,
the Company shall select an independent investment bank or other expert in
valuation of securities to calculate the Determined Price. Such bank or expert
shall be subject to the reasonable approval of the Majority Holders. The
Determined Price calculated by the bank or expert so selected and approved shall
be final and binding on all parties hereto. All costs of such independent
investment bank or other expert shall be paid by the Company. The term "Trading
Day" shall mean any day on which securities are traded on the American Stock
Exchange or such other national securities exchange or automated inter-dealer
quotation system upon which the shares are then trading or quoted.
(d) A "Liquidating Event" shall occur if (i) the Company sells
all or substantially all of its assets and uses such proceeds solely either to
repay debt or other liabilities of the Company and/or to pay dividends to the
holders of Common Stock or (ii) the Company merges with and into another entity
where the Company is not the surviving corporation and the surviving corporation
(a) is listed on the New York Stock Exchange Inc. or the American Stock Exchange
Inc. or quoted on the National Association of Securities Dealers Automated
Quotation System ("NASDAQ") or the National Market System of NASDAQ, and (b) has
an outstanding float of publicly available common equity in excess of $300
million (not counting for purposes of determining the outstanding float of any
company shares held by affiliates of such company).
(e) The record date for any distribution with respect to a
Liquidating Event described in clause (i) of the definition thereof shall be no
earlier than the second business day
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following the date the Liquidating Event occurred.
(f) Notwithstanding anything in clause 1.3(ii) to the
contrary, any agreement to merge the Company with and into another entity where
the Company is not the surviving corporation shall provide that for purposes of
the calculation of the amount of cash and/or the number of securities to be
distributed to holders of Common Stock, the undersigned shall be deemed to hold
the number of shares of Common Stock held by the undersigned adjusted to give
effect to Section 1.3(b) as though the transactions contemplated therein had
taken place prior to the closing of the merger.
Section 2.
2. Investor Representations and Warranties. The undersigned hereby
acknowledges, represents and warrants to, and agrees with, the Company as
follows:
2.1 Authorization. This Agreement constitutes a valid and legally
binding obligation on the part of the undersigned, enforceable in accordance
with its terms except as affected by (i) bankruptcy law, and (ii) equitable
principles. The undersigned represents that he, she or it has full power and
authority to enter into this Agreement.
2.2 No Advertisement or Solicitation. The undersigned acknowledges that
the offer and sale of the Shares to him, her or it has not been accomplished by
any form of general solicitation or general advertising, including, but not
limited to, (i) any advertisement, article, notice or other communication
published in any newspaper, magazine or similar media, or broadcast over
television or radio or (ii) any seminar or meeting whose attendees have been
invited by any general solicitation or general advertising.
2.3 Restrictions on Transfer.
(a) The undersigned understands and acknowledges that the
Shares have not been registered under the Securities Act of 1933, as amended
(the "Securities Act"), or applicable state securities laws, by reason of a
specific exemption from the registration provisions thereof which exemption
depends upon, among other things, the bona fide nature of the investment intent
of the undersigned as expressed herein and the accuracy and completeness of the
other representations of the undersigned set forth herein.
(b) The undersigned understands and acknowledges that, except
as provided for by the Registration Rights Agreement attached hereto as Exhibit
E (the "Registration Rights Agreement"), none of the Shares have been registered
under the Securities Act or registered or qualified under the securities laws of
any state and none may be sold, transferred, assigned, pledged or hypothecated
(i) absent effective registration thereof under the Securities Act and
applicable state securities laws, or (ii) absent an opinion of counsel, which
opinion is satisfactory in form and substance to the Company and its counsel, in
their respective reasonable discretion, to the effect that such registration is
not required under the Securities Act or such state securities laws or that
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such transaction complies with the rules promulgated by the Securities and
Exchange Commission (the "Commission") under the Securities Act or such state
securities laws or (iii) except in a transaction in compliance with Rule 144
under the Securities Act. The undersigned understands and acknowledges that he,
she or it must bear the economic risks of this investment resulting from such
limitations.
(c) The undersigned is aware of the provisions of Rule 144
promulgated under the Securities Act, pursuant to which the undersigned may be
able to sell the Shares, subject to certain exceptions, one year after they
receive such Shares so long as certain current public information is available
about the Company, the sale is through a broker in an unsolicited "broker's
transaction" and the undersigned does not sell, in any three-month period, more
than the greater of 1% of the outstanding Common Stock or the average weekly
trading volume of the Shares for the four-week period preceding the sale. The
undersigned generally will be able to sell the Shares without regard to any
volume or other limitations discussed above beginning two years after they
receive the Shares, unless they are affiliates of the Company (i.e., a person
controlling, controlled by or under common control with the Company). Affiliates
of the Company will continue to be subject to the volume limitations on
unregistered sales following the expiration of the two-year period. The
preceding description is a general summary of the restrictions of Rule 144, and
each of the undersigned should consult with his, her or its own legal advisor to
ensure compliance with all of the requirements of applicable federal and state
securities laws and regulations. In this connection, the undersigned understands
Rule 144 may or may not be available for the resale of the Shares and the
undersigned should consult an attorney with regard to the availability of Rule
144. The Company is subject to the reporting requirements under the Securities
Exchange Act of 1934, as amended (the "Exchange Act"). Upon notice of issuance,
the Shares will be listed for trading on the American Stock Exchange. If not all
of the requirements of Rule 144 are met, registration under the Securities Act
or some other registration exemption will be required for any disposition of the
Shares. The undersigned understands that although Rule 144 is not exclusive, the
Commission has expressed its opinion that persons proposing to sell restricted
securities received in an offering other than a registered offering or pursuant
to Rule 144 will have a substantial burden of proof in establishing that an
exemption from registration is available for such offers or sales that such
persons and the brokers who participate in the transactions do so at their own
risk.
2.4 Disclosure of Information.The undersigned and/or the undersigned's
purchaser representative or personal advisor, as the case may be:
(i) has been furnished with and has carefully read and
reviewed the Company's Annual Report on Form 10-KSB for its fiscal year ended
December 31, 1997, the Company's Quarterly Report on Form 10-Q for the quarter
ended March 31, 1998, the Company's Current Report on Form 8-K filed January 23,
1998, the Company's Current Report on Form 8-K/A filed February 24, 1998, the
Company's Current Report on Form 8-K filed April 10, 1998, the Company's Current
Report on Form 8-K filed May 15, 1998 and the Company's Current Report on Form
8-K/A filed June 10, 1998, and has been afforded access to all information
necessary to evaluate the merits and risks of the acquisition of the Shares, and
has relied solely (except as indicated in subsections (ii) and (iii) below) on
such materials or documents.
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(ii) has been provided an opportunity to obtain any
additional information requested concerning the Shares and the Company;
(iii) has been given the opportunity to ask questions
of, and receive answers from, the Company, or a person or persons acting on the
behalf of the Company, concerning the terms and conditions of this Agreement and
the Registration Rights Agreement and other matters pertaining to this
investment, and has been given the opportunity to obtain such additional
information necessary to verify the accuracy of the materials or documents that
were provided in order for him, her or it to evaluate the merits and risks of an
investment in the Company to the extent the Company possesses such information
or can acquire it without unreasonable effort or expense, and has not been
furnished any other offering literature or prospectus on which they are entitled
to rely except as mentioned herein;
(iv) understands that the materials or documents
provided to the undersigned and/or the undersigned's purchaser representative
or personal advisor, as the case may be, have not been prepared by, and the
accuracy of such materials or documents have not been verified by, Donaldson,
Lufkin & Jenrette Securities Corporation ("DLJ") which is acting as placement
agent in connection with the purchase and sale of the Shares. DLJ makes no
representations or warranties with respect to the materials or documents
provided to the undersigned; and
(v) has determined that the Shares are a suitable
investment for him, her or it and that at this time he, she or it could bear the
economic risk of the investment.
2.5 Investment Experience. The undersigned represents that he, she or
it has such knowledge and experience in financial and business matters as to be
capable of evaluating alone, or together with his, her or its purchaser
representative or personal advisor the merits and risks of an investment in the
Shares and protecting his, her or its own interests in connection with the
investment and has obtained, in his, her or its judgment, alone, or together
with his, her or its purchaser representative or personal advisor sufficient
information from the Company to evaluate the merits and risks of an investment
in the Shares. The undersigned has not utilized any person as his, her or its
purchaser representative or professional advisor in connection with evaluating
such risks and merits or, if the undersigned has utilized a person as his, her
or its purchaser representative or personal advisor to assist in evaluating the
risks and merits of an investment, the purchaser representative or personal
advisor has executed the Purchaser Representative's Certificate attached as
Exhibit C to this Agreement. The undersigned acknowledges that he, she or it has
the financial ability to bear the economic risk of his, her or its investment in
the Company (including his, her or its possible loss), has adequate means for
providing for his, her or its current needs and personal contingencies and has
no need for liquidity with respect to the investment in the Company. If other
than an individual, the undersigned also represents it has not been organized
solely for the purpose of acquiring the Shares.
2.6 Purchase Entirely for Own Account. This Agreement is made with the
undersigned
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in reliance upon his, her or its representation to the Company, which by the
undersigned's execution of this Agreement he, she or it hereby confirms, that
the Shares to be received by the undersigned and any certificate which may be
issuable in respect thereof (the "Certificate") will be acquired for investment
for the undersigned's own account, not as a nominee or agent, and not with a
view to the resale or distribution of any part thereof, and that he, she or it
has no present intention of selling, granting any participation in, or otherwise
distributing the same, except as provided in the Registration Rights Agreement,
or under an exemption from registration available under the Securities Act and
applicable state securities laws.
2.7 Further Limitation on Disposition. Without in any way limiting the
representations set forth herein, the undersigned further agrees not to offer,
sell, offer or contract to sell, transfer, assign, grant any option for the sale
of, pledge or encumber, or otherwise convey any shares of Common Stock prior to
the Settlement Date.
2.8 Legends. In addition to the legend required by Section 6.2.9 of the
Company's Amended and Restated Articles of Incorporation, dated as of December
12, 1997 and the statements required by Section 7.1 of the Company's By-Laws, as
amended on December 12, 1997, to the extent applicable, any Certificate or other
document issued in respect of any Shares shall be endorsed with the legends set
forth below, and the undersigned covenants that, except to the extent such
restrictions are waived by the Company, the undersigned shall not transfer any
Shares without complying with the restrictions on transfer described in such
legends:
(i) "THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN
REGISTERED UNDER THE UNITED STATES SECURITIES ACT OF 1933, AS AMENDED (THE
"SECURITIES ACT"), OR REGISTERED OR QUALIFIED UNDER THE SECURITIES LAWS OF ANY
STATE AND MAY NOT BE SOLD, TRANSFERRED, ASSIGNED, PLEDGED, OR HYPOTHECATED (1)
ABSENT AN EFFECTIVE REGISTRATION THEREOF UNDER SUCH ACT (2) ABSENT AN OPINION OF
COUNSEL, WHICH OPINION IS REASONABLY SATISFACTORY IN FORM AND SUBSTANCE TO THE
COMPANY AND ITS COUNSEL, TO THE EFFECT THAT SUCH REGISTRATION IS NOT REQUIRED
UNDER SAID ACT OR SUCH STATES OR THAT SUCH TRANSACTION COMPLIES WITH THE RULES
PROMULGATED BY THE SECURITIES AND EXCHANGE COMMISSION UNDER SAID ACT OR SUCH
STATES OR, (3) EXCEPT IN A TRANSACTION IN COMPLIANCE WITH RULE 144 UNDER THE
SECURITIES ACT."
(ii) THESE SECURITIES ARE SUBJECT TO ADJUSTMENT UNDER
THE TERMS AND CONDITIONS OF THAT CERTAIN SUBSCRIPTION AGREEMENT DATED AS OF JULY
7 1998, A COPY OF WHICH IS ON FILE AT THE PRINCIPAL OFFICES OF THE COMPANY."
(iii) Any legend required by any applicable state
securities law.
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Section 3.
3. Company Representations, Warranties and Covenants. The Company
hereby acknowledges, represents and warrants to, and agrees with, the
undersigned as follows:
3.1 Organization, Good Standing and Qualification. The Company 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
carry on its business as now conducted. The Company is duly qualified to
transact business and is in good standing in each jurisdiction where the failure
to so qualify would have a material adverse effect on its business or
properties.
3.2 Authorization. All corporate action on the part of the Company, its
officers, directors and stockholders necessary for the adoption, authorization,
execution, filing (where applicable) and delivery of this Agreement and the
Registration Rights Agreement, the performance of all obligations of the Company
hereunder and thereunder, and the authorization, issuance (or reservation for
issuance), sale and delivery of the Common Stock being sold hereunder has been
taken or will be taken prior to the Closing. This Agreement and the Registration
Rights Agreement constitute valid and legally binding obligations of the
Company, enforceable in accordance with their terms, except (i) as limited by
applicable bankruptcy, insolvency, reorganization, moratorium, and other laws of
general application affecting enforcement of creditors' rights generally, (ii)
as limited by laws relating to the availability of specific performance,
injunctive relief, or other equitable remedies, and (iii) to the extent the
indemnification provisions contained in the Registration Rights Agreement may be
limited by applicable federal or state securities laws.
3.3 Valid Issuance of Common Stock. The Common Stock that is being
purchased by the undersigned hereunder, when issued, sold and delivered in
accordance with the terms of this Agreement for the consideration expressed
herein, will be duly and validly issued, fully paid, and nonassessable, and,
based in part upon the representations of the undersigned in this Agreement,
will be issued in compliance with all applicable federal and state securities
laws. The issuance and sale of the Common Stock will not violate any preemptive
rights.
3.4 Disclosure. The Company has provided the undersigned with all the
information that the undersigned has requested for deciding whether to purchase
the Shares. Subject to Section 3.7, the written information and certificates
provided to the undersigned pursuant to this Agreement or the Registration
Rights Agreement are true and accurate in all material respects.
3.5 REIT Status. (a) The Company, beginning with its taxable year ended
December 31, 1993 and through December 31, 1997 (i) has been subject to taxation
as a "real estate investment trust" (a "REIT") within the meaning of the
Internal Revenue Code of 1986, as amended (the "Code"), and has complied with
all requirements contained in the Code to qualify as a REIT for such years, and
(ii) has operated, and currently intends to continue to operate, in such a
manner as to qualify as a REIT for the tax year ending December 31, 1998 and
thereafter.
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(b) The Company is a "domestically-controlled" REIT within the
meaning of Code Section 897(h)(4)(B) and is not a "pension-held REIT" within the
meaning of Section 856(h)(3)(D) of the Code. To the Company's knowledge, other
than an Excepted Holder (as defined in the Company's Amended and Restated
Articles of Incorporation), no person or entity which would be treated as an
"individual" for purposes of Section 542(a)(2) of the Code (as modified by
Section 856(h) of the Code) owns or would be considered to own (taking into
account the ownership attribution rules under Section 544 of the Code, as
modified by 856(h) of the Code) in excess of 9.8% of the value of the
outstanding equity interest in the Company.
(c) From and after the date hereof, until the earliest to
occur of (i) the date on which no Holder owns any Shares, (ii) the first
anniversary of a Qualifying Offering (as defined below) or, (iii) the date of a
Liquidating Event, the Company will elect to be taxed as a REIT in its federal
income tax returns, will comply will all applicable laws, rules and regulations
of the Code relating to a REIT, and will not take any action or fail to take any
action which could reasonably be expected to, alone or in conjunction with any
other factors, result in the loss of its status as a REIT for federal income tax
purposes.
3.6 Material Adverse Change. Since March 31, 1998 there has been no
material adverse change in the business, affairs, operations, properties, assets
or financial condition of the Company.
3.7 No Other Representations. The Company shall not be deemed to have
made to the undersigned any representation or warranty other than as expressly
made by the Company in Section 3 hereof. Without limiting the generality of the
foregoing, and notwithstanding any otherwise express representations and
warranties made by the Company, in this Section 3, the Company makes no
representation or warranty to the undersigned with respect to any projections,
estimates or budgets heretofore delivered to or made available to the
undersigned of future revenues, expenses or expenditures or future results of
operations.
3.8 Shelf Registration Statement. The Company will cause to be filed
with the Securities and Exchange Commission (the "SEC") within ten (10) days of
the Closing a shelf registration statement and related prospectus (the "Shelf
Registration Statement") that complies as to form in all material respects with
applicable SEC rules providing for the sale from time to time by the Holders of
the Shares, and agrees to use its commercially reasonable best efforts to cause
such Shelf Registration Statement to be declared effective by the SEC as soon as
practicable thereafter. If the Company fails to file the Shelf Registration
Statement with the SEC within ten (10) days of the Closing, the undersigned
shall have the right, upon the timely written notice (the "Put Notice") to the
Company (which notice must be received by the Company no more than thirty-five
(35) days from the date of the Closing), to require the Company to purchase the
Shares from the undersigned within thirty (30) days of the Company's receipt of
the Put Notice at a price of $16.50 per share plus any accrued but unpaid
dividends.
3.9 Qualifying Offering. The Company will consummate a Qualifying
Offering on or
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prior to the first anniversary of the Closing. If the Company fails to
consummate a Qualifying Offering on or prior to the second anniversary of the
Closing and if, at that time, the Holders own, in the aggregate, at least 25% of
the Shares purchased by them at the Closing, the Company shall, on the second
anniversary of the Closing, pay to each Holder, as a purchase price adjustment,
an amount equal to (i) the total number of outstanding shares of Common Stock of
the Company on such second anniversary times (ii) 2.5% times (iii) a fraction,
the numerator of which is the number of Shares purchased by such Holder pursuant
to this Subscription Agreement and the denominator of which is the number of
Shares purchased by all Holders pursuant to this Subscription Agreement times
(iv) the arithmetic average of the Sales Price on each of the Trading Days
during the 30-day period ending on the third business day prior to the second
anniversary of the Closing. For the purposes of this Section 3.9, a "Qualifying
Offering" shall mean either (i) the sale of Common Stock in one or more
offerings at a price of at least $16.50 per share, to at least fifteen (15)
investors in the aggregate (provided that none of investors may purchase more
than the greater of $15 million of Common Stock (based on the net proceeds to
the Company) or 10% of the aggregate number of shares of Common Stock sold in
the Qualifying Offering), which results in net proceeds to the Company of at
least $150 million or (ii) a Liquidating Event which results in a minimum
liquidation price to the holders of Common Stock of $16.50 per share plus any
accrued but unpaid dividends.
3.10 Preemptive Rights. The Company shall provide each Holder with
written notice of any proposed issuance for cash of Common Stock no later than
30 days prior to the proposed issuance thereof. Such notice shall specify the
purchase price, the proposed issuance date and all other material terms of such
issuance. Upon delivery to the Company by any Holder no later than 10 days after
such notice by the Company of a notice stating that such Holder intends to
acquire a portion of the Common Stock to be issued, such Holder shall be
entitled, on the terms offered by the Company to other prospective purchasers of
the Common Stock to be issued, to purchase up to an amount of the securities
such that, upon consummation of the proposed issuance, the Holder would hold the
same percentage of the Common Stock as such Holder holds immediately prior to
such issuance. Any such notice from any Holder shall indicate the amount of
Common Stock it intends to purchase and shall constitute a binding contract to
acquire such Common Stock on the terms set forth in the notice delivered to such
Holder by the Company with respect to such issuance. Notwithstanding anything
herein to the contrary, the Company shall be entitled not to proceed with the
proposed issuance or to alter the terms thereof; provided that, in the event
that any material terms of the proposed issuance are altered, (i) any notice
delivered by a Holder to the Company pursuant to this Section 3.10 shall be
revoked automatically and (ii) such Holder shall be entitled to participate in
such proposed issuance on the revised terms in accordance with this Section
3.10. The provisions of this Section 3.10 shall no longer apply and shall be of
no further effect after the Company consummates a Qualifying Offering.
Section 4.
4. Conditions of Investors' Obligations at Closing. The obligations of
the undersigned under Section 1.2 of this Agreement are subject to the
fulfillment on or before the Closing of each
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of the following conditions:
4.1 Representations and Warranties. The representations and warranties
of the Company contained in Section 3 (other than those made as of a specified
date earlier than the date of Closing) shall be true and correct in all material
respects on and as of the date of the Closing with the same effect as though
such representation or warranty was made on and as of the date of such Closing,
and any representation or warranty made as of a specified date earlier than the
date of such Closing shall have been true and correct in all material respects
as of such earlier date.
4.2 Performance. The Company shall have performed and complied with, in
all material respects, all agreements, obligations and conditions contained in
this Agreement that are required to be performed or complied with by it on or
before the Closing.
4.3 Compliance Certificate. The President or a Vice President of the
Company shall deliver to the undersigned at the Closing a certificate certifying
that the conditions specified in Sections 4.1 and 4.2 have been fulfilled.
4.4 Qualifications. All authorizations, approvals, or permits, if any,
of any governmental authority or regulatory body of the United States or of any
state that are required in connection with the lawful issuance and sale of the
Shares pursuant to this Agreement shall be duly obtained and effective as of the
Closing.
4.5 Opinion of Rogers & Wells LLP. The undersigned shall have received
from Rogers & Wells LLP, counsel for the Company, an opinion dated as of the
Closing, to the effect that the issuance of the Shares contemplated by this
Agreement is exempt from registration under the Securities Act.
4.6 Opinion of Piper & Marbury L.L.P.. The undersigned shall have
received from Piper & Marbury L.L.P., special Maryland counsel for the Company,
an opinion dated as of the Closing, to the effect that the Shares, when issued,
sold and delivered in accordance with the terms of this Agreement for the
consideration expressed herein, have been duly authorized and validly issued,
are fully paid, and are nonassessable and that the execution, delivery and
performance by the Company of this Subscription Agreement and the Registration
Rights Agreement are within the Company's corporate powers and have been duly
authorized by all necessary corporate action.
4.7 Registration Rights Agreement. The Company and the undersigned
shall have entered into the Registration Rights Agreement in the form attached
hereto as Exhibit E.
4.8 Stock Exchange Listing. The Shares shall have been
approved for listing on the American Stock Exchange.
4.9 Certificates. Certificates representing the number of shares of
Common Stock set forth on the counterpart signature page hereof and in such name
as the undersigned has designated pursuant to Section 1.2 hereof, shall have
been delivered to the undersigned.
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4.10 Consents. Morgan Stanley Asset Management Inc. shall have received
consents from Stichting Pensioenfonds ABP, Stichting Bedrijfspensioenfonds Voor
De Metaalnijverheid, the Washington State Investment Board, the Public
Employee's Retirement Association of Colorado and MS Special Funds Pte Ltd.
returning to such entities the right to vote certain of the Shares.
4.11 Co-Sale Arrangements. Jeffrey Kelter and the Holders shall have
entered into a side letter relating to the right of the Holders to "tag-along"
with any sales of shares by Jeffrey Kelter of Common Stock prior to the
Qualifying Offering, in form and substance satisfactory to the Holders.
Section 5.
5. Conditions of the Company's Obligations at Closing. The obligations
of the Company to the undersigned under this Agreement are subject to the
fulfillment on or before the Closing of each of the following conditions by the
undersigned:
5.1 Representations and Warranties. The representations and warranties
of the undersigned contained in Section 2 (other than those made as of a
specified date earlier than the date of Closing) shall be true and correct in
all material respects on and as of the date of the Closing with the same effect
as though such representation or warranty was made on and as of the date of such
Closing, and any representation or warranty made as of a specified date earlier
than the date of such Closing shall have been true and correct in all material
respects as of such earlier date.
5.2 Payment of Purchase Price. The undersigned shall have delivered the
Purchase Price.
5.3 Qualifications. All authorizations, approvals, or permits, if any,
of any governmental authority or regulatory body of the United States or of any
state that are required in connection with the lawful issuance and sale of the
Shares pursuant to this Agreement shall be duly obtained and effective as of the
Closing.
5.4 Opinion of Davis Polk & Wardwell. The Company shall have received
from Davis Polk & Wardwell, counsel for the undersigned, an opinion dated as of
the Closing, to the effect that the Holders, individually or in the aggregate,
should not constitute an "affiliate" of the Company for the purposes of the
Securities Act.
Section 6.
6.1 Modification. Neither this Agreement nor any provisions hereof
shall be waived, modified, discharged or terminated except by an instrument in
writing signed by the party against whom any waiver, change, discharge or
termination is sought.
6.2 Notices. All notices, payments, demands or other communications
given hereunder
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shall be deemed to have been duly given and received (i) upon personal delivery,
(ii) in the case of notices sent within, and for delivery within, the United
States, as of the date shown on the return receipt after mailing by registered
or certified mail, return receipt requested, postage prepaid, or (iii) the
second succeeding business day after deposit with Federal Express or other
equivalent air courier delivery service, unless the notice is held or retained
by the customs service, in which case the date shall be the fifth succeeding
business day after such deposit.
6.3 Binding Effect. Except as otherwise provided herein, this Agreement
shall be binding upon and inure to the benefit of the parties and their heirs,
executors, administrators, successors, legal representatives and permitted
assigns. If the undersigned is more than one person, the obligation of the
undersigned shall be several and not joint.
6.4 Entire Agreement. This Agreement and all exhibits hereto including,
without limitation, the Investor Information Sheet, Account Information Sheet,
Purchaser Representative's Certificate, Accredited Investor Questionnaire and
Registration Rights Agreement, contain the entire agreement of the parties with
respect to this subscription, and there are no representations, covenants or
other agreements except as stated or referred to herein or therein.
6.5 Assignability. This Agreement is not transferable or assignable by
the undersigned.
6.6 Applicable Law. This Agreement shall be governed by and construed
in accordance with the laws of the State of New York applicable to contracts
made and to be performed entirely within such State without giving effect to the
conflict of law provisions thereof. The parties agree that all disputes between
any of them arising out of, connected with, related to, or incidental to the
relationship established between them in connection with this Agreement or the
Registration Rights Agreement, and whether arising in law or in equity or
otherwise, shall be resolved by the federal or state courts located in New York,
New York. Nothing herein shall affect the right of any party to serve process in
any manner permitted by law or to commence legal proceedings or otherwise
proceed against the other in any other jurisdiction. In addition, each of the
parties hereto consents to submit to the personal jurisdiction of any federal or
state court located in the state of New York in the event that any dispute
arises out of this Agreement or the Registration Rights Agreement or any of the
transactions contemplated hereby or thereby. The parties, for themselves and
their respective affiliates, hereby irrevocably waive all right to a trial by
jury in any action, proceeding or counterclaim (whether based on contract, tort
or otherwise) arising out of or relating to the actions of the parties or their
respective affiliates pursuant to this Agreement in the negotiation,
administration, performance or enforcement thereof.
6.7 Gender. All pronouns contained herein and any variations thereof
shall be deemed to refer to the masculine, feminine or neuter, singular or
plural, as the identity of the parties hereto may require.
6.8 Counterparts. This Agreement may be executed through the use of
separate signature pages or in counterparts, and each of such counterparts
shall, for all purposes, constitute one agreement binding on the parties hereto,
notwithstanding that the parties hereto are not
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signatories to the same counterpart.
6.9 Further Assurances. The undersigned will, from time to time,
execute and deliver to the Company all such other and further instruments and
documents and take or cause to be taken all such other and further action as the
Company may reasonably request in order to effect the transactions contemplated
by this Agreement.
6.10 Expenses. Each party shall pay all costs and expenses which it
incurs in connection with the negotiation, execution, delivery and performance
of this Agreement; provided that, on or prior to the Closing, the Company shall
pay the reasonable fees and expenses of the undersigned's outside legal counsel.
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AMERICAN REAL ESTATE INVESTMENT CORPORATION
SUBSCRIPTION AGREEMENT
COUNTERPART SIGNATURE PAGE
The undersigned hereby agree to all of the terms and provisions of this
Subscription Agreement and agree to be bound by all such terms and provisions.
The undersigned has executed this Subscription Agreement as of the 7th
day of July, 1998.
MORGAN STANLEY ASSET MANAGEMENT INC.,
as attorney-in-fact for each of
its clients set forth in Schedule A
By:/s/Russell C. Platt
----------------------------------
Name: Russell C. Platt
Title: Managing Director
Agreed and Accepted this
7th day of July, 1998.
AMERICAN REAL ESTATE INVESTMENT CORPORATION,
a Maryland corporation
By: /s/Jeffrey E. Kelter
----------------------------------
Name: Jeffrey E. Kelter
Title:President
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Exhibit 99-1
FOR IMMEDIATE RELEASE
American Real Estate Investment Corporation Announces Private Placement of
Approximately 1.1 Million Shares of Common Stock
PLYMOUTH MEETING, Penn., July 8 /PRNewswire/ - American Real Estate
Investment Corporation (AMEX:REA) announced today that it has entered into
agreements to sell in a private placement 1,092,051 shares of its Common
Stock for an aggregate purchase price of approximately $18.0 million to
several institutional purchasers, including certain accounts managed by CRA
Real Estate Securities. The shares will not be registered under the
Securities Act of 1933, as amended, and may not be offered or sold in the
United States absent registration or an applicable exemption from
registration. The net cash proceeds from the sale will be used for the
repayment of a portion of the Company's outstanding debt under its revolving
credit facility and to partially fund previously announced acquisitions in
Upstate New York. The Company expects the private placement to close by July
10, 1998. Donaldson, Lufkin & Jenrette Securities Corporation acted as the
placement agent for the Company.
American Real Estate Investment Corporation, with headquarters in Plymouth
Meeting, Pennsylvania, and regional offices in Franklin Lakes, New Jersey,
Albany, 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 primarily located in the
Mid-Atlantic and Northeast states. The Company currently owns 49 office and
industrial properties containing an aggregate of 5.8 million square feet. For
more information, contact Jeff Kelter at 610-834-3447, 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: Jeff Kelter of American Real Estate Investment Corporation,
610-834-3447
